DMI Announces More Than $500 Million in Fluid Milk Partnerships

08:57PM Oct 29, 2014
( Source: Dairy Management, Inc. )

Dairy Management, Inc. (DMI) today announced more than $500 million in fluid milk partnerships with seven major companies. The effort is being launched to re-invigorate fluid milk sales, with special emphasis on extended shelf life and shelf stable fluid milk products that will be available when and where consumers want them.     

The seven partners include: The Coca-Cola Company in its joint venture with Select Milk, Dairy Farmers of America, Darigold, The Kroger Company, Maryland and Virginia Milk Producers, Southeast Milk and Shamrock Farms. Most of the $500 million pledged will be in processing plants and stainless steel infrastructure along with some branded marketing efforts, say Tom Gallahger, DMI CEO. The dairy checkoff commitment is about $30 million.

Most of the partnerships are under development, each will vary and will initially last two to three years. Some partners are looking for product development help, others for nutrition consultancy and others product testing.

The one product Gallagher can talk about publicly is Coca Cola’s fairlife product, which is a joint venture with Select Milk Producers. It has 50% more protein, 50% less sugar and more calcium than fluid milk while at the same time being lactose free.

In the Denver test market, the product has sold very well, says Mike Saint John, president of Coca Cola North America’s Minute Maid Business Unit, which will market the product. Saint John expects it to do even better when it is launched nationally December 15th.   

Gallagher notes that the test market also showed fairlife did not cannibalize other fluid milk sales. In fact, just the opposite happened. Consumers who purchase fairlife purchased less soy and almond imitation milk products and increased their purchase of other fluid milk for home use.

Gallagher realizes many dairy farmers might be skeptical that fluid sales can be reinvigorated. After all, they have been in decline for 40 years, with sales declining roughly 8% over the past decade.

For its part, the dairy checkoff program has learned what doesn’t work. Even though it has poured hundreds of millions of dollars into award winning advertising, sales declined. “The more generic advertising we do, the more we disincent the brands to advertise,” he says.

“But the companies we have partnered with are not in the business of losing money…. Coca Cola is not going into this to be a commodity, but to use its marketing to leverage their products,” he says.

“I believe we will see change,” Gallagher says. “But be patient. This won’t be solved in a year or two,” he says.

The challenge is that one of every two U.S. consumers over the age of 18 drinks no milk.

Getting these consumers back, with products where and when they want them, will be key. Health and wellness milk-based beverages are one avenue of opportunity. “We have to have products that are relevant to consumers at every stage of life,” says Gallagher.

Most of the new products will be targeted for the U.S. domestic market, says Gallagher. But the U.S. Dairy Export Council has identified at least 1.3 billion pounds of market potential in China. Hispanic fluid markets in Mexico and South America are also being under-served, says Gallagher. So there is potential there as well.