Fluid Milk Sales in Crisis
Feb 14, 2011
It was a stunning admission: Generic fluid milk advertising doesn’t work, or at best doesn’t work very well.
That confession came at the Dairy Forum in Florida in January, when MilkPEP officials rolled out new research that examines who is drinking milk, when they’re drinking it and why they’re drinking less each year.
Over the past 10 years, per capita milk consumption has fallen 1.8 gln., a 9.3% decline. On its face, 1.8 gln. doesn’t sound like a big number—but multiply it by 307 million Americans. Then it becomes a big number. A very big number.
Like 540 million gallons of lost milk sales per year. Or, 6.4 billion pounds of milk production. Or, 3.3% of 2010’s U.S. milk production of 193 billion pounds.
To get some sense of how big that number is, it’s the annual milk production of no less than 21 states: Alabama, Alaska, Arkansas, Connecticut, Delaware, Hawaii, Louisiana, Maine, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Jersey, North Carolina, North Dakota, Rhode Island, South Carolina, Tennessee, West Virginia and Wyoming.
Granted, these are our smallest dairy-producing states. But they still represent the blood, sweat and toil of some 2,800 dairy producers.
And things could be even worse. According to USDA’s annual report to Congress, generic fluid milk advertising is somewhat effective. It shows that for every 1% increase in fluid milk advertising, per capita milk consumption climbs 0.06%. And for every 1% increase in non-advertising fluid milk marketing, per capita consumption climbs 0.032%. Those ratios look paltry. But without $100 million pumped into fluid milk advertising and marketing annually, it’s likely another 6.9 billion pounds of fluid milk sales would be lost.
Total annual beverage consumption in the United States is 222 gln. per person. That consumption has remained flat for 30 years. “To increase milk consumption requires stealing market share,” says Steven Goldbach, an analyst with Monitor, the company which conducted the study.
The biggest surprise out of all of this is that water, not soft drinks, soy ‘milk’ or sports drinks, is milk’s biggest competitor and threat. “Water is the highest volume and most ubiquitous milk competitor,” says Goldbach. “One third of the decrease in milk consumption is due to the increase in water consumption, and it’s the Number 1 source of the decline in milk sales.”
The easiest way to grab market share back is to go after those occasions where milk is already being consumed: breakfast, lunch and dinner at home.
Milk grabs a 32% share of beverages consumed during breakfast. But that share has eroded by a half-gallon per capita over the last decade because of the decline of cereal sales and breakfasts eaten at home. Partnering with cereal makers to defend and bolster this position makes sense.
“In any given day, there are 140 million alternative beverages that are chosen by all consumers in-home at breakfast,” says Donna Armstrong, a MilkPEP communications specialist. In other words, this is the size of the opportunity to steal market share from other beverages at home during breakfast, she says.
After breakfast, extend milk’s dominant share to lunch and dinner. Milk only commands a combined 12% market share at lunch and dinner. But there are 304 million alternative beverages consumed at home at lunch and dinner every day-- another huge opportunity, says Goldbach.
I’ve been around the dairy industry long enough to be both skeptical and hopeful. Skeptical in that I don’t know how many times in my 30+ years covering this industry the milk promotion folks have come and said they’ve found the solution to declining milk sales. First, it was the institution of the checkoff programs in the 1980s and ‘90s. Then it was the “got milk?” campaign and milk mustaches. Then it was a more recent demographic study targeting moms as the great salvation.
But I’m hopeful as well. This time around, the MilkPEP folks realize they can’t do it alone. They only have $100 million or so to advertise with. Red Bull sports drinks—one brand—spends some $135 million by itself each year.
So the MilkPEP folks realize they must partner with Dean’s and Kroger’s and General Mills and Kellogg’s and other big, national companies to leverage marketing efforts. The opportunity is there. Let’s hope they get it right this time.