Milk Going Sour?

Published in CSP Daily News

Retailers pushing smaller, more-convenient packaging, healthy varieties

ROSEMONT, Ill. -- In an age of vitamin waters and energy drinks, the decades-long decline in U.S. milk consumption has accelerated, worrying dairy farmers, milk processors and grocery chains, reported The Wall Street Journal.

The industry "is coming to recognize this as a crisis," Tom Gallagher, CEO of Rosemont, Ill.-based Dairy Management Inc., a trade group that promotes milk products, told the newspaper. "We cannot simply assume that we will always have a market."

Per-capita U.S. milk consumption, which peaked around World War II, has fallen almost 30% since 1975, even as sales of yogurt, cheese and other dairy products have risen, according to U.S. Department of Agriculture statistics cited by the paper. The reasons include the rise in popularity of bottled waters and the concern of some consumers that milk is high in calories.

To revive sales, milk companies and retailers are pushing smaller, more-convenient packages and health-oriented varieties, including protein-enhanced milk aimed at fitness buffs, said the report.

The dairy industry is also retooling its marketing to tout the authenticity of cow's milk and to deride alternatives like soy and almond milk as "imitation milk."

The decline's recent acceleration is due in part to increases in milk's retail price, a result of the soaring costs for grains fed to dairy cows, according to industry officials cited by the Journal. But the depth of this year's slide has surprised some food-industry executives because retail milk prices have risen only slightly this year after surging 9.2% last year, according to federal data.

Americans drank an average of 20.2 gallons of milk last year, a decline of 3.3% from the previous year and the biggest year-over-year slide since at least 1975, said the USDA.

So far this year, sales volume at U.S. food retailers for all types of liquid milk, including nondairy varieties, has fallen 2.9% from a year earlier, and total dollar sales have slipped 2.2%, according to the report, citing Chicago-based market research firm SymphonyIRI Group Inc. Sales volume for the biggest milk category--skim and low-fat milk--has dropped 4%.

Organic milk sales are growing but account for only about 4% of retail sales, said Dairy Management.

The protracted slide is troubling for retailers, which have long sold milk at the back of the store to lure shoppers through the aisles, often as a loss leader. "Milk is an extremely important category for us," Alan Faust, director of dairy and frozen products at Kroger Co., the second-biggest U.S. food retailer by sales after Wal-Mart Stores Inc., told the paper.

Kroger CEO David Dillon said in a recent Journal interview that consumers may no longer consider milk as healthful as they once did. So Kroger, which runs its own dairies, plans to start selling a milk brand called CARBMaster next month that contains 20% more protein and lower sugar content than conventional milk, the report said.

Shamrock Farms Co., an Arizona-based milk producer, recently began selling a "muscle builder" version of its high-protein milk, Rockin' Refuel, in partnership with retailer General Nutrition Centers. With the product, which combines chocolate milk and added protein, Shamrock is attempting to lure consumers who buy nondairy drinks such as CytoSport Inc.'s Muscle Milk, Shamrock's marketing director, Sandy Kelly, told the paper.

The milk industry is also trying to target busy families with new packaging sizes and styles. Shamrock, for instance, came up with 12-ounce, easy-to-grip bottles of milk that are sold at Subway restaurants and seven-ounce bottles sold at Arby's restaurants targeted at children.

Dean Foods Inc., the largest U.S. dairy producer, last year introduced a low-sugar chocolate milk for kids called TruMoo, and it sells lactose-free milk in grocery stores.