Girl pouring milk into glass
June 10, 2016

Fluid Milk and the Glass Half Full

 |  By: Dairy Talk

Like a broken record that’s been spinning since 2010, fluid milk sales continue to decline. The most recent March/April numbers show a 632 million lb. decline over the previous 52 weeks, for a percentage decline of 1.3%.         

 But, believe it or not, that’s actually good news. Over the past four years, fluid milk sales were declining by an average of more than a 1 billion lb. annually. The 1.3% decline over the past year is roughly half of what it has been, says Barbara O’Brien, a senior VP at Dairy Management, Inc. (DMI), and president of the Innovation Center for U.S. dairy.This slowing is a hopeful, early indication that new innovations and new approaches to fluid milk marketing are starting to take hold, she says.

In 2013, Tom Gallagher, CEO of DMI, challenged the industry to re-commit and reinvigorate the fluid milk category. Some, perhaps many, thought him crazy. But where others saw failure, Gallagher saw opportunity. Every gallon of lost fluid sales meant finding almost a pound of cheese sales somewhere else. Why not fix fluid?

“Lack of innovation that occurred in fluid milk has really given the marketplace away,” he says. “We didn’t lose the market. We owned it, and we gave it away.”       

Revitalization efforts are starting to pay off. For example, fairlife milk, originally developed by Fair Oaks Farms in Indiana and now being marketed by Coca Cola, is starting to gain major traction. In 2015, when it was introduced, sales had already totaled $100 million. In 2016, sales will reach $150 million.

Fairlife, with Coca Cola’s marketing muscle behind it, now has 80% market penetration and 50% repeat sales. In marketing circles, 20 to 30% repeat sales of a new product is considered high, says Paul Ziemnisky, DMI’s senior VP of global innovation partnerships. Fairlife is also kicking the you-know-what out of plant-based beverages.

Coca Cola, which owns Minute Maid, is tapping into that subsidiary’s distribution infrastructure in grocery stores, where its personnel are in these venues several times each week. That’s critical to ensure dairy cases are kept fully stocked, especially during peak buying times. Its next priority is to move fairlife into convenience stores and onto college campuses.

 A second, modest success story is lactose-free milk. Though only 3% of the fluid market, lactose-free sales were up 19% in April. The category was jump-started by a six-year partnership between DMI and HP Hood. Others processors have since joined the lactose-free band wagon. My local big box grocery store now has an entire floor-to-ceiling facing of lactose-free options.

The exciting news is that things are just getting started. In 2014, DMI signed seven partnerships with major companies and dairy co-ops to revitalize fluid milk. The DMI/HP Hood agreement has now run its course, but partnerships with Dairy Farmers of America, Shamrock Farms, Darigold, Coca Cola, Kroger, Maryland/Virginia and Southeast Milk, Inc. are now coming to fruition. “In 2017, all of these partners will have new products to bring to market,” says Ziemnisky.

DFA’s “Live Real Farm” brand of dairy/juice beverages is already being test marketed in Arizona, Minnesota and Wisconsin. Shamrock is looking at product extensions and re-packaging of current products. Kroger is vertically integrating its own plants with its grocery stores, giving it the ability to test product concepts rapidly. Others are looking at aseptic and extended shelf life dairy products that could tap unconventional points of sale and export markets.

All tallied, some $500 million has been invested in new plants and equipment. For dairy farmers and their shriveled milk checks, it has come none too soon. But it is coming, and it can only get better from here.