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Dean’s New National Milk Brand Bears Watching
Dean Foods Company this week announced the introduction of what it calls the country’s first national branded fresh white milk, under the DairyPure brand. Given the struggles the fluid milk category has experienced in recent decades, it will be very interesting to see how DairyPure fares in the months and years ahead.
Dean Foods says it is “revolutionizing” the fluid milk category with DairyPure. If ever there was a category that needed “revolutionizing,” it is the fluid milk category.
Statistics help illustrate this point. In 2013, US beverage milk sales totaled 51.9 billion pounds, the lowest level since 1982. Beverage milk sales in 1975 totaled 53.2 billion pounds, so this is a category that has been slowly declining, or at best holding steady, for decades.
Further evidence of this point can be seen in per capita consumption figures. Per capita consumption of beverage milks and creams (plus egg nog) totaled 189 pounds in 2013, down some 72 pounds per person since 1975.
In fact, digging a bit deeper into USDA per capita consumption figures, we can conclude that per capita milk consumption has declined by more than 100 pounds since 1965. That year, it totaled 292 pounds (fluid milk consumption statistics for that period included such products as yogurt and sour cream, which were relatively minor products back in the 1960s and 1970s).
From these statistics, we can conclude that the fluid milk business hasn’t grown for decades now, and could certainly benefit from some “revolutionizing.”
So is a new, national milk brand the answer to the fluid milk industry’s long-term woes? Perhaps.
Keep in mind that fluid milk sales have long been dominated by private labels. According to the Private Label Manufacturers Association, private labels account for 59 percent of milk sales on a dollar basis and almost 61 percent of milk sales on a volume basis.
Does this have any affect on sales? Maybe. For several years, the annual USDA report to Congress on the dairy farmer-funded and fluid milk processor-funded promotion programs included a review of the fluid milk research and marketing programs by Beverage Marketing Corporation.
BMC’s review was intended, among other things, to provide a third-party perspective on the competitive position of fluid milk in the broader US beverage marketplace.
So in the 2008 report to Congress, for example, BMC evaluated milk’s position relative to a “growing competitive beverage set” that now included soy beverages, value-added bottled waters, energy drinks and ready-to-drink coffee, in addition to carbonated soft drinks, ready-to-drink teas, fruit beverages, bottled water and sports beverages.
In one section of its review for the 2008 report, BMC analyzed and discussed specific marketplace factors that affect the overall performance of the fluid milk category, particularly within the context of the competitive and market landscape. Among those five factors: branding and media spending.
Here’s part of what BMC had to say in that 2008 report: “One of the more significant differences between milk and its competitive set is the dominance of private label milk in the category, and the lack of major national brands to compete with significant brands in competitive categories.”
In 2007, BMC noted, private label milk comprised 69 percent volume and branded milk 31 percent volume, compared with “very high” branded volume levels in categories such as sports beverages (99 percent branded) and carbonated soft drinks (89 percent branded volume).
“BMC believes this disparity places milk at a definite disadvantage with regard to the rest of the competitive set because of the challenges inherent in marketing a category versus brands. Additionally, many private label products, across most categories, are generally sold in less-premium, undifferentiated packages and with little or no marketing support. Thus, the high share of private label milk reinforces milk’s commodity image, making competitive premium-image branded products more attractive to consumers.”
Although BMC’s observations date back several years, they still ring true. And in that context, we have to believe that Dean’s new DairyPure brand has the potential to reverse, or at least slow, the decades-long slide in milk sales.
This move does represent a gamble on the part of Dean Foods. The company has built up its business in recent years partly by acquiring local and regional dairy brands, including, among many others, Mayfield, Country Fresh, Alta Dena, Berkeley Farms, Dean’s and Verifine. These brands hold number one or number two positions in roughly 80 percent of the markets Dean Foods serves, according to the company’s 2014 annual report.
Initially, the new DairyPure label will be in addition to the regional labels, but it seems likely that Dean Foods will eventually phase out most if not all of its regional brand names. Yes, that’s a gamble, but it’s worth remembering that all of these brands haven’t helped prop up fluid milk sales in recent years (it’s also worth noting that, again according to Dean’s 2014 annual report, 53 percent of the company’s net sales are private label, versus 47 percent for company brands).
Dean Foods has had some success with a national brand: its TruMoo flavored milk has grown to a more than $700 million brand, and is the country’s largest flavored milk brand. Maybe it will have equal or greater success with DairyPure.
So this new brand bears watching by the entire dairy industry, which has grown accustomed to flat or declining fluid milk sales.
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