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Declining sales spur experiments

Published on October 11, 2012 3:01AM

Last changed on November 8, 2012 7:30AM

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Maddox fears limited interest in new efforts among established dairy operations


Capital Press

Per capita consumption of fluid milk in the United States has declined for more than 30 years, from 27.9 gallons a year in 1980 to 20.6 gallons in 2009.

But Steve Maddox, chairman of the National Dairy Board, said a 7 percent decrease in retail gallon container milk sales last January compared with January 2011 was a cold splash in the face.

Today's consumers eat more meals away from home than they did 40 years ago and are looking for convenient offerings as opposed to the traditional gallon jug, said Maddox, who is also a Burrell, Calif., dairyman.

While dairymen have funded successful partnerships with quick-serve restaurants and schools to increase fluid milk sales and consumption through their checkoff dollars, sales in retail outlets are still suffering.

The National Dairy Board charged Dairy Management Inc., which manages checkoff dollars, to look at the whole category and every entity that has a stake in the issue, said Barb O'Brien, senior executive vice president for DMI and president of its Innovation Center for U.S. Dairy.

By the end of the year, DMI will have met with 30 to 35 fluid-milk processors to find out if they're willing to play a role in turning around faltering milk sales, she said.

"Dairymen can't carry that alone" through checkoff funding, she said.

But checkoff funding can help. DMI has committed up to $14 million to focus on fluid milk and has accepted six proposals out of 27 submitted to address innovations in lactose-free and value-added milk and packaging.

Many of the 27 proposals were disappointing, Maddox said, showing the industry was stuck with a generational mindset and inclined to stay with what feels safe, such as paperboard containers.

But DMI did receive a wide array of strategies and will be partnering with the processors to get those innovations in the works, O'Brien said.

One focus that could bring a quick desired result is shrink-wrapped 18 single-serve containers of milk for markets such as Costco and Walmart. Another focus is a research project to understand what consumers are looking for in on-the-go breakfasts. Other partnerships will focus on high-performance milk beverages and driving sales in new channels, such as health clubs.

Hopefully, O'Brien said, the success of these innovations will stimulate other processors to follow suit.

Long term, the industry needs to tackle the gallon and half-gallon container mindset. It also needs to focus on growing the category rather than cannibalizing existing sales from other types of containers. The changes needed are complex, and it's not going to be a quick fix, Maddox said.

One issue the industry must deal with is the disconnect between producers and processors, he said.

While milk going into fluid milk channels brings the highest milk check for producers, it also brings the smallest processing margin. That lean margin has hindered innovation that's needed in the fluid milk market, he said.

Producers want bottlers to innovate, and bottlers say they can sell more milk if producers drop their price. So there is a stalemate between the two factions, he said.

"We're going to catch stones and arrows from both sides. (But) it's an industry-wide challenge, and it needs an industry-wide solution. It's important to all dairy producers," he said.


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