Magazine article Marketing

Sour Side to Growth

Magazine article Marketing

Sour Side to Growth

Article excerpt

Although volume sales in the sector are expected to continue their steady rise, inflation will take its toll on value, writes Jane Bainbridge.

The milk and cream sector is a rare thing in today's economic climate: a market in growth. Despite issues such as fluctuating production costs, volume rose 5.6% and value by 15% between 2005 and 2010, according to Mintel. In 2010 it is estimated that the sector will be worth pounds 3.4bn and reach 5.2bn litres, with liquid white milk accounting for pounds 3bn.

Retail pricing structures in the dairy market have been a contentious issue, especially for farmers who have found their margins eroded because the escalating cost of production has often not been passed onto consumers. This came to a head in 2008, when many UK farmers abandoned dairy production and milk imports increased; supermarkets then finally hiked prices to reflect what they were being charged.

Consumer preferences are changing the make-up of the market - the liquid white milk, flavoured milk and cream categories are all performing strongly, while sales of canned and dried milk have stalled. In a shopping environment where most people have access to the fresh product 24/7, the traditional fall-back, emergency formats of milk are no longer needed.

Flavoured milk is growing the most strongly, its fortunes revived through healthier options for children and NPD in adult-oriented products. Volume and value have increased 42% since 2005 and sales are expected to reach pounds 160m by the end of this year.

In the fresh white milk category, sales of skimmed and the newer 1% fat milk have grown in line with the desire for healthier products. The Food Standards Agency has also targeted full-fat milk and cream in its campaign to reduce saturated fat consumption.

At a time when many consumers are refusing to pay the price premium associated with organic produce, organic milk sales have held up well The Soil Association says these grew by 1% in 2009, compared with a fall of almost 13% across all organic produce. Yeo Valley has performed strongly in the branded organic segment.

The environmental impact of milk production has gained attention and the industry has sought to address this, focusing in particular on reducing packaging waste. Since doorstep-delivered milk (with its easily recycled glass bottles) has decreased in the UK, alternative, and often less recyclable formats, have grown.

Own-label dominates the liquid white milk market with more than two-thirds of the share. Yet there are a few notable brands, led by Arla's Cravendale, which is supported by quirky TV ads. Meanwhile, Dairy Crest has rebranded its milk under the Country Life banner; it also owns FRijj, the leading flavoured-milk brand.

Robert Wiseman introduced the 1% fat category to the UK with its The One brand in 2004. It has gained share of branded production with its Black & White range, as well as own-label, having picked up trade following the demise of the Dairy Farmers of Britain co-operative in 2009.

Effectively communicating the health benefits of milk will be of ever-more strategic importance to the sector. Parents are aware of the value of milk in boosting their children's calcium intake. Yet, scientific studies suggest that drinking milk can help protect against a range of conditions, from cancer and high blood pressure, to Alzheimer's disease, and this could be better exploited by the industry. …

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