Milk It

While traditional milk is no longer a cash cow for retailers, emerging alternatives show promise.

Milk It

April 2019   minute read

By: Terri Allan

Kaeli Stanley, manager of Belsches Kwik Stop in Bumpass, Virginia, speaks for many convenience retailers by what she says of traditional milk products, “the only time [customers] show any excitement is when the weatherman says it’s going to snow.”

Indeed, milk sales continue their decades-long decline, victim to ongoing competition from other beverages. According to the U.S. Department of Agriculture, per-capita consumption of milk sunk to 149 pounds in 2017, down some 40% from 247 pounds in 1975. Sue McCloskey, co-founder of fairlife—the cold-filtered milk distributed by Coca-Cola—said the decline in milk sales over the years has been driven by the commoditization of the product and changing lifestyles. “Unfortunately, the dairy industry allowed milk to become perceived by the consumer as a generic product,” she remarked. “When milk is used as a loss leader in grocery stores, it just loses any kind of intrinsic value or desire by the consumer. Combine that with the advent of a more on-the-go lifestyle that modern families lead, and you can see how dairy’s lack of innovation left fluid sales to lag.” While 90% of U.S. households purchase milk, McCloskey noted, only 47% of consumers drink it on a weekly basis, down from 71% 30 years ago.

Milk’s decline has been particularly noticeable in the convenience channel. McCloskey reported that c-stores’ share of total category sales has shrunk to 5% from 8% in the last decade, representing a $1.3 billion loss in sales. The channel’s lagging performance continued last year. According to Meghan Liefeld, director, insights and category management at Danone North America, dollar sales of fluid milk in c-stores plunged 8% for the 52 weeks ending December  30, 2018, compared to the 3% decline in groceries during the same period.

Consumers are looking for value-added versions of milk and are moving away from conventional dairy.

However, pockets of growth within fluid milk have been emerging via the explosion in better-for-you alternatives, and marketers like McCloskey are encouraged. “We’re seeing the industry revitalize and reinvent itself by emphasizing the incredible nutritional profile of milk,” she said. As compared to traditional milk, fairlife, for example, has higher protein, lower sugar and no lactose. Liefeld from Danone, marketer of brands such as Silk almond milk, added that sales of plant-based milk products in convenience stores surged 25% last year, while lactose-free milk sales jumped 60%. “These growth pockets suggest that consumers are looking for value-added versions of milk and are moving away from conventional dairy for their snacking needs,” she explained.

Competitive Market

Convenience retailers around the country confirmed the downward trends for milk sales in their stores, noting the fierce competition they face from larger retailers. “We can’t compete with Walmart’s $1.98 for a gallon of milk,” said Maurine DesJardine, marketing director at Alta Convenience Stores, with 117 locations in Colorado, New Mexico, Nebraska and Kansas. As a result, many of the stores no longer stock the large-format containers. While DesJardine conceded, “We still sell a lot of milk,” she noted that some Alta stores recently cut back on the space devoted to dairy from four cooler doors to two. Tom Bleier, senior manager, category team, at Global Partners—which operates 1,600 c-stores primarily in the Northeast under banners such as Alltown, Xtra Mart and Honey Farms—reported that fluid milk sales are down at a single-digit rate. He added that while it’s a space challenge for traditional c-stores to stock drinkable dairy products, “having a presence is important. Consumers naturally think that your offering is not fresh or appealing if you only have a few products on the shelf.”

Bleier added that Global Partners recognizes the emerging demand for plant-based milks, probiotics and organic milks, and that the company’s newest concept, Alltown Fresh, features the drinks. “While it’s too early to evaluate trends, the learnings from these new locations will assist us in enhancing our dairy offerings in our traditional stores,” he said.

Some people want organic, and they’re willing to pay for it.

Bleier and other retailers, meanwhile, noted that flavored milks, such as chocolate milk and protein shakes, are generally performing better than traditional milk. At Latitudes convenience store in Rio Rancho, New Mexico, Denise Brown, marketing manager, reported that sales of Plains Dairy chocolate milk in both quarts and 16-ounce singles are on the rise. In 2018, the store sold 1,560 units of the brand, she said.

Better-for-you drinkable dairy options are performing better than traditional milk products, retailers and marketers note. At Country Corner Grocery & Deli in Rock Island, Washington, sales of organic 2% milk and half-and-half have been “fairly steady,” according to Liz Longworth, manager. “Some people want organic, and they’re willing to pay for it,” she explained. At Latitudes, meanwhile, fairlife’s yup!, a flavored low-fat milk with more protein and less sugar than regular low-fat milk, is doing “extraordinarily well,” Brown said. Indeed, McCloskey reported that fairlife sales in c-stores increased 25% last year. “Our value proposition of highly nutritious beverages in single-serve options has been relevant to meeting c-store shopper needs,” she remarked.

Plant-based milks, such as almond milk and the emerging oat milk, are also making headway in c-stores. Califia Farms’ Choc-A-Maca and Maca-‘Nilla protein almond milks in 10.5-ounce bottles, for example, are available in 7-Eleven stores in five markets—Florida, New York City, Chicago, Los Angeles/San Diego and Washington State—and response has been positive, according to Dan Mader, senior vice president of sales at Califia Farms. “We’re just starting to get into almond milk,” said Alta’s DesJardine. While early results are promising, the retailer added that it’s unlikely sales of plant-based milks will make up for lost sales of traditional milk.

Drinkable yogurts are another niche in the dairy section. According to Latitudes’ Brown, the New Mexico store only sold 300 units of drinkable yogurt last year. But Mader and Califia Farms see opportunity for probiotic drinkable yogurts in c-stores. “They combine good taste, functionality and design,” he said, and are perfect for the consumer on the go, including at breakfast time and “to drink in the car.” Probiotic yogurts help store operators “reach consumers who are wellness- and health-focused,” Mader added.

Revitalization Efforts

Despite the continued challenges from drinkable dairy products, convenience retailers remain steadfast in their support. Alta, for example, offers a milk punch card, whereby customers can earn free gallons and half-gallons of milk. Latitudes promotes “two for” specials, such as two gallons of milk for $4 and two 11-ounce singles of Muscle Milk nondairy protein shakes for $5.

Make room for where consumers are going. They’re moving toward health and wellness.

Marketers of drinkable dairy products believe that with the right selection and merchandising support, c-stores can revitalize category trends. Mader advises that retailers examine their offerings. “Look at your doors,” he said. “Do they look like they did 10 years ago?” Due to changing consumer demands in the milk category, the Califia Farms executive suggests that retailers balance their selection. “Maintain holding power for your core products but make room for where consumers are going. They’re moving toward health and wellness,” Mader said.

Danone’s Liefeld added that value-added milk products help “drive the perception that the convenience channel is relevant for consumers who value health and wellness.” She recommends that retailers consider placing single-serve alternative milks in open coolers, cross-promote with healthy snacks such as fruit and nutritional bars, and communicate with consumers that the options are available.

According to McCloskey, “There is definitely opportunity for more c-stores to optimize their milk options to be more relevant with today’s consumers and drive more repeat trips.” The fairlife co-founder said, “Milk is still highly relevant, but it’s a matter of making sure we appeal to consumer needs via the flavors, pack sizes, health claims and brands that they prefer. Once your store is a destination for milk, given the habitual nature of this category, you’re sure to drive repeat traffic.”

Terri Allan

Terri Allan

Terri Allan is a New Jersey-based freelance writer. She can be reached at [email protected] and on Twitter at @terriallan.

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