Posted onNovember 22, 2016
The milk sector’s bumpy ride in 2014 – when sales of fresh milk slumped £89m – was a walk in the park compared with the travails of the past 12 months. More than £165m has been wiped off category as the supermarket price war took its toll.
By the summer, all the major mults had cut the price of four pints of standard own-label milk to between £1 and 89p, while Asda, Sainsbury’s and Tesco had also dropped the retail price on one and two-pint SKUs.
The price cuts have been brutal, but there is some good news here: they appear to have boosted volume sales, with own-label milk volumes up 1% year on year to just under 3.6 billion litres. It’s a big improvement on 2014, when Nielsen recorded a 4.6% fall.
Volume, of course, is only part of the story; there’s no question even more value has been stripped out of the sector. In own-label milk alone, price cuts have driven a 7% – or £142.6m – collapse in value sales.
Efforts are under way to mitigate some of the value loss: Morrisons has launched the higher-priced Milk for Farmers range in partnership with its milk supplier, Arla, which allows customers to choose to pay more for their pinta in the knowledge the extra money is passed back to farmers. It’s a relatively recent initiative, however, having rolled out in October, so while the retailer is reporting strong sales it remains to be seen if Milk for Farmers really can help drive value back into liquid milk.
Tough times for milk brands
For now, retailers’ and suppliers’ best chance of persuading punters to pay more for the white stuff is through strong brands and added-value lines.
That is proving easier said than done, however. While the topline figures for milk brands are encouraging, with value sales up 3% to £818.8m, this growth hasn’t come from dairy. Indeed, the likes of Cravendale and Müller Wiseman’s Black & White are in decline as they struggle against cheap own-label milk.
“At the start of the price war, Cravendale saw significant switching into standard fresh as the price gap was too much for many consumers,” says Arla brand manager Claire Mackintosh. However, things are improving thanks to a new TV and marketing push, with volumes up 5% in the 12 weeks to 10 October, she stresses.
The greatest gains, however, are being made by a ‘milk’ brand that doesn’t contain dairy: Alpro is now the second-largest milk brand, having overtaken Black & White, with sales up 29.1% to £95.6m.
These figures signify a “coming of age” for the Alpro brand, says marketing controller Vicky Upton. “We are now present in one in five households, so Alpro is now very much a mainstream product.” The key task for the brand is to continue pioneering in the category, she adds.
With consumer interest in free-from food and drink remaining strong, Arla’s Lactofree has also bucked the general decline in branded milk.
In contrast with the largely commoditised white milk market, flavoured milk has built on an 11.3% surge in value sales last year to post a 6% rise this year. With own-label flavoured milk in decline, the growth is from brands, up 9% year on year to £234.1m.
This shows brands are moving away from the perception that flavoured milk is just for children, suggests Hamish Renton, MD of analysts HRA Food and Drink, and are playing on the growing perception “milk is healthy again, while sugar-rich or artificial sweetener-laden carbonated drinks are out”. Demand for protein drinks is also driving growth to an extent, he adds.
Innovation is also helping boost the presence of dairy drinks in supermarkets, says Nyree Chambers, head of marketing at Nurishment owner Grace Foods. “Lots of NPD, including smaller packs, PMPs, and innovations such as coffee flavours, is removing barriers to entry to the category, and this is driving volumes,” she adds.
Despite this, market leader Frijj didn’t manage to grow value sales this year. However, Frijj owner Dairy Crest is working hard to restore growth: it relaunched Frijj Supreme SKUs this year to “make them even more indulgent”, and is addressing concerns over high sugar levels with a ‘40% less sugar’ variant.
Yoghurt drinks, meanwhile, look like they may finally be shaking off the impact of the EU’s clampdown on probiotic health claims: after a 5.4% slump last year, sales are up 2%.
It’s all about tweaking your positioning, says Renton. “They have had to be smart in appealing to customers and are doing so through techniques such as promotions, family-sized packs and products aimed at children.”
Such strategies have certainly worked for Actimel, says brand marketing manager Julia Lowbridge.
Its new Actimel for Kids sub-range helped to drive incremental brand sales and penetration among families, and contributed to an 8% – or £6.6m hike – in value sales, more than double the sales increase experienced by the total category.