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Is the dairy industry having an image crisis?

Anti-dairy campaigning has overshadowed the need for the sector to catch-up with consumer eating and lifestyle trends.

 

Tom Levitt reports...

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Is the dairy industry having an image crisis? #Februdairy

Two high profile social media campaigns for and against the place of dairy in our diets have grabbed media attention.

 

First #veganuary encouraged people to make a New Year’s resolution, or at least a January-long one, to cut out meat and dairy from their diets.

 

Then, in reaction, the industry hit back with #februadairy, an opportunity for supporters of dairy to make the case for people to put it back on their shopping list.

 

These campaigns undoubtedly generated passion on both sides, but they have overshadowed two equally difficult challenges for the long-term future of the dairy sector: namely value and innovation.

 

Dairy has had, and continues to have, a privileged place in UK diets.


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About 97 per cent of households in the UK still buy cow or other animal milk, with £2.6 billion spent on dairy products in the last three months of 2017, up 6.3 per cent on the year.

 

The Government’s recommendations on dairy are it should make up 8 per cent of our daily dietary intake. Actual consumption is about 20 per cent.

 

The problem for dairy, particularly liquid milk, has been in not extracting enough value out of this huge market for dairy products.

 

Vegan alternatives, such as almond and soya, cost about £1.80/litre for branded products or £1.40/litre for supermarket own-label. This is more than double the price commanded by dairy equivalents.

 

Part of the reason for this is the excitement and consumer interest generated around a recent surge in the variety and promotion of vegan alternatives.

“Dairy is like a marriage you take for granted and flirt with alternatives,” said Rebecca Miah, who is helping run the AHDB’s £1.3m consumer campaign on dairy.

 

“We need to remind consumers of the brand of dairy and why they fell in love with it.”

 

Ms Miah said the price of dairy does have an impact on how people perceive it.

 

Products with a premium, she said, ‘make people value them more and want to trade up to try the shiny new thing’.

 

But achieving higher prices will require big changes, not least in how milk is packaged and sold to consumers.

 

After decades spent using it as a loss leader to draw customers into stores, even supermarkets appear to recognise the milk aisle needs to be re-invigorated.

 

Beth Hart, head of agriculture at Sainsbury’s said: “How do we add value back into milk? Only through innovation and new formats.

 

“Every day we are getting approached by a new product as an alternative to milk. The sector is full of bright entrepreneurs who I wish would come to dairy too. Look at the premium they could add for dairy. Milk is still viewed as a commodity. It is a race to the bottom.”

 

A big growth opportunity for dairy is in convenience, said Ms Hart, pointing to the rise in on-the-go products, protein supplements and a general desire to assemble meals rather than cooking from scratch.

Developing new markets for dairy products

Developing new markets for dairy products

One major out-of-home market which dairy has still to fully capitalise on is cafes and coffee shops.

 

It is a market popular with consumers aged 35 and under, who say they are most likely to be cutting back on dairy, according to survey data released by consumer research firm Kantar Worldpanel last year.

 

A number of specialist milk for coffee brands, such as The Estate Dairy and Brades Farm Barista Milk – which won the British Farming Awards Dairy Innovator of the Year award in 2017 – have started to capitalise on the willingness of coffee shops to pay a premium for good-quality milk with provenance.

 

Estate Dairy co-founder Shaun Young said: “We are trying to pioneer something different and raise the quality and perception of milk by getting cafes to stand behind it and be more passionate about the milk they sell.”

 

After just two years, he is selling 85,000 litres of milk a week across 500 outlets in London and has just added chocolate. Mr Young said presentation and packaging was key to making a dairy product stand out and get noticed by customers.

 

He added: “Our milk bottle looks different to a conventional one you find in the supermarket.

 

“We buy the labels reverse facing so when it is sat in a coffee bar its facing the customer. We use a clear material which looks quite bespoke. It is a niche thing but by doing these small things, it makes a difference.”

Organic growth

Organic growth

The one category which has had some success in adding value in dairy has been organic.

 

Organic dairy sales made up 29 per cent of the total organic food and drink market, with total sales of £344 million in 2017.

 

No surprise then to see the recent deal between the dairy cooperative Arla and the well-known organic dairy brand Yeo Valley, allowing the former to use the Yeo Valley brand on milk, butter, spreads and cheese.

 

“Our ambition is to encourage customers to trade up from standard to organic milk, butter and cheese, driving overall growth for organic across dairy categories,” said Arla Foods UK managing director Tomas Pietrangeli.

 

Arla has also been launching a host of new products, including Protein Milk, Skyr Yoghurt and a Starbucks ready-to-drink coffee.

 

The idea, said Arla’s head of innovation Sven Thormahlen, was to ’follow our consumers where they go’, which at the moment is consuming more food and drink out of the home, not somewhere where dairy has traditionally exploited.

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