We have had a month of Veganuary headlines. Now it is the turn of Februdairy. There is no doubt about the rising interest in veganism. And it matters for the future of cow’s milk.
Tom Levitt reports...
One-third of people under 35 say they are cutting back on consuming dairy. And in the US, soya, oat and almond ‘milks’ have grown rapidly, with sales of US$2 billion (£1.5bn) in 2017. Sales in the UK are worth about £300 million/year.
But the problem with milk is not the prospect of falling sales, it is the low price it commands in the marketplace.
And that can only be changed through brands and marketing. Decades of standardisation have left it with little value. Margins are tight for processors. A typical carton of milk on the supermarket shelf is not going to win any design awards.
It has long been a commodity, but retail use of it as a loss leader has squeezed its market price still further. You can praise retailers for offering milk contracts with market premiums.
But supermarket own-label – however many pictures of cows, wellies and farmers you put on it – will never add significant value.
The problem is that, held back by those low-margins, milk has been slow to adapt to the trends and desires of a new generation of consumers.
Two-litre cartons of milk and those ugly metal trolleys of milk we see in the supermarket are not desirable. But dairy can adapt and succeed.
Despite headlines about veganism and the growth in sales of ‘milk’ alternatives, the market for cow’s milk is evolving, not disappearing.
More than 80 per cent of people still regularly consume cow’s milk.
That is still a huge market that the dairy sector has been poor at capitalising on. Those businesses that are adapting are benefiting. People are paying more to buy branded and innovative milk products.
Take the fermented milk brand Bio-tiful Kefir. It is a drinkable product halfway between milk and yoghurt. A 250ml bottle retails at £1 and its biggest consumer base, according to its founder Natasha Bowes, is slimming women. Exactly the consumer most likely to be avoiding dairy.
It is now sold across UK supermarkets and has just expanded its capacity to 16m bottles a year.
Milk as a word does not necessarily matter to a new generation of consumers. It is the product being made with it that matters.
That is what people are willing to buy and pay more for. They are not paying more for milk. They are paying more for Bio-tiful Kefir.
Today, the urgent priority must be to turn milk into a valuable and desirable product, one people are willing to prioritise spending that little bit extra on.
That is the only sustainable future for the category and the best vehicle for that is brands.
Branded milk is not green, red or blue-top milk. A brand is a unique product produced by a particular business under a particular name.
Others would be Graham’s Gold Jersey, specialist milk-for-coffee brand The Estate Dairy, or Fairlife, the Coca-Cola-owned milk brand that started in the US in 2014 and has now expanded to Canada.
Branded milk is already driving growth in the liquid milk category, with value sales up 4.4 per cent and volumes up 52 per cent in 2017. But it is a still a hugely underdeveloped market, with less than 20 per cent of the milk sold today branded. The rest is unlabelled and undervalued.
So why are brands successful?
Because they are the ones innovating.
And by that I mean producing new milk drink products that consumers are willing to pay more for.
The focus of the dairy industry today should be on promoting and supporting new approaches by entrepreneurs and dairy firms to adding value to milk.
That means creating desirable milk drink products that provide a specific taste, health or nutritional benefit and capture consumers’ changing eating habits, interests and lifestyles.