by Cindy Sorensen
Founder and CEO, The Grocery Group
The dairy case is one of the most profitable sections of the grocery store. It delivers 20 percent of store profit in just 3 percent of the store space. The milk category is large and enviable. It’s consumer household penetration of 95 percent and its trip-driving qualities are coveted by most every other category in the store.
In recent years, we have seen rising consumption in three segments within the milk case: whole, flavored and value-added milk. We have also seen an increase in new item introductions of plant-based beverages. These new introductions have brought innovation in products, packaging and marketing to the dairy case, but they have not delivered sales in proportion to the amount of shelf space they have commandeered. In fact, they account for about 30 percent of shelf space, with only approximately 6 percent of the gallon consumption.
They have gained the shelf space from the plethora of products that have been introduced, which often create duplication and not variety in choices for the shopper. The inequity created on the shelf is responsible for driving out-of-stocks in the growing segments of whole, flavored and value-added milk, all which are segments larger than the plant-based segment. These out-of-stocks also impact total basket size and store profitability.
When milk is in the shopping basket, the annual basket size is three times that of plant-based beverages, and baskets including milk offer $7 more in profitability than those without it. Because of this, the milk consumer is highly sought after by retailers. Let’s correct out-of-stocks for which shoppers have very little tolerance.
With competitive distribution channels more plentiful than ever before and shoppers visiting six different retailers to fulfill their shopping basket, being in-stock on the products they want is more critical than ever for staying relevant in the marketplace.
The time is now to fix the fundamentals at retail that will reduce out-of-stocks and increase consumer satisfaction. What is the solution? The milk industry is introducing The Milk Revitalization Alliance (MRA), a united industry front representing the full dairy value chain from farm to shelf, local to national. It represents dairy farmers and milk companies with the goal of increasing milk sales. The MRA will revitalize the milk case to leverage consumer trends and maximize sales, with a four-pillar approach, with short term and long-term goals for each pillar: Shelf, Marketing, Packaging and Products.
“We’ve seen first-hand how fixing out of stocks and stocking the right products can be successful when put into practice,” according to Melissa Malcolm-Cullison, director, national sales and field marketing at the Milk Processor Education Program (MilkPEP), which is one of the industry participants in the MRA.
Case studies have been conducted with several retailers who had been experiencing decreased milk sales. These retailers participated in a program called “Dairy Case Dynamics.” The program helped retailers drive profit and maximize sales by fixing the fundamentals of shelf and category management.
There will be more industry-wide initiatives in the future that will focus on product and package innovation, but let’s get the shelf management issues addressed so these new innovative products have proper representation on the shelf to increase their chances of success when they are introduced.
For more information on the Milk Revitalization Alliance and how to participate in a Dairy Case Dynamics project, contact Malcolm-Cullison at [email protected].
Cindy Sorensen is the founder and CEO of The Grocery Group, which focuses on developing leadership in the grocery industry by supporting professionals in their career development. The Group also develops programs to connect grocery industry professionals to colleges and universities to help attract, recruit and retain a talented workforce in a competitive employment market. Reach Sorensen at [email protected].