The International Dairy Foods Association Economic Impact Study, which measures the combined impact of the dairy products industry, showed the economic impact totaled $752.93 billion in the U.S. With more than 90 percent household penetration and high frequency of consumption, IDFA board member Blake Waltrip said the average U.S. consumer today has anywhere from three to four milk and milk alternatives in the refrigerator.
Waltrip, who also is CEO for North America a2 Milk company, noted some declining aspects of dairy, but said the “only way out of declining commodity categories is innovation – always has been the case, always will be the case.”
“While conventional dairy has been declining, for years and years, the premium dairy value added propositions new innovations are actually growing in the category and that’s where we fit into the premium side and building innovation,” Waltrip said.
Room for both
Waltrip sees room for both conventional dairy and plant-based alternatives. There’s a consumer need for the plant-based side of the equation, a $2.5 billion dollar category, he said.
“The biggest issue is there are a set of consumers that certainly have opted to move into the plant-based alternatives,” he said. “And what you’ve seen a lot of happening in plant based is a lot of trading back and forth between different types of plant-based alternatives.
“Remember, the industry started with soy milk and then almond milk took over from soy milk and then you had a big surge, you had some surge with tea milk and now an oat milk. So there’s been sort of a movement across what’s the hot plant-based alternative.”
Nutritional comparison
Although he agrees there’s room for both dairy and plant based, Waltrip said the former outperforms in terms of nutrition.
“If you were to compare the nutritional equivalency of dairy, which is a complete protein, all essential amino acids and the right balance, compared to many of these plant-based alternatives, you can’t compare them…there’s a reason that milk is still in the USDA Food Pyramid, it’s because it’s such nutritionally dense food that we need in our bodies.”
“Plant-based milk alternatives often present inferior nutritional substitutes of bovine milk,” according to an abstract from the International Dairy Journal. “The protein content of the plant-based milk alternatives reviewed ranged from 5 to 100 percent (48 percent when averaged) of the protein content of whole bovine milk.”
Biggest trends in fluid milk
Waltrip highlighted three of the biggest trends he’s seen in the fluid milk category. They include:
- Ultra-filtered products like Fairlife, that deliver higher protein, lower sugar benefit proposition for consumers, and which has been a “successful initiative,” Waltrip noted.
- a2 milk, which is what his company, the a2 Milk company, has invested in educating U.S. consumers as to why they should care and explain to them the difference between the a1 and a2 dedication protein.
- Super-premium layered propositions like grass-fed milk.
Supply chain
According to Waltrip, a2 has been fortunate with the co-packing network it uses.
“We have great relationships with our co-packers and they’re excellent at what they do. And we’ve fortunately been able to keep a steady source of supply in our product,” Waltrip said.
However, he added that there’s pressures across the board.
“The time frames for getting packaging are longer than they’ve ever been. The time frames for often the demand to get products into a certain place, the freight side of the equation has been a real challenge. In general, it’s resulted in higher out-of-stock rates than any manufacturer would like to see, which was reflected in sometimes empty spaces on the shelves.
“We’re fortunate that we’ve been able to kind of fight through those and have been able to have fairly decently high service levels to all of our retail customers. But that’s been one of the biggest challenges.”
A2 Milk
The a2 Milk company has a value proposition focused on the a2 beta-casein protein.
“There’s two kinds of proteins in milk, a1 beta-casein proteins and a2 beta casein protein,” Waltrip explained. “And there’s been animal geneticists that have traced back thousands of years ago, when this a1 protein was created as a genetic mutation that happened when cows became domesticated and crossbred.
“Today, we’ve got about around circa 30 percent of cows with a1 genetics, somewhere in that is about 30 percent of a2 genetics and then the rest produce a blend of a1 and a2. Why it’s important is because millions of people who have issues digesting dairy naturally assume they’re lactose intolerant, because that’s the general understanding.”
Waltrip said that percentage of people having issues digesting is “much smaller” than previously understood.
“And so our hypothesis, which is being proven out again and again, is that it’s more likely people have an intolerance to the a1 protein. When they consume milk that only comes from cows that produce the a2 protein, they have no issues digesting. That’s the foundation of our proposition.”
The idea, Waltrip continued, is to build awareness for what was previously an unknown proposition in the a2 protein “through the goodness of milk and ultimately to be able to expand our platform, leveraging this incredible natural protein. Because it really is all about genetics…we go out and we genetically test all the cows in the herd.”
As of mid-April, a2 is in more than 26,000 stores. The U.S. retail operations began in 2015 with a test market in California and 400 different sites.
“We’ve seen tremendous growth in our distribution,” Waltrip said. “We’ve had an 85 percent growth [compound annual growth rate] over the last five years. And we’re still in the early stages of this journey of developing broad consumer awareness.
“But in premium milk, we’ve been able to develop a strong aided awareness, strong loyalty, we have the second highest loyalty in a category when you measure from a brand health perspective. And we’re extremely excited about the progress we’ve made to inform consumers of this alternative opportunity for them to effectively love milk again.”
For more information, visit idfa.org.
