The overall dairy category is huge, with a value of pound;7.5bn a year, and it’s getting bigger. It’s currently growing at a rate of 5.7% a year, with some industry estimates suggesting that it could reach pound;10bn a year by 2010.
One of the biggest dairy companies, Dairy Crest, has recently carried out category research and found that there were three key drivers to growth: health, convenience and taste. Dairy Crest category marketing controller (foods) Steve Horton says the dairy category has benefited from increasing concerns about health, with an explosion of new functional products, such as probiotic drinks, taking the sub sector’s value to pound;800m. Consumers are also looking for greater convenience and are willing to pay a premium for products such as sliced and grated cheddars, and they are looking for better tasting products pushing indulgent ranges into growth.
With health being such an important issue Dairy Crest has added Omega 3 oils to its milks and spreads and introduced lower salt versions. A new taste has been added to Dairy Crest’s range of Cathedral City cheddars. It is the UK’s biggest selling cheese brand, worth pound;106m and growing at 12% year-on-year, and Cathedral City Mild yet Distinctive Cheddar will be joining the portfolio in the convenience sector later this year.
Jackie Fuller, customer marketing manager (convenience) at Dairy Crest, says the wholesale and cash and carry channel is a vital route to market for many of the company’s products such as Cathedral City Cheddar and Clover spread, and the channel accounted for more than 11% of the company’s overall sales of Utterly Butterly. However, she adds: “One of the key issues within the channel for both wholesalers and cash and carry outlets is lack of discipline within the independent store customer base.
“This applies to ranging, merchandising and particularly promotions – with poor implementation and retailers shopping around for the best deals. This means it is often hard to maintain shelf listings and grow base sales even with brand leading lines.”
Danone is driving growth in healthy dairy products through a series of product launches and an increased marketing spend across its brands, looking to build on its 18% growth in the last year.
Activia yogurt grew by 87% over the year to July 15, and is currently benefiting from a heavyweight TV campaign that explains the brand’s health benefits and uses real people to describe how much better they feel as a result of consuming it.
In the probiotic drinks sector, Actimel has a 59% market share, and younger consumers are catching on to Actimel since Danone launched Actimel Kids Packs in April. The brand is currently being supported by its highest marketing spend ever, through a pound;14m above and below-the-line campaign running throughout 2006.
Shape is appealing to the weight conscious and dieters with the addition of Shape Lasting Satisfaction, a creamy, fruity, yogurt that has added ‘effective fibres and proteins’, that produce a lasting ‘full up’ feeling that dampens the desire to snack on less healthy products. The launch is supported by a pound;5m TV advertising campaign featuring Tess Daly and in-store promotion to encourage trial purchase.
A repositioning towards ‘heart health’ has widened Danacol’s appeal. Pack-size has been enlarged from four to six bottles, in line with usage habits, and a redesigned heart shaped icon as well as the on-pack statement ‘with Omega-3 and plant sterols to help maintain a healthy heart’ emphasises the heart health message. A pound;4m integrated marketing campaign that includes TV advertising started in July and will run through to October.
Consumers looking for a healthier lifestyle have also been increasingly turning to soya products as dairy free alternatives. Alpro has developed a range of products and commercial director John Allaway comments: “Alpro is committed to focusing on our range of naturally healthy soya products. We strive to overcome the negative taste perceptions some consumers have of soya and we believe that taste is one of the most important factors, particularly for those trying soya for the first time. Continuing to invest heavily in product upgrade and our national sampling campaign is paramount to securing new customers.”
In addition to its milk alternatives, the company produces a dairy free range of yogurts and a dairy free chocolate shake, and will be supporting the category with a range of marketing activity including TV advertising.
Sarah Petts, channel and communications manager for Kraft Foods, believes the cheese category is an area in which retailers can maximise sales from impulse purchases, as consumers seek savoury snacks to bridge the hunger gap while on the go. Within this category, processed cheese is a vitally important sector which includes established spreads brands such as Dairylea and new innovations like Philadelphia Splendips.
Within the processed cheese category, spreads and slices make up a significant part of value sales, with spreads worth pound;69m and slices pound;45m. Petts says: “Dairylea is a trusted band name within both of these sub-categories, with tubs of Dairylea, Dairylea Triangles and Dairylea Slices all being popular choices.”
The soft white cheese sector has grown by 4.2% in the last year, taking its total value to pound;82.4m. Both regular and light Philadelphia are out-performing the category, growing by 15.1% and 13.8% respectively, and Petts recommends that 125g tubs of Philadelphia and Philadelphia Light, price-marked at 99p, are the most appropriate pack size for the convenience trade.
New product launches have been the main driver of growth in the adult cheese snacks category. Philadelphia Splendips, the dipping snack launched in August last year, has achieved a 28.6% share of the market, taking its total value to pound;4.7m, and is being supported by the ‘Philly Angels’ TV campaign at key times. Packs feature price marks at pound;1.15 to help c-stores encourage impulse sales.
The kids cheese snacks category declined by 1.3% in the past year, but was still worth pound;129.2m. However, Kraft Foods’ number one variant Dairylea Dunkers Jumbo Munch is still showing growth year on year, and Kraft Foods has seen an increase of almost 50% in the number of packs being shipped since it introduced price marked packs.
Pilgrims Choice, the second biggest cheddar cheese brand, has also added to the snacking market with Pilgrims Choice Minis, and Kerry Foods has relaunched its Cheestrings backed by a pound;5m marketing spend, highlighting its healthy credentials as 100% cheese.
One of the busiest and fastest growing sectors in the dairy category is flavoured drinks.
Campina’s Yazoo brand has attained a 32.9% share of the market and it sees the wholesale and cash and carry sector as vitally important. Chris Collis, director of marketing at Campina, comments: “We are very pleased with the relationship we have developed with our wholesale and cash and carry partners, and think they are doing a great job to promote Yazoo. Most wholesalers and cash and carries include Yazoo in both the ambient and chilled sectors to maximise their profits. With sales of 80 million bottles, Yazoo grew by 14% in the last year, and our biggest cash and carry partner, for example, sold over ten million half-litre bottles in 2005.”
The latest initiative was 1.5metre high Garfield soft toys being displayed in depots to draw attention to the latest on-pack offer, and Collis says there will be more promotional activity based around a new product launch in October.
Other developments in the sector include the relaunch Dairy Crest’s flavoured milk brand, Frijj, which was valued at pound;28m a year and has grown by 35% over the latest 12-week period, and Mars Drinks has relaunched its Galaxy and Bounty drinks in new resealable 250ml bottles.
Butter, spreads and margarines
With a market value of pound;887m and 99% household penetration butters, spreads and margarines is a valuable category, which is growing by 0.4% in volume terms and 1.1% in value terms.
One of the initiatitives in the sector is Partners for Growth, an industry activity from Unilever. It aims to address an estimated pound;1bn in lost sales in the c-store sector when consumers can’t find what they want, and spreads is one of the nine categories it covers.
Partners for Growth advises that retailers should stock four product groups: butter, where Lurpak Spreadable 250g is the top seller in the c-store sector with 18% market share; buttery spreads, where Clover 500g has 28% of the market; health, dominated by Flora; and baking where Stork SB 500g has 42% of the market.
High technology has been employed by suppliers in the foodservice sector to produce dairy products which provide chefs with something special. The world’s largest goat’s cheese producer, Eurial Poitouraine, has invested e25m in the past decade to develop what it claims is the first individually frozen goat’s cheese products.
The technology works by slicing the otherwise crumbly cheese using a laser beam then freezing each piece individually, preventing the problem of them sticking together. The cheese is available in a variety of frozen cubed and sliced sizes weighing 1-20kg. The company says the main benefits are easier portion control, reduced wastage caused by cutting and crumbling, savings in time and labour, and a 12-month shelf life.
Dairygold Ingredients has also been working with cheese, but this one is specifically for pizza topping. Pizzamelt is a 9.6mm grated blend which provides an even coverage, but due to the size of the grate does not suffer from excessive browning during cooking. It also melts readily, to remove any trace of its shred identity and has a stretchable elastic quality.
Claire Bridge, of Dairygold’s NPD team, says “We have taken our time in developing this product, gaining valuable insight into the way the cheese performed in varying conditions and we believe we have now got the best blend in terms of taste, functionality and performance characteristics to give the new Pizzamelt brand the maximum opportunity for success and to provide our customers with the best product for their needs.”
Twelve months of development at Pritchitts’ Knowledge Centre went into the creation of Millac Cappuccino Milk, a milk that makes it easier to achieve the perfect cappuccino and latte by guaranteeing a consistent foam.
The secret to the new milk is the addition of extra proteins and stabilisers. While the added proteins have the ability to grab more of the air to form bubbles during the foaming process, the stabilisers stop the foam breaking down as quickly allowing it longer to form a rich smooth consistency.
As a result, Millac Cappuccino Milk produces more foam than fresh milk which means operators require less volume per drink, representing a real cost saving.
=== supplier’s viewpoint ===
The introduction of new school guidelines has created a whole range of issues and opportunities. Today I meet Duncan Barnes, 3663 wholesaler category buyer for the dairy sector, to present new concepts from various categories, designed to protect sales in some areas and grow sales in others. Millac Lite, a low fat alternative to dairy whipping cream is particularly relevant. It is ideal for the education sector and Duncan quickly understands the potential benefits and agrees to list the product, subject to commercial sign off.
He is also very interested in a range of flavoured milk drinks specifically developed with natural ingredients and low added sugar to comply with the new school guidelines. These will work really well in school vending machines.
We also discuss how the new school food guidelines will impact on milk sales with only semi-skimmed and skimmed varieties being permitted into schools from September.
Finally, as part of the review we analyse trends in the market and for cream. Interestingly, despite an increase in healthy eating and low fat products, cream consumption is increasing. There is definitely a place for healthy and indulgent products to sit together to drive category growth.