The strong demand for chilled food from smaller stores has been demonstrated by the major multiples’ c-stores, but the independent sector has been slow to catch on. One of the strongest offerings is from Londis, which supplies 700 fresh food lines from its regional service centres with an additional 40 lines delivered to its members by Greencore.
Steve Carter, head of buying – fresh at MBL, says there are significant opportunities for independent retailers, with much higher margins than in many other categories, but they must be willing to “invest” in wastage. For instance, Londis recommends that in dairy retailers should expect wastage of about 4%-5%.
Compared to the delivered wholesale sector with its temperature controlled vehicles, cash and carries face an even greater challenge, with customers needing to maintain the temperature of purchases until they reach their store. Philip White, convenience trading controller at Danone, points out that chilled rooms also tend to be tucked away in depots, reducing the category’s visibility even futher.
He believes there is a need for manufacturers in the chilled sector to mount a co-ordinated education campaign to help independent retailers make the most of the chilled opportunity. He says: “Wholesale is less than 20% of our Features > Business, but it is driving a huge amount of growth. We are keen to talk to wholesalers and develop specific wholesale solutions.”
Danone has several of the top brands in the sector lead by Activia, the functional yogurt, which recently took over as second biggest brand in the category from M uuml;ller Light. In addition there is Actimel, the probiotic drinking yogurt, which has developed into a pound;100m brand in just four years, although White says the introduction of a lot of “me too” products has brought an element of confusion to this sector.
Shape is another strong Danone brand. It was relaunched last year with the promise to keep consumers feeling fuller for longer. White says it is the only diet brand in growth.
With such a portfolio of brands Danone has a 15% share of the overall market, but its share is just 5% when it comes to the wholesale channel. White says this is partly because Danone is a relative newcomer to the UK market, and he wants wholesalers to recognise his company’s commitment to the UK and the investment it is making in its brands and in growing the overall category.
Wholesalers and retailers failing to keep up the demand for chilled products will struggle to survive, according to Stewart Gilliland, chief executive of M uuml;ller UK. In an address to the Landmark Wholesale conference earlier this year he pointed out that sales of short life dairy products in the UK totalled pound;1.9bn and that yogurts and desserts outsold chilled drinks by two to one.
Gilliland said that one of the factors driving growth in the category was a high level of investment and innovation by suppliers.
The latest new product from M uuml;ller is One a Day, a yogurt that contains one fruit portion per pot. M uuml;ller claims it is the only yogurt that supplies in a single pot one of the five portions of fruit and vegetables the government recommends each adult should consume. The launch of One a Day will be supported by a pound;5m marketing campaign breaking this month. In addition M uuml;ller is currently running a pound;0.5m consumer press campaign for its Cadbury Twin Pot range with a consumer press advertising burst, and this month also sees the return of the Little Stars TV ads backing the childrens range M uuml;ller introduced last year.
Gilliland says: “Even with all of the pressure on chiller space, it’s vital for the development of the category to continue to bring innovative new products to market. That’s what makes the short life dairy product category so successful. But we appreciate the issues facing customers in determining how to maximise the potential of their chiller cabinet and we are working in partnership with both wholesalers and retailers to take a fresh look at how they can use their chiller space to their best advantage.” The company has carried out trials in cash and carry depots, sharing its category expertise, and achieved sales uplifts of 41%.
Nestl eacute; is another company that has invested heavily in its products, with recent relaunches of its two major brands, Munch Bunch and Ski. Munch Bunch was relaunched with increased calcium delivery through Calci+, a natural source of calcium, intended to help children grow healthy teeth and bones. Mark Beales, marketing director, Lactalis Nestl eacute; Chilled Dairy, explains: “We launched a new advertising campaign for Munch Bunch, featuring ‘Bones’ the Munch Bunch calcium character, who introduces the new Squashums containing Calci+. We’ll be spending pound;5.5m this year alone on supporting the brand, with a Sky Family Movies sponsorship, a new website and lots of sampling.”
With Ski, the company has developed Activ 8, which contains eight vitamins and minerals intended to maximise the body’s release of energy.
The butter, spreads and margarine (BSM) market is another area where heavyweight investment in advertising has been used to support the leading brands. Anchor is the number one block butter brand and the marketing spend by Arla on it this year is set to be pound;10m, including a TV campaign over the summer. For 2007, as consumers interest has grown in areas such as animal welfare, Arla is focusing on the fact that Anchor is the only butter or spread widely available on the UK market to be made from free-range milk.
Another Arla brand, Lurpak, is the second largest BSM brand, with sales of pound;175m, just behind Flora with pound;179m. In March, Lurpak launched a pound;6m media campaign with the strapline ‘Good food deserves Lurpak’, which was part of a wider pound;13m support package. Oliver Mantle, Arla business manager cash and carry, comments: “The wholesale channel is extremely important to Arla Foods. We have a range of tailored products that cater for both the independent and foodservice customer. Our main brands, including Anchor, Lurpak and Cravendale, are all in significant year-on-year growth within the wholesale arena.”
Responding to research which shows that more than half of all adults (54.5%) would like to improve their health, Dairy Crest has lowered the saturated fat levels in Utterly Butterly so it now has 70% less than butter, but with the same taste.
The packaging has also been redesigned to reflect the new health benefits and there will be a marketing campaign this year, with an overall spend of more than pound;4m. It includes a new TV campaign, two new 30-second adverts airing in October and the New Year.
Dairy Crest is also launching a new Omega 3 variant of Utterly Butterly targeted at consumers who are aware of the benefits of Omega 3 and are looking for ways to increase their intake without changing their weekly diet.
In the liquid milk category, organic milk is the fastest growing sector of the market, according to Yeo Valley Organic’s market audit, produced by Nielsen. Sales topped pound;145m in the year to mid July, compared with pound;121m for the previous year. According to the report, Yeo Valley is the brand leader of the organic sector, with an 8.9% share and turnover ahead by 200%. A Yeo Valley spokesman says: “Organic milk has become one of the most dynamic markets in the total grocery trade, with sales volume rising by double digits and strong growth reported for both branded and own label products. This is against the background of a conventional milk business which had been regarded as a commodity market for many years.
“The growth rate of organic was held back by a shortage of supply at the end of 2006 and early 2007, but it is still moving ahead strongly and advancing at a rate well ahead of the total milk market.
“Though selling at a premium to conventional milk, due to the fair price being paid to organic dairy farmers for their output, organic milk is now the preferred regular buy for a growing number of shoppers who choose it for a variety of reasons, including taste, animal welfare benefits and nutritional advantages, such as its naturally higher Omega 3 content.”
Another growing sector is dairy alternatives with UK sales of soya milk, desserts, cream and yogurts having risen by 7% in value over the last year. The total dairy free market is worth more than pound;132m a year and is dominated by Alpro soya, with a 64.9% share and sales of pound;85.6m, followed by private label sales of pound;25.6m and So Good with pound;17.9m. The Alpro brand is growing ahead of the market, at 14% by value, year on year.
John Allaway, Alpro’s commercial director, commented: “Gone are the days when soya was perceived as a niche food for vegans and those with a dairy intolerance. But we are not being complacent about our success and there is now a big job to do to genuinely capture a mainstream market position. This is why we will continue to invest in the success of the category in terms of education, marketing and NPD. This year we launched the first chilled organic soya milk in the UK. Alpro soya Organic sits alongside our existing chilled range, Alpro soya Original and the hugely successful Alpro soya Light.”
Growth is also being seen in flavoured milk drinks with Yazoo claiming the number one spot for flavoured milk brands by volume and frequency of purchase. Sales grew over 17% in 2006, with annual UK consumption now running at 100 million bottles.
Yazoo is currently running an on-pack promotion offering the chance to see a rocket launch at the UP Aerospace Centre in the US. The winner will be able to include a letter and photograph of themselves inside the rocket, and be given a tour of the control centre and launch pad. The promotion will be featured on 200ml multi-packs, 500ml and one litre bottles.
Alan Prior, Campina UK sales and marketing director, says: “The launch of Yazoo’s Rocket promotion is part of our on-going campaign to encourage kids to spend less time speed texting and watching television, and more time using their imaginations.
“This is an exciting opportunity for the brand and offers retailers yet more opportunity to leverage sales. As the market leader we invest substantially in activities that push the boundaries of the flavoured milk market and help feed kids imaginations. Teaming up with UP Aerospace does both. It is exciting and will attract new customers to the market, providing a substantial profit opportunity for retailers.”