Developments in dairy consumption

by Eric Schroeder
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While dollar sales across the dairy aisle are on the upswing, the amount of gallons of milk, cheese sticks and tubs of butter making their way into consumers’ grocery carts has definitely cooled.

According to data from The Nielsen Co., New York, for the 52 weeks ended July 12, total dairy department unit sales were 18,033,191,099, down 1.6% from the same period a year earlier and down 2% from the period ended July 17, 2004. Dollar sales, meanwhile, totaled $42,187,684,556 in the period ended July 12, 2008, up nearly 12% from the same period a year ago and up approximately 17% from July 17, 2004, according to Nielsen.

For the purposes of providing data for the dairy category, Nielsen breaks the segment into 12 main groups: total butter and margarine; total cheese; total cottage cheese, sour cream and toppings; total dough products — refrigerated; total eggs — fresh; total juices and drinks — refrigerated; total meal starts — refrigerated; total milk; total puddings/desserts — dairy; total snacks/spreads/dip — dairy; total yeast — refrigerated; and total yogurt.

With the exception of total yeast, every category posted higher year-over-year dollar sales in the 52-week period ended July 12, but only three categories — total meal starters, total snacks and total yogurt — managed to post year-over-year volume gains. While total meal starters and total snacks may be considered fringe dairy categories, with combined unit sales of less than 335 million, the same may not be said about yogurt, which moved approximately 3.7 billion units during the most recent 52-week period, according to Nielsen.

Just say yes to yogurt

Several reasons for the sustained growth in yogurt exist, not the least of which has been the influx of new products touting health attributes.

"Consumers are increasingly looking for opportunities to make choices that are healthier, especially when they can come with convenience and affordability," said Chuck Fugua, spokesperson for the National Yogurt Association. "The live and active cultures contained in yogurt have a number of potential health benefits."

In the 52 weeks ended July 12, total yogurt dollar sales totaled $3,587,834,857 on unit sales of 3,668,687,607, up 10.6% and 0.9%, respectively, from the same period a year ago and up 30% and 16%, respectively, from the 52 weeks ended July 17, 2004.

Mr. Fugua said innovation in the inclusion of cultures in yogurt, coupled with the public awareness of what is contained in yogurt and how it adds to healthy nutrition, have been instrumental in the category’s growth in sales.

"The convenience, nutritional value and taste all figure in to consumers choosing yogurt as part of their daily menus," Mr. Fugua said. "Researchers around the world are studying the potential attributes of live and active culture yogurt in preventing gastrointestinal infections, boosting the body’s immune system, fighting certain types of cancer and preventing osteoporosis. More research must be done to establish a definitive link between live and active culture yogurt and these health effects, but the results to date are encouraging.

"Additionally, the live and active cultures found in yogurt break down lactose in milk. This allows lactose intolerant individuals who commonly experience gastrointestinal discomfort when they consume milk products to eat yogurt and receive the nutrients contained in the milk product without the side effects of abdominal cramping, bloating and diarrhea."

Looking ahead, Mr. Fugua was optimistic that yogurt will be able to maintain its growth pace.

"It is hard to predict the future in any field, but yogurt is recognized as a nutritional part of a healthy diet," he said. "And, as that is the case, one would expect for consumers to continue buying the product and for more to join as well."

Michael Neuwirth, senior director of public relations at The Dannon Co.,White Plains, N.Y., echoed many of Mr. Fugua’s remarks, noting there remains a tremendous opportunity for continued growth.

"We believe that the U.S. yogurt market is still fairly underdeveloped and poised for continued growth, and we are making the needed investments in R.&D., innovation and consumer communication to fuel continued growth," Mr. Neuwirth said. "In fact, we see the U.S. as a ‘frontier’ market for yogurt growth. In the grocery retail environment, yogurt is growing at a rate almost double that of refrigerated grocery shelf space (6.3% annual yogurt growth vs. 3.9% annual shelf space growth). We’re working to expand refrigerated grocery shelf space, which has constrained yogurt category growth."

Innovation in cheese

Although overall category unit sales have fallen sharply during the past year, cheese stands out as a category within dairy where positive consumption patterns are taking place amid higher prices.

According to "Dietary Assessment of Major Trends in U.S. Food Consumption, 1970-2005," published in March by the U.S. Department of Agriculture, cheese availability

contributed significantly to the 6% overall increase in milk and milk products during the period spanning 1970 to 2005. The U.S.D.A. said the availability of cheese (excluding cottage cheese) during the period nearly tripled, rising to 31 lbs per person from 11 lbs.

The introduction of convenient cheese products, such as resealable bags and cheese sticks helped pace the growth. Sargento Foods, Inc., Plymouth, Wis., has been a key player in the category, introducing its Limited Edition, Artisan Blends and Finishers product lines. The products are intended to be on-trend with focuses on personalization and customization.

LiveActive natural cheese sticks and cubes from Northfield, Ill.-based Kraft Foods Inc. also have been received favorably in the marketplace. The LiveActive line of products are made with the live, natural probiotic culture bifidobacterium lactis that helps promote regularity in 14 days.

These products and others helped contribute to dollar sales in the cheese category that eclipsed $10 billion for the first time, according to Nielsen. Dollar sales in the cheese category had been roughly unchanged for the past two years before spiking nearly 11% in the 52-week period ended July 12, Nielsen said. After several years of unit sales gains, the cheese category fell 2.2% in the most recent 52 weeks, and at 3,465,164,566 units was only marginally ahead of sales of 3,452,920,704 in the 52 weeks ended July 17, 2004.

There have been pockets of the cheese category that have weathered the commodity crunch storm, though. Specialty/imported cheese, the most consistently strong cheese sub-category over the past five years, experienced unit volume growth of nearly 2% in the most recent period tracked by Nielsen. Shredded/grated cheese, a category in which many of the new Sargento products fall under, sustained a 1% decline in unit volume sales after several years of higher volume. But even in face of the volume decline, the shredded/grated cheese category by all accounts is performing well, as dollar sales jumped an impressive 15.7% to better than $2.8 billion.

In a June interview with Food Business News, Louis Gentine, president of consumer products at Sargento Foods, talked extensively about efforts undertaken by the company to add value. One example of that effort was the launch of Vermont sharp white cheddar, first Limited Edition variety in the company’s shredded cheese line.

"We really are attempting to create the sense of excitement around high flavor cheeses the consumer may not normally find or even know about," Mr. Gentine said. "It is a very on trend idea, because it offers continued variety, flavor and brings news to the category."

What’s missing in milk?

No discussion of dairy consumption patterns would be complete without examining the state of the milk category.

According to the U.S.D.A.’s March report, beverage milk availability plunged 33% between 1970 and 2005. The cutback in availability comes even as the U.S.D.A. has maintained its recommendation that Americans consume 3 cups of milk and milk products per day (based on a 2,000 calorie-per-day diet). Currently, the U.S.D.A. said Americans are not meeting the recommendation, instead getting about 1.8 cups of milk and milk products per day.

Data from Nielsen support the U.S.D.A.’s statistics on milk. In the 52 weeks ended July 12, total milk unit volume totaled 4,622,690,365, down 2.8% from the same period a year ago and down 6.7% from the 52 weeks ended July 17, 2004.

Why the decline?

Earlier this decade, a number of beverage companies targeted the milk category with products geared toward convenience and taste. The flavored milk category, thanks in part to the introduction of fortified Nesquik products and extensions to the Slammers line from Bravo! Foods International Corp., North Palm Beach, Fla., topped $500 million in annual sales with nearly 290 million units sold, according to Nielsen. But innovation has slowed, and the category has been on a downward slide for several years. In the just ended 52-week period, unit sales of dairy-flavored milk fell 10% to 246 million.

But through it all, the International Dairy Foods Association, which represents the nation’s dairy manufacturing and marketing segments and their suppliers with a membership of 570 companies, remains optimistic consumers will continue to search out dairy products.

"Dairy products remain a solid value for consumers," the association said in a mid-June update on factors affecting dairy prices. "Penny for penny, no other food offers as much nutritional value for America’s families as milk. While food budgets are tight for many people, dairy products remain an important staple ingredient for their great taste and nutrition."

This article can also be found in the digital edition of Dairy Business News, August 19, 2008, starting on Page 1. Click here to search that archive.

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