Shining star: as health messages and foodservice success stories gain momentum milk could be the bright spot in the beverage market this year

Dairy Foods, Feb, 2005 by David Phillips

McDonald's sales nationwide jumped from 625,000 units a week to more than 4.2 million units a week within less than two months after the new package and promotional efforts were introduced.

The growth has been so dramatic, processors are scurrying to add capacity to keep up with demand, says Tom Gallagher, CEO of Dairy Management, Inc.

"Other chains will follow suit with 8 oz packages and we are working on getting the 16 oz packages in (to McDonald's and Wendy's)," Gallagher says. "At the rate they are going, they could yield easily a billion lbs of extra milk sales a year."

That equals nearly a 2% jump in the 54 billion lbs sold in the United States in 2003.

Takin' 'em to school

Vending and foodservice are two non-core channels that offer great opportunity for increased sales. But the school a la carte line may be the most important to the future of the milk industry.

This year DMI is working to encourage processors to improve school milk in two ways--by offering more flavors and by switching from paperboard cartons to resealable plastic bottles, just as McDonald's and Wendy's have done.

"People always want to do studies," Gallagher says. "But we know we went from seven cardboard cartons a week per store to 300 per store. That's the study."

DMI has evidence too that the phenomenon will transition from the golden arches to the school cafeteria.

Several processors including HP Hood, National Dairy Holdings, and Dean Foods, began to offer plastic bottles in their school programs, in 2003. The New Look of School Milk (NLSM) pilot program (see story p. 32) offered better flavors, plastic packaging, and in some cases, larger package sizes, and the results were remarkable. Currently plastic packaging is in about 1,500 of the nation's 90,000 schools, but Gallagher says that's up from virtually zero a few years ago.

Within the industry there is some debate as to how tightly school milk improvement efforts should be focused.

"Our take on schools is a little broader than simply the packaging," says Tom Nagle. v.p. of marketing at the International Dairy Foods Assn. "There are about 15 different things you can do to improve school milk. If you just pick five, you will see very substantial improvements in sales. If you treat it like any other foodservice provider, you will do what you need to do to please the customer."

Indeed, other improvements are being made to school milk. HP Hood offers upgraded flavors in both plastic and a more colorful paper container, and Smith Dairy, Orrville, Ohio, recently developed a no-sugar-added chocolate school milk with 31% fewer calories.

While the a la carte line may hold exponentially more potential for growth, no one is saying that school vending should be ignored either. Recently the Wisconsin Milk Marketing Board boasted that two-thirds of the Dairy State's high schools have milk vending machines. That's a higher percentage than anywhere else in the country.

Organic growth

Last month Organic Valley Family of Farms, La Farge, Wis., announced record sales of $208 million in 2004, up 33% from $156 million the year before.