Milk numbers offer mixed signals

Dairy Foods, July, 2006

Milk sales figures in the U.S. have been sending some mixed signals in the past year. There is good news for sure, but there is also bad news. Overall milk continued to trend downward in 2005 and there was significant shrinkage in the final quarter of the year, according to Information Resources, Inc. But USDA numbers (see below) for February and March show a few bright spots, particularly for lowfat milk.

Of course lowfat milk has been the strength for some time, even by IRI's measures. From the last quarter of 2004 through the second quarter of 2005, lowfat sales in IRI's F/D/MX channels were actually up a bit.

The mixed signals might have something to do with the fact that IRI's numbers are for food, drug, and mass merchandisers, but do not include Wal-Mart, or the corner gas station, or the school lunch line. USDA's estimates are intended to represent all milk sold in the U.S.

USDA figures show that nearly all reduced fat level white milk experienced sales gains in February and March compared to the same periods a year ago.

If one is optimistic, a couple of conclusions might be drawn:

No. 1: Milk is being sold in a wider variety of outlets, including some where growth is hard to measure like foodservice and convenience stores.

No. 2: Consumers are gravitating toward lower fat level products, having finally gotten the message that lowfat milk tastes great and is a healthful food.

Flavored milk continues to slump according to IRI's numbers, although private label and some strong local brands did have some growth. USDA shows flavored reduced-fat milk gaining ground in February and March.

Going back to IRI's numbers and looking at the top 10 brands of lowfat milk, private label is shrinking, while value-added brands including Lactaid 100, Horizon Organic, and Organic Valley are experiencing the most growth.

The first time Dairy Foods published a monthly Dairy, Market Trends, in August 2001, the subject was branded vs. private label milk, looking particularly at lowfat and skim. Private label was starting to shrink then and the trend toward branding has continued. In 2001, just one organic brand, Horizon Organic was in the top 10, at No. 9 with 14 million units sold. Now Horizon is joined in the top-ten ranking by Organic Valley which has amassed nearly a 1% share of the total lowfat milk market.

Estimated U.S. Sales of Milk Feb.-March 2006

                                 February           March
Product Name                Sales   % change   Sales   % change

                               Mil. Lbs.          Mil. Lbs.

Whole Milk                  1,301    -2.3      1,455     -1.3
Flavored Whole Milk            55    -6.1         61     -8.7
Reduced Fat Milk (2%)       1,403     3.3      1,569      4.5
Low Fat Milk (1%)             512     3.3        574      4.4
Fat-Free Milk (Skim)          643     3.2        712      3.8
Flavored Fat-Reduced Milk     333    -1.7        371      8.5
Buttermilk                     42     3.1         46     -2.0
Total Fluid Milk Products   4,306     1.2      4,807      2.7

Source: USDA

Quarterly Sales of Milk

Reporting period   Dollar sales   % change   Unit sales   % change
13 weeks ended      (millions)    vs. yago   (millions)   vs. yago

03/26/06              $2,745       -5.2        1,106       -5.3
12/25/05              $2,829       -0.99       1,131       -4.09
9/25/05               $2,693       -5.85       1,099       -2.92
6/26/05               $2,698       -3.91       1,105       -0.73
3/27/05               $2,876        7.69       1,165       -0.19
12/26/04              $2,857        2.04       1,179       -1.05

Source: Information Resources Inc.

Quarterly Sales of Lowfat and Skim Milk

Reporting period   Dollar sales   % change   Unit sales   % change
13 weeks ended      (millions)    vs. yago   (millions)   vs. yago

03/26/06              $1,699        -4.1        683         -4.2
12/25/05              $1,692         0.4        673         -3.0
9/25/05               $1,665        -4.7        677         -1.3
6/26/05               $1,669        -2.5        679          1.1
3/27/05               $1,771         9.3        713          1.7
12/26/04              $1,686         2.5        693          1.0

Source: Information Resources Inc.

Top 10 Brands Flavored Milk

Brand               Dollar sales   % change   Market share
                     (millions)    vs. yago    by dollar

Private Label          $215          3.26        30.08
Nestle Nesquik          $98           -5         13.63
Dean's                  $29         -2.5         4.02
Kemps                   $16         -5.05        2.27
Mayfield               $13.6         4.74        1.90
Prairie Farms          $13.1         10.7        1.84
Borden Milk Prod.      $11.8         -.20        1.64
Garelick Farms         $11.4         -.86        1.59
Land O Lakes           $10.8        -4.53        1.50
Hersheys Morn.         $10.7        -36.8        1.49
Total Category        $716.0        -1.05        100

Brand                Unit sales    % change
                     (millions)    vs. yago

Private Label           116          1.32
Nestle Nesquik           55         -9.06
Dean's                   16         -4.93
Kemps                    8          -4.28
Mayfield                 6           2.05
Prairie Farms            7           9.12
Borden Milk Prod.       5.2         -3.36
Garelick Farms          5.4         -7.81
Land O Lakes            5.4         -5.82
Hersheys Morn.          5.1         -40.98
Total Category          382         -3.58

52 weeks ended 03/19/06

Source: Information Resources Inc.

Top 10 Brands Lowfat and Skim Milk

Brand             Dollar sales   % change   Market share
                   (millions)    vs. yago    by dollar

Private Label        $4,182       -3.08        62.47
Lactaid 100           $212         8.75         3.16
Horizon Organic       $126        19.97         1.89
Kemps                 $86         -8.64         1.28
Dean's                $81          1.03         1.21
Garelick Farms        $72         -2.36         1.07
Mayfield              $67          6.72         1.00
Prairie Farms         $66         -9.63         0.98
Organic Valley        $64         17.92         0.96
Hood                  $63        -11.29         0.94
Total Category       $6,695       -2.41        100.00

Brand              Unit sales    % change
                   (millions)    vs. yago

Private Label        1,738        -1.39
Lactaid 100            63          3.56
Horizon Organic        33         10.28
Kemps                  33         -8.87
Dean's                 38         -0.61
Garelick Farms         31         -1.34
Mayfield               19          4.32
Prairie Farms          29         -6.13
Organic Valley         18         12.12
Hood                   24         -9.69
Total Category       2,709        -1.74

52 weeks ended 03/19/06

Source: Information Resources Inc.