Cash Cow

American Demographics, Feb 1, 2002

There's no use crying over spilled milk - unless they're tears of joy. After years of losing market share to more portable beverages, the milk industry is finally seeing some sweet gains. According to a report released in November 2001 by Packaged Facts, a division of MarketResearch.com, sales of flavored dairy beverages reached $2 billion in 2001, up from $1.8 billion in 2000 and $1.4 billion in 1997. That's an increase of 40.4 percent over the four-year period or an 8.9 percent compound annual growth rate. And future sales are expected to remain strong. Packaged Facts predicts that by 2006, the sales in the flavored dairy beverage industry will grow by another 50 percent (8.4 percent annually) to $3 billion. Currently, the largest share of the industry's annual receipts (55.5 percent) come from ready-to-drink flavored milk products. Cocoa mixes and milk flavorings - chocolate flavored products that contain dry milk ingredients that are added to water, or dairy free products that are added to milk - are responsible for an additional 26.8 percent of annual sales while other ready-to-drink dairy beverages claim 17.1 percent of the market. Flavored mixes and milk flavorings other than cocoa - such as coffee flavored mixes, chai tea concentrates, and instant breakfast or smoothie mixes - account for less than 1 percent of industry sales.

MOOOVE OVER, CHOCOLATE

The future of the flavored dairy beverage industry will focus less on traditional chocolate milk and more on sophisticated flavors, such as coffee, that appeal to adults.