Good for All

Dairy Field, Oct 2004 by Dudlicek, James

With fluid sales perpetually in need of a boost, it's great to see IDFA on the team that launched Bev Expo last month. This new trade show, which includes participants from all corners of the beverage spectrum, offered a strong dairy presence from exhibitors as well as educational programming.

I was lucky enough to be down in Tampa for the expo, not only because the hurricanes were gone by then, but to hear the preaching not just to the choir, but to the whole beverage community, that opportunities for milk abound.

But then, what's left to be said? Dairy Field has been at the forefront of delivering the latest news of how milk stands poised as the next great dietary lifestyle choice; another look at milk's role in the obesity debate can be found in this issue. And just last month, I suggested to you that we stand at the cusp of a banner year for school milk. One of the Bev Expo sessions I attended confirmed as much, and outlined an ongoing series of nationwide workshops aimed at strengthening the case for school milk.

But on new ideas, Bev Expo did not disappoint. Among the dairy-related sessions was the presentation of a new strategy under way, titled "Optimizing Space in the Dairy case." This study from the Fluid Milk Strategic Thinking Initiative, presented by Rob McCabe of Williard Bishop Consulting, looked at different dairy case management ideas to increase sales.

The study led to the development of a computer model aimed at helping retailers determine how to maximize space for fluid sales by size, flavor, and type according to varying consumer needs. Its mission is to combat the displacement of fluid products from dairy cases as other products compete for space, leading retailers to shrink facing space for products like white gallons. The goal is to reaffirm the historic profitability of fluid milk as a staple of consumers and convince retailers they shouldn't be giving up ground to other products.

Yet another study, this one out of Texas A&M University, provided cold, hard data for something of which I'm sure the industry has been keenly aware for quite some time: milk's biggest competitor is pop, and dairy takes it on the chin when retail prices jump.

Historically, analyses of milk sales have understated the competitive forces in the marketplace and asserted that demand for milk is inelastic, explained A&M's Dr. Oral Capps. In fact, Capps said, research shows milk loses more consumers to carbonated soft drinks for every 1 percent increase in milk prices. On the other hand, sales of bottled water appear to be fairly independent of milk.

So what does this mean? Well, much like Dr. Zemel's research showed us hard data on what we already knew, that milk is good for you, the A&M study affirms the pattern of declining fluid sales. And while milk is historically profitable as a sales driver in the grocery arena, retailers apparently see it as expendable in the fight for shelf space.

Thus the circle is drawn: Demand is low so prices fall and production drops. Supply is short so prices rise and consumers seek alternatives. Then as the wheel turns, wrenches like BSE and CWT get thrown into the spokes.

Is market stability possible? Maybe, if the industry takes advantage of the data being offered and attempts to artificially stunt supply are halted. Stress to retailers the strength of milk on sales and deliver them innovative, quality products. Stress to consumers the strength of milk on health and taste, and deliver them innovative, quality products.

Promote consistent demand, encourage consistent prices. The commodities roller coaster isn't good for anyone.

James Dudlicek

(847) 205-5660 ext. 4009

jdudlicek@stagnito.com