Challenges in Fluid Milk Consumption. October 25, 2017

Transcription

1 Challenges in Fluid Milk Consumption October 25, 2017

2 Increased Competition At Store 1970 s Milk Soft Drinks Coffee Juice 1980 s Milk Soft Drinks Coffee Juice Bottled water RTD juice Teas 1990 s Milk Soft Drinks Coffee Juice Bottled water RTD juice Teas Wellness Sports drinks Flavored tea 2000 s Milk Soft Drinks Juice Coffee Bottled water RTD juice Teas Wellness Sports drinks Flavored tea Functional beverages Energy drinks Enhanced water RTD coffee Almond drink Coconut beverages Today Milk Soft Drinks Coffee Juice Bottled water RTD juice Teas Wellness Sports drinks Flavored tea Functional beverages Energy drinks Enhanced water RTD coffee Almond drink Coconut beverages Veg/Fruit blend drinks Sparkling juice Fusion drinks Fermented tea Coconut water Craft sodas

3 Overview The past decade has seen increased ad spending by big beverage companies, myriad new product innovations, and shifting consumer preferences. All of these have had an impact on milk consumption, which has fallen in the last 25 years. Big Brands Advertising Budgets Continue To Grow Coca-Cola announced a plan to increase spending on media and brand building to $1 billion this year Increased Competition From sports drinks to coconut water, more products than ever are competing for finite space in consumers stomachs Innovation The milk aisle has not kept pace with other beverages in terms of new product development The Rise of Value/Combo Meals 8 billion value meals are sold annually; other than in kids meals, they rarely include milk as a component Cold Cereal Is Disappearing From Breakfast As cold cereal consumption declines, so does milk consumption

4 $1.3 Billion Spent on Drink Ads in 2013 Advertising Spending by Category (2013) (in millions of dollars) Regular Soda $384 Diet Soda $210 Energy Drinks $ % Juice $140 Sports Drinks Fruit Drinks Plain Bottled Water $74 $53 $127 FUN FACT: From 2013 to 2015, Coca-Cola increased its ad spend by 21%, spending $565 million in the US. Light Juice Soda Brands Iced Tea Flavored Bottled Water $41 $33 $32 $22 Coca-Cola CEO Muhtar Kent pledged to increase media spending and brand-building initiatives by up to $1 billion in Other Diet Drinks $20 Other Sugary Drink Brands $19 Source: Rudd Center analysis of Nielsen data (2014); Ad Age Datacenter

5 Advertising Beyond Television In addition to the $1.3 billion beverage companies spent on traditional media formats (i.e., television, magazines, billboards, etc.), they also maintain large budgets to reach consumers in other ways. Sponsorships PepsiCo spent more than $350 million on sponsorships in 2014, including $90 million on its sponsorship with the NFL. Coca-Cola spent $295 million on sponsorships in 2014 (and is estimated to spend $100 million on Olympic sponsorship alone). Social Media Energy drinks and soda brands are very popular on social media. Not only do they have many followers, but Coca Cola averaged 25,000 display ads viewed on Facebook every month in Smartphone Apps Apps such as Coca-Cola s Freestyle and Red Bull s Racers provide games, entertainment and music while promoting the brand. Estimates range from $250,000-$750,000 per app and many brands have more than one (Red Bull alone has 15 apps).

6 Dairy Alternatives Are Proliferating Dairy-based milks have fallen from 74% of new milk/milk beverage products introduced in 2005 to 57% in % of new milk beverages by source 2005 % of new milk beverages by source % 24% 8% 5% 5% 2% 74% 18% 57% Dairy Nut Soy Dairy Nut Coconut Soy Grain Other Source: Innova New Product Database Includes Milk/Milk Drinks, Cream/Creamers, Dairy Alternative Drinks, Drinking Yogurt/Fermented Beverages; US only

7 Non Dairy Alternative Beverages

8 Reasons Consumers Choose Non-Dairy Beverages Like the taste 41.5% They are healthier to drink 36.3% They provide better nutrition 30.3% Like the flavor varieties They have healthier fats Dairy/milk/lactose allergy or intolerance No use of antibiotics/hormones/steroids 24.8% 23.3% 21.6% 20.3% They are non-gmo They are vegetarian/vegan They have no cholesterol They are better for the environment Price Don t have to be refrigerated Grew up drinking them 16.7% 13.9% 13.3% 13.3% 12.2% 9.6% 9.6% Other 4.9% Source: Packaged Facts January 2015 survey based on national online consumer panel of 2,000 U.S. adults age 18+, balanced to Census on primary demographic measures. Percentages correspond to 468 consumers in the sample who drink non-dairy milk. Published in Packaged Facts Dairy and Dairy Alternative Beverage Trends in the U.S., April 2015.

9 Milk Represents Only 4% of New Drinks Tea, juice and coffee accounted for more than half of all new beverage introductions from This is particularly bad news for milk, since these beverages all play in the same morning consumption space when milk is most often consumed. Milk 1,170 Flavored water 1,205 Iced Tea 1,565 All other Tea 7,998 Soft Drinks [VALUE] Drink Concentrate/ Mixes 2,474 Energy Drinks 2,506 Coffee 2,549 Juice 4,853 "Today, for all of us in business and government and civil society, the choice is between innovation and irrelevancy. You either innovate or you become irrelevant. - Coca-Cola CEO Muhtar Kent Source: Innova New Product Database

10 Milk Not Widely Available Away-From-Home 81% of people drink beverages away-from-home, but only 14% drink milk away- from-home. Though reasons are likely varied (availability, competition, flavor pairing, etc.) it is worth noting that 8 billion value meals were sold in 2011 and virtually none included milk in the offer. Only kids meals tend to include milk as an option. Source: Kantar World Panel

11 Cereal Consumption Is Down Cold cereal is leaving the breakfast table which has an impact on milk consumption (only 26% of inhome breakfasts included cold cereal in 2016, down from a high of 35% in the mid 90 s.) Fruit, sandwiches, yogurt, toaster pastries and bars are all replacing cereal. % of In-Home Breakfasts that Include Ready-to-Eat Cereal '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 16 Source: NPD Eating Trends in America

12 Wisconsin Needs More Milk Billions Of Pounds of Milk 35 Milk Production vs. Milk Requirements Milk Produced in Wisconsin * Produced in WI Extra Milk Needed *Preliminary estimate Source: USDA/NASS, Milk Production

13 Demand for Wisconsin Cheese is Strong Growth Rates (based volume sales) Past Year Growth, Five Year Growth, % Total Category 7.5% Wisconsin-Identified Cheese 5.3% 6.3% 4.3% 3.2% 1.8% 0.6% Non Specialty Specialty Non Specialty Specialty Source: IRI Custom WMMB Database MULO+C, Exact weight and random weight combined

14 Opportunity: Whole Milk

15 Opportunity: Milk Segments White gallon milk is driving decline in sales Flavored milk and lactose-free milk continue to increase Organic milk is in a weak position for 2017

16 Milk Packaging/ School Milk

17 Opportunity: 1% Flavored Milk at School Offers students another choice and perhaps a better option at school meals. School Nutrition Directors need to request an exemption from their state agency. (WI- DPI) School Nutrition Directors currently are not pursuing.

18 Challenges in Fluid Milk Consumption Discussion & Questions