developing a value added marketing plan for your dairy

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BUSINESS INNOVATION IN FOOD, AGRICULTURE, NATURAL

RESOURCES, AND THE BIOECONOMY

Developing a Value Added Marketing Plan for Your Dairy

Tom KalchikAssociate Director

MSU Product Center

www.productcenter.msu.edu

Overall Market StrategyMarketing Plan

Overall Market Strategy Pricing Sales Tactics

Ad ti i d P ti Advertising and Promotion Packaging Publicity

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Marketing Research and Analysis Customers Customers

Market Size and Trends

Competition

Market Share and Sales


Where do you find this? MSU Product Center

www.productcenter.msu.edu Market Reports Rapid Opportunity Assessments

Dair ROA Dairy ROA Innovation Counselors

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Dairy ROA Cultured dairy products have many opportunities Yogurt drinks are a growing market, and are

particularly appealing to the demand drivers of convenience and wellness

From 1999 through 2003, there were 653 product introductions in the yogurt industry andproduct introductions in the yogurt industry, and there has been an upward trend in new introductions. The most popular product positioning claims were low/no/reduced fat, organic, all natural and low/no/reduced calories


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Where do you find this?MSU P d C MSU Product Center www.productcenter.msu.edu Market Reports Rapid Opportunity Assessments Dairy ROADairy ROA Innovation Counselors

MI MarketMaker www.mimarketmaker.msu.edu Free resource

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Find a Target Market Household Type Education Foreign Born Race Income Income Income by Race Food Preferences

Average Dairy Products at Home Expenditures

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Dairy ROA Cultured dairy products have many opportunities Yogurt drinks are a growing market, and are

particularly appealing to the demand drivers of convenience and wellness

From 1999 through 2003, there were 653 product introductions in the yogurt industry andproduct introductions in the yogurt industry, and there has been an upward trend in new introductions. The most popular product positioning claims were low/no/reduced fat, organic, all natural and low/no/reduced calories


Market size and forecast Consumer exhibit

retraction in demand as the FDMx volume sales, on average, declined 2.4% annually during 2003-08.

Private labels, which account for 60% of the total FDMx sales andtotal FDMx sales and are priced 15-25% cheaper than the branded milk, have largely patterned the market sales trends during 2003-08.

SOURCE: MINTEL'S ESTIMATES BASED ON U.S. BUREAU OF LABOR STATISTICS, CONSUMEREXPENDITURE SURVEYS, INFORMATION RESOURCES, INC. INFOSCAN REVIEWS

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The competition yogurt and yogurt drinks

Recent (functional) ece ( u c o a )innovations in yogurt coupled with the fact that consumers are trying to eat healthier foods, has made yogurt one of the biggest competitors of milk. Consumer perceive yogurt more healthful than milk, as yogurt not only has similar nutritional profile as milkpresence of calcium and vitamin D, but also carries live cultures that are considered essential for a healthy digestive system

SOURCE: MINTEL/BASED ON INFORMATION RESOURCES, INC. INFOSCAN REVIEWS


Segment sales and forecast of milk Refrigerated white g

milk posts impressive dollar sales growth through price increase in FDMx during 2006-08.

Flavored milk remains flat due to narrow consumer positioning.

Powdered milk and evaporated milk contribute to the sales growth in other milk segment.

SOURCE: MINTEL'S ESTIMATES BASED ON BASED ON INFORMATION RESOURCES, INC. INFOSCAN REVIEWS INFORMATION

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Hispanics and blacks are primary whole milk consumers

Hispanics and black milk-using households exhibit much higher incidence of using whole milk, compared to the average household. For HispanicsFor Hispanics, drinking whole milk is likely a habit carried over from their native countries.

Source: Mintel/Simmons NCS/NHCS: NCS Summer 2008 Adult Full YearPOP


Supermarkets experience impressive growth on the strength of private labels

U.S. SALES OF MILK, BY RETAIL CHANNEL

Supermarkets experienced impressive 13% growth during 2006-08; however, much of this growth

8,000

10,000

12,000

14,000

2006 $ million 2008 (est) $ million

of this growth was driven by private label milk sales.

0

2,000

4,000

6,000

Supermarkets Convenience stores Drug and mass

SOURCE: MINTEL'S ESTIMATES BASED ON INFORMATION RESOURCES, INC. INFOSCAN REVIEWS INFORMATION /NATIONAL ASSOCIATION OF CONVENIENCES STORES

*

*EXCLUDING WAL-MART

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www.productcenter.msu.eduTop six dairy processors only account for 26% of the total market share

The top six dairies Dean HP HP Hood

Dean Foods

FDMx SALES OF LEADING MILK COMPANIES

2008 $ million 2007 $ million

The top six dairiesDean, HP Hood, Prairie Farms, Nestl USA, National Dairy Holdings, and Group Dannonaccounted for only 26% of the market share in 2008.

Private labels accounted for nearly 60% of the total market share in FDMx. Since consumer do not differentiate

0 500 1000 1500 2000 2500

Groupe Dannon

National Dairy Holdings

Nestl USA

Prairie Farms

consumer do not differentiate between different brands of milk, especially white milk, the 20-25% price discount in private labels, compared to branded milk has led consumers to adopt private label milk.

0 2,000 4,000 6,000 8,000 10,000

All other

Private label

FDMx SALES OF PRIVATE LABEL AND ALL OTHER COMPANIES

2008 $ million 2007 $ million

SOURCE: MINTEL/BASED ON INFORMATION RESOURCES, INC. INFOSCAN REVIEWS INFORMATION


Personal incidence of using milk is lower

than that of carbonated drinks 66%No children present in the household

INCIDENCE OF INDIVIDUAL CONSUMPTION OF MILK AT LEAST FOUR TIMES A WEEK, BY KEY DEMOGRAPHICS

CH

ILD

REN

IN H

H

carbonated drinks and bottled water

While 96% of all U.S. households exhibit incidence of using milk, only 68% of all adults aged 18 and over report drinking milk at least four times a week. 66%

69%

70%

59%

70%

72%

55-64

65+

White

Black

Hispanic

Children present in the household

pCR

ACE/

HIS

PAN

ICO

RIG

INA

GE

least four times a week. This suggests that personal consumption of milk lags that of carbonated drinks (nearly 90%) and bottled water (70%).

68%

67%

72%

72%

68%

61%

Male

Female

18-24

25-34

35-44

45-54

AG

END

ER

SOURCE: MINTEL

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Boomers prefer functional over natural/organic positioning Boomers are most interested in yogurt that contains live active cultures, is low in

sugar and fat and high in calcium, and are less interested in natural/organic

434240

4443

50

45 4544

Importance of healthy positioning with yogurt and yogurt drinks, by age, August 2009

18-24 25-34 35-44 45-54 55-64 65+

g g , gpositioning.

%

36

2723

38

2824

36

2119

35

23

36

1916

40

27

35

19

13

29 30

1414

21

30

13

7

21

It's naturalIts hormone-free Its organic Its high in calcium It contains active yogurt cultures

It contains probiotics

Source: Mintel


Healthy eating trend has driven growth since 2004, but recession leads to a slowdown in 2009

ns

4,500

5,000

5,500

FDMx sales of yogurt and yogurt drinks, at current prices, 2004-14 Sales of yogurt

and yogurt drinks grew 32% since 2004, reaching $4.1 billion in 2009 in FDMx. Following four years of strong sales growth

$ m

illion

projected

3,000

3,500

4,000

2004 2005 2006 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f

sales, growth slowed to 2.8% in 2009 as the economic recession prompted some consumers to cut back on yogurt.

Source: Mintel/based on Information Resources, Inc. InfoScan Reviews

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4 000

5,000

FDMx sales of yogurt and yogurt drinks, by type, 2004-09

Refrigerated yogurt

Recession hurts sales of most types of

yogurt, but gives frozen yogurt sales a

2,000

3,000

4,000 Refrigerated yogurt

350

400

450

500

y gboost

Refrigerated yogurt accounts for the majority (86% in FDMx) of yogurt sales. Sales of refrigerated ns

0

50

100

150

200

250

300

350

2004 2005 2006 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f

Refrigerated yogurt drinksFrozen yogurt/tofuShelf-stable yogurt/yogurt mixes

gyogurt grew a strong 40% from 2004-09 as more Americans discovered its health benefits. $

milli

on

Source: Mintel/based on Information Resources, Inc. InfoScan Reviews

projected


Natural product supermarket retail sales of yogurt

Sales of yogurt and yogurt drinks in the natural channel

227.2230.7

Natural product supermarket retail sales of yogurt and yogurt drinks, at current prices, 2007-09*

Sales of yogurt at natural foods stores grew a strong 12% in 2008 thanks to an emergence of new local and artisan llio

ns

202.3

2007* 2008* 2009*

brands that generated interest in the category.

$ m

i

Source: Mintel/SPINS

* 52 weeks ending September 8, 2007, September 6, 2008 and September 5, 2009

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Trends in personal consumption of refrigerated

Women are core yogurt users, but usage among men is growing

%

42 43

64 6467 68

Trends in personal consumption of refrigerated yogurt/yogurt drinks, by gender, Fall 2003 to

March 2009

Male Female

Nearly seven out of ten women (68%) eat refrigerated yogurt/yogurt drinks, compared to only 43% of men. But usage among men is on the rise; personal consumption among

%

39 3742

2003 2005 2008 2009

consumption among men increased by 4 percentage points from 2003-09.

Source: Mintel/Experian Simmons NCS: Fall 2003 Adult Full YearPOP, NCS/NHCS: Fall 2005 Adult Full YearPOP, NCS/NHCS: Winter 2008 Adult Full YearPOP, NCS/NHCS: Winter 2009 Adult Full YearPOP


FDMx sales of yogurt and yogurt drinks, by

Small, premium brands are stealing share from market leaders Groupe Danone and General Mills

1,362

1,347

1,378

1,354

Groupe Danone S.A.

General Mills

FDMx sales of yogurt and yogurt drinks, by manufacturer, 2008-09 Two companies,

Groupe Danone and General Mills, dominate the yogurt market, accounting for more than 67% of sales in FDMx. Despite a high level of product innovation and marketing m

illion

s

451

744

469

833

Private label

Other2008*

2009*

and marketing support, both market leaders lost market share from August 2008-09.

$ m

* 52 weeks ending 52 w/e August 10, 2008 and August 9, 2009Note: Data may not equal totals due to roundingSource: Mintel/Based on Information Resources, Inc. InfoScan Reviews

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Importance of non-health related attributes with yogurt and yogurt drinks, August 2009

Purchase drivers

The two most %61

59

54

37

36

It comes in a wide variety of flavors

The flavor of the yogurt/yogurt drink

The price of the yogurt/yogurt drink

The texture of the yogurt/yogurt drink

It is portable/easy to carry outside the home

y g y g , gimportant attributes consumers consider when buying yogurt are flavor selection and

i it d b34

29

22

21

9

It has fruit on the bottom

It comes in a multi-pack package

It has healthy mix-ins (eg, granola, nuts, dried fruit)

It comes in a family size package

It has candy/cookie mix-ins

price, cited by 61% and 54% of respondents.

Source: Mintel


TakeawaysM k h d l i i i l Market research and analysis is essential

Use Product Center as resource Market reports Rapid Opportunity Assessments (Dairy ROA)

Innovation Counselors Innovation Counselors Use MI MarketMaker to

Help your customers find you Find potential markets and customer

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Takeaways Fluid milk is a mature and competitive

product line, dominated by private label bottlers, with some potential for flavored products for Hispanic and Black consumersconsumers

Cultured products such as yogurt and yogurt drinks have potential, especially for small companies

developing a value added marketing plan for your dairy

Documents

yogurt industry

product introductions

growing market

market sales trends

opportunities yogurt

eduthe competition yogurt

new introductions

msu p d c msu product