Fluid Milk RevitalizationAt Retail

April 10, 2019Paul Ziemnisky

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Agenda

• Milk Revitalization Alliance

• Key Milk Facts to Leverage

• Opportunity Areas and Industry Resources

DMI: Global Innovation Partnerships Team

Who we are:Dairy industry consultants that provide expertise in:

Product Science + Marketing + Insights + Innovation

Core capabilities and resources:

Consumer Insights & Innovation

Objectives: Drive incremental sales and build trust in dairy

ProductDevelopment

NutritionConsulting

SocialResponsibility

Exports &Supply Chain

Marketing

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Milk Revitalization Alliance Vision

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Leverage the power of the dairy value chain to:

Increase milk’s impact

WIN at retail

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Take back the dairy aisle

Fix the fundamentals

Reignite category growth

Better serve retail customers

We have a tremendous opportunity to:

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MRA Aligned to Provide “Smelling Salts” to Retailers

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Optimized Shelf &

Assortment

Category & Consumer Insights

Packaging Messaging

Product Innovation

Shopper Marketing

2019 Retail Approach

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Milk Brands

Milk Revitalization

Alliance (MRA)

Retailer/Etailers

Direction of Communication

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1. Milk is a powerhouse category• Offers unmatched foot traffic, bigger basket rings and higher

profit potential than other categories

• Drives key growth opportunities

MRA Unified Story

2. Milk delivers on consumer needs• On trend with what shoppers are looking for

3. Milk needs to be prioritized• From shelf space to marketing to packaging to product; the

MRA can help with both short and long-term action steps

4. Milk presents an opportunity to create new products and engage the consumer to build relevance

Milk Facts

Fluid milk declines have been driven by 4 major dynamics

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Societal Changes:Changing American

Demographics & Household Composition

Changing Breakfast Behaviors

Growth of Out-of-Home Channels

Significant Beverage Innovation Outside of Fluid

Milk

• Milk

• Soft Drinks

• Coffee

• Juice

• Bottled Water

• RTD Juice

• Teas

• Wellness

• Sports Drinks

• Flavored Teas

• Functional Bevs

• Energy Drinks

• Enhanced Water

• RTD Coffee

• Almond Drink

• Coconut Bevs

• RTD Smoothies

• K-Cups

The beverage landscape has grown exponentially

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1970s 1980s 1990s 2000s Today

• Vegetable/Fruit Blend

• Sparkling Juice

• Fusion Drinks

• Coconut Water

• Drinkable Yogurt

• Pea Protein Drinks

• Kombucha

• Other Fermented

• Cold Brew Coffee

• Cold Pressed Juices

• Alkaline Water

• Maple Water

• And many more…

• Milk

• Soft Drinks

• Coffee

• Juice

• Milk

• Soft Drinks

• Coffee

• Juice

• Bottled Water

• RTD Juice

• Teas

• Milk

• Soft Drinks

• Coffee

• Juice

• Bottled Water

• RTD Juice

• Teas

• Wellness

• Sports Drinks

• Flavored Teas

• Milk

• Soft Drinks

• Coffee

• Juice

• Bottled Water

• RTD Juice

• Teas

• Wellness

• Sports Drinks

• Flavored Teas

• Functional Bevs

• Energy Drinks

• Enhanced Water

• RTD Coffee

• Almond Drink

• Coconut Bevs

• RTD Smoothies

• K-Cups

With these new beverage options, milk has loss to multiple choices

35.5

7.4 5.6

4.5 4.5 3.8 2.3 2.3

0.6 0.4 0.1 0.0

BottledWater

Coffee Tea Juice PlantBeverages

SportsDrinks

EnergyDrinks

Flav/OtherMilk

YogurtDrinks

ClubSoda/Tonic

Other SSBeverage

Smoothies

White Milk Volume Loss to Competitive Switching (Gallons)

Source: NCP; Total US - All Outlets; 52 Weeks Ending 11/12/2017 vs YAG

53.0% 11.1% 8.4% 6.7% 6.6% 5.6% 3.5% 3.4% 0.9% 0.5% 0.1% 0.03%Share of

Switching

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Impact of plant-based beverages are not as

big of a driver of declines as other factors

As choice expanded, Milk’s share of stomach declined

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Milk’s Share of Beverage Occasions% Occasions

Source: Kantar Worldpanel

18.9

1987

18.5

1997

10.3

2007

8.3

2017

% Occasions

Consumers Age +1

12me December 1987 - 2017

Source: National Consumer Panel Total US – All Outlets; 52 we 11/12/2017 vs. YAG

We are losing share of stomach primarily with our retained buyers, who account for 90% of White Milk declines

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Lost Buyers(4% of all buyers)

New Buyers(3% of all buyers)

Lost buyers

contributed 10% of

White Milk’s decline,

or -19.6 million gallons

Retained buyers

account for 90% of

White Milk volume

decline -70.5 million

gallons

Retained Buyers Current(97% of all buyers)

New buyers

contributed gain of

+12.0 million gallons

Equates to -.6 gallons per

household annually =

~1.5oz per week

• We are losing 1.5oz per week on average..

• With existing users..

• Just one more serving per household per week could drive significant growth for the category

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Milk is still a powerhouse category

Source: IRI/DMI Custom Unify Milk Database, Total US Multi Outlet + Convenience, YTD Ending 6/19/2018

30 Annual Trips

$106 / buyer

$2,100 annual basket value

95%HH Penetration

$14.3BCategory Size

>$150MMAnnual Spending

$1.6B Flavored Milk

$1.5B Organic Milk

$1.1B Lactose Free

Support from industry

and brands

Dairy Case Studys

Consumer Segmentation

Pre-Competitive Category Tool Kits

Beverage Innovation

Milk Messaging/Claims Test

2019 Calendar of Events

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Available Resourcesfor Brands

Deep Dive:

Dairy Case Study Results in Action

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Dairy Performance: 3 – 10 – 20

Dairy represents

20% OF GROSS

PROFITREGISTERS

FLORISTP

RO

DU

CE

BU

LK

GR

OC

ERY B

AK

ERY

WIN

E & SP

IRITS

DELI &

PR

EPA

RED

FOO

DS

DAIRY, EGGS & COFFEEMEATSEAFOOD

3%OF SPACE

10%OF SALES

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Milk & eggs have the lowest DOS & deliver highest GMROIIDOS = Days of Supply

Dairy Department Days-of-Supply (Avg DOS)

Category Definitions:• Fluid Milk: Buttermilk, Conventional White, Eggnog, Flavored Milk, Organic White

• Alterative Beverages: Almond, Soy, Rice, Coconut & A/O

• Refrigerated Beverages: Juice, Drinks, Tea & Iced Coffee Beverages

Source: Inmar/Willard Bishop Grocery SuperStudyTM

2.3

2.6

4.9

5.8

6.0

6.1

7.3

10.1

10.4

Eggs

Fluid Milk

Rfg Bevs

Yogurt

Cultured

Cream/Creamer

Dairy Alt Bevs

Cheese

Margarine/Butter

Dairy Case Avg AGMROII $25.86(Total Stores is $8-10)

Avg AGMROII

Eggs $82.94

Fluid Milk $55.35

Cream/Creamer $34.38

Rfg Bevs $29.37

Cultured $28.64

Yogurt $24.86

Dairy Alt Bevs $24.25

Cheese $17.71

Margarine/Butter $16.66

Average GMROII*

GMROII is Average Gross MarginReturn on Inventory Investment

NATIONAL

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There are key growth segments within dairy milk. Historical growth in plant based has been entirely driven by almond.

2018 Sales ($MM)5 Year Growth

($MM)5 Year $ CAGR

Whole White Milk $4,779 $280 1.2%

Lactose Free Milk $1,279 $604 13.6%

Flavored Milk $1,573 $160 2.2%

Refrigerated Plant Based $1,620 $499 7.6%

Refrigerated Almond Beverage $1,188 $578 14.3%

Refrigerated Plant ex Almond $431 -$79 -3.3%

Source: IRI/DMI Custom Unify Milk Database, Total US Multi Outlet + Convenience, YTD Ending 12/2018

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Sales Rate, Milk Segments$382

Whole White Milk

Source: IRI/DMI Custom Unify Milk Database, Total US Multi Outlet + Convenience, YTD Ending 12/2018;

*Sales Rate measured in Dollars per $MM / item

$368

2% White Milk

$220

1% White Milk

$113

Skim White Milk

$47

Flavored Milk

$51

Lactose Free Milk

$56

Organic Milk

$39

Refrigerated Plant Based Alternative

Milk and its segments are the volume powerhouses of the category

Conventional White Milk(excludes Organic and Lactose Free)

Value-Added Products

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Milk subcategories are more productive than those of plant-based

Source: IRI/DMI Custom Unify Milk Database, Total US Multi Outlet + Convenience, YTD Ending 12/2018;

*Sales Rate measured in Dollars per $MM / item

Sales Rate, Value-Added Products

$58

Ch

oco

late

Stra

wb

erry

Van

illa

Wh

ite

Milk

Flav

ore

d

Wh

ite

Milk

Flav

ore

d

Bu

tter

milk

Egg

No

g

Tota

l Pla

nt-

Bas

ed

Tota

l Alm

on

d

Soy

Cas

hew Flax

Pea Oat

$23 $22

$72

$30

$74

$22

$45

$20

$39$48

$31$19

$9 $8 $5

Flavored Milk($1.6B)

Lactose Free($1.3B)

Organic($1.5B)

Other Milk Refrigerated Plant Based($1.6B)

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Shopper Segmentation:

Milk Mavens

Morning Quenchers

Perfect Pairers

Entrée EnhancersMilk

MagiciansMixologists Diluted Drinkers

Whyconsume

milk

Love the taste and texture

Versatile

Health benefits

Quench thirst

Nourish and satisfy

Health and calcium

Inexpensive

Completes food

‘Washes down'

Added nutrition

Delicious

Goes with food

Nourish and satisfy

Calcium

Transform ingredients

Create deliciousness

Nourish and satisfy

A great base for a treat OR

Control heath

Natural and nutritious

Simple way to get a caffeine boost

Whenconsume

milk

Across all occasions

In a glass or with breakfast

In a glass or with snacks

In a glass or with dinner or lunch

In cereal / oatmeal and recipe

Base for lattes, smoothies,

milkshakes, etc.

In drip coffee or tea

Size and Volume

7% of People

24% of Volume

18% of Trips

10% of People

13% of Volume

16% of Trips

16% of People

21% of Volume

24% of Trips

6% of People

9% of Volume

8% of Trips

5% of People

6% of Volume

7% of Trips

2% of People

3% of Volume

3% of Trips

6% of People

7% of Volume

8% of Trips

Shopper segmentation research reveals consumers are using milk in many different ways

Source: Arc Brandpoint Segmentation Research 2018

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MilkPEP 2019 Calendar

Timing Jan + Feb March + AprilMarch +

AprilJulyJune July August October Nov + Dec

Always On e-comm

Objective/Goal

Build trust and salience in real milk

Drive traffic to retail and increase volume of milk for morning breakfast routines

Drive traffic to retail with fitness-focused shoppers to buy chocolate milk gallons as their workout recovery beverage of choice

Drive traffic to FeedingAmerica.com to drive donations to Great American Milk Drive

Drive awareness and purchase of fresh milk delivery thru eCommerce channel

Get Mom to buy more milk during the back to school stock up and fill-in trips

Drive foot traffic to retailers to buy more chocolate milk during the Halloween season

Get families to buy more milk during the holiday season during stock up and fill in trips

Drive incremental sales

Position milk front and center on the digital shelf

Strategy

Inspire Milk Mavens and Perfect Pairers and families to feel happy and proud about choosing real milk

Remind Mom to start the day with simple, nutritious solutions so that her kids can take on whatever life puts on their plate

Irresistibly link chocolate milk with real recovery

Remind shoppers that milk helps fuel children and their community has a need

Use the modern milkman (eCommerce) to help mom savor more of summer with cold milk delivery

Milk is the school supply that solves a real, everyday problem: the afterschool “hangries”

Make chocolate milk the Official Drink of Halloween(to be trademarked)

Remind mom that milk is integral to the holiday fabric and inspires holiday memories

Leverage program activations at the digital shelf

Creative Reference

HolidayHalloweenBack to SchoolChocolate Milk Recovery

(Launch) Milk.Love What’s Real.

Great American Milk Drive

Summer e-cmmMake Mornings Matter White Milk

Chocolate Milk

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2019 Brand/Retail Communication Calendar

In progress, subject to change

Q1 Q2 Q3 Q4

EBLASTS

MILKPEP.ORG

WEBINARS

TRADE MEDIA

Dairy Foods Print Ad, Native, e-

newsletterDairy Foods Print Ad, Native

VIA MRA

1:1 OUTREACH

RETAIL CONFERENCES

Digital Food & Beverage

NFRA Food Convention

P2PX

NACS Show

Retail Trade SupportProgressive Grocer webinar, print

P2P Summit

Groceryshop

Cold Vault Summit

Continued Retailer MeetingsTargeting retailers in social/programmatic

Continued retail follow-up and outreach for pilotsPilots in Market

Shopper, MRA

Shopper, MRA

3Shopper Webinars (Mar, Jun, July)

Ongoing Earned Media

3 Shopper Webinars (BTS, Oct, Holiday) 2020 Shopper

Category Innovation

Fluid Milk Revitalization Vision

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Be Milk:Moderate the decline of base fluid milk (milk as milk)

Be the Competition:Develop and grow fluid milk-based beverages (fluid milk as ingredient)

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2019 Partner Plans

2019

Partner

Plans

Launch New

Packaging,

Advertising and

Fit Milk

Expand LRF Wholesome

Smoothies, Launch New

Milk Products

Launch Flavored Whole

Milk, Test New Milk

Platform

Launch New Single-Serve

Products, New Channel

Products

1st Quarter 2019 Category Innovation

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Global Trend Study Beverage Growth Pockets Beverage Occasion Landscape

Gen Z Insights & Innovation Milk Messaging Test

DMI is investing in research to help drive the fluid milk vision

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Consumers are focusing on living a

Holistic LifestyleA movement that considers the whole person and how they interact with their environment. It emphasizes the connection of body, mind, and spirit.

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Will I enjoy it?Is it good for my body? Does it fit my needs?Do I feel good

about buying it?

Peak PerformanceTotal body and mind

optimization

Sensorial

ExperiencesExperiences that make me

feel good

FunctionalityThe right size for the right

occasion

Responsible

ConsumptionGood for the planet and

community

With a holistic lifestyle, consumers’ perceptions and questions around food and

beverages are changing more rapidly than ever before. They’re asking questions like:

30+ Consumer-Centric

Concepts Developed

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Strong, near-in pre-competitive concepts

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Future emerging areas

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Milk MessagingTest

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Milk message test objective

Determine the optimal use of valuable real estate on milk packaging by identifying the most motivating claims / messages to drive consumers to purchase milk.

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Claims were tested across a wide range of territories

Clean Label

Processing

Local

Nutrition

Sustainability

Taste/Texture

Natural

Fresh

Organic

Chocolate Specific

Lactose Free Specific

Calories, Fat, Sugar Grass-Fed

Protein/Energy

Recommendation

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FROM:Inconsistent,

confusing, less-impactful messages

• rBST-Free

• Non-GMO

• Vitamin D Milk (for whole milk)

TO: Relevant, impactful messages

across industry (combined with brand-

specific messages)

• 100% Real Milk

• All Milk is Antibiotic Free & Has No Artificial Hormones

• Powerful Nutrition

• Farm/Local

• Responsible Consumption

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Bringing it all together - what to do next

MRA to hold industry webinar in Q2 with new DCD insights to proactively manage space story with retailers. Leverage to prove value of dairy segments relative to limited reach of new alternative flavors to optimize category sales and profits.

Assortment & Space

MRA to hold webinar in Q2 on optimal messaging bundles and language angles. Leverage to inform retailers and brand messaging for category lifting language.

Packaging:Messaging & Structure

MRA to hold webinar in Q2 on milk concept testing insights to prove to retailers on the opportunity to growth with milk and milk-based innovation.

InnovationConcepts

MilkPEP has a detailed marketing event calendar that highlights activation opportunities.MarketingCalendar

Leverage the insights provided to bring the voice of dairy back to category leadership.Activate

Thank You

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Milk Revitalization Alliance Vision

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Leverage the power of the dairy value chain to increase

milk’s impact and WIN at retail.