18 Jan 2008


Print	Email

Category focus: Dairy

With a sales value of almost £7.6bn and as the largest food category, Dairy Crest's 2007 report ŒDairy for life' apprises dairy as; “clearly a super category”.

However, in the latter half of 2007 soaring milk prices and supply issues sent pricing across the sector spiralling. “Up until the end of last summer prices had been flat for at least two years,” says Nick Slater, senior controller chilled foods at Nisa-Today’s.

“Since August prices on dairy products have gone through the roof. We have seen increases of up to 25%.”

With prices widely anticipated to keep on rising well into 2008, retailers must look to the latest consumer trends to ensure they are stocking products that consumers consider worthy of their price tags.

Naturally healthy

Dairy is well-placed to capitalise on the healthy eating trends that are pushing spending across the entire food and drink sector.

“Consumers intrinsically see dairy as healthy, providing important nutritional benefits,” says Dairy Crest. However, Œhealthy’ is no longer the one-dimensional low fat/low calorie concept that it used to be.

Whilst consumers continue to look to trim their waistlines with lower fat milk products (three quarters of milk sales are semi-skimmed, and skimmed is catching up, says Robert Neal, trading controller at Spar), it’s no longer diet-led that is driving demand for Œhealthy’.

Balanced diet

“People are adopting a more holistic, more natural approach and we are seeing consumers switching from diet specific products to foods that positively help them achieve a healthy, balanced diet,” says Chris McDonough, marketing and R&D director at Müller. The new Müllerlight marketing campaign, just launched this January, echoes McDonough’s comments, creating a Œhealthy’ message rather than positioning it as a diet product.

However, there is still space for indulgence, and consumers are still buying into the cream category. “There has been a definite move towards crème fraiche and soured cream which offer consumers such versatility,” says Slater at Nisa-Today’s. “Even mascarpone is becoming a popular cream substitute, through PR from celebrity chefs. Not enough independents stock these products at the moment.” Elsewhere in dairy, the rapid rise of functional products is now beginning to slow.

“Functional spreads such as Flora Proactive have withered somewhat,” says Neal at Spar. “The higher pricing and a reduction in promotional activity have been deterring shoppers.” Even functional yogurts, recent stars of the chiller cabinet, have been suffering. Neal again: “The huge growth in functional yogurts in 2006 has slowed as too many brands have come in and fragmented the category.

Retailers should focus in on known sellers, otherwise they risk confusing consumers with too much choice.” In the butter, spreads and margarine (BSM) category, it’s butter which has profited from u this move to Œnatural’. “This year, I think we’ll continue to see more people going Œback to butter’ as consumers opt for purer, more natural foods,” says Alison Palmer, brand marketing controller for Kerrygold.

However, consumers are still demanding convenience and this has led to a surge in spreadable butter sales, which is the largest sector in BSM, valued at £244m. This has real benefits for retailers, says Neal at Spar: “The margin on these products may be slightly lower, but the the category is not being compromised by BOGOF activity.”

Organic growth

Lurpak’s launch into organic butter reflects a wider trend making waves through dairy. According to Lurpak “volume sales of organic BSM are growing 16% year-on-year and worth £13m.” Brands such as Yeo Valley and Rachel’s Organic are now moving mainstream and Yeo Valley has heavy investment planned for 2008.

Its modern, cleaner rebranding is currently being supported by £3m of press, poster and TV advertising.
Slater of Nisa-Today’s says this is not a trend to be ignored. “Organic is growing fast, and as it adds a premium for retailers even smaller stores should be offering Yeo Valley and Rachel’s Organic.” Ben Cull, marketing director for Yeo Valley, predicts that organic milk, which he says is seeing 26% growth year-on-year, will continue to be a strong performer.

“Organic has really revitalised the milk market and from a virtually static situation it is now in growth again.” However, Neal of Spar is more cautious about the imminent potential of organic milk: “Organic milk is still not a core product and it’s important that it doesn’t overface the chiller section, particularly where space is at a premium.

As long as you have fresh milk 24/seven then you will be meeting consumers’ demands, but you must have the right fat content in stock.”

Popular provenance

An area of continuing growth, which all experts agree retailers should be aware of, is provenance. Mintel reports that the trend for Œbuying British’ has provided a “huge boost for sales of British regional cheeses”, which it says rose by 16% between 2004 and 2006.
“In the next 12 months, I think the provenance dairy products seen in the supermarket multiples will be coming into the independents,” says Neal at Spar.

Consumers’ palates are also changing, and those after a richer taste are driving sales of extra mature and vintage Cheddars. Slater at Nisa-Today’s believes this will also mean an increase in sales of continental cheese:

“Independents still lag behind on continental cheese and we are seeing big growth in these areas.” Whilst Neal at Spar says that it is important to keep stocking the core ranges; “Ultimately the bulk of sales will come from core products from Danone and Muller”, Slater says there is still no excuse for independents not to experiment; “Consumers are now expecting to see all the new products in independent stores too. I would recommend retailers to invest a s much as they can in refrigeration and stock new products, especially those which have been nationally launched.”

Paul Delves, managing director of Harry Tuffins stores, has three convenience stores of between 1,500 and 3,000 sq ft in Shropshire and mid-Wales.

With the most recent store to open boasting 30 metres of chillers, 18 metres of which are dedicated to dairy, Delves has some top tips to maximise sales in this category.
“It’s important to keep on reinvigorating dairy with new products to keep it exciting, but we’ve also got to consider space because no retailer has elastic shelves,” says Delves.

“At my stores, it’s important to stock local produce. Customers are keen to know that local means reduced food miles and we use barkers at product level to display food miles.” However, Delves advises that pricing is still crucial: “There is a lot of talk about local and we will continue to expand our local offering, but we’ve got to get the price right.

The two most important things to customers are price and convenience, and customers will still turn their noses up if products are too expensive.” “Promotions are also always very popular,” says Delves. “as much as 30% of our dairy takings are from promotions and Œ2 for’ deals are particularly popular.”

In his newest store Delves has sectioned off food-to-go in a separate chiller, and retails milk, one-shot yogurts and some cheese snacks such as Dairylea Dunkers and Babybel.
“Food-to-go is doing well in the new store and we’ll look to devote more space to this in the other stores this year,” he says.

“Another area which will certainly continue to grow is Econvenience’ with natural sliced and grated cheese becoming increasingly popular,” says

Slater: “Also, food-on-the-go is in huge growth.” Dairylea Dunkers and Philadelphia Snacks are both seeing double digit value growth and there have been range extensions by Cheesestrings (light variant), and by Primula cheese (squeezy tube format) launched in 2007.

Slater predicts there will be even more npd in 2008: “A number of manufacturers are now looking for their products to be stocked alongside sandwiches. Our recommendation is to have a separate food-on-the-go cabinet which should be front of store for easy access for lunchtime trade.”

Email this to a friend