Twenty-five years after the National Milk Processor Education Program (MilkPEP) launched the iconic “Got Milk?” advertising campaign, the dairy industry is finding that more than ever that the answer is “no.”
Milk’s declining popularity with U.S. consumers has gone from a dip to a sustained downward trend, and it’s one that looks set to continue in the years ahead. Last year, market research group Mintel reported dairy milk sales were predicted to drop 11 percent from 2015 to 2020.
In response, major processors have moved to consolidate operations and control costs. This month, Dean Foods began cutting off partnerships with some dairy farms due to a drop in demand. Price declines have become so severe that some smaller dairy farms are concerned that the risk for suicide among farmers is on the rise.
In response, dairy lobbyists have been looking to slow the decline by pressuring the U.S. Food and Drug Administration (FDA) to crack down on non-dairy products using terms like “milk” and “yogurt,” as well as launching educational campaigns highlighting the nutritional value of dairy compared to alternatives.
But traditional dairy brands that have built companies through timeworn products like milk and cheese, are also taking on their new competition by fighting innovation with innovation.
Framing the Argument
Lewis Goldstein, VP of Brand Marketing for Organic Valley and a board member of MilkPEP, said he sees the situation for dairy differently than many others in the category. The “enemy” of milk is not plant-based alternatives, he said, but water. Goldstein said he believes in many cases parents are uninformed about dairy’s nutritional value and instead of milk, they are serving their children water that lacks the same vitamin and calcium content.
“The dairy industry hasn’t done a good enough job of reminding parents of the benefits of milk,” he said. “Our biggest challenge isn’t plant-based, it’s our own ability to communicate the benefits of our product in an industry that has traditionally been made up of regional brands that don’t do a lot of marketing.”
According to Goldstein, one way Organic Valley is innovating is via its Grassmilk line of 100 percent grass-fed dairy, which offers a higher ratio of healthy fats than conventional milk products. Other companies, including Horizon Organic and Maple Hill Creamery, have similarly seized on grass-fed as an easily communicated differentiator in the dairy set. Some brands, such as Maple Hill Creamery, which debuted a chocolate milk variety at Natural Products Expo West 2018, have committed to working exclusively in the grass-fed dairy space.
Over the past few years, Organic Valley has also begun focusing on grab-and-go RTD products, such as whey protein shake line Organic Fuel and breakfast replacement drink Organic Balance, which will launch a reduced sugar reformulation this spring. Another brand, Fairlife, which markets RTD products made with ultra-filtered milk that contains more protein and less sugar than conventional milk, has similarly carved a path forward via strong distribution and placement thanks to its ownership by The Coca-Cola Company.
“We’ve seen the success of Fairlife, and their ability to connect with the consumer and that they could get distribution through their relationship with Coca-Cola, that shows that people want dairy to be unique and innovative and to change with them,” Goldstein said.
Isolating The Problem Protein
Meanwhile, other brands are trying to remove barriers to milk that exist for some consumers, like lactose intolerance. Australian brand The A2 Milk Company’s theory about lactose intolerant consumers is this, for example: lactose isn’t the problem.
While products such as Lactaid have given this set of consumers a digestible lactose-free dairy option for years, The A2 Milk Company, which launched in the U.S. in 2015, claims that very few people are actually lactose intolerant and that the discomfort many consumers feel after drinking cow’s milk is actually because of the presence of the A1 protein, one of two forms of beta-casein protein in milk. The company uses selective breeding of cows to create a product with sharply reduced levels of A1 while boosting the A2 protein, allowing for easier digestion.
“We’ve got 75 million people in the U.S. alone who self-diagnose as lactose intolerant, but research shows only about 4 to 5 percent of them are really lactose intolerant,” Blake Waltrip, CEO of The A2 Milk Company North America, told BevNET. “This has the ability to bring people back to milk. And if you think about how the $15 billion dairy category has been declining double digits for a long time, it’s not just because of plant-based alternatives.”
Speaking at Expo West, Waltrip said the brand has focused on finding placement in natural retailers such as Whole Foods and Sprouts, and is now expanding in the Northeast. In the U.S., the portfolio includes standard milk varieties such as whole, reduced fat, low fat, and chocolate. According to Waltrip, infant formula has also been a top selling product in Australia and China and is in the pipeline for a U.S. launch.
This month, the company launched a nationwide television marketing campaign in the U.S. targeted at consumers who have over the years abandoned the category for dairy alternatives. The commercial features several narrators explaining that they had missed the taste of real milk and that A2 Milk allows them to once again enjoy drinking authentic dairy.
“Once people try the product and find that it works for them, it relieves the problems,” Waltrip said.
Also at Expo West was California-based Alexandre Family Farm, which premiered a line of multi-serve milks also promoting the A2 protein. The line included flavored varieties including vanilla, chocolate, and ginger turmeric.
If You Can’t Beat Them, Join Them
For some dairy companies, embracing plant-based alternatives is the way they are staying ahead of shifts in consumer behavior. According to Mintel, plant-based dairy alternatives are projected to reach nearly $3 billion by 2020 — almost one-fifth of milk’s projected $15.9 billion value.
Lifeway, best known for its kefirs, has expanded beyond drinkable products over the past several years with the launch of probiotic Farmer Cheese cups and skyr products. At Expo West, the company announced its first dairy-free offering: Plantiful, a line of probiotic pea-protein based drinks featuring vegan kefir cultures. The line complements Lifeway’s current focus on gut health and probiotic products, which also includes an elixir line.
“It’s undeniable there is a shift in consumers and their desire to have dairy-free options,” Lifeway CEO Julie Smolyansky told BevNET. “[…]So of course we want to be right there helping our consumers get what they are asking for.”
Almost a century old, Elmhurst Dairy took a more extreme turn away from the traditional dairy business. Founded in 1925, the company rebranded last year as Elmhurst Milked and pivoted entirely to plant-based milks, including cashew, peanut, and oat milk offerings. According to Cheryl Mitchell, who developed the proprietary technology Elmhurst uses to produce its nut milks, embracing a “plant-forward” approach can actually help traditional dairy brands to expand their reach.
“You look at the future of where we’re going and with the population growth we’re going to need to look for more plant-based sources, or ‘plant-forward,’” she said. “I like that term because it’s not to the exclusion of dairy milk. This is helping people to transition. Now, is dairy going to realize that they can go beyond dairy?”
Last summer, Comax Flavors conducted a consumer survey that found that 48 percent of plant-based milk drinkers opted for the category because of flavor. Thirty-six percent cited nutrition and 30 percent cited all-natural credentials. In a response sent to FoodNavigator-USA, the National Dairy Council urged consumers to double check labels and noted that “not all substitutes add up.”
‘Got Milk’ Redux?
Still, as Goldstein would know, there’s no substitute for good old marketing. And so he’s been advocating for the dairy industry to stop trying to position milk as a lifestyle brand and instead return to its traditional identity as a nutritious drink for kids.
“Water has done a good job of communicating the importance of hydration,” he said. “Water has done a better job than milk about talking to mothers. Water is important for kids, but the child still needs to protein, calcium and vitamin D as part of their growing up. And that same quality can not be delivered in plant-based, and that is not being delivered in water.”
MilkPEP, Goldstein said, is currently testing messaging campaigns promoting milk as an valuable nutritional component for childhood development. The early results have been positive.
“The primary time of drinking milk is when you’re a kid,” he said. “We can get to adults later, but you start with the biggest opportunity of who’s interested in your message and that’s mothers with young kids.”