After years of being the predictable cash cow of many supermarkets' private-label programs, house-brand dairy products are demonstrating new potential for growth, as retailers fulfill demand for organic, all-natural and functional foods, as well as premium products at a value price.

“I think in general, we are all getting smarter about what it is that consumers are looking for,” said Marilyn Wilkinson, director of national product communications for the Wisconsin Milk Marketing Board. “[We're] trying to provide that information and that look and confidence in that product. From what we read, consumers are responding to this.”

Indeed, recent data indicates consumer perception of store-brand dairy has improved dramatically during the past few years. Five years ago, about half of shoppers thought private-label products were as good or better than branded products. Now, that number is up to 70%, according to “What's in Store 2008,” the annual state of the industry report produced by the International Dairy-Deli-Bakery Association, Madison, Wis.

Those views are reflected in growing sales. According to ACNielsen, private-label dairy sales rose 7.9% from $13.4 billion a year ago to $14.5 billion in the latest 52 weeks ending Sept. 29. By comparison, total dairy grew 4.5% during that time, with sales up from $36 billion to $37.7 billion.

More specifically, private-label milk sales grew 7.7%, outpacing total milk sales growth of 5.6%, during the same period. And private-label cheese grew 4%, while total cheese sales were up 2.2%.

Although price inflation has played a role in the dairy category's sales growth this year, these numbers do indicate a shift toward more private-label purchases — a move that major grocers have helped spur by responding quickly to emerging consumer demands.

RAISING THE BAR

Notably, in response to consumer concerns, Kroger, Safeway and Publix this year announced they would stop using artificial bovine growth hormones in their dairy facilities.

During the mid-1990s, artificial growth hormones — alternately called recombinant bovine growth hormones or recombinant bovine somatotropin — were approved by the U.S. Food and Drug Administration for use in dairy herds, where they help boost milk output. Proponents of these veterinary drugs argue that there's no scientifically discernible difference between milk taken from a cow treated with rBGH or rBST and an untreated cow. However, many consumers have been skeptical of those claims, and concern about artificial hormones is one of the most common reasons that many shoppers cite for buying organic dairy products.

“Even though the Food and Drug Administration has said that synthetic bovine growth hormone is safe, there are others who don't want those kinds of products in their foods,” Wilkinson said.

Lakeland, Fla.-based Publix started shipping its rBST-free milk on April 30, 2007. “We made this change to respond to our customers' demand for products not treated with anything artificial,” said spokeswoman Maria Brous.

Alan Hiebert, education information specialist for IDDBA, agreed.

“The science is not conclusive, but the growth in the organic and natural dairy categories is definite,” he said.

Similarly, health concerns are driving interest in new functional foods as well.

“We have seen an interest in the functional health foods arena, such as probiotics or prebiotics to aid in everything from digestive tract [health] to reducing cholesterol,” Brous told SN. The company has responded to the trend by launching PublixActive six-pack yogurts — a yogurt infused with probiotics for digestive health — in January of this year.