IDDA REPORT SEES CHALLENGES, CHANGES AHEAD

STEPHEN DOWDELL

MADISON, Wis. -- Supermarket dairy departments are likely to face important challenges and changes in the next five years, said the International Dairy Deli Bakery Association in its latest What's In Store trends report.

The annual report is a compendium of industry studies and trade press reports, along with analysis and commentary from IDDA staff.

In the report, IDDA said that the dairy business will be driven by such trends as "bovine growth hormone hysteria, fear of fats, the long-lingering 'light' craze." It said these issues have the potential to "help manufacturers and retailers win big for the balance of the 1990s."

The report, issued late last year, looks at trends affecting the major dairy categories in supermarkets, including fluid milk, eggs, refrigerated juice, table spreads and yogurt. The study also examines trends in the in-store deli and bakery departments, and treats the cheese segment as a separate entity.

"Consumers have a positive feeling about dairy products, despite bad publicity that surfaces occasionally," the report said. "Dairy products in some form are consumed by 99% of the population."

IDDA said dairy will continue to hold its place as a leading gross profit and volume contributor in supermarkets. In addition, it will hold its own as a bastion of private-label volume, although in many of the mainstream categories private-label's performance is likely to be flat or declining.

The product segments and marketing niches to watch, meanwhile, harbor some "value-added" aspect, which IDDA said could include "products with healthful benefits or those enriched with vitamins or flavors," as well as "products marketed to . . . age or ethnic groups."

Not surprisingly, light dairy products surface again and again in the report as catalysts for sales volume growth.

"Concern about the fat content of foods seems to be at an all time high," said IDDA, quoting research from the Food Marketing Institute and

other sources. "Better dairy formulations will fuel growth in the light dairy segment to the point where it will outperform advances in the overall dairy market in the near future. Find/SVP projects retail sales of refrigerated light dairy products to grow at an average compound annual rate of 15.2% through 1996."

In the cases of milk and yogurt, for example, low-fat and nonfat products are performing better than their full-fat counterparts in their respective categories. What's more, in some categories fat-free is outperforming reduced-fat or low-fat items.

The report quotes a study by scan data tracking service Information Resources Inc. in which "they found that the only nonfat dairy product that lists as a modest-to-sluggish growth opportunity is nonfat processed cheese." Nonfat versions of natural cheese, ice cream, sour cream, cream cheese and cottage cheese are all up-and-coming segments, according to scan data.

The study concluded that "cannibalization of the low-fat products may be occurring as consumers continue to decide what level of fat satisfies their taste/performance needs."

All this preoccupation with expansion of light product sales means retailers are looking for space to merchandise, said IDDA. "Retailers are using secondary merchandising areas in other departments or are moving items that don't require refrigeration out of the dairy case to satellite cases and displays."

While more than a third of dairy case sales continues to come from fluid milk products (creams, creamers, milk and sour cream), the department's future will have to make room for other growing categories, IDDA noted, such as refrigerated salads and dough.