STUDY: DAIRY CAN BE CASH COW FOR SUPERMARKETS

LIZA B. ZIMMERMAN

ROSEMONT, Ill. -- Seventy-eight percent of shoppers buy all their milk at the supermarket, according to a new wide-ranging study of the dairy case that highlights the enduring importance of the department and its potential for carrying even more weight in the future.

The newly released study, called "Understanding How to Drive Dairy Performance," comes from Dairy Management Inc. here. Its findings -- which combine consumer and retail perspectives, dairy performance data and suggestions on how to increase retail dairy sales -- were presented at a one-day seminar here.

Retailers who attended the presentation told SN afterward that the data provided valuable insights that would benefit their dairy operations.

The study was prepared by Willard Bishop Consulting, Barrington, Ill., for DMI. It was based on 800 consumer surveys, an analysis of dairy sales from 1,100 stores, 200,000 purchase transactions, a survey of the top 50 supermarket chains' loyalty-marketing programs and a cost analysis of the dairy departments of three major supermarket chains.

A dairy category manager from a major Midwestern retail operation who attended the seminar called its content "pretty insightful."

Howard McKinney, regional buyer/merchandiser for dairy at Nash Finch Co., Minneapolis, who also attended the seminar, said much of the information presented "was really beneficial at a retail level."

He also stressed the important role supermarkets play in consumers' dairy purchases, since they dominate the category.

"What really hit me is the reminder that supermarkets still own the milk and dairy business, which you can't say about the other aisles," Bishop noted.

Citing another one of the study's key findings, Bishop explained customers were found to fully plan 85% of their dairy purchases before entering the store, a figure that has increased 20% since 1990.

Jon Hauptman, a senior associate at Willard Bishop, opened his presentation of the consumer perspective part of the study by noting milk is not an impulse purchase and consumers generally know exactly what they want, right down to "the brand, type and size."

Bishop noted out-of-stocks of an item that consumers plan to buy can have a large negative effect. Eighteen percent of respondents said they wouldn't buy milk at all if the product they desired was out of stock.

Freshness -- demonstrated by visible and readable codes -- was rated the No. 1 product attribute at the dairy case, by 73% of consumers, while price, at 29% , and brand, at 22%, were rated to be considerably less important.

A Midwestern retailer said he had been surprised to find out cleanliness was so important and that the presence of a brand played less of a role overall in dairy sales. He also explained that the seminar had given him a better understanding of customers' decision-making processes.

Nash Finch's McKinney said he was surprised that consumers considered freshness to be more important than a brand.

Willard Bishop's Hauptman added that "consumers equate well-stocked dairies with freshness. If there are only one or two items there is a sense that they are leftover.

"They expect the dairy to be well run. If it's poorly run or dirty they will leave the store," he cautioned.

Bishop said retailers "have to recognize that the dairy department is vital to your most important customers and the condition and management of it is as important as the right price."

In terms of merchandising approaches, consumers said they preferred to see the dairy department located at the end of traffic flow, so dairy products don't sit as long in the cart. They also said they would like to see all the dairy items -- from milk to cheese and eggs -- merchandised together.

Nash Finch's McKinney said learning about consumers' interest in having all the dairy items in one case was one of the seminar's more interesting nuggets of information.

And the Midwestern retailer said the results of the study made him think about re-evaluating his dairy display in order to group all his dairy products together.

Madlyn Daley, a vice president of market research at DMI, presented a cheese segmentation study, based on responses from 4,633 individuals. She explained that although the category was fragmented, "there are clear patterns of consumption based on the type of use in home."

One market segment, as defined by Daley, was cheese snacking fanatics, those who are very involved with cheese as a lifelong habit and consume 72% of the cheese they eat as a snack.

"Interestingly enough, they don't cook much with cheese," she commented.

With snack fanatics, as well as other categories of cheese consumers, Daley recommended increasing the method of cheese consumption that was already favored by the group as a strategy to drive sales.

Cheese enhancers, another group identified by the study, used 86% of their cheese as an ingredient or in sandwiches, and "love to cook with cheese."

Convenience seekers showed comparatively less interest in any dish's cheese content than the previous two groups. Light users didn't think cheese's benefits outweigh health concerns. And free agents, she said, showed "no consistency of behavior and were more difficult to target."

The milk segmentation study showed that almost all milk is consumed at home and that kids and teens account for 46% of consumption.

DMI's Daley cautioned that milk sales began to dip as children matured, and she noted that "milk is not delivering where kids start making decisions." She recommended that competitive beverages be taken more seriously in evaluating milk's packaging and image.

The market-basket analysis part of the study, based on 12 weeks of data involving 200,000 transactions from three retail operations, was presented by Laura Henze, an associate at Willard Bishop. It found that 68% of transactions contain at least one dairy product.

Two percent milk was found to be the most popular variety, and was consumed by 48% of respondents.

"Positioning other dairy categories adjacent to the milk may help increase dairy sales," suggested Henze.

The dairy consumer is worth four times as much as the nondairy consumer, according to the study's findings, so "moving customers into milk and other dairy product segments can help transaction size,"said Henze.

Henze went on to explore the use of loyalty-marketing campaigns as a way of driving dairy sales. "Loyalty marketing is the most effective way to target promotions to specific consumers," she noted.

When asked about the usefulness of the loyalty-marketing segment of the study, the Midwestern retailer responded that he didn't have any loyalty-marketing programs and didn't have any plans to use them.

A second dairy marketing seminar is scheduled for late October in Salt Lake City, according to Kevin Burkum, the director of industry marketing communications at DMI.

Priorities at the Milk Case

Just under three-quarters of consumers rate freshness as the most important attribute when buying milk. Price and brand were rated as considerably less important.

Top product attributes when purchasing milk

(consumers rated these categories most and second

most important):

Freshness date 73%

Product type 50%

Price 29%

Package size 27%

Brand 22%

Planned Purchases

Since 1990 consumers have significantly increased their planned purchases of milk. This change can partially be attributed to the fact that they are more informed about milk products and more time constrained.

Fully Planned 85%

Partially Planned '96, '90 31%

Unplanned 4%

Charts from DMI's 1996 "How to Drive Dairy Department Performance Study" and the 1990 "National Dairy Case Management Study," prepared by Willard Bishop Consulting.