MILK MONEY

Lynne Miller

For milk marketers, new single-serve products are a sunny spot in an otherwise gray sky. While sales of white milk in traditional cartons and jugs have been flat for years, single-serve sales are growing at a staggering pace -- without taking away from sales of white milk.

Flavored milk sales volume grew by more than 10% this year compared to last year, and products in bottles smaller than a quart in size saw volume sales go up 30%, according to the latest 2003 data from the International Dairy Foods Association, Washington. In contrast, the fluid milk category barely budged, growing less than 1% in volume sales, and posting a 2% decline in dollar sales compared to 2002. Meanwhile, drinkable yogurts are even hotter than single-serve milks. More than 64 million pints of yogurt drinks were sold last year, up 41% from 2001, the IDFA reported. The category also saw a 41% increase in dollar sales.

All of these products, developed for mobility, are helping the dairy industry compete with manufacturers of soft drinks, the No. 1 beverage in the country. Unlike traditional white milk products in gallon jugs or gable cartons, consumers buy single-serve milk drinks on impulse, sometimes for their own lunch away from home, or to drink in the car. The products benefit from having a healthy image, and parents buy them for their children's school lunches.

Marketers think it's significant that out-of-home consumption of milk went up from 5% in 2000 to 6% in 2001 -- the first increase in eight years. The jump "is entirely due to these single-serves," said Tom Nagle, vice president of marketing for IDFA. "Ninety percent of all milk consumption is in the home."

That teens are responsible for some of the growth is also encouraging. Marketers for years have seen a pattern of consumption decline once children hit the teen years and discover other beverages. Products that can be consumed on the spot appeal to the young.

"As teenagers become teenagers, they're at home less," Nagle said. "Wherever they are, milk isn't. They need more product variety and we have to be able to deliver it to the teenage consumer. Unless you have single-serve, immediate-consumption products, you won't have teens drinking milk."

Sales of single-serve milk products do not cannibalize white milk, he added. "It's additional money, additional consumption," he said.

The products represent a sea change for the milk industry. Historically, white milk has been sold in nondescript quart, half-gallon or gallon containers for the home. Most white milk is also sold under private label. Flavored milk beverages, meanwhile, are mostly branded products in opaque plastic bottles, some with a unique elongated shape and screw-top caps. Bottles have brightly colored labels with juvenile images, designed to catch the eye of young consumers -- and their parents.

Sales of single-serve milks are highest during the school year at the Jewel-Osco stores in the Chicago area. During the summer, sales drop off, said a spokeswoman for the chain, a division of Boise, Idaho-based Albertsons.

"We do know they're very appealing to the younger generation," said Lauri Sanders, director of public affairs for the chain, which operates more than 280 stores in northern Illinois. "Parents are buying them for their school-age children."

Officials at Jewel-Osco believe health and nutrition concerns are among the primary demand drivers, and have moved to increase their availability. The retailer recently added a new line of single-serve milk products as well as two new lines of drinkable yogurt.

During promotions, some stores in the chain display products in multiple locations, depending on the availability of refrigerated display space, Sanders said. Strawberry- and vanilla-flavored milks are growing in popularity, though the hands-down favorite is chocolate.

The category has broad appeal. While the teen market appears to be growing the fastest, consumers of all ages pick up the drinks to have on their way home or for lunch, said an official from St. Louis-based Schnuck Markets.

"Many moms buy the flavored single-serve milks, freeze them, then pack them with the kid's lunches," said Steve Zielinski, dairy category manager for Schnuck, which operates more than 100 stores.

While sales of gallon milk have remained steady, sales of single-serve flavored milk are up about 20%, he said, adding they don't appear to be taking business away from white milk. In about 20 stores, the flavored-milk products are stocked in the dairy aisle, as well as separate self-serve cases that offer an assortment of grab-and-go foods. Here, too, chocolate is the favorite flavor, easily outselling strawberry- and banana-flavored drinks, Zielinski said. Schnuck stores carry 22 stockkeeping units of flavored milk and white milk products in single-serve containers, as well as 20 SKUs of drinkable yogurt. Single-serves are hot in Woodbury, Minn., a fast-growing suburb of the Twin Cities. People looking for healthier alternatives to soda seem to be attracted to flavored milks, while the yogurt drinks also are viewed as a healthy food, an official from Cub Foods said. The convenience factor also plays a big role in consumer demand.

"Anything quick and easy, believe me, they'll buy," said Don Dvorak, dairy-frozen foods manager for Cub, operated by Jerry's Enterprises, Edina, Minn. "If they can tear the cover off and start eating it, they'll buy it."

Early this year, officials at the 85,000-square-foot store set up a display of single-serve flavored milks in the deli to encourage trial by consumers shopping for lunch. In the dairy department, Cub also has a larger case, measuring three feet across with five shelves holding about a dozen varieties of flavored single-serve products.

The two locations attract different consumers, with the secondary location in the deli accounting for about 50% of single-serve milk sales, Dvorak said. "I'm seeing more demand for flavored milks like strawberry and banana and vanilla," he added.

At St. Paul, Minn.-based Kowalski's Markets, officials have begun placing secondary displays of single-serve milk in the cafe areas of those stores in the eight-unit chain that have them. As a result, those stores sell more milk drinks than the others, a store official said. More than anything else, he thinks the convenience of ready-to-drink milk has made the category a success story.

"We see a lot of people in a hurry, going to work and at lunch, and they want something quick and easy," said Mike Oase, Kowalski's vice president of operations. "The single-serve milks are the right portion size; they're easy to get and real user-friendly."

Drinkable yogurt has emerged as an even easier sell. At Cub Foods, officials began to notice a strong uptick in sales in the spring. The retailer stocks four-packs and individual yogurt beverages, under two national brands, and they range in size from five- to 10-ounce bottles. A few weeks ago, the retailer introduced a line of drinkable yogurts from a Minnesota dairy. Dvorak estimated he goes through 35 to 40 cases of yogurt beverages in a week at one store.

"They're doing very, very well," Dvorak said, adding he was surprised by the response. "I was leery when they first came out with these."

Indeed, while consumers are used to drinking milk, they might need some encouragement before they'll quaff yogurt. But once they try it, they buy it, Dvorak has learned.

At Kowalski's Market in Woodbury, associates sold 240 six-ounce bottles of yogurt following a day of sampling. Sales of yogurt drinks have increased in the past year, and the category has room to grow, officials said. The convenience of having yogurt without a spoon adds to its appeal.

"Everyone who has tried it likes it," said Tom Schwintek, a retail specialist at the store. "I don't even like yogurt and I like it. It's like a milk shake."