—Jason Voiovich, Ecra Creative Group
Key Points:
1. The National Milk Producers Federation wants the FDA to crack down on plant "milks" (i.e. Silk) using the word "milk" to describe their product.
2. The dairy industry has reason to worry – dairy consumption isn’t quite keeping pace with inflation, the soy milk market (while small) is increasing rapidly, and plant milk prices are approaching parity with dairy milk.
3. But protecting the generic "milk" word is a losing strategy – the dairy industry should instead throw its muscle behind differentiating products, especially the exploding probiotics market.
I tried Almond Milk a couple of weeks ago.
I am not a fan.
Even though I tried both the "Regular" and "Vanilla" flavors at the SuperTarget sample cart in Shoreview, I couldn’t stomach it. My wife bought a small carton to try in her cereal (it didn’t go well for her, either). I know a lot of people like "non-cow" milks, but to me, they taste wrong. Perhaps that’s because I am making a mental connection between "cow’s milk" and this new "milk" – perhaps an unfair comparison.
That mental comparison, I come to learn, is precisely the problem the National Milk Producers Federation sees as well. The NMPF has recently petitioned the FDA to stop allowing "non-dairy" beverages to use the word "milk". To put it more clearly, the NMPF wants the FDA to specify that only mammary secretions from certain mammals (cows, sheep, and goats) may be marketed using the word "milk".
They contend that the word "milk" conveys a specific set of expectations, characteristics, and health benefits that other "milks" do not. In short, they confuse the buying public. The NMPF points to industry research that shows people lump soy milk, almond milk, rice milk, and other plant-based creations into the "milk" category, and see the two as interchangeable. Also, they claim plant-based "milks" marketing their product as "just as good as milk" distort the "facts" as the dairy industry sees them.
And when the name "milk" becomes genericized, it loses its power as a brand.
The NMPF is quick to point out that it is not saying these products should not be sold, but only that they use a different name to describe their product.
Before you file this in the "you’ve got to be kidding" folder, it’s important to understand how big of a business issue this is.
When soy-based "milks" got their start as early as the 1970s, they represented a mere nothing to the dairy industry. They were hard to get, expensive, and unpopular.
That all changed with "Silk". A fun branding combination of the words "Soy" and "Milk", Silk was the first real marketing success for the non-dairy milk industry. From a set of humble beginnings, Silk sales passed the half-billion mark in the middle of the last decade and are approaching $1 billion annually. But it was not just the name or some sense of "latent demand". Silk was successful, in part, because it was the first truly "national" milk brand. Up until that point, there was no national dairy milk brand – only store-based, local, or regional brands. Silk was able to capitalize on national marketing power that the dairy industry could not.
So what’s the net affect?
The numbers tell the story. While milk production is rising at about 1.1% per year (at the same rate as US population growth), dairy consumption is only growing at 0.4% per year. In the long run, the pressure will be to push prices down (or at least hold dairy milk prices to anemic growth). During the same time period, prices for soy milks (such as the brand Silk) have trended downward as volumes dramatically expand.
Of course, some of this decline in consumption could be due to population shifts and changing tastes, but 11% annual growth in plant-milks in the low margin dairy milk commodity market is significant, especially when that’s triple the dairy milk growth rate. Also, as plant milks approach the regular price of skim milk, it stands to reason more people would consider them a viable substitute – something soy agricultural interests are working hard to promote and dairy agricultural interests want to slow, stop, and ideally, reverse.
Hence the attempted protection for the "milk" brand.
But I think that proverbial cow has left the pasture.
The soy industry has used issues surrounding the use of antibiotics, Bovine Growth Hormone, and risks with un-pasteurized milks, to nudge more and more of the market to its side. I’m not qualified to take sides in the health aspects of this debate, but there’s little doubt the strategy has been working. Instead of protecting an now-clearly-generic term, the dairy industry would be better served competing in the marketplace using a differentiation strategy.
In addition to the current suite of dairy milk products (the "big four": whole, 2%, 1%, and skim), the industry must do a better job unifying and promoting an entirely new group of products. These include the neglected brands of Yogurt milks, infused milks (vegetables/fruits), Omega 3 milks, and flavored milks. These can command a 10-15% price premium over the plant-based milks and provide the market additional variety.
More than that, as the Yogurt industry has successfully done, the milk industry can work to promote pro-biotic milk products. Available in limited distribution now, these milks command a 20-30% premium over soy products and tap into a growing boomer market for "health" foods.
If the dairy industry is frustrated by declining margins and undifferentiated products, it seems like it has the tools to attack both. The term "milk" is not one of them.
Related Links:
Imitation Dairy Products