Where is the innovation in fluid dairy?
I was in a meeting today and found myself talking about the lack of industry wide innovation in the fluid dairy category. In my opinion, the absence of innovation has been the single largest contributor to the decade long decline in consumption. If you look at the most recent data in the Retail Monthly Milk Snapshot from Dairy Management Inc., new product introduction accounts for less than 1% of the total gallons. Of that, the vast majority is from the re-branding or re-packing of chocolate milk. Not exactly cutting edge innovation. On the other hand, over 142MM gallons of milk alternatives have been sold YTD, driven by Almond Milk, which accounts for 94MM gallons. In fluid dairy, total value added items account for only 192MM of 2.7billon gallons sold year to date and Organic accounts for 65% of that number.
This begs the question as to why the lack of innovation? In my opinion, it is the result of the fluid milk industry being operations centric. In my nearly 25 years, the one constant has been the focus on plant efficiencies. So if the metrics being measured are variables like gallons per hour and cost per gallon, then innovation is in direct conflict with the achievement of those metrics. There is a bit of irony here as well. As this lack of innovation has also impacted plant innovation. Walk any dairy plant and you will see the same Federal fillers, blow molds and packaging that have been in existence for 40 years. Couple that with shipping product in plastic cases that the industry spends hundreds of millions replacing due to theft each year. It boggles the mind. There have been advances upstream in process and controls and downstream in warehouse automation, but the physical milk plant has remained almost unchanged for years. There have been a few pioneers; willing to innovate and challenge the norm; HP Hood and Shamrock Farms are two good examples.
I find it interesting that most of the recent investment in dairy has been to further commoditize the product. New powder plants are been built to capitalize on the growth in Asia, but few are thinking through how they may respond to that growing opportunity with finished goods, value add or customized. I would again, postulate it is the effect of an operation centric thinking.
The industry bemoans the constant departure of consumers from the franchise. There is a huge amount of money spent by the industry to champion the benefit of milk, yet it has failed to stop the bleeding. It is time for the industry to abandon the operations centric mindset and truly become consumer focused. Now that is easier said than done, because there is so much capital tied to existing dairy plants. The solution may be found in thinking outside the plant; leveraging co-packers or finding new blends or uses for fluid milk as an ingredient. The purpose of this piece is not to offer the definitive recipe or solution to this decade long problem. Rather, it is meant to open the dialogue to offer a new perspective and bring a contrarian voice to the discussion.
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Thanks for reading.