Added Value in Dairy Drinks, Milk and Cream - UK - May 2017

OVERVIEW
What you need to know
Products covered in this report
EXECUTIVE SUMMARY
The market
Weakness of white milk continues to overshadow the category
Some inflation for all segments 2017-21
Mixed picture for volume sales 2017-21
Figure 1: UK retail value sales of milk, milk drinks and cream, 2011-21
Cow’s milk volume sales falter in 2016
Multiple factors boost flavoured milk
Uncertainties linger over milk prices
Antibiotic use comes under closer government scrutiny
Companies and brands
Own-label retains dominance in white milk and strengthens hold on cream
Figure 2: UK retail sales of white milk*, by leading brands, by value, 2016
Leading flavoured milk brands fail to benefit from growth in the market
Retailers and brands highlight ethics
White milk leads on L/N/R sugar claims in 2016
Advertising spend rises in 2016
Arla remains the largest advertiser, with a strong focus on versatility
The consumer
Cow’s milk needs to woo younger consumers
Figure 3: Usage of milk, by type, February 2017
Flavoured milk usage rises
Health and food waste concerns restrict cream usage
Majority of users would pay more for milk than supermarkets charge
Figure 4: How much milk users would pay for 4 pints (2.272 litres) of milk, February 2017
References by glass could help to boost usage of milk as a source of calcium
Guarantees of minimal antibiotics have wide appeal
Figure 5: Behaviours relating to milk, milk drinks and cream, February 2017
Milk price cuts risk a backlash, good supplier relations appeal
Clearer sugar labelling for flavoured milk valued by many users
Figure 6: Attitudes towards milk, dairy drinks and cream, February 2017
Stronger emphasis on vitamins could enhance milk’s health image
What we think
ISSUES AND INSIGHTS
Shoppers’ concerns over farmers’ pay make it imperative for retailers to make good supplier relations tangible on-pack
The facts
The implications
Minimal antibiotics guarantees have strong scope to appeal
The facts
The implications
Smaller cream formats and recipe suggestions should help to allay food waste concerns
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Weakness of white milk continues to overshadow the category
Some inflation for all segments 2017-21
Mixed picture for volume sales 2017-21
Cow’s milk volume sales falter in 2016
Multiple factors boost flavoured milk
Uncertainties linger over milk prices
Antibiotic use comes under closer government scrutiny
MARKET SIZE AND FORECAST
Troubles of white milk continue to overshadow the category
Figure 7: UK retail value sales of white milk*, cream and flavoured milk, by segment, 2011-21
Figure 8: UK retail volume sales of white milk*, cream and flavoured milk, by segment, 2011-21
Slow growth with some inflation 2017-21
Figure 9: UK retail value sales of milk, milk drinks and cream, 2011-21
Little movement for white milk over 2017-21
Retailer price competition to dilute effects of inflation
Volume sales growth to remain sluggish
Figure 10: UK retail value sales of white milk, 2011-21
Consumer health concerns will continue to affect cream over 2017-21
Figure 11: UK retail values sales of cream, 2011-21
Soft drinks levy should boost flavoured milk, but health concerns and price rises present barriers to sales
Figure 12: UK retail value sales of flavoured milk, 2011-21
Forecast methodology
MARKET SEGMENTATION
Cow’s milk volume sales slide in 2016
Figure 13: UK retail value sales of white milk, by fresh and longlife, 2014-16
Figure 14: UK retail volume sales of white milk, by fresh and longlife, 2014-16
Almond and coconut milks continue their rapid growth
Figure 15: UK retail value sales of white milk, by type, 2014-16
Figure 16: UK retail volume sales of white milk, by type, 2014-16
Consumer health concerns erode double cream sales in 2016
Sour cream continues to benefit from world food trends
Figure 17: UK retail value sales of cream, by type, 2014-16
Figure 18: UK retail volume sales of cream, by type, 2014-16
Multiple factors boost flavoured milk
Lack of innovation prevents milk modifiers from benefitting from sugar concerns
Figure 19: UK retail value sales of flavoured milk, milk smoothies and milk flavourings, 2014-16
Figure 20: UK retail volume sales of flavoured milk, milk smoothies and milk flavourings, 2014-16
MARKET DRIVERS
Multiple factors affect milk prices
Brexit vote raises multiple uncertainties
Pound’s depreciation could lead to inflation for plant-based and flavoured milks
Need for dairy industry to win over younger consumers
Soft drinks sugar levy could give a boost to flavoured milk
…but industry will still be required to reduce sugar
…and health concerns could still limit opportunities to grow volume sales
EFSA rules make it difficult for dairy drinks to make a low-sugar claim
Government advice on Vitamin D provides opportunities for fortified milk
Antibiotic use comes under closer government scrutiny
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Own-label retains dominance in white milk and cream
Leading flavoured milk brands fail to benefit from growth in the market
Retailers and brands highlight ethics
White milk leads on L/N/R sugar claims in 2016
Advertising spend rises in 2016
Arla remains the largest advertiser, with a strong focus on versatility
MARKET SHARE
Own-label retains dominant position in white milk
Figure 21: UK retail sales of white milk*, by leading brands, 2015-16
Figure 22: UK retail sales of white milk*, by leading brand-owners, 2015-16
Alpro continues to gain from growth of the free-from market
Further growth for Graham’s Dairy
Own-label strengthens its position in cream
Figure 23: UK retail sales of cream, by leading brands, 2015-16
Figure 24: UK retail sales of cream, by leading brand-owners, 2015-16
Leading flavoured milk brands fail to benefit from growth in the market
Figure 25: UK retail sales of flavoured milk, milk smoothies and milk flavourings, by leading brands, 2015/16-2016/17
Figure 26: UK retail sales of flavoured milk, milk smoothies and milk flavourings, by leading brand-owners, 2015/16-2016/17
Range extensions boost own-label, while smaller brands gain distribution
Further strong growth for Starbucks milk drinks
LAUNCH ACTIVITY AND INNOVATION
Retailers and brands move forward on ethics
Operators take differing approaches to reassure consumers on supplier relations
Farmer organisations launch free range milks
White milk leads on L/N/R sugar claims in 2016
Flavoured milk brands take differing approaches to replacing sugar
Figure 27: New product launches in the UK milk, dairy drinks and cream market*, by top 20 claims (sorted by 2016), 2012-16
Organic brands look to make organic claim more tangible
Arla unveils Vitamin D Milk
Arla ups competition with other soft drinks with on-the-go Cravendale
Goat’s milk brand targets school lunchbox occasion
ADVERTISING AND MARKETING ACTIVITY
Total spending rises in 2016
Figure 28: Total above-the line, online display and direct mail advertising expenditure on milk, dairy drinks and cream, 2013-16
Arla continues to dominate advertising
Cravendale promoted as a quality product, but also as fun and versatile
On-the-go Cravendale promoted as helping people to get through their day
Continued focus on B.O.B milk as offering both health benefits and taste
B.O.B milk featured in breakfast campaign
Organic milk advertising takes environmental focus
Weetabix continues to focus on convenience of its breakfast drinks
Frijj returns to TV screens for first time in three years
Pushing associations with white milk
Pro-vegan advertising campaign attacks the dairy industry
Nielsen Ad Intel coverage
THE CONSUMER – WHAT YOU NEED TO KNOW
Cow’s milk needs to woo younger consumers
Flavoured milk usage rises
Health and food waste concerns restrict cream usage
Majority of users would pay more for milk than supermarkets charge
References by glass could help to boost usage of milk as a source of calcium
Guarantees of minimal antibiotics have wide appeal
Milk price cuts risk a backlash, good supplier relations appeal
Clearer sugar labelling for flavoured milk valued by many users
Stronger emphasis on vitamins could enhance milk’s health image
USAGE OF MILK 
Age bias in cow’s milk usage makes it necessary to woo younger consumers
Figure 29: Usage of milk, by type, February 2017
Usage of plant-based milks unchanged from last year
Risk of backlash if plant-based milk’s eco-friendly credentials come into question
Shift from whole to semi-skimmed milk has plateaued
Figure 30: Usage of milk and milk drinks, by variety, February 2017
Flavoured milk usage rises
USAGE OF CREAM
Three in five people use cream
Smaller formats should help to address food waste concerns
Figure 31: Usage of cream, by type, February 2017
Recipe advice could boost usage of culinary creams
HOW MUCH CONSUMERS ARE PREPARED TO PAY FOR MILK
Most users still willing to pay more than supermarkets charge for milk
Figure 32: How much milk users would pay for 4 pints (2.272 litres) of milk, February 2017
A quarter would pay £1.50 or more
Farmers’ pay guarantees are a promising means to appeal
BEHAVIOURS RELATING TO MILK, DAIRY DRINKS AND CREAM
Calcium’s importance is widely acknowledged
…but a third of users do not attempt to meet calcium recommendations
References by glass could help to boost usage of milk as a source of calcium
Lower awareness of milk’s calcium among younger consumers suggests targeted marketing is needed
Figure 33: Behaviours relating to milk, milk drinks and cream, February 2017
Minimal antibiotics guarantees appeal to many
Highlighting their credentials on antibiotics could boost organic producers
Supermarkets could promote their antibiotic policies more widely
ATTITUDES TOWARDS MILK, DAIRY DRINKS AND CREAM
Risk of a backlash if supermarkets renew milk price wars
Making good supplier relations tangible on-pack has wide scope to appeal
Figure 34: Attitudes towards milk, dairy drinks and cream, February 2017
Detailed sugar labelling on flavoured milk could boost help companies to be seen as proactive on health
Flavoured milk using British milk could appeal to consumers’ desire to support local agriculture
QUALITIES ASSOCIATED WITH SELECTED MILKS AND DAIRY DRINKS
Stronger on-pack emphasis on cow’s milk’s vitamin B12 content would better enable these to appeal to the health-conscious
Few people are aware of plant-based milks’ calcium or vitamin content despite widespread fortification
Figure 35: Qualities associated with selected  milks and dairy drinks, February 2017
Scope for expansion in on-the-go formats
Flavoured milk does not benefit from white milk’s calcium associations
Sugar concerns could present a barrier to health-based marketing
Meal deals could help to reposition flavoured milk as a drink for adults
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Figure 36: Forecast of UK sales of milk, milk drinks and cream, by value, best- and worst-case, 2016-21
Figure 37: Forecast of UK sales of milk, milk drinks and cream, by volume, best- and worst-case, 2016-21
Figure 38: Forecast of UK sales of white milk, by value, best- and worst-case, 2016-21
Figure 39: Forecast of UK sales of white milk, by volume, best- and worst-case, 2016-21
Figure 40: Forecast of UK sales of cream, by value, best- and worst-case, 2016-21
Figure 41: Forecast of UK sales of cream, by volume, best- and worst-case, 2016-21
Figure 42: Forecast of UK sales of flavoured milk, by value, best- and worst-case, 2016-21
Figure 43: Forecast of UK sales of flavoured milk, by volume, best- and worst-case, 2016-21
Figure 44: UK retail volume sales of milk, milk drinks and cream, 2011-21
Figure 45: UK retail volume sales of white milk, 2011-21
Figure 46: UK retail volume sales of cream, 2011-21
Figure 47: UK retail volume sales of flavoured milk, 2011-21
Forecast methodology