Added Value in Dairy Drinks, Milk and Cream - UK - April 2018

OVERVIEW
What you need to know
Products covered in this Report
EXECUTIVE SUMMARY
The market
Price rises in all segments in 2017
Weakness of white milk and cream to continue to overshadow the category over 2018-22
Figure 1: UK retail value sales of milk, milk drinks and cream, 2012-22
Cow’s milk continues to dominate white milk but sees sales slip
Cream’s decline continues, further sales growth for flavoured milk
Public health focus both hinders and boosts the category
Companies and brands
Own-label continues to dominate milk
Arla brands see mixed fortunes
Figure 2: UK retail sales of white milk^, by leading brands, by value, 2017/18*
Dairy alternatives lead on L/N/R sugar
Growth in fortified launches
Advertising on milk and cream falls in 2017
Dairy industry steps up marketing activity
The consumer
96% of UK adults use milk
Figure 3: Usage of milk, by type, February 2018
Most users would pay more than £1 for a four-pint bottle of milk
Niche retail availability limits uptake of ethical milks
Figure 4: Awareness and usage of added-value milks, by type, February 2018
Consumer interest in animal welfare does not always translate to buying
Figure 5: Behaviours relating to milk, dairy drinks and cream, February 2018
Multiple barriers to drinking milk out of home
Figure 6: Attitudes towards milk, dairy drinks and cream, February 2018
What we think
ISSUES AND INSIGHTS
Focus on iodine should help to boost milk’s health image
The facts
The implications
Need for ethical dairy systems to highlight their animal welfare credentials
The facts
The implications
Social media can help to drive cream cooking occasions
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Price rises in all segments in 2017
Weakness of white milk and cream to continue to overshadow the category over 2018-22
Cow’s milk continues to dominate white milk but sees sales slip
Cream’s decline continues, further sales growth for flavoured milk
Public health focus both hinders and boosts the category
MARKET SIZE AND FORECAST
Price volatility of white milk impacts the entire market from 2012-17
Inflation in all segments in 2017
Figure 7: UK retail value sales of white milk*, cream and flavoured milk, by segment, 2012-22
Figure 8: UK retail volume sales of white milk*, cream and flavoured milk, by segment, 2012-22
Weakness of white milk and cream to continue to overshadow the category over 2018-22
Figure 9: UK retail value sales of milk, milk drinks and cream, 2012-22
Retailer price competition set to curb white milk inflation over 2018-22
White milk to lose out from cow’s milk’s ageing user base
Growth in non-dairy milks to slow
Figure 10: UK retail value sales of white milk, 2012-22
Health concerns and changed cooking habits to continue to impede cream volume sales over 2018-22
Faster inflation expected for cream than milk
Figure 11: UK retail value sales of cream, 2012-22
Flavoured milk volume sales growth to lose momentum from 2018-22
Slower inflation expected in flavoured milk for 2018-22 than in 2017
Figure 12: UK retail value sales of flavoured milk, 2012-22
Forecast methodology
MARKET SEGMENTATION
Cow’s milk sees further volume decline in 2017
Rising prices push up value sales despite falling volumes
Figure 13: Retail value sales of white milk, by fresh and long-life, 2015-17
Figure 14: Retail volume sales of white milk, by fresh and long-life, 2015-17
Conventional cow’s milk remains dominant
Filtered milk struggles to distinguish itself to consumers
Further strong growth for almond and coconut milks
Figure 15: Retail value sales of white milk, by type, 2015-17
Figure 16: Retail volume sales of white milk, by type, 2015-17
Health concerns and consumers’ more varied meal repertoires hit cream
Cream prices rise sharply in 2017
Double cream remains the leading cream type
Figure 17: UK retail value sales of cream, by type, 2015-17
Figure 18: UK retail volume sales of cream, by type, 2015-17
Second year of growth for flavoured milk
Pound’s depreciation drives up flavoured milk prices in 2017
Artificial image impedes milk modifiers
Figure 19: UK retail value sales of flavoured milk, milk smoothies and milk flavourings, 2015-17
Figure 20: UK retail volume sales of flavoured milk, milk smoothies and milk flavourings, 2015-17
MARKET DRIVERS
Milk prices continue to rise for most of 2017
Pound’s weakness supports export demand and ups price of flavoured milk in 2017
Uncertainties surround government’s post-Brexit policies
Public health focus both hinders and boosts the category
A quarter of users have cut back on cow’s milk
Flavoured milk benefits from its exemption from the sugar tax
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Own-label continues to dominate milk
Arla brands see mixed fortunes
Dairy alternatives lead on L/N/R sugar
Growth in fortified launches
Advertising on milk and cream falls in 2017
Dairy industry steps up marketing activity
MARKET SHARE
Own-label retains its lead in white milk
Figure 21: UK retail sales of white milk^, by leading brands, 2015/16-2017/18
Figure 22: UK retail sales of white milk^, by leading brand owners, 2015/16-2017/18
Mixed results for Arla brands
Arla acquires part of Yeo Valley’s dairy business
Alpro continues to benefit from the growth in the free-from market
Danone completes WhiteWave acquisition
Own-label remains leader of declining cream market
Figure 23: UK retail sales of cream, by leading brands, 2015/16-2017/18
Figure 24: UK retail sales of cream, by leading brand owners, 2015/16-2017/18
Yazoo sales recover in buoyant flavoured milk market
Figure 25: UK retail sales of flavoured milk, milk flavourings and dairy smoothies, 2015/16-2017/18
Further struggles for Frijj
Continued NPD activity drives further growth for own-label
Unusual flavours boost smaller brands
LAUNCH ACTIVITY AND INNOVATION
L/N/R allergen claims climb rapidly in 2017
Brands and retailers explore less commonly seen ingredients
Rude Health innovates with milk types
Figure 26: New product launches in the UK milk, dairy drinks and cream market^, by top 20 claims (sorted by 2017), 2014-18
Retailers build up their lactose-free ranges
Dairy alternatives lead on L/N/R sugar claims in 2017
Smaller brands explore L/N/R sugar flavoured non-dairy milk drinks
Growth in L/N/R sugar milk flavourings
Growth in fortified launches
Arla adds white milk to Protein range
Animal welfare claims grow but remain niche
Arla rebrands its organic milk as free-range
M&S secures RSPCA Assured certification for its dairy farms
Morrisons adds extra welfare requirements to Milk for Farmers
Brands and retailers explore different packaging formats
Müller reduces size of Frijj and introduces sharing format
The Co-operative’s mini cartons target lunchbox occasions
M&S adds clotted cream in single-serve pot
Flavoured milk brands aim for a more adult audience
Further growth in coffee-flavoured milks
Milk with valerian claims to improve sleep
Crossover brands enter the flavoured milk category
ADVERTISING AND MARKETING ACTIVITY
Advertising spend falls in 2017
Figure 27: Total above-the-line, online display and direct mail advertising expenditure on milk, milk drinks and cream, 2014-17 (sorted by 2017)
Arla continues to lead on advertising despite spending cutbacks
Cravendale puts the focus on freshness in new TV advert
YouTube adverts for organic milk highlight the cows’ idyllic life
Social media campaign promotes different milk drinks for different coffee drinks
Further sampling for Best of Both
FrieslandCampina ups spending as it supports Yazoo
Cinema advert for no-added-sugar variant focuses on permissibility
New advert emphasises compliance with PHE calorie targets
‘Shake it up’ campaign urges people to be adventurous
Targeting students with Freshers’ Week sampling
Vegan body urges consumers to ‘Ditch Dairy’
Dairy industry steps up activity
Dairy UK and AHDB Dairy launch new generic marketing campaign
Dairy Council promotes health benefits with nutritionist-backed Milk Manifesto
Dairy farmers co-operate on ‘Februdairy’ social media campaign
Nielsen Ad Intel coverage
THE CONSUMER – WHAT YOU NEED TO KNOW
96% of UK adults use milk
Most users would pay more than £1 for a four-pint bottle of milk
Niche retail availability limits uptake of ethical milks
Consumer interest in animal welfare does not always translate to buying
Multiple barriers to drinking milk out of home
USAGE OF MILK, DAIRY DRINKS AND CREAM
96% of UK adults use milk
Need to persuade younger consumers of the merits of cow’s milk
Figure 28: Usage of milk, by type, February 2018
Under-35s are key users of plant-based milks
Most plant-based milk users also use cow’s milk
Semi-skimmed remains the most widely used milk type
Figure 29: Usage of milk and milk drinks, by variety, February 2018
Cream is used by half of UK adults
Figure 30: Usage of cream, by type, February 2018
HOW MUCH CONSUMERS ARE PREPARED TO PAY FOR MILK
Most users would pay more than £1 for a four-pint bottle of milk
A quarter of users would pay more than £1.40
Figure 31: How much consumers are prepared to pay for milk, February 2018
AWARENESS AND USAGE OF ADDED-VALUE MILKS
Retailers’ marketing push underpins reported usage of farmers’ fair pay milks…
…but consumers’ high trust in supermarkets limits usage
Figure 32: Awareness and usage of added-value milks, by type, February 2018
Reported usage of free-range milk contrasts niche retail availability
Consumers’ trust in regulators both boosts and hinders reported usage
Need to boost distribution and in-store visibility of ethical milks
BEHAVIOURS RELATING TO MILK, DAIRY DRINKS AND CREAM
Consumer interest in animal welfare does not always translate to buying
Figure 33: Behaviours relating to milk, dairy drinks and cream, February 2018
Need for high-welfare dairy producers to emphasise this more strongly on-pack
Perception of negative publicity adds further urgency
Cream loses out as consumers embrace varied meals repertoires
Social media can help to encourage cooking with cream
ATTITUDES TOWARDS MILK, DAIRY DRINKS AND CREAM
Multiple barriers to drinking white milk out of home
In-store positioning should help to encourage impulse purchases
Figure 34: Attitudes towards milk, dairy drinks and cream, February 2018
Importance of iodine is acknowledged by many
References by glass would help to make milk’s role as source of iodine more tangible
Iodine’s role in maintaining brain function should help to boost milk’s appeal
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Figure 35: Best- and worst-case forecast of UK sales of milk, milk drinks and cream, by value, 2017-22
Figure 36: Best- and worst-case forecast of UK sales of milk, milk drinks and cream, by volume, 2017-22
Figure 37: Best- and worst-case forecast of UK sales of white milk, by value, 2017-22
Figure 38: Best- and worst-case forecast of UK sales of white milk, by volume, 2017-22
Figure 39: Best- and worst-case forecast of UK sales of cream, by value, 2017-22
Figure 40: Best- and worst-case forecast of UK sales of cream, by volume, 2017-22
Figure 41: Best- and worst-case forecast of UK sales of flavoured milk, by value, 2017-22
Figure 42: Best- and worst-case forecast of UK sales of flavoured milk, by volume, 2017-22
Figure 43: UK retail volume sales of milk, milk drinks and cream, 2012-22
Figure 44: UK retail volume sales of white milk, 2012-22
Figure 45: UK retail volume sales of cream, 2012-22
Figure 46: UK retail volume sales of flavoured milk, 2012-22
Forecast methodology