Retail Opportunities in Dairy
As CEO of Washington, D.C.-based MilkPEP, Yin Woon Rani is responsible for helping milk suppliers and retailers sell more milk. Rani talked to Progressive Grocer about the impact of plant-based products on the dairy industry, how milk producers are innovating in the functional beverage age, and the (shrinking) carbon footprint of a glass of milk.
Progressive Grocer: Can you talk about your background and how you came to be CEO of MilkPEP?
Yin Woon Rani: My whole career has been in marketing communications. I have almost 18 years on the agency side. I have been lucky to work with clients like P&G, Smucker’s, GlaxoSmithKline, and Hasbro, and, before coming to MilkPEP, I was at Campbell Soup Co. as their chief consumer experience officer across a large portfolio of products.
PG: Why did you make the move to dairy?
YR: My role at MilkPEP feels like the job I’ve been preparing for my whole career, without knowing it. It’s wonderful to be attached to such a big, important industry and to be able to generate awareness for a category with such an impact.
PG: For people who aren’t familiar with MilkPEP, tell us about the organization’s goals and your role as CEO.
YR: PEP is an acronym for Processor Education Program. It is what is known as a “checkoff program,” which is funded by the largest dairy companies in the U.S. For every 100 pounds of milk they process, they are assessed an amount of money that the USDA gathers, which becomes the operating budget for MilkPEP. And so our mission is actually very simple: It is to encourage Americans to drink more milk every day.
PG: Let’s define what milk is today, because there’s a lot of controversy about what is milk and what is not milk.
YR: We are solely focused on dairy milk. Obviously, there’s a lot of plant-based drinks that use the “milk” moniker, though technically, under FDA standards of identity, they would not meet these standards. But in consumer language, that’s what they’re called. We feel strongly that dairy milk is unique in its nutritional profile with what it brings naturally to the table. It’s one of the reasons I’m excited to work in the category every day. Dairy milk has few ingredients, while plant-based drinks are highly fortified, yet still fall short of milk’s nutritional profile.
PG: What is the state of dairy milk consumption in the U.S. right now?
YR: Consumption of dairy milk has been on a steady decline for decades for a lot of reasons. But plant-based alternatives are not the primary source of loss. In fact, we see more interaction between milk and bottled water. The plant-based category is still small in the larger picture. We sell more dairy milk in a week than is sold in an entire year for oat milk. One of the big structural reasons why milk is declining is not necessarily a loss of preference; it’s more because consumers want on-the-go beverages. To adapt, the dairy industry is increasingly investing in both extended shelf life and aseptic. Additionally, kids’ milk packs are still going well, as, again, this offers an on-the-go option.
PG: But dairy milk has seen a lot of innovation over the years, hasn’t it?
YR: Yes. Particularly with organic and lactose-free, which is one of the fastest-growing segments of milk. Lactose-free on a volume basis is growing over 5% a year and in double digits, from a dollar standpoint. Our value-added segment, which includes health-enhanced milk, is $1 billion more than the plant-based. So dairy milk is really very big, and, interestingly, within what we call traditional milk, we continue to see whole-fat growth.
PG: Milk sales were up during the pandemic, right?
YR: Yes, during the surge period and during the balance of the year, because frankly, the more people are home, the more milk they drink. We have lots of consumer data that demonstrates that milk is still considered extremely healthy — it is the healthiest beverage in consumer perception, besides water itself. People still appreciate real dairy’s nutrition profile. During the pandemic, we did a survey, and it was in the top three of most essential items in the pantry and refrigerator, up there with eggs and bread. Attitudes toward milk are more positive than one would think. Consumers not only still like real milk, but milk plays a significant role in consumers’ diets in comparison to other kinds of milk. Total dairy is also in really good shape. People will continue to eat more cheese, yogurt and ice cream than many categories could possibly match.
PG: What should grocers be doing differently when it comes to merchandising milk at the dairy case?
YR: Some retailers continue to use dairy as a loss leader to attract shoppers. Milk is one of the most planned things in the grocery cart, and if you have milk in your basket, it’s usually a big, valuable basket. But retailers need to understand what a valuable product it is, not just for consumers but for the retail channel itself. Milk has 4% of shelf space, but 10% of revenue and 20% of profit for an average store — milk is highly, highly productive. Given the pressure from other alternatives, that dairy case space is very valuable, but we do think that milk is under-spaced and under-allocated as all this alternative innovation has come.
Retailer customers are leaving money on the table by not having enough milk in stock, particularly in conventional versus value-added. This year, we’re seeing out-of-stocks at a record high in value-added milk, which is the fastest-growing, most premium-priced products. We have analysis that shows that when retailers don’t have enough holding power for milk, retailers lose $1,000 to $3,000 per store. We know that the plant-based market is over-spaced, but retailers are looking for something else that’s as interesting, as compelling, has the right graphics and has the right modern appeal, as plant-based. The milk companies are increasingly responding to that ask, and our industry innovation pipeline has only just begun.
PG: What’s going on with organic milk?
YR: Organic is plateauing a little bit because it’s been growing for a long time and many consumers have already opted in. The lactose-free and health-enhanced segments are really the star pupils right now. It’ll be interesting to see during this inflationary period what happens, because traditional milk is still a really good deal — both in terms of cost and nutritional value. We’re watching closely to see how the inflationary part affects value-added, but I do think that is going to continue to be a big growth area.
PG: Are consumers clamoring for more sustainable dairy options?
YR: Shoppers are increasingly interested in the dairy industry’s sustainability efforts. Our data says that sustainability is critical, particularly among younger people. While sustainability is not a main driver as to why they buy milk or don’t buy milk, it is definitely a consideration that will continue to have more and more importance.
The good news is that the industry is very focused on their sustainable footprint and frankly has made a lot of progress, thanks to increasingly modern and innovative dairy farming practices. In a 10-year time period, the environmental impact of producing a gallon of milk shrank significantly, requiring 30% less water, 21% less land and a 19% smaller carbon footprint. So the industry is laser-focused and super-committed to sustainability.
