The Grocery Opportunity:
Four Ways to Optimize Milk Sales, Store Profit
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ilk is a key driver of shopping trips. As an item bought by more than 95 percent of households1, its availability (or lack thereof) impacts shoppers’ overall image of your store. Ensuring you have variety in your milk case, proper space allocation and merchandising has the potential to drive greater store profitability. According to MilkPEP’s proprietary research, milk: Drives Shopper Trips: Milk trips to grocery average 21 times per year – far more than other top categories.1 Drives Shopper Basket Rings: Large baskets with milk are 23 percent more profitable than those without milk.3 Drives Your Bottom Line: Out of 227 total store categories, milk ranks No. 2 in true profit1
MILK IS A TRIP DRIVER. IT DRIVES MORE THAN 21 TRIPS TO THE GROCERY STORE PER YEAR
There are four ways you can invigorate your fluid milk business at grocery: 1. Remedy the out-of-stock issue: In many stores, milk’s space reductions have led to out-of-stocks and ultimately, lost sales and decreased shopper satisfaction.4 Because of milk’s fast turns and extremely low days-of-supply, roughly half of the milk category must be restocked every Friday, Saturday and Sunday – resulting in higher labor costs. Midday restocking is required but costly, and not always realized; restocking alone is not the solution.5 The research shows that retailers lose when underspacing milk – and overspacing other parts of the dairy case. When you add in extra stocking labor, retailers lose $1,800 to $3,000 per shelf, per year by converting that last milk shelf to milk alternatives.6 It is time to “reset” the dairy case and balance inventory and days of supply to ensure milk stays in stock. 2. Increase days of supply for more profit: One of the most important ways to ensure milk stays in stock is to focus on days of supply. Conventional milk’s last / worst-performing shelf – captures three times the profit of almond milk’s last shelf. Yet, currently milk’s days-of-supply is lower than almost any other product in store. On average, milk gallons only have 1.5
days of supply and half gallons 2.3 days of supply, compared to almond milk at 5.9 days of supply and soy at 7.8 days of supply.4 To get to the right amount of supply, retailers should ensure there’s adequate shelf space, most importantly, in addition to ensuring back stock is adequate and restocking approach is sound. To meet demands, the research recommends: 3-4 days-of-supply for traditional milk (which translates to 1-2 days on the weekend to ensure consistent availability during heavier shopping days)12 5-7 days for value-added milk due to variability of demand from week-to-week, uniqueness of items (some do not have substitutes) and often limited back stock and supply chain7 While space recommendations should be customized to each store, the research suggests four categories that should be reviewed for potential reduction in favor of more fluid milk facings: dairy alternatives, juice, yogurt and refrigerated baking.3 3. Make space for new product introductions: Shoppers demand options and variety in their food choices – milk is no exception. Milk companies have been focusing on innovation and new product introductions, which means that retailers need to make more space on shelf for more milk SKUs. New product introductions satisfy a variety of shopper needs and wants. Over the past four years, lactose-free milk sales have increased 42 percent, health enhanced products are up 73 percent, single-serve flavors are up 30 percent and organic milk is up 12 percent. Taken together these represent nearly $500 million in sales.7 These value-added products now represent a sizeable part of the category — 21 percent of dollar sales — and an opportunity to increase milk sales.7 New dairy milk product introductions should be evaluated against other new products within the dairy case and not the established milk gallon. Comparing to the established category leader may misrepresent the potential value of a new introduction. The best way to asses profit potential is to compare the new product opportunity to similar value added products.3 4. Optimize milk merchandising: Shopper insights suggest that communicating the benefits of milk — not just price — could drive increased purchase. In particular, focusing on milk’s protein advantage — 8 grams in every 8 ounces — and chocolate milk’s benefits as a post-exercise recovery drink. Leveraging MilkPEP’s nationally supported retail marketing programs and support from your milk suppliers, has the potential to help optimize your dairy case, and drive incremental sales.