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Dairy sales down, but looking up.

Like the old joke goes, there is good news and bad news in the dairy department.

The bad news is that overall sales were down last year, although yogurt, cheese and refrigerated juice--which collectively account for more than one-quarter of this more than $18 billion category--did very well. The good news is that 1984 should be a very good year for the dairy case. Consumption of all milk and milk-related dairy products was weak during most of 1983, according to the USDA. But a 3% gain from October to December raised total consumption for 1983 about 0.3% above 1982. Gains in 1984 are expected to be between 1% to 3%.

The expected increase is a result of lower support prices for milk that should help to hold down retail dairy prices; the improving economy; stricter standards on surplus food distribution; and the national dairy product promotion program that will become effective later this year. Shifting milk preferences

Per capita consumption for liquid milk was down 5.4 pounds. A new study by the Business Trends Analysts research firm says per capita sales of whole milk will continue to decline from 207 pounds in 1970 to 117 pounds by 1993. While sales of whole milk are on the decline, sales of low-fat and skim milk are rising.

Compounding the situation are milk price wars, which have been common-place in the last year. "We're selling 2% milk for $1.69 to $1.79 per gallon in some areas," says Jim Hagrelious, dairy merchandiser for J.M. Jones, a Super Valu division headquartered in Urbana, Ill.

Larry Grunkemeyer, program coordinator for the American Dairy Association, agrees. He points to the influx of warehouse stores across the country as helping increase milk sales, but keeping dollar volume down. "They are doing a fantastic job of bringing in the people," Grunkemeyer says, "but, of course, their margins are low."

The "chocolate milk wars" are another factor helping milk sales. Nestle, Hershey and Beatrice Foods (Swiss Miss) are now selling their mixes to local dairies across the country, promoting the concept of "quality chocolate milk." Say cheese

The big cheese is still gaining ground in the dairy case. Per capita consumption of cheese went up 0.3 pounds in 1983 and should increase more this year because of stricter restrictions on the government cheese giveaway program. Last year, cheese surplus donations totaled 634 million pounds, a 48% gain. Many industry observers believe cheese sales, particularly in processed cheese lines, have been adversely affected by the giveaway programs.

Hagrelious of J.M. Jones reports that random weight cheese and shredded cheese, particularly nacho and taco varieties, are selling well in his market area. Lee Gentine, senior vice president of marketing for Sargento Cheese Co., says 15% of all natural cheese sales come from the growing shredded cheese category. Sargento's newest innovation on the market is Fancy Shredded Cheese. Cultured activities

Yogurt continues to be a big seller in the dairy department with new varieties, especially custard style, being added continuously.

Kraft recently introduced a six-pack of Light 'N Lively yogurt. "The convenience pack is for people who are big yogurt eaters," says a spokesperson for Kraft. "It's a handy way to buy yogurt." The six-packs feature three cartons each of two flavors.

Kraft also introduced a line of 10 premium dips made with real, quality sour cream, cream cheese and buttermilk. The dips come packaged in 8-ounce tubs with paperboard sleeves. The big scoop

U.S. ice cream consumption in 1983 was more than 887 million gallons--more than 15 quarts per person--an increase of 4% over 1982.

The newest trend in ice cream is toward the "gourmet" items on the market. These ice creams contain higher butter fat content, are higher in calories and more expensive, but obviously, consumers' "quest for the best" is influencing their ice cream purchases.

A new entry is expected this summer in test markets when Swensen's Ice Cream Co. introduces its first packaged ice cream for sale in supermarkets and convenience stores. Also, Land O' Lakes has introduced a premium ice cream line, Country Creamery, in Minnesota and western Wisconsin.

Popsicle Inc. and Nabisco Brands recently went national with Oreo Cookies N' Cream, an ice cream featuring Oreo cookies crunched up in a premium ice cream. It is available on a stick, in a sandwich and in a variety of flavors including vanilla, chocolate, mint and coffee. A $6 million advertising campaign is backing the product. Buttering up

Butter consumption per capita increased 0.5% in 1983. The American Dairy Association is planning a $5 million advertising campaign stressing butter's taste advantage and countering consumer perceptions about butter's cholesterol content and higher retail price.

The big news in butter and margarine is the marriage of the two in the new butter blends on the market. Sources claim butter blend tonnage volume is up 69% and dollar volume up 75%.

Country Morning Blend, the first to enter the blend market three years ago, is made with 40% sweet cream butter and is now marketed in 85% of the country. Price may be the determining factor for future growth of the product, say industry observers. Country Morning Blend retails for $1.69 a pound, very close to the $1.79 price of butter. New entries on the market have less butter and lower prices. For example, Kraft's Sheffield Farms dairy blend with only a small amount of butter made its debut at about $1.19 a pound.

Annual per capita egg consumption has been dropping for several years now as consumers look to cut cholesterol. A shortage of eggs toward the end of the year brought egg prices up.

Seaboard Farms, an egg producer headquartered in Lakewood, N.J., is planning to introduce a private-label egg in the New York/New Jersey market in November. "We can conceivably have the eggs in the supermarket within 48 hours after they are laid," says Boyce Overstreet, president of Seaboard. The price differential for the 48-hour egg will be about 10 cents per dozen. "But," says Overstreet, "71% of the consumers we surveyed said they would pay more for a fresher egg and that's the feature we plan to provide."

Seaboard is currently marketing Eggs T' Go, a hard-boiled egg with a 60- to 90-day shelf life. The egg is steamed, then the pores are sealed with natural gum tree resin to prevent bacteria, which can cause spoilage, from entering the egg. The big squeeze

Refrigerated juice sales continue to boom as consumers respond to the convenience aspect of the product. According to the Florida Department of Citrus, volume sales of ready-to-serve orange juice rose 13% last year to 346 million gallons. Dollar sales also increased 13% to $1.2 million. Volume sales of ready-to-serve grapefruit juice climbed 2% over last year to 28 million gallons, but dollar sales of $113 million remained unchanged from a year ago.

Severe cold weather caused considerable damage to the nation's citrus crop this past season, which could result in higher prices this year, but citrus industry experts feel the outlook remains positive, largely due to the improved economy.

Procter & Gamble's recent national rollout of Citrus Hill orange juice is expected to expand the entire orange juice market. Sources report that in the 12-week introduction period for Citrus Hill, consumers drank 34% more chilled orange juice than usual. Orange juice consumption prior to that had been growing at a much slower 4.5% pace.

So far, Citrus Hill is reported to have won 8% of the orange juice market and analysts expect its share to climb to 15%.

P&G spent $100 million in advertising and promotions on the national rollout of Citrus Hill, including freestanding inserts, coupon offers and direct mail couponing. In response, Beatrice Foods' Tropicana brand has more than doubled its advertising to between $15 to $20 million and increased incentives to the trade through co-op advertising, couponing and greater spot advertising in the brand's strongholds in the East and pockets of the Midwest and South.
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Publication:Progressive Grocer
Date:Jul 1, 1984
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