Options for liquid milk producers do exist but time and effort is needed
When one examines the Irish liquid milk market some interesting facts emerge. Gone are the days of buying a pint of milk in the local shop – just 3% of milk bought is purchased in the local shop, down from 20% of the milk bought in 2002. The rise of private label or own brand milk is also interesting. In the UK, 90% of milk sold is own label, ie Tesco or Sainsbury milk. In Ireland, own label milk accounts for 55% of the milk sold on supermarket shelves. And when a 2L bottle is some 40c cheaper than the branded version, it’s not difficult to see why shoppers would go for this option.
The amount of Northern Ireland milk is also startling – some 25% of the milk on supermarket shelves is from the North, none of which ‘qualifies’ to carry the National Dairy Council logo.
Traditionally at farm level, liquid milk producers were the envy of other dairy farmers. After all, they received a bonus for producing milk year round. However, the joke seems to be on them now – they’re working what other dairy farmers would consider ‘overtime’ for a bonus that was, on average, 4c/L over the past 20 years. Yet, liquid margins have been eroded over the years. This is despite the fact that liquid milk producers have a very valuable asset.
However, if processors continue to sell unbranded milk to the multiples they are simple undercutting their own, and the farmers’ valuable asset – branded milk. It makes no sense for processors to water down their own brands, by selling milk to retailers who, in turn, are undercutting the branded product.
If the UK retail market is any indication of the future composition of our supermarket shelves, the percentage of own label, as opposed to branded milk will continue to grow, especially if a 2L bottle of private label milk sells for 40c cheaper than the branded version.
Indeed, Tesco says that all of its own label milk carries the NDC ‘farmed in the Republic of Ireland logo’ and it is promoting the provenance of Irish milk to its customers, but not necessarily through the branded products on its shelves. Some 60% of the milk it sells is Tesco own label, not branded milk, compared to the national average of 55%.
Liquid milk farmers need to wake up and smelled the coffee. They have an extremely valuable product and it’s about time they did something to achieve a viable return.
At farm level, the issues around herd fertility need to be addressed immediately. But, the most valuable asset liquid milk producers and processors have is their brands. And, greater focus must be on the value of such brands – both growing the market share of the current brands and developing new brands and products.
Glanbia’s new Avonmore protein milk is a prime example of adding value to an already established branded product. The wider industry must work to ensure there is greater investment in research and development to develop more branded products for the liquid milk and increase the promotion of the brands currently on the market.