Milk Shakes

FUNNY HOW MILK LOOKS like a brand when it’s on the upper lips of celebrities, but still sells like a commodity in the grocery store.

This is the year all that changes.

The two marketing boards that have brought us milk mustaches and “got milk?” ads are combining efforts this year on an aggressive consumer promotion strategy. Armed with a branded beverage and a $186 million marketing budget ($15 million earmarked for promotion), they’re taking on the soft drink and juice brigade to 1/2nally make good on those popular ads and sell more milk. For the 1/2rst time, dairy processors like Kemp’s and Dean’s will join forces with dairy farmers to bring the brand pitch in-store.

“It’s time to deliver the sales payoff. Promotion climbed up our priority list,” says Tom Nagle, vp-marketing for the International Dairy Foods Association (IDFA), marketing arm for the processors’ group.

“Our boards and our members are holding us to the wall. They want to see an impact on consumption,” says Greg Rotunno, director of milk marketing for Dairy Management Inc. (DMI), representing dairy farmers.

After four years of branding milk with high-profile ads, the two groups have begun thinking like true beverage marketers. “Promotion is long overdue,” says Jerry Dryer, president of The Jerry Dryer Group, a Chicago dairy marketing consultancy. “Individual [dairy] companies don’t do anything, and other beverages do all kinds of things. Milk ads raised awareness, but the other shoe hasn’t dropped yet. There hasn’t been much branding.”

At the same time it steps up promotion, the industry is weathering a tempest in a milk glass over its marketing practices.

In September, the U.S. Department of Agriculture Office of the Inspector General issued a report to Congress criticizing the way the processors’ association, Milk Processors Education Program (MilkPEP), and its agent, IDFA, handle contracts. With Kenneth Starr-like scrutiny, the report alleges that MilkPEP didn’t file paperwork with the USDA for $127 million in contracts, including marketing work, and that some contracts weren’t bid out. Washington-based IDFA is contracted by MilkPEP to execute marketing; Bozell, New York, handles advertising, and McCracken Brooks Communications, Minneapolis, handles promotions.

MilkPEP railed against the report, which gained widespread public attention in late November. The audit, begun in January ’97, focused on “nitpicky procedural matters” and exaggerated unbid contracts, says IDFA spokeswoman Susan Ruland, who stresses that the audit found no misappropriation of funds.

“Milk processors are 1/2ghting a tough battle – milk sales have been in decline for 30 years and processors are heavily outspent in marketing by soft drink and juice companies,” she added. “This is run like a business. You wouldn’t want it run like a government entity.” In fact, the MilkPEP board told Secretary of Agriculture Daniel Glickman that it would vote to shut down the program if the USDA forced too much bureaucracy into its process.

The report also criticized the mustache ad campaign for having little impact on sales. “That’s one of the main reasons we’re moving into promotion, to focus on increasing sales,” counters Nagle.

The glass is half full MilkPEP and DMI have pooled their resources and set a slate of major quarterly promotions for this year. Promotion spending triples to $15 million nationally, with DMI’s 20-plus state and regional co-ops kicking in another $5 million to extend campaigns locally. Those co-ops become the arms and legs of the joint effort, selling in promos to retailers in their regions. It’s the first time DMI has used its 1/2eld force to run promotions, and the 1/2rst time IDFA has had access to a national network of reps.

Rosemont, IL-based DMI has never done fluid milk promos, though it does extensive co-marketing for cheese. MilkPEP’s past promotion strategy has been “FSI, FSI, FSI,” says Mark Lenss, president of McCracken Brooks. Sporadic joint offers with Pillsbury, Nabisco, and others offered cents off companion foods like cereal and cookies with the purchase of milk. It was easy to execute nationally, and avoided discounting milk, but it was still a commodity sell. Milk needs a value-added approach, heavy on the in-store execution. Retailers need a consistent program to plan their calendars “rather than have a promotion pop up once in a while,” says Nagle, who adds, “The key to success is not just executing on the national level. “We have to get in and build promotions on a local level.”

DMI’s regional groups made their 1/2rst sales call in ’98 to sell in MilkPEP’s second celebrity calendar. In November and December, shoppers got a calendar free with purchase of two gallons. DMI and MilkPEP aimed for 60 percent ACV distribution, and got 64 percent when 16,396 stores bought in.

“This is the biggest opportunity [of the joint effort]: local representation at the retail level,” Rotunno says. “Now we can develop push promotions instead of turn-key FSIs that rely on pull. So many opportunities have opened up at the local level, Tom [Nagle] and I looked at the ’99 plan to see how we can measure each promotion’s impact on consumption.”

DMI and MilkPEP surveyed the 50,000 households in ACNielsen’s Shopper Panel to check if the calendar offer raised consumption, not just sales. Shoppers reported whether they got a calendar, and DMI and MilkPEP matched that against the household’s purchase cycle. If shoppers bought milk as frequently and sales went up, then consumption rose, Rotunno explains. Such data helps in planning for 2000 and beyond, and shows members which promotions work.

“We inundate our members with sales data, but what they really want to know about is consumption,” Rotunno says. “We’ll spend a lot of money [in ’99] to get a bearing on the impact of different programs.”

While DMI won’t get consumer data back until March, retailers have been encouraging. The calendar sell-in “proved retailers have a real appetite for milk promotions,” Nagle says. In fact, grocers have encouraged milk marketers to ride their hot ad campaign in-store the same way a national brand would. “They told us that marketers with this kind of major equity would be sure to get it in store,” Nagle says. “It confirmed that we were heading in the right direction, and that we were selling to a receptive audience.”

The 1/2eld force also helps MilkPEP engage its own members. “A lot of processors are not up to speed on MilkPEP programs,” says May1/2eld Dairies president and DMI chairman Scottie May1/2eld. “We were contacting them by mail, but nothing beats a face-to-face conversation. This grassroots effort with [DMI’s] local folks sitting down with our members lets them really see programs they can participate in.”

This year, the two groups will concentrate on their four major promotions, with occasional partner FSIs, like a purchase-with-purchase deal on Kraft Foods’ Cappuccino Coolers. The 1/2rst-quarter national effort is an account-specific sweepstakes program called Get Smart with Milk. Retailers who meet feature-ad requirements get their own sweepstakes giving away Apple iMac computers and $1,000 scholarships. McCracken Brooks handles execution, and customizes materials to each chain. Feature ads boost volume sales as much as 48 percent, Lenss says, but ads have been down as milk prices have risen. Tying the sweeps to a required amount of feature ads encourages retailers to price and promote milk more aggressively.

For Dairy Month in June, DMI and MilkPEP will give away Milk Mustache Maker plastic shakers with recipe booklets for milk-based concoctions like Purple Cow and Apple Pie in a Glass. The shaker tested well in two markets last summer and was a hit with processors at IDFA’s October conference in Toronto. It will roll out nationally this year, free with purchase of two gallons of milk and a half-gallon of chocolate milk. Spring will see a spate of partner FSIs, and the celebrity calendar will make its third go-round in fourth-quarter. (Third-quarter plans are still in development with McCracken Brooks.)

The aggressive promotion plan was a tricky sell with MilkPEP and DMI members. “Promotions is a tough one,” May1/2eld says. “The board is sensitive that programs don’t give any one processor an advantage. But promotions are more effective when they tie in to a brand or a store.” That’s hard to reconcile with the board’s mission of equitable, generic marketing for all members. Still, “we’ve decided to go ahead with some ideas, and if they’re not effective, we won’t do them again.”

At DMI, dairy farmers pay in 15 cents per 100 pounds of milk they produce, and “they have to see their money being spent,” says an industry insider. “They want to see their ads on TV.” Promotions are less visible, even though they’re more effective: Volume sales rose 1.7 percent in November-December ’97, when the first celebrity calendar promo ran. That’s about 10 million more gallons in two months.

Even the ads don’t sit right with DMI members sometimes. “The agency keeps getting sent back to create ads that farmers like,” says one source. Still, farmers have been persuaded by the popularity of the ads and the success of smaller promotions to support more marketing. DMI members voted in November to keep the marketing assessment at 15 cents (ten cents to support local efforts, 1/2ve cents for DMI’s national budget).

DMI and MilkPEP members didn’t vote on the joint venture, but “our producers are jazzed about the program,” Rotunno asserts. “They think it’s about time the two organizations came together with an integrated campaign, and they want us to move as quickly as possible.”

Working together also enables DMI and MilkPEP to better target different consumers. DMI had targeted kids 6-11, the age when consumption begins to slip. There wasn’t enough money to also target moms buying for the household, and retail promotions to kids didn’t make sense because “tweens don’t do much shopping at the local Pathmark,” Rotunno explains.

At the same time, MilkPEP was targeting adults and teens, with little geared to moms to pique household consumption. The joint effort “lets us include an additional target: moms buying for the whole family,” Rotunno says. The associations used DMI’s 1997 consumer segmentation study and MilkPEP research to mutually reallocate spending against all target groups. The result is a cleaner, more consistent brand message to all consumers, with promotional twists that appeal to each group.

The industry is also benefiting from a packaging revolution sparked by Dean Foods’ Milk Chug. Resealable, single-serve bottles are showing up all over the country, and convenience stores are selling more milk than ever. Chocolate milk sales have jumped as much as 164 percent in Chug markets, and Dean reports that 25 percent of Chug users are drinking more milk. Dairies are spending millions to re-fit plants to handle new packaging, and the investment is paying off in brand equity as well as sales. “It’s part of the recognition that we don’t want milk to be a commodity,” Nagle says. “It can be a highly branded beverage choice. We just have to act less like suppliers and more like branded beverage marketers.”

Dryer the consultant concurs: “Want to sell milk? Sell something healthy, or sell something really, really fun. Get out of the dairy business and into the Frappucino business -you know, branding and real beverage marketing.”

With branding at the core of promotion and advertising, it begs the question: Are consumers sick of milk mustaches?

Not yet, contends Lenss. “Teen girls collect them,” he shrugs. “My niece collects them, and she was the envy of all the girls in her school when I gave her a complete set of the ads.”

Now if they drink more milk this year, marketers really will have begun to shake things up.