9/9/2009

EVALUATING GENERIC

PROMOTION PROGRAMS

Bill Thomas

University of Georgia

2001 Southern Dairy Conference

9/9/2009

Milk Production & Commercial

Disappearance, U.S., 19975 - 1999

110

120

130

140

150

160

170

1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Billio

n P

ou

nd

s

Milk Production

CommercialDisappearance

9/9/2009

Evaluating Generic

Promotion Programs

• Cornell University – Economic Impact

• Beverage Marketing Corporation –

Business school approach to assess milk

marketing programs

9/9/2009

Generic and Brand Advertisement and

Promotion of Fluid Milk and Cheese, 1980 to

1999, Deflated Dollars

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

Th

ou

san

d D

ollars

Generic Fluid

Brand Fluid

MilkPEP

GenericCheeseBrand Cheese

9/9/2009

Cornell Study

• Impact of programs 1996-99

• Fluid consumption –1.4% w/o programs

• Total consumption –1% w/o programs

• Cheese consumption +1.2%

• All milk price $0.85 lower w/o program

• BCR = 4.29

• Return of $4.29 for each $1.00 invested

9/9/2009

U.S. Commercial Disappearance of

Milk and Dairy Products, 1975-99

100

110

120

130

140

150

160

170

Billio

nP

ou

nd

s

Actual

Trend 1975-83

Trend 1984-99

9/9/2009

U.S. Fluid Milk Sales and Cheese

Sales (Milk Equivalent)

35000

40000

45000

50000

55000

60000

65000

70000

75000

80000

Millio

n P

ou

nd

s

Fluid Sales

Cheese Sales (MilkEquivalent)

9/9/2009

Total Per Capita Cheese Sales, U.S., 1975-98

0

5

10

15

20

25

30

1975 1978 1981 1984 1987 1990 1993 1996 1999

9/9/2009

Per Capita Fluid Milk Sales, U.S. 1975-98

190

200

210

220

230

240

250

260

1975 1978 1981 1984 1987 1990 1993 1996 1999

9/9/2009

Project Objectives of BMC

• Develop an in-depth understanding of the

beverage environment

– Input into future programs and annual Report

to Congress

• Provide a third party qualitative

assessment of generic milk marketing

programs

• Assist with competitive measurement

system

9/9/2009

How Milk Fares in Competitive Universe

• Milk’s growth lags the category

9/9/2009

4.6

3.6

0.6 0.5

-0.6

0.1

-1

0

1

2

3

4

5

B. Water CSD Sports RTD Tea Fruit

Beverages

Milk

Ch

an

ge

in

Ga

llo

ns p

er

Ca

pit

a

P=PreliminarySource: Beverage Marketing Corporation

Competitive Beverage Set Per Capita Consumption Growth1995 - 1999P

Milk’s Performance Lags the

Category

9/9/2009

New Product Introductions 1998-1999 Change

-6%

22%26%40%

146%

271%

-50%

0%

50%

100%

150%

200%

250%

300%

Milk is the Only Category Showing a Decline

Bottled

Water

Fruit Beverages

Sports

Beverages RTD TeaSoft

Drinks

* Includes non-dairy milk and yogurt drinks** Projected based on five months dataSource: Beverage Marketing Corporation; Marketing Intelligence Services

Milk

9/9/2009

7479

93

114

0

20

40

60

80

100

120

1996 1997 1998 1999**

# o

f N

ew

Pro

du

cts

* Includes non-dairy milk and yogurt drinks** Projected based on five months dataSource: Beverage Marketing Corporation; Marketing Intelligence Services

Milk New* Product Introductions

Declining

9/9/2009

$290

$460

1998 1999

Orange Juice with Calcium Sales*1998-1999In Millions

* Chilled and frozen concentrateSource: Beverage Marketing Corporation; A.C. Nielsen

$230

$205

$178

$151

1996 1997 1998 1999

+ 18%

+ 15%

+ 12%

Soy Beverage Sales 1996 - 1999In Millions

Potentially Competitive Products to Milk

Appearing

+ 58%

9/9/2009

How Milk Fares in Competitive Universe

• Milk’s growth lags the category

• Milk addresses basic and functional

product benefits

– while the competition addresses higher-order

consumer benefits

9/9/2009

Overall, milk addresses primarily basic/ functional benefits

• However, consumers now expect higher-level emotional benefits from the beverages they drink

• Well-positioned, highly-marketed products tend to address higher-order consumer benefits

Highest-order Benefits

Emotional Benefits

Self-esteem Well-being

Functional Benefits

Basic Product Attributes

TrustSmart ChoiceSocial status/ acceptance

Self-indulgence Individuality

High Quality Filling Soothing NutritiousRefreshing

TasteDependable/ Consistent

Cold Generic

Confidence

Good Value

• How do I feel about this?

• What does it do for me?

• What is it?

Flavor Variety

Consumer Benefit Hierarchy for Milk

Source: BMC

9/9/2009

Vegetable Juice

Traditional

Highest Order Benefits

Basic Attributes

InnovativeColas

Traditional Fruit Juice

Flavored CSDs

PET Water

Isotonics

EnergyDrinks

TraditionalFruit Drinks

PriceRTD Teas

New AgeFruit Drinks

Premium RTD Teas

New AgeFruit Juice

e.g. Sobe, Snapple Elements

Milk

Milk in lowest segment for growth, innovation and benefits

High Growth

Low Growth

Source: BMC

9/9/2009

How Milk Fares in Competitive Universe

• Milk’s growth lags the category

• Milk addresses basic and functional product

benefits

– while the competition addresses higher-order

consumer benefits

• Milk’s packaging is functional/operations-

driven

9/9/2009

EnhanceMarket/ Consumer

Promote Convenience* Proprietary Image

CSDs

Bottled Water

Fruit Beverages

Sports Beverages

RTD Tea

Milk

Excellent

Excellent

Excellent

Excellent

Excellent

Poor

Beverages must have the appropriate packaging formats/array

Beverage Packaging Trends

* Portable, resalable, unbreakable, light-weight

Excellent

Good

Good

Excellent

Good

Poor

Excellent

Excellent

Good

Excellent

Excellent

Fair

Good

Excellent

Good

Excellent

Excellent

Fair

Source: BMC

9/9/2009

How Milk Fares in Competitive Universe

• Competition addresses the issue of

product availability better than milk

– although milk is improving

9/9/2009

Availability is a key element

Immediate Consumption vs. Take Home Distribution1998

Source: Beverage Marketing Corp.

50.745.0

39.5

26.018.0 16.0

49.355.0

60.5

74.082.0 84.0

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CSD Sports

Beverages

RTD Tea Fruit

Beverages

Bottled

Water

Milk

Sh

are

of

Vo

lum

e

Immediate Consumption Take Home

9/9/2009

Milk’s Availability in MM has Increased, but

Still Lags

Source: Beverage Marketing Corporation; AC Nielsen

0%

20%

40%

60%

80%

100%

1996 1997 1998 1999

RTD Tea

CSDs

Juices

Bottled Water

Milk

Percent ACV in Mass Merchandisers1996 - 1999

9/9/2009

How Milk Fares in Competitive Universe

• Competition addresses the issue of product

availability better than milk

– although milk is improving

• Milk’s “voice” in the marketplace is soft

relative to its size

9/9/2009

Milk’s Relative Share of Voice

16%

13%

16%14%

13%

23% 23% 22% 21% 20%

0%

5%

10%

15%

20%

25%

1995 1996 1997 1998 1999

Share of Voice Share of Market

Milk’s Share of Voice is Less than its Share of

Volume

Source: Beverage Marketing Corporation; Competitive Media Reporting

9/9/2009

Only Bottled Water Spends Less on Advertising

Competitive Set Ad Spending per Gallon 1999

$0.06

$0.04$0.03

$0.02

$0.17

$0.07

$0.00

$0.02

$0.04

$0.06

$0.08

$0.10

$0.12

$0.14

$0.16

$0.18

$0.20

Sports Drinks Fruit

Beverages

RTD Tea Soft Drinks Milk PET Bottled

Water

Do

lla

rs p

er

Ga

llo

n

Source: Beverage Marketing Corporation; Competitive Media Reporting

9/9/2009

How Milk Fares in Competitive Universe

• Competition addresses the issue of product

availability better than milk

– although milk is improving

• Milk’s “voice” in the marketplace is soft

relative to its size

• In-store, milk’s merchandising falls

behind competition

9/9/2009

0%

2%

4%

6%

8%

10%

12%

14%

1996 1997 1998 1999

Juices

CSDs

RTD Tea

Bot. Water

Milk

Milk Lags in % of Dollar Volume Sold on Feature

Percent of Beverages Sold on Feature

1999

Source: Beverage Marketing Corporation; A.C. Nielsen

9/9/2009

BMC’s Assessment of Milk Marketing

Programs

• Program is notable for unusually high

consumer awareness

– Endorsements make product contemporary

– Good media mix for messaging

• Program’s greatest weakness is low

share of voice

– Spending is over-indexed to adults

– Generic lacks impact of branded advertising

9/9/2009

BMC’s Assessment of Milk Marketing

Programs

• Effective marketing has moderated

declines

• Even with the marketing program, milk is

still vulnerable to a decline

9/9/2009

BMC’s Areas of Improvement

• Evolve messaging

– From functional/nutritional to higher order

need states and emotional benefits

• Adjust ad mix to emphasize key 12-24 age

and ethnic groups

• Increase ad/promotional spending

9/9/2009

BMC’s Areas of Improvement

• Enhance processor marketing programs

– positioning, packaging,pricing, availability,…

• Develop field execution expertise

comparable to competition

• Innovation is key to future growth

9/9/2009