Dean Foods declares bankruptcy amid drop in milk demand

Top US milk company Dean Foods declared bankruptcy this week, blaming a decades-long drop in milk consumption as more consumers turn to alternatives. Here, Mintel Global Food and Drink Analyst, Caroline Roux explains how a better understanding of what consumers want and why is critical to success in the dairy category.

It’s true. Consumers have been drinking less milk for decades now. But dairy milk remains a staple in the US. In fact, in the three months to August 2019, 90% of US consumers purchased dairy milk and 66% of US parents used it as a drink for their children, according to Mintel research on milk and non-dairy milk.

However, consumers – particularly younger ones – have become unsure about the health benefits of milk, with many going so far as to say that plant-based ‘milk’ is more nutritious (and tasty) than dairy milk. The growing popularity of plant-based ‘milk’ is partly due to the fact that these brands connect better with consumers. Owed to their hefty margins (plant-based drinks are mostly made out of water), plant-based ‘milk’ brands have budgets to spend on innovation and marketing campaigns. Plant-based drinks also deliver more margins to retailers who, therefore, allocate a larger share of shelf space to the products, which helps to recruit more consumers to the category.

Both consumer demand and hefty margins convinced Danone to buy the plant-based business WhiteWave, which was spun off by Dean Foods in 2012; at the same time, Mintel predicted the healthy growth opportunity for non-dairy products. Danone’s ambition to triple their plant-based business by 2025 is further confirmation that dairy brands need to become more relevant to consumers.

Consumers need a better image of milk

Milk brands should prioritise improving the perception that consumers have of dairy milk. Consumers will be interested to know about milk’s (high quality) protein and naturalness. Consumers won’t fall for chocolate milk loaded with sugar or any other dairy products – even if they taste good – if they have a long list of “not-clean” ingredients. Last year, Dairy Farmers of America ran an inspiring campaign to encourage consumers to reappraise milk as a delicious and nutritious drink. Mülü – which is nothing more than a fake brand of whole milk packaged in a trendy bottle – was promoted as a new all-natural “superdrink” packed with protein and vitamins.

What we think

To resist the competition of plant-based milk, dairy milk brands must break the category norms and reinvent themselves with more on-trend proposals. To make milk exciting and fun, brands can look at product positioning that is quirkier, and less serious. Milk packaging design featuring cows grazing on bright grass is definitively out of fashion.

Dairy companies must reassure consumers of their commitment to sustainability as plant-based milk brands cash in on their environmental credentials. Mintel research on a related category, yogurt and yogurt drinks, shows that consumers want more sustainable food, with 11% of US consumers say they would buy more yogurt if it was made through sustainable farming practices.