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2275 Half Day Road, Bannockburn, IL 60015Phone 847.945.1155www.primeconsulting.biz
Increasing Milk Sales in FoodserviceIncreasing Milk Sales in FoodserviceFinal ReportFinal Report
March 2003
Developed for
SmartMarketing 2003
Page 2
Executive Summary
Project Objectives & Approach
Processor/Operator Interview Summary
Focus Group Findings Summary
In-market Test Reports – VOLUME II
Separate Project Reports – Secondary Research– Detailed Focus Group Findings– Processor/Operator Interviews Full Report– Consumer Survey Responses (Electronic surveys)
Agenda
Page 3
Background: The Importance of the Restaurant Segment to Milk
Source: SIP Analysis 2002.
Executive Summary
Milk is only 3-5% of a restaurant’s beverage sales, while a much larger share of at home beverage consumption. The lower level of milk ordering when eating out, plus declining meals at-home, creates a doubly difficult challenge for the milk industry to overcome.
Restaurant sales continue to grow as more people eat outside the home or bring take-out food home, yet 90% of milk consumption occurs at home.
Recent innovations in flavors, packaging and quality hold promise as part of an effort to reverse the decline and capture an enormous untapped channel for milk sales.
One point is clear, without significant action to reverse these trends, milk consumption will decline as food at-home continues to decline.
854
870
885
1990 1995 2001
121
130
138
Annual Meals Purchased at a Restaurant
Per Person
Annual Meals Prepared & Consumed In-Home
Per Person
Page 4
Project Objectives
The objective of this project is to develop proven ways to increase milk sales in foodservice outlets through innovative research and testing.
The project was designed to:
gather currently available research about milk in foodservice operations. interview dairy processors and foodservice operators about current attitudes
and perceptions. understand consumer mindset regarding milk away from home. gain information about milk purchasing habits in foodservice settings. engage consumers to design consumption-building programs. develop, conduct and measure in-market tests based on learnings-to-date. report on development opportunities.
Executive Summary
Page 5
Approach
Three Phase Approach
Phase 1 – Gather Current Knowledge – Conduct secondary research and milk processor/ foodservice operator interviews to determine how milk fits into foodservice operations.
More than thirty interviews were completed.
Phase 2 – Understand Consumers – Interview consumers in focus groups to determine awareness of milk's availability in foodservice outlets, perception of freshness, desirability and likelihood of milk purchase.
Ten focus groups were conducted in three cities.
Phase 3 – Conduct In-market Tests – Design and conduct milk promotion tests for each processor/operator pairing. Analyze test results and develop market strategies.
Executive Summary
Current Knowledge
Consumer Understanding
Testing
1
2
3
Page 6
Approach (cont'd)
Four key foodservice formats were included in the research:
1. Quick Serve Restaurants (QSRs) – Offer a limited menu, usually specializing in a type of food and emphasize speed (e.g., hamburger, sandwiches, donuts, etc.).
2. Midscale Restaurants (MSRs) – Include a more varied menu than QSR, often geared toward family/value dining (e.g., Denny's, Old Country Buffet, Waffle House).
3. Upscale/Casual Dining Restaurants (USRs) – Offer an extensive menu, have wait staff, almost always sell alcoholic beverages (e.g., steak houses, Friday's, Chili's, etc.).
4. Business & Industry (B&I) – Covers a range of cafeteria or deli style settings in work places. Universities are included in this segment.
Executive Summary
Page 7
Approach (cont'd)
Important learnings were gained through preliminary research before development of the in-market tests.
The research conducted prior to the test development included:
– Processor Interviews – interviewed dairy processors about their foodservice customers' purchasing habits.
– Operator Interviews – interviewed foodservice restaurant operators to gain an understanding of their buying patterns, views about milk and other beverages.
– Focus Groups – conducted in 4 cities with teens, young adults, adults, and mothers with young children.
– Secondary Research – conducted through the Internet, publications, etc., to gain a broader understanding of restaurant promotions and views on beverages.
Executive Summary
Page 8
Research Participants
PROCESSORSPROCESSORS
Berkeley Farms
Borden Milk*
Dean Foods*
Garelick Farms*
Mayfield Dairies
Roberts Dairy*
Schneider's Dairy*
Shamrock Foods
Smith Dairy
Suiza Southeast
OPERATORSOPERATORS
Anderson Restaurant Group – QSR, USR*
Bickford's Diner – MSR
Cracker Barrel – MSR
Dairy Queen - QSR
Denny's Restaurant – MSR*
Epicurean Feast – B&I*
Hardee's - QSR
Hyatt Regency – QSR, MSR, USR*
Johnson County Community College – B&I*
King's Family Restaurant – MSR*
Krispy Kreme Doughnuts – QSR*
Krystal Hamburgers – QSR*
Legal Seafood – USR
Metz & Associates/Erie Life Insurance – B&I
Sodexho/EMC – B&I*
Waffle House – MSR
Wal-Mart Radio Grill – QSR*Test Participants
Project Objectives & Approach
Page 9
Processor and Operator Interview Key Findings
Restaurant operators have made few changes to menu beverage variety in recent years, except for carrying bottled water.
A few restaurants had started offering milk in a plastic resealable bottle (mainly QSR and B&I outlets).
In the QSR and MSR segments, operators usually offer 2-3 varieties of milk (in USR, even fewer).
In B&I/College restaurants, 3-4 milk varieties are offered, in some cases as many as 5-6 varieties.
Milk is generally not sold in a plastic resealable bottle, although some restaurants are beginning to carry it after seeing the success of other retail operators and their own success with bottled water.
The way milk is currently served in restaurants gives it a commodity image to operators and they believe it is an uninteresting beverage to consumers.
Executive Summary
Page 10
Focus Group Key Findings
Focus group participants said: they are open to ordering milk in restaurants, but aren't always aware of its availability; would like more variety in milk; don't usually view milk as a "treat" beverage as they do with other beverages.
When consumers sampled flavored milk in a plastic resealable bottle, they thought it tasted better and colder than milk in a carton or glass.
Participants liked the convenience and portability of milk in a plastic bottle.
Participants said they would be more likely to buy milk in restaurants if it were offered in a variety of flavors in plastic resealable bottles.
Consumers were shown several milk promotions and responded with enthusiasm. Kids-oriented promotions and meal deals were especially appealing.
Executive Summary
Page 11
Test DevelopmentExecutive Summary
Results from all preliminary research—focus groups, interviews, secondary sources—were analyzed and discussed with processors and operators participating in the in-market tests.
Processors and operators developed tests to validate the findings highlighted in the research.
Processors and operators tested:
– Adding flavored milk in plastic resealable bottles.
– Providing milk flavoring straws that turn white milk to a flavor when sipped through a straw.
– Targeting children by offering fun gifts featuring milk and accompanying point-of-purchase (P-O-P) material.
– Offering milk combo deals with meals or snacks.
– Promoting milk through menus, table/counter tests and other P-O-P.
Page 12
Tests Yielded Strong Results: +42% for the Average Program
Average program increasedmilk sales by 42%.
Milk sales increased on average 52% in restaurants where children were the primary target for promotions.
Milk sales rose an average of 35% in promotional tests where adults were the primary target, demonstrating adults will order milk if promoted properly.
Very little (< 20%) cannibalization occurred from other beverages. The milk increases were 80+% incremental to the restaurant.
Executive Summary
42%
35%
52%
Average Adults Children
Page 13
Promotional Test Concept: Milk Flavoring Straws
Children like the "entertainment" experience that flavored milk offers (through flavoring straws) and were excited to order milk.
– Flavored Milk was seen as a treat.
Flavoring straws allow a restaurant to offer additional milk flavors without carrying more milk SKUs or inventory.
Straws increased milk sales 776% in an upscale/casual restaurant (USR), a format in which many USR operators believe milk doesn't sell well.
Avg. Sales Growth+55%
Executive Summary
* +55% growth over prior milk sales level
Page 14
USR Promotions Worked to Increase Milk Sales to Kids
During the test, 94% of respondents said their children ordered milk – yet 44% said their kids “never” order milk when in restaurants.
94%Yes
Did Child Order Milk Today?How often does child order milk
when dining out? (any occasion)
6%
44%Sometimes
44%Never
Frequently
Always
6%
6%No
Promotions converted Non-Milk Drinkers to
Drinkers
Page 15
Flavor Straws Were Very Effective in Increasing Ordering
Importance of Promotional Item in Child's Decision to Order Milk
13% Not
14% Some
20% Very
53% Extremely
53% Not
34% Some
13% Very
(Turns white milk to flavors)
Page 16
Server Suggestion Was Very Important for Ordering Milk in USR units
Server interaction is key to encouraging kids to order milk.
Did server suggest milk?Did server mention
flavor straws?Before ordering, did child see flavor straw poster?
NoYes
Page 17
Strong Opportunity Amongst Hispanics – Especially Male Teens
The opportunity for flavors is especially strong among Hispanics, where Milk consumption is:
– higher than the general market.
– flavors are consumed more often.
– achieved (converted) more often from a lower awareness level.
– higher than other beverages – especially amongst males.
0
5
10
15
20
25
30
Milk Bot.Wat.
FruitJuice
CSD Tea AllOth
Share of Teen Beverage Consumption
Share(%)
Milk Consumption Yesterday(% of People)
Source: SIP Analysis 2002
Milk in Restaurants
Hispanic GeneralAwareness 42 % 50%Purchased 21 11
Conversion 2:1 4.5:1
Page 18
Avg. Sales Growth+30%
Major Test Learnings
Promotional Test Concept: Combo Meal
Develop combo meal programs that appeal to target diners(e.g., kids meals with flavored, and potentially kids-sized milk; breakfast and milk pint for B&I diners).
Show price and promote milk and combo item together. Note: Diners respond better to promotions advertising price.
Vary combo items with milk at least every four weeks to maximize sales and offer variety.
Executive Summary
* +30% growth over prior milk sales level
Page 19
Combo Meals Grew Milk Sales 57% in a B & I Outlet
Milk sales grew 57% in Dollars and 21% in Units.Cookie Sales doubled as well!
Average Weekly Units
Pre-Test Test
+21%
2961/2
Pints
246 1/2
Pints
111Pints
Average Weekly Sales $
Pre-Test Test
$1651/2
Pints$138
1/2Pints
$121Pints
296Units
357Units +57%
$165
$259
Page 20
Pre-test Test
Milk Pints
Milk Pint Sales Rose 47% During the Test in a Hamburger Chain
Average Store Weekly Unit Sales
+47%
58
85
Page 21
Pre-test Test
Milk Pints
Sales of Milk Pints Grew 19% During a Combo Test with Donuts.
Average Weekly Unit Sales per Store
+19%
Double-digit sales growth shows even a highly-developed milk business can increase sales through promotions.
680
810
Page 22
Major Test Learnings
Promotional Test Concept: Promotions Targeting Children
Use as much child-oriented P-O-P material as possible – children
responded to repetition.
Include a promotional item that children can take home (e.g., got milk? temporary tattoos or stickers) – reminds them to return to the restaurant and order milk.
Flavored milk appeals to children – in a restaurant customer survey, almost all children said they would order it.
Promotions targeting children may increase the number of families dining, as they have a strong say in restaurant choice.
Executive Summary
Avg. Sales Growth+48%
* +48% growth over prior milk sales level
Page 23
Suggesting Flavored Milk – through Flavoring Straws – Impacted Both White & Chocolate Milk Sales
White Milk Chocolate Milk
Total Milk
Test Locations
% Change vs. Year Ago
White milk sales increases were expected due to flavor straw popularity – straws turned milk into chocolate, strawberry or caramel flavor. The
chocolate increase indicates the power of suggesting Milk.
Page 24
Major Test Learnings
Program Test Concept: Introducing Plastic Pints
Add plastic bottled milk to existing milk offerings, evaluate results and determine products to be carried/ discontinued.
Add "flavored milk" without increasing SKUs by using flavor straws that turn white milk into flavored when sipped through the straw.
Link new products into existing promotional events to capture the target market, if appropriate, (e.g., ongoing kids eat free night event with new kids-size flavored milk).
Executive Summary
Avg. Sales Growth+33%
* +33% growth over prior milk sales level
Page 25
Milk Growth did not Cannibalize Coffee/Tea Sales at a Coffee Bar
Coffee & Tea Milk
% Changevs.
Year Ago+32+25
Pre-Test
Test
Pre-Test
Test
Page 26
Major Test Learnings
Suggestive selling was part of most tests.
Servers and/ or cashiers can reinforce the milk message by telling customers about milk and the promotion – encourages purchases at the point of order/sale.
Having servers wear "fun" apparel – got milk? hats, buttons, etc., is a visual reminder to the customer and server to order/suggest milk.
Promotional Test Concept: Milk Drinker Frequency Card
Frequency card returns show diners bought milk in a B&I setting5.7 times per week.
A focus on meal purchases by frequent milk drinkers increases total dollar ring and the likelihood of buying milk with meals.
Promotional Test Concept: Suggestive Selling & Promotional Effectiveness
Executive Summary
Page 27
Test Recap: Promotions delivered 30-60% sales growthExecutive Summary
Milk sales from the promotional and pint distribution tests grew an average of 42%.
* due to a very low base.
Average Growth From
All Tests
Upscale/Casual
Business & Industry
Midscale
Quick Serve
0%
40%
80%
52% Children
35% Adults
42%
AvgTest Milk
Sales Growth
Milk Flavor Straws
Children-Oriented Promos
Combo Deal
Intro Plastic Pints & Flavors
60%
20%
62% MSR
55%
48% MSR
62% MSR
48%48% MSR
47% QSR
34% MSR
58% B&I
47% QSR
23% B&I
30%
19% QSR
58% B&I
34% MSR
32% QSR 33%
= Average
776% USR* 776% USR*
Page 28
"Menu" for Program Design – Quick Serve Restaurants
Develop milk sales by promoting:
– Meal Combos – breakfast sandwich lunch sandwich/ burger
kid's meals
– Flavors – ready-to-drink product
Support the promotion with:
Server/Cashier POS Consumer Involvement Signage Giveaways• Suggestive Selling • Menu Boards • Temporary Tattoos• Apparel – "got milk" • Register Cards Shirts/ Buttons • Drive-thru Menu
• Backlit Menu Board/ Extender• Cooler Decals
Page 29
"Menu" for Program Design – Mid-Scale Restaurants
Develop milk sales by promoting:
– Milk in existing programs (i.e., family nights, meal combo programs).– Adults and children at the same time.
• Adults may order as role model for child.– Focus on flavors – RTD flavors and modifiers (powder, straws,
syrup).
Support the promotion with:
Server/Cashier POS Consumer Involvement Signage Giveaways• Suggestive Selling • Coloring Placemats • Temporary Tattoos• Apparel – "got milk" • Menu Cards Shirts/ Buttons • Table Tents • Ceiling Danglers
Page 30
"Menu" for Program Design – Upper-Scale Restaurants
Develop milk sales by promoting:
– Milk in existing programs (i.e., family nights).– Mystery diner for server contests.– Milk served in a chilled glass – White and flavors.
Support the promotion with:
Server/Cashier POS Consumer Involvement Signage Giveaways• Suggestive Selling • Coloring Placemats • "got milk" Stickers • Menu Cards
Page 31
"Menu" for Program Design – Business & Industry
Develop milk sales by promoting:
– Meal combos (breakfast and lunch) – Between meal combos (2-4 weeks long).
• Cookie or muffin and milk.– Frequent diner card.– Flavors through sampling.– To frequent milk drinkers who aren't purchasing at B&I location.
Support the promotion with:
Server/Cashier POS Consumer Involvement Signage Giveaways• Suggestive Selling • Cooler & Register • "got milk" Magnets for• Apparel – "got milk" Signs – Include Price Office Shirts/ Buttons, Aprons • Table Tents (Not as• Sampling Flavors Effective) Occasionally • Ceiling Danglers
Page 32
Flavor Straws
Child- Oriented
Combo Deals
Introducing Pints
QSR (1,000 units)Quick Serve/Fast Food
$1,860,000 $800,000 $330,000 - $1,550,000 $1,460,000
MSR (100 units)Midscale/Diners, Buffets
$ 80,000 $ 186,000 * $ 598,000
USR (20 units)Upscale/Casual
$ 16,000 $ 16,000 * $ 34,400
B&I (100 units)Business & Industry
* * $45,000 - $ 113,000 $ 489,000
Projections assume restaurants will experience the same sales increase if running promotions similar to those tested. Pint introduction assumes 52-week distribution; other promotions assume three 4-week long promotions during a year.
* = Not testedNote: The USR with +776% growth started from a low base, as would most upscale/casual dining restaurants.
Executive Summary
Significant Sales Growth from Wide Range of Programs
Sales increase projections were developed for each segment and test program.
per Chain
Page 33
Implications for Processors and Operators
Milk sales grew an average of 42% as a result of the tests.
The annual incremental sales potential (applying conservative adoption rates) from these promotion programs across the four segments studied, totals $100–200 million.
The key learnings confirmed consumers:– are open to ordering milk more often.– need a reminder of milk's availability in restaurants.– respond to P-O-P, suggestive selling and combo offers.– view flavored milk as a “treat” beverage when eating out.– ordered milk in addition to other beverages.
This final point indicates that milk growth will be largely additive for the restaurant operator and not reduce existing beverage sales and profits.
Executive Summary
Page 34
Implications for Processors and Operators (cont'd)
The results provide strong evidence that restaurant operators and dairy processors can grow milk sales through focused and relatively easy-to-execute programming.
Upscale/casual restaurants benefit from milk promotions, even if selling little milk currently. One steak house format restaurant promoted milk to children and adults (with no price discounts) and saw a 776% increase since so little milk was sold before the promotion.
Executive Summary
Page 35
Key Steps for a Successful Sales-Building ProgramExecutive Summary
Determine the best milk promotion for the
targeted customer.
Present and gain commitment.
Jointly plan the implementation.
Implement.
Track and report results – fine-tune for next time.
Develop promotion revenue, cost and ROI.
Step 1
Step 2
Step 3
Step 4
Step 5
Step 6
Step 7
If the restaurant is introducing pints, be sure to let your consumers know
about it.
Use P-O-P as suggested on the
"Menu for Program Design".
Offer give-aways to children to keep them
returning with their parents.
Design the promotion based on your target customer and their consumer.
Page 36
Final Thoughts
Processors and operators should review the report for specifics related to their respective operations.
The breadth of ideas that delivered strong sales increases suggest there are many such ideas. Other ideas should be tested and implemented using a similar process.
Regardless of how attractive the consumer proposition, processors and operators will need to establish implementation steps and reporting to successfully execute even simple programs.
Executive Summary
Page 37
Final Thoughts (cont'd)
Since there is relatively little milk program activity today, processors are encouraged to first learn how operators implement programs before designing specific events.
The sales growth potential from developing milk sales in foodservice outlets is large – ranging from $100-200 million annually.
Processors are encouraged to develop greater foodservice marketing and programming expertise to capture this potential.
Executive Summary
2275 Half Day Road, Bannockburn, IL 60015Phone 847.945.1155www.primeconsulting.biz
Increasing Milk Sales in FoodserviceIncreasing Milk Sales in FoodserviceFinal ReportFinal Report
March 2003
Developed for
SmartMarketing 2003
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