Where is Our Milk Being Produced, Who is Buying it ? Rick Naczi ADADC Inc

Where is Our Milk Being Produced, Who is Buying it?

Rick NacziADADC Inc.

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The number of occasions of milk drinking per capita has “slipped” over time as well for younger kids and adults age 50

0 to 5 6 to 10

11 to 13

14 to 18

19 to 24

25 to 34

35 to 49

50 to 64

65+0

2

4

6

8

10

12

14Occasions per Capita 2012 vs 2006

By Age

2012 2006

Milk

occ

asio

ns p

er w

eek

Source: Kantar Worldpanel

Kids 0-5 had 2.4 fewer milk occasions/week in

2012 vs. 2006

-10.0%

-5.0%

0.0%

5.0%

$1.00

$2.00

$3.00

$4.00

$5.00

% Vol. Chg vs Yago Avg Price / Gallon

Monthly Milk Historical Snapshot: Milk Sales Maintain Downturn Through 2013 YTD; Average Prices Still Remain Down $0.20 From December Of 2012

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Milk Sales % Chg- based on ADADC Multi-Outlet

Note: Milk includes White Milk, Eggnog, Buttermilk and Kefir milk segments Source: IRI DMI Custom database,ADADC Multi-Outlet.

-4.1%7/14/2013

$4.327/14/2013

Annual Average % Chg.

2010 : -0.6% 2011 : -0.7% 2012 : -1.9% 2013 YTD : -2.5%

Multi-Outlet (MULO) retail channel includes: Grocery, Drug, Walmart, Club, Dollar, Military, and AO Mass stores

Declining Sales + Growing Population = Falling Per Capita consumption

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

55,262 54,981 54,578 54,543 55,137 55,087 55,140 55,447 54,671 53,739 52,850

Total Fluid Milk Sales*million pounds through all channels

* Includes all milk products, buttermilk, eggnog and other misc. productsSource: USDA/AMS

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 % Change 2012 vs. 2002

Milk Sales

U.S. Population

% Change vs. PY -0.5% -0.7% -0.1% 1.1% -0.1% 0.1% 0.6% -1.4% -1.7% -1.7% -4.4% +11.9%

Since 2002, fluid milk through all channels has declined over 4%, while population has grown almost 12%

• DECLINE OF HOUSEHOLDS WITH CHILDREN IMPACTS MILK

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Percentage of households with children under age 18

Beverage Milk Consumption by AgeAnnual Eatings Per Capita

Source: GfK Consulting

How Will this growing Consumer Base Affect US Beverage Categories in 2020?

People Age 65+

Boomers getting older• 12% of population age

65+

Fast growing• +36% 2010-20 versus

+6% Other Age Groups

Growth of 15 million• Between 2010-20

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How Will this growing Consumer Base Affect US Beverage Categories in 2020?

HISPANICS

Largest minority group • 16% population

Fastest growing• +33% 2010-20 vs +6%

Non-Hispanic

Growth of 17 million• Between 2010-20

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Other Retail6.6%

Shrink & Not accounted for

2.2%

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2011 Milk SalesShare by Channel

% Change Volume 2011-12

TOTAL USDA Fluid Milk Sales

-1.7% Volume

Retail Outlets (measured by IRI, MULO + C-Store)

-3.1% Volume

Restaurants (Combined milk + specialty coffee milk)

slightly up

Servings

Schools*Flat to down

slightly

Volume

* SY 2010-11 vs. 2011-12

Schools7.2%

RetailMeasured through IRI

69.8%

Foodservice14.2%

In 2012, Fluid Milk Declines Most significantly through Retail, The Major Channel

Sources: Prime/MilkPEP All Channel Tracking, 2011;NPD/Crest;SymphonyIRI, DMI Custom DB Multi-Outlet Data (MULO), includes: Grocery, Drug, Wal-Mart, Club (ex. Costco), Dollar, Military and Mass Stores. Excludes Convenience Stores.

ADADC Multi-Outlet Milk Sales/Pricing: Milk Sales Are Down Nearly -3% For 2013 YTD, As Prices Begin Increasing

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ADADC Multi-Outlet – Data Through 7-14-2013

Source: IRI DMI Custom database,ADADC Multi-Outlet.

Q2 2013 2013 YTD

ADADC -3.9% -2.5%

Grocery -5.4% -3.7%

All Other +0.2% +1.2%

(Gallons) 2013 YTD

Avg Price % ChgYago

ADADC $4.29 +3.0%

Grocery $4.48 +3.1%

All Other $3.77 +3.6%73%

27%

Grocery All Other

Volume % Chg. vs. Year Ago Average Price Per VolumeTotal Fluid Milk Volume Share

2013 YTD - ADADC

All Other outlets have much lower prices than traditional Grocery stores

Grocery outlet declining while All Other outlets are growing, as consumers find lower average prices at Club stores

“All Other” Outlet includes: Walmart, Club, Dollar, Military, AO Mass


Volume Growth by Beverage Category

Fruit B

everages*

Carbonated Soft Drin

ksMilk

Total Coffee

Sports

Beverages

Total Tea

Bottled Water

Value-Added Water

Energy Drin

ks

-14.2%-10.1%

-2.3%

1.0% 1.0% 4.0%10.3%

25.6%

74.7%

% Change, 2011 vs. 2006

Source: Beverage Marketing Corporation

Fastest Growing Milk Segments

Produce Q2 2013 2013 YTD

Omega 3 +3.5% +7.2%

96 oz. +6.4% +7.0%

Organic +2.9% +4.6%

Flavored +1.8% +2.6%

Lactose Free +1.7% +2.1%

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ADADC Multi-Outlet Milk Segments: 2013 YTD (Jul 14th)

Milk by Fat Level• Reduced Fat with small growth through July• Sharp downturn in Fat Free (19% share)• Reduced Fat Milk accounts for largest share

Milk by Flavor• White Milk holds 97% of Milk volume share• Flavored has 3% share of the Milk category and is growing +3% through 2013 YTD

Milk Branded vs Private Label• 45% of Milk is Branded, sales down -3%• Private Label is faring slightly better than Branded

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Whole 29.1% -0.3%

2% 30.5% +0.3%

1% 21.2% -3.1%

Fat Free 18.7% -9.0%

White 96.9% -2.6%

Flavored 2.7% +2.6%

Eggnog 0.1% +35%

Buttermilk 0.3% 0.0%

Branded 45.2% -2.8%

Private Label 54.8% -2.2%

% Chg vsYago

Share of MilkSnapshot based on combined ADADC Multi-Outlet



Lactose-Free Milk• LF Milk accts. for nearly 4% of Total Milk• Lactose Free showing growth for 2013 YTD

Organic Milk• Organic accounts for 7% of Milk volume• Organic Milk outperforming Non-Organic

Other Value-Added Milks• Other value-added Milks remain very tiny• DHA/Omega 3 Milk with increasing sales

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Lactose- Free Milk 3.8% +2.1%

Full Lactose Milk 96.2% -2.6%

Organic Milk 7.3% +4.5%

Non- Organic Milk 92.7% -3.0%

% Chg vsYago

Share of Milk

Creamy Milk 0.5% -28.9%

Omega Milk 0.8% +7.2%

Plant Sterols Milk 0.04% -36.8%

Snapshot based on combined ADADC Multi-Outlet





Milk Sizes• Nearly all sizes posting volume sales declines• High growth in 96 oz. size due to value-added• Gallon accts. for 65% of Milk; downturn of -2%

Milk Packaging• Milk packaging predominantly Plastic; declining• Paperboard holds 12% share and is down -5%• Premium Glass segment tiny but increasing

Non-Dairy Alternatives• Non-Dairy growing strong off small base• Almond remains key growth driver• Coconut continues to develop, although tiny

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Tot Non Dairy 5.2% +15.0%

Soy 2.0% -14.1%

Almond 2.6% +53.9%

Coconut 0.2% +3.9%

Rice 0.1% -8.0%

16oz 0.3% -17.7%

32 oz 4.4% -1.2%

64oz 28.5% -3.2%

96 oz 1.5% +7.0%

128oz 64.6% -2.3%

% Chg vsYago

Share of Milk

Plastic 88.3% -2.1%

Glass Bottle 0.05% +46.3%

Paperboard 11.6% -5.2%


Snapshot based on combined ADADC Multi-Outlet

Share of % ChgMilk + Non-Dairy Yago


Lasting EnergyLow Carb

Quick EnergyLightly sweet

To relaxLow CalCool Off

Pure/CleanNutritional Benefits

TreatFun to Drink

Wake UpHealthier Choice

Goes Well w Food/SnackReplenish Fluids

Goes w FoodTaste

Quench Thirst

2%3%4%5%5%6%6%6%6%6%7%8%9%

12%22%

26%29%

33%

Total Beverages

2%1%2%2%

4%4%

1%2%

22%3%4%

2%11%

22%5%

57%34%

10%

White Milk

Milk’s Strengths Do Not Fully Align With Consumer Beverage Needs

15Source: Kantar World Panel12 months ending March 2012

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Competitiveness Ramped Up

• Milk• Soft Drinks• Coffee• Juice

• Milk• Soft Drinks• Coffee• Juice• Bottled Water• RTD Juice• Teas

• Milk • Soft Drinks• Coffee• Juice• Bottled Water• RTD Juice• Teas• Wellness• Sports Drinks• Flavored Teas

• Milk • Soft Drinks• Coffee• Juice• Bottled Water• RTD Juice• Teas• Wellness• Sports Drinks• Flavored Teas• Functional

Beverages• Energy Drinks• Enhanced

Water• RTD Coffee• Almond Drink• Coconut Bevs

• Milk • Soft Drinks• Coffee• Juice• Bottled Water• RTD Juice• Teas• Wellness• Sports Drinks• Flavored Teas• Functional Bevs• Energy Drinks• Enhanced Water• RTD Coffee• Almond Drink• Coconut Bevs• Vegetable/Fruit

Blend Juice• Sparkling Juice• Fusion Drinks• Fermented Tea• Coconut Water

1970’s

1980’s

1990’s

2000’s

Today

The number of choices Consumers have at retail has exploded in the past 40 years

Total U.S. new milk product introductions account for only 5% of all new beverages introduced worldwide

Asia

West

Europe

East

Europe

Latin Ameri

ca

Middle Ea

st

United St

ates

Africa

Australa

sia

748

569

322

235168

116 110

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2012 New Product Introductions

Source: Innova

MANY NEW U.S. PRODUCTS WERE FAMILIAR FORMS, FLAVORS

TruMoo Limited Edition Halloween Orange Color Vanilla Milk

Friendly Farms Pumpkin Spice Milk

Outside the box

Lucerne Protein + Refuel Protein Fortified Dairy Beverage: Chocolate

Shamrock Farms' Rockin' Refuel Protein Fortified Low Fat Strawberry Milk Drink

Core Power 26g Protein Honey

Source: Innova

Beyond our bordersMilk Multi-Taskers

Source: Innova

Nutricima Bliss Smoothie Fruit Milk: Orange and Pineapple. Contains vitamins A, C, and E for immunity; vitamin B complex for energy

Jalea Vital with vitamin B6 to boost the immune system

• Vitamin B for Energy, Immune System• Fiber for Intestinal Health• Vitamin A for Healthy Eyes

Fibre to boost intestinal transit

Japan: Yakult Compressed Healthy Glucosamine Dairy Drink: Apple. Includes glucosamine to strengthen chondrocyte. Also include chondroitin for the endurance of cartilage. Added 20% of apple citrus to give refreshing flavors.

Vanilla flavored semi-skimmed milk with added vitamins and minerals. With vitamin A for healthy eyes.

Skimmed Milk Drink Enriched with Plantsterol. Scientifically proven. Skimmed milk drink with additional plantsterol. Actively reduces cholesterol.

Nesfluid Hydra Nutrition Renforce Cocoa Flavored Milk Drink with Coconut Water. For enhanced hydration

• Coconut Water for Hydration• Glucosamine for Healthy Joints

Worst of the Worst

Walgreens - East Windsor, NJ Stewarts - Ballston Spa, NY

CVS New Hyde Park

Before After

Walgreen’s NYC and Western NY

Specialty Coffee Accounts for Significant and Growing Share of Fluid Milk Through Restaurants

Servings of Milk and Specialty Coffee are used to gauge Milk’s performance at restaurants:

as servings of milk as ingredient in other beverages such as specialty coffee and shakes

- Specialty Coffee drinks often contain at least an 8 oz. serving of Milk*

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* As determined by review of ingredient/nutrition data on Starbuck’s and McDonald’s websites

Source: NPD/Crest

Milk1.45

Spe-cialty

Coffee 2.75

Billion Servings,2012

Restaurant Servings, % Change

2011-12 2007-12

Specialty Coffee +5.0% +20.7%

Milk -4.4% -12.8%

Total +1.5% +6.5

Milk Jug Packaging Promotional Materials

McPlay App

McDonald’s: Despicable Me & Fluid Milk

Safeway: Make It with Milk

Quaker17%

Milk5%

Next Steps• Monitor long-term behavior

change• Expand to more retailers for

sustained effort• Make It with branded Milk• Support with print campaign

and social media

Results• Higher sales volume• Retailer support• Loyalty program activation• Online consumer engagement

April 2013: 2 weeks in 1400 stores nationwide

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When Milk Stretches Into Other Categories, Success has Followed

LattesDrives Milk Usage at QSRs, propping up adult milk

usage

SmoothiesSteep growth curve – currently more juice than

milk-based

Weight Loss BeveragesThis segment has grown more than 30% over last

5 years with rosy forecast

Nutraceutical BeveragesFocus on health/wellness, aging population, surging health care costs have fueled growth

Thank [email protected]

Documents

Where is Our Milk Being Produced, Who is Buying it ? Rick Naczi ADADC Inc