The Do’s and Don’ts of Dairy

To drive profits in this core category, c-stores need to create a destination that showcases value, freshness and quality.

By Erin Rigik, Associate Editor.

Dairy offerings have been dwindling at convenience stores in recent years as operators make space in the coolers for popular items like energy drinks and other healthful beverages. But when stores lack a strong dairy presentation, retailers are finding that their customers are shopping for their dairy products elsewhere.

Keith Brown, vice president of marketing for Scaff’s Inc., admits dairy is “a tough category” for convenience stores. Still, in 2011, milk sales at the company’s 44 S&S Food Stores in Florida are up overall.

S&S Food Stores takes its dairy section seriously, featuring a full line of milk products, including gallons of 1%, skim, 2% and whole milk, as well as half gallons, quarts and pints of milk. In addition to milk, the chain offers cottage cheese, whipping cream, sour cream, dip and yogurt, as well as sliced cheese, butter, oleo and eggs.

In order to keep customers returning for dairy products, “You have to have the best dates on the products,” Brown said.

Gallons of milk, however, remain a hard sell to c-store shoppers, who are often looking for something they can drink on the go. “We are matching supermarket/drugstore gallon retails,” Brown said. “Right now, though, there’s no profit on gallons, but we’re not willing to give up the customer.”

As for other dairy products, “ice cream has to be priced competitively,” Brown said. Scaff’s prices its ice cream at or below the prices found at local supermarkets, and draws customers with name brands including Gustafson’s and Blue Bell. “We price our eggs in line with supermarkets also. I think if we could expand space, yogurt could become a better seller.”  

And he’s likely correct. According to the International Dairy, Deli, Bakery Association’s (IDDBA) What’s In Store 2011 report, the yogurt category is predicted to grow significantly by 2014 with full-fat yogurt grabbing 64.5% of the business. (See sidebar at end of article.)

A Dairy Destination
Byrne Dairy Stores, with 55 locations in New York, is another c-store chain boasting strong dairy sales. Its secret is devoting the space to show customers that dairy is a high priority for each store—with a minimum of  2-3 cooler doors dedicated to a variety of dairy items. It also doesn’t hurt that Byrne offers a full line of proprietary products including milk, buttermilk, creamers and ice cream, as well as 12-ounce single serve UHT (ultra-high temperature processing) milks.

The 12-ounce UHT milks have seen double-digit growth since last year and represent one “of the best and fastest growing” sections within the dairy category, said Tim Mody, director of sales and national accounts for Byrne Dairy.

To drive sales, Byrne Dairy dedicates space for the popular 12-ounce products, not only in its coolers, but also by crossmerchandizing the single-serve dairy items near the foodservice section of its stores.

The product comes in nine flavors currently, including chocolate, low-fat chocolate, low-fat cappuccino, low-fat mocha cappuccino, low-fat vanilla, low-fat strawberry, as well as in whole milk, skim and 2% varieties.  

“It’s a new innovative product for us that comes from our own ultra dairy products, and it comes off our line with a 120-days code date, which allows us a great opportunity to sell it anywhere in the state or across the country or internationally,” Mody said.  

In addition to serving its own stores with proprietary dairy products, Byrne Dairy supplies about a dozen other c-store chains, and has thousands of customers across New York State and several hundred customers nationally.

“Outside of our Byrne Dairy Stores, over the last year dairy sales have been flat or decreasing, but at our company-owned stores, because we dedicate so much time and space to the category, we’ve seen some growth this year,” Mody said. “So when you put some dedication into the dairy category, you can grow the category still today.”

Many convenience stores, Mody noted, are afraid to carry dairy and are looking for a quick sale on single-serve items and energy drinks, which hurts the overall dairy presentation and impacts the customers’ perception of the store as a destination for dairy products.

“Operators are moving away from having dedicated space in their stores. They used to have a couple full doors for dairy and now it has gone down to a door or less,” Mody said, a move that only further diminishes sales. If operators want to boost sales, the key is to devote significant space for dairy.

“If convenience stores are going to try to grow this category and do well with dairy, they have to have dedicated space to it,” Mody concluded. “They can’t be afraid to take some chances, and they should definitely dedicate time and space for single-serve products.”

Eyeing Dairy Trends

The International Dairy, Deli, Bakery Association’s (IDDBA) What’s In Store 2011 report found that fortified, fiber-rich, fat-specific and organic options have become more prevalent in dairy coolers, driven by the anti-obesity movement in the U.S.

Trends in the dairy case:
• Yogurt has evolved to fill health, snack and dessert roles with functional ingredients and is benefiting from the ‘health halo’ surrounding ideal nutritional foods. Sales of Greek yogurt have been strong, as have sales of 100-calorie decadent dessert-inspired yogurts such as strawberry cheesecake and lemon torte. Greek yogurt is even being used as a healthier base for dips in place of traditional sour cream.
• Enhanced milks containing vitamins and minerals are joining traditional dairy products.
• Hummus is leading growth in the flavored spreads and dips category. Small single-serve packages and exotic flavors—think spinach artichoke—are helping to boost the product’s popularity.
• Cottage cheese is helping some customers to up their fiber intake, thanks to products promising 20% of the recommended intake and to 100-calorie packs of fiber-enriched cottage cheese with fruit.

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