How a2 Milk plans to revitalize the slumping dairy category
The New Zealand company aims to rebuff the growing plant-based segment with a product that removes a harmful protein while keeping a healthier one.
The dairy industry has faced a steady decline in consumption for almost two decades as consumers have turned away from these products in favor of alternatives made from soy, almonds, coconuts and other plants.
But the a2 Milk Company is aiming to change that.
While most milk products contain both A1 and A2 proteins, the New Zealand-based company found A1 can cause stomach discomfort. a2 Milk, as its name implies, now sells dairy products that only contain the better-for-you A2 protein.
"You're going to start seeing people come back to dairy — we're seeing it already."
U.S. CEO, a2 Milk Company
Blake Waltrip, the company's U.S. CEO, told Food Dive this appeals to consumers and has played a role in increasing a2 Milk's distribution and product offerings. The company more than doubled its retail count during the last year to more than 12,000 stores, with more growth forecast in 2019.
"You're going to start seeing people come back to dairy — we're seeing it already," he told Food Dive at Expo West earlier this month.
Education has been an important part the company's growth since a2 Milk, which entered the U.S. in 2015, is still new to many consumers, he said. Waltrip said the company has heavily invested in education in the U.S. through public relations, social media, in-store shopper marketing and a national TV advertising campaign.
"It could be a little scientific if you're not careful and consumers don't care about science," he said. "Consumers fundamentally care about what works for them and how the product tastes."
While it is still building its recognition among American consumers, a2 Milk has already established a sizable presence in other parts of the globe. The company was originally founded by a New Zealand scientist in 2000. For years, a2 Milk increased its popularity in Australia and the brand now controls about 10% of the milk market in grocery stores there, according to its website.
While traditional milk sales dropped 15% from 2012 to 2017, non-dairy milk sales in the U.S. have increased 61% during the past five years to more than $2 billion annually. The drop in dairy consumption has hurt some big companies who have had to adjust, including Dean Foods, which said last month it is exploring strategic alternatives that could include a sale of the company, and Kraft Heinz, which is considering divesting its Breakstone's brand.
Despite the dire picture for dairy, Waltrip is optimistic his company can disrupt the category in much the same way plants did in his industry.
"The category's been starving for innovative new products and that's the only way out of commodity declining situations — you've got to bring innovation to the category," he said.
The plant-based beverage category is facing its own share of challenges as dairy makers want to ban the term "milk" from their labels. The U.S. Food and Drug Administration is going through more than 13,000 public comments on regulating labels for plant-based dairy alternatives. While no decisions have been made, outgoing FDA Commissioner Scott Gottlieb seemed to be leaning toward limiting the debated terms to dairy products, saying last year that "an almond doesn't lactate."
Waltrip said plant-based beverages have a place in the market, but he doesn’t see them replacing milk. He said it's not really about consumers confusing nut milk versus the traditional variety, but rather that people will be uniformed about the nutritional values each of them possesses. Waltrip said real dairy milk has all nine essential amino acids and it is a complete protein, which is a drastically different nutritional profile than plant-based beverages. Some claim plant proteins often have incomplete amino acid profiles.
As the company's milk has made inroads in the market, Waltrip said a2 Milk expanded earlier this month into coffee creamers. The category, he said, is growing and the product was the top requested item customers wanted from the company. More new items could be on the way in the coming years, he said.
"The (creamer) category is screaming for something simple and dairy based. We think it's a big opportunity as a great extension for our milk brand, but also to build awareness of A2 milk," he said. "It's still a relatively new proposition here in the U.S., very big on a global basis, but we're building it here for the last three years in the U.S. and making some good headway."
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