“A product is a commodity when all units of production are identical, regardless of who produces them.” This definition identifies the position of nearly 100% of the cow’s milk options in the dairy case.
The result is the same regardless of which dairy company processes and packages conventional milk. The nine vitamins and nutrients, and their content level per 8 oz. serving, are identical.
Packaging is nearly the same, with slight differences in plastic and paper, and animals that produced the milk were cared for humanely by their dairy farmer owners.
Regional brands are priced comparatively, while the private label is priced at $1.00 less than its branded competitor. Promotions are frequent and deep across both brands and private labels.
How Milk Can be Moved From the Commodity Category?
Product, packaging, pricing, and promotion depth and frequency determine a product’s position as a commodity. These four “P’s” should look familiar to anyone with a marketing background.
Based on history in these areas, milk is performing like a commodity. Cow’s milk has an enviable position because over 90% of all households purchase and consume cow’s milk.
Is it possible to transform cow’s milk from a commodity category into a premium value-added category? I believe so.
There are several examples of categories that have successfully done so. Here are a few examples: coffee, laundry soap, mandarin oranges, avocadoes, and orange juice.
My personal experience is with the orange juice category. In 2001, orange juice was a commodity category.
Grocery retailers would feature one brand (or private label) of 64 oz chilled orange juice weekly with a retail of $.99.
Consumers were “trained” to purchase on the deal weekly, knowing orange juice would always be on sale for $.99.
Because of these offers, most purchases were made when the product was on promotion, reducing the total dollars in the category.
I was in sales management with The Minute Maid Company when we introduced Simply Orange juice. The objective was to introduce a premium, value-added product.
This value-added product would do three things:
- Bring users back to the category.
- Increase the consumption of orange juice by current consumers.
- Grow the overall category.
- When we introduced Simply Orange, we made this promise to our retailers.
How did The Minute Maid Company do it?
Simply Orange delivered on the four P’s. The product was different than any other juice in the category due to its processing method.
The packaging, a 52 oz plastic carafe, was revolutionary to the category of 64 oz paper cartons at that time. The price per ounce for Simply Orange was higher than its competitors.
Central to success was the marketing of the product, including advertising, frequency, and depth of promotions. Advertising focused on the added value of taste and freshness of the product to support point-of-sale pricing.
The advertising had high visibility and frequency during launch, driving demand often before the product could get on the shelf.
Unlike the frequency and depth of promotions of the past, there was a promotion price “floor” under which we were not allowed to offer to our retailers, and we could not fund features more than once a month.
These actions all contributed to creating a premium, value-added product.
Next, competitors followed Minute Maid’s actions and introduced similar products with similar attributes and promotion and pricing strategies.
The result was double-digit growth in the orange juice category, both in sales and consumption. Why?
Consumers returned to the category, and current category consumers drank more orange juice, just as we had promised our retail customers!
Can cow’s milk do it? It already has. In 2012, Fairlife introduced premium, value-added dairy, which delivers on the four P’s I discussed above.
The Simply Orange examples I provided were followed by Fairlife during its introduction and continue to be followed based on its pricing and promotion strategy history since its launch.
Most importantly, consumers can’t get enough of it!