Australian consumers and the value of premium products
By Dairy News
Picture: AAP Photo/Julian Smith
With temperatures heating up, all eyes are on southern Australia's harvest prospects.
As northern parts of the country experience yet another failed harvest, the southern crop will be paramount for any potential impact on current feed costs.
While feed prices continue to keep farmers' cost of production elevated this season, healthy demand for dairy is supporting a strong milk price.
Supermarkets act as a major sales channel for Australian dairy products and remain vital for value creation throughout the supply chain.
During a challenging year, it's important to keep track of supermarket sales, as any change in consumer shopping behaviour tends to impact demand for dairy.
Premium dairy products drive value growth
Over the course of 2019 consumers have grown increasingly concerned about the wider economy and the potential for a downturn, which has impacted consumer spending.
While consumers have become less willing to spend money on 'non-essential' items, sales of premium priced dairy products have driven value growth in the domestic market.
Supermarket sales of yoghurt only grew 0.1 per cent to 233 000 tonne over the 12 months to June 2019, however, value increased 2.1 per cent. This was mainly driven by sales of premium-priced yoghurt products, such as sweetened yoghurts (up 9.9 per cent in value) and probiotic yoghurts (up 7.2 per cent in value). The same can also be observed in sales of cheese, which grew 0.9 per cent in volume to 160 000 tonne but 3.4 per cent in value to $2.5 billion over the same period.
The overall value growth was largely driven by deli-style cheeses, which are retailed at a significant premium compared to other varieties.
Opinions vary on extra value
The perception of what is additional value differs significantly between consumers.
Some are willing to pay extra for products perceived as healthy while others will pay extra if they think the product enables them to support a cause.
The 'drought milk' launched by retailers is an example of this.
By retailing specific milk products as a good way to support struggling dairy farmers, retailers saw private label milk sales grow.
Sales of private label milk grew 3.5 per cent in the first month 'drought milk' was introduced on the market, even though it was retailing at a higher price-point than usual.
It is important to consider that consumer perceptions of product benefits are key to purchase decisions. This can include the idea of a product being healthy to consume or accommodate various diet preferences.
Health-style yoghurt sales surge
The health and fitness trend spans across all shopper goods, as consumers are increasingly concerned about purchasing products marketed as being beneficial to their health.
In the dairy space, this trend has been especially evident in the yoghurt market.
Over the past year, sales of yoghurts that position themselves as healthy have grown exponentially, both in volume and in the number of companies manufacturing this product.
These products are perceived as healthier and thus consumers are willing to pay a significant premium for a small pack-size.
Over the 12 months to June 2019, sales of single-size yoghurt containers grew 14.6 per cent to make up 34.1 per cent of the entire yoghurt market. This surge in growth was predominantly underpinned by fast growing 'health-style' yoghurt varieties.
Consumer campaigns compete with dairy
Another trend influencing the market is consumer desire for individualisation and the willingness to purchase products that allow them to express specific views.
This trend is currently being pursued by a nut beverage company as a tactic to attract more consumers.
A company selling oat milk, in Australia and overseas, has launched a social media campaign called "post-milk generation", which encourages consumers to switch to oat milk and share photos on social media of them consuming the product.
This desire for consumers to be recognised as unique individuals has partly driven the 23.9 per cent increase in oat milk sales in the six months to September, at the same time as dairy alternatives sales increased 6.7 per cent. This represents an example of the kind of consumer campaigns the dairy industry will have to compete with in the future.
Challenges and growth opportunities
Ongoing drought, fires and high feed and water costs continue to create challenges for the industry and milk production is likely to remain subdued this year. Whilst conditions on farm and for processors remain challenging, opportunities in the domestic market are a welcome sign.
While the industry continues to focus on the outcome of the harvest, the value growth in the yoghurt and cheese market highlights the opportunities available in the domestic market for products that capitalise on consumers preferences.
Kyabram Netball Association gearing up for huge 2020
THE Kyabram Netball Association's 2020 season is shaping up to be action-packed, with a five-week summer competition and regular winter competition just a taste of what the competition's junior athletes can look forward to. Now in its 70th...
Hounds looking for vengence in Bush Bash
HURLEY Hotel Hounds will be looking to avenge a first round loss in the inaugural Crane Aid Goulburn Valley Bush Bash League when they tackle Jarvis Delaney Crushers at Kyabram's Northern Oval this Sunday. The Kyabram-based franchise suffered...
Andison goes big in GMC
FIRE Brigade opener Brett Andison lauched a merciless onslaught on the Echuca bowlers at Kyabram's Northern Oval on Saturday, blasting 137 out of an impressive team score of 2/231. Andison shared an opening stand of 163 with Tyronne Schiller...
With temperatures heating up, all eyes are on southern Australia's harvest prospects. As northern parts of the country experience yet another failed harvest, the southern crop will be paramount for any potential impact on current feed costs. While...
Deni man arrested for ram raids
A 33 year-old Deniliquin man has been charged in relation to ram raid thefts in Moama and Wakool earlier this year. In both bases, an ATM was stolen - from a Wakool licensed premises on February 20 and the Moama Marketplace on February 25. Murray...
Zoe McMaugh
Australian milk production continues to slide, while global markets present opportunities
THE 2018–19 season will most certainly be remembered as an exceptionally challenging season for the Australian dairy industry. Universally high feed costs, record high temporary irrigation water costs and widespread dry seasonal conditions have...
Sofia Omstedt