Select Committee on Agriculture Minutes of Evidence

Memorandum submitted by the National Dairy Council (Q 35)



  Prior to deregulation of the milk market in 1994, there was extensive national advertising and promotion of milk, cheese and cream funded by the whole dairy industry. This was executed through the National Dairy Council (NDC) in England and Wales and the Scottish Dairy Council in Scotland. Following deregulation, industry-funded generic marketing ceased, contributing to the continuing decline in consumption of dairy products, particularly liquid milk.

  Recent industry-wide consultation among dairy farmers has indicated strong support for re-establishing a generic marketing campaign, funded by means of a statutory levy collected through the Milk Development Council (MDC). The dairy trade, via The Dairy Industry Federation (DIF), has stated its willingness in principle to match farmer contributions on a voluntary basis, subject to the control and management of the campaign resting with the NDC.

  However, it would be necessary to extend the statutory remit of the MDC to enable it to collect a levy from farmers for this purpose.

  The Agriculture Committee is invited to consider the following:

    —  the strong case for a new generic marketing campaign for milk;

    —  to support the extension of the MDC's remit;

    —  to consider facilitating the removal of the regulatory obstacles to the industry's proposals;

to enable the NDC to undertake this work on behalf of the whole industry.

  The NDC represents the whole industry and as such cannot comment on areas on which there is no industry consensus. For this reason the NDC is restricted to addressing the area of generic marketing within this submission and within any subsequent evidence.


  Established in 1920 to co-ordinate the dairy industry's generic information and promotion activities, the NDC has over 70 years' experience of promoting milk and dairy products.

    —  Uniquely, it represents both sides of the dairy industry—farmers and dairies.

    —  It is the only industry body whose focus and communications are directed at the consumer.

    —  It is independent, non-profit making and has no commercial bias.

    —  It has acknowledged experience in education, nutrition, consumer research and generic marketing on behalf of the whole industry.

    —  Its past advertising campaigns for milk include the memorable Drinka Pinta Milka Day, Gotta Lotta Bottle and, more recently, "Dancing Milk bottles".

2.2  Representation

  The NDC works on behalf of dairy farmers and the dairy trade in Great Britain. An Executive Board comprising representatives of DIF, The Scottish Dairy Association and The UK Federation of Milk Producer Organisations, the National Farmers' Union (NFU), the Scottish Farmers Union (SFU) and the Women's Farming Union direct its activities.

2.3  Funding

  The NDC's current annual budget is £1.55 million of which £800,000 is funded by a grant from the MDC.

  Further monies have been obtained in the past four years from the European Commission for campaigns to promote milk to children aged 5-15 and their mothers. The current contract, which finishes in July 1999, is worth £1 million.

2.4  Key Tasks

  Encourage consumer demand by promoting milk and dairy products.

  Protect and promote the positive image of the dairy industry and its products.

  Defend the industry and its products against negative criticism and events.

  Principal outputs, from which all sides of the industry benefit, include:

    —  Issues and crisis management on behalf of the dairy industry.

    —  Continuous research into consumer attitudes and behaviour which impact on the purchase of dairy products.

    —  Advertising and promotion of milk, cream and cheese as part of an integrated marketing approach which also uses information, education and public relations.

    —  Unique database and worldwide reference source on nutrition research, which provides sound scientific evidence for claims made about milk and dairy products.

    —  Programmes to ensure opinion influencers in health, education and government continue to endorse the importance of milk and dairy products to a healthy diet and understand the production, processing and manufacture of those products.

    —  Enquiry service for the industry, consumers, health professionals, schools and the media.

    —  A wide range of authoritative information materials on healthy eating, nutrition, dairy facts and figures and career opportunities.


Market size:

  The total milk market is worth more than £6 billion a year, of which the liquid milk market accounts for £3 billion.


  Overall household sales of milk in England and Wales have declined from 4,971 million litres in 1990 to 4,495 litres in 1998, a drop of 476 million litres or 8.4 per cent.

Types of milk:

  Semi-skimmed milk is now the most popular choice, accounting for 51 per cent of the total liquid milk market (whole=36 per cent; skimmed=13 per cent).


  Between 1990 and 1997, consumption per head declined from 4.11 pints (2.33 litres) per head per week to 3.93 pints (2.23 litres)—a far cry from "a pinta milka day".

Doorstep delivery service:

  In the last decade, the volume of milk sold via the doorstep delivery service has dropped from around 71 per cent to 35 per cent. Today, just 29 per cent of all households continue to purchase milk from the milkman.


  Average consumption of milk in the home is about half a pint per person per day. This provides about8 per cent of the daily energy intake and 40 per cent of the calcium.

  Milk and dairy products make a major contribution to the nation's overall consumption of food nutrients.

Table 1


1997Energyvalue ProteinCalcium Vitamin A
Liquid milk8%14% 39%8%
Other dairy products8% 7%17%15%
Total dairy products16% 21%56%23%
Total all foods100100 100100

  Source:   National Food Survey.

  One pint of milk can supply the amount of calcium needed daily by adults and younger children.

  Calcium is an essential nutrient, which is vital for the development of healthy teeth and bone structure. A diet providing adequate amounts of calcium, together with regular physical exercise throughout childhood, helps to achieve peak bone density at the end of the growth years. It has been estimated that a 1 per cent increase in peak bone density translates into a 12 per cent reduction in risk of osteoporosis. It has been estimated that osteoporotic fractures are currently costing the NHS over £940 million per year.

  Milk also contains a range of other minerals and is particularly valuable for phosphorus, magnesium, zinc and potassium, as well as calcium.

  Most vitamins are present in milk, though some only in small amounts. Vitamins A and D are contained in the cream, so skimmed milk contains only trace amounts. Milk is a good source of vitamin B2 (riboflavin) and vitamin B12. It also contains useful amounts of other B vitamins such as thiamin, niacin, vitamin B6 and folate.

  Whole milk contains considerably less fat than most people assume—3.9g/100g (4 per cent). Semi-skimmed milk typically provides 1.6 per cent (1.6g/100g) and skimmed milk less than 0.1 per cent.

  Unlike fruit juice, carbonated beverages and cordials, milk is not acidic or cariogenic. This means that it is safe for teeth between meals.


  Independent research regularly commissioned by the NDC shows that, as a result of considerable investment by the industry in the past, the overall image of milk remains overwhelmingly positive. However, its image among consumers and knowledge of its health benefits is declining (see Table 2). This decline is most pronounced among young adults and teenagers.

  In particular, research shows that consumer misconceptions about the fat levels in milk, which they overestimate by a factor of eight, are damaging milk's positive image and holding back sales. 11 per cent of consumers claim they would drink more milk if they knew the true fat content.

  Milk is also slowly losing its relevance to the consumer. It faces increasing competition from squash and carbonated drinks.

  Encouragingly, recent research among teenagers found no overt barriers to milk drinking. It is widely seen as both healthy and nutritious, and to a certain extent delicious. However, milk is also seen as a dated product, whose low-fat varieties are considered bland.

  The one consumer attitude which has not been eroded is the 99 per cent agreement with the statement that milk is good for children's teeth and bones. This is the message which the NDC has been promoting with European Commission funding.


6.1  Its purpose

  Its purpose is to improve perception of the product category as a whole and thereby increase overall consumption, ie the size of the market. Brand advertising, by contrast, helps individual brands to increase the size of their particular share of the market.

  Generic marketing is most effective in enhancing the size and/or value of a market, if it is focused on addressing genuine issues of concern to the consumer, such as healthy eating and product image.

  There is a growing body of evidence to suggest that generic advertising has been effective in boosting sales in a number of basic food markets, including dairy products. Table 3 summarises the estimated rate of return on advertising spend for a range of generic campaigns, together with a number of branded goods for comparison.

Table 3


GenericRevenue effect BrandsRevenue effect
Cheese£2 Haagen-dazs£2
Butter£4Hovis £5
Milk£4-£6 Gold Blend coffee£5
Red meat£6-£12 Felix catfood£6
  Walker's crisps £11

  Source: MMD Ltd/Advertising Works, volumes 1 to 10.

6.2  Benefits of generic marketing of milk

  The National Dairy Council has worked with independent research company, MMD Ltd, since 1986 and has developed an econometric model to aid the understanding of the dynamics of the milk market and inform industry decision-making. This takes account of a number of different variables that influence household demand for liquid milk, including advertising, price and the rise in supermarket purchases of milk.

  Past experience has shown this model to be very accurate (98 per cent) in its predictions. Over the period 1988 to 1998 it has helped explain the variations in sales of liquid milk. In particular the model has played a key role in tracking the positive effect of generic marketing.

  A report[2] was commissioned by the NFU and the MDC to assess the likely effectiveness of a national generic advertising campaign for milk in Great Britain, using the NDC/MMD econometric model. Its principal findings may be summarised as follows:

    —  A generic marketing campaign could make an important contribution towards helping to stabilise the liquid milk market or even stimulate modest growth.

    —  A £10 million campaign would increase the liquid milk market in Great Britain by 135 million litres a year, worth £44 million at average retail prices. Its effects would be felt largely over a period of two years, with half the benefit being delivered in the first year.

6.3  The NDC's proposed new campaign

  The NDC has put forward proposals for a new generic marketing campaign to increase sales of liquid milk, which all sides of the industry agree is the way forward. This national marketing campaign would use TV advertising within its planned core expenditure of £7 million a year over three years. The NDC also has a commitment from dairies and retailers that they will undertake additional activity to support the campaign. The essential elements of the campaign are:

    —  A broad consumer appeal, at the same time targeting specific key subgroups such as children, teenagers and mothers.

    —  A strategy designed to make milk relevant and modern and educate the consumer about milk's true fat content and health benefits.

  It is intended that in the first year of this campaign that research will be undertaken into the role of generic marketing within other sectors of the dairy market, particularly cheese and cream.


7.1  Historical

  Prior to deregulation, the NDC's generic milk marketing campaigns were jointly funded, in equal measure, by the farmers and the dairies with funds collected by the Milk Marketing Board (MMB).

  Previous generic marketing activities were at their height in the late 80s and 90s, when the NDC operated with a budget of some £22 million, funded equally by the MMB and DIF.

7.2  Current

  Following deregulation, the MDC was established by Statutory Order under the Industrial Organisation and Development Act 1947. The purpose of the MDC is to carry out a range of functions designed to improve the efficiency and productivity of British dairy farming. The MDC's members are appointed by Ministers and consist mainly of farmers, under an independent chairman.

  The Order provided for funding by means of a statutory variable levy collected from some 30,000 farmers, which set at 0.04p per litre for 1998-99. The Council determines how these funds are spent within a range of functions specified under the Order. (see Annex 1).

  Under these arrangements, the MDC provides a grant towards the NDC's work in providing information on milk's role in the diet to professionals working in health and education. However, its remit does not permit the MDC to fund promotional activity.

  However, there is considerable support for such a campaign from all sides of the industry. The NFU and the SFU undertook a consultation exercise among its members, which indicated strong support among milk producers. As far as the dairy trade is concerned, DIF has also indicated support in principle from its members.

7.3  Proposed

  Since a mechanism already exists through the MDC for collecting a statutory levy from producers, it is felt that this would be the most cost-effective method of collecting an additional levy for a generic marketing campaign.

  However, this would require an extension of the MDC's remit by amending the Milk Development Council Order 1995. Function 16 of Schedule 1 of the Industrial Organisation and Development Act 1947, was specifically excluded from that Order. If it were reinstated, this would permit a levy to be collected for the funding of a campaign. Function 16 states: "promoting or undertaking arrangements for better acquainting the public in the UK with the goods and services supplied by the industry and the methods of using them."

  It is understood that a producer poll would be required prior to amending legislation, which would need to be specific as to increase in pence per litre needed to fund the campaign. The NFU have stated that they are willing to assist with such a poll.

  It is envisaged by the industry as a whole that producer contributions to the promotional fund would be passed directly to the NDC. Matching contributions from the trade would be provided through DIF, subject to the campaign being devised and controlled by the NDC.

  Responding to exploratory approaches from the industry, the Minister has said that the MDC might be an appropriate body to collect a farmer contribution to a generic milk promotion levy. However, extending the MDC's remit is not a step to be taken lightly because:

    —  It would need EU approval under the State Aid Rules, as well as possible Treasury approval.

    —  The National Audit Office would need to be satisfied with the financial control arrangements; and the MDC Accounting Officer would be held accountable for the regularity, propriety and value for money of expenditure of levy monies.

    —  It would be necessary to reach a consensus of views of producers in England, Wales and Scotland, since the MDC is a GB organisation.

  The Minister has urged the industry to consider the alternative option of a voluntary, non-statutory levy. However, the industry has already considered this option and believes that a statutory levy is the only satisfactory way forward.

23 July 1999

1  Dairy Facts and Figures 1998 Edition, National Dairy Council. Back
2  Research into the Generic Marketing of Milk, MMD Ltd, July 1998. Back

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