Memorandum submitted by the National Dairy
Council (Q 35)
GENERIC MARKETING
1. SUMMARY
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.
2. THE NATIONAL
DAIRY COUNCIL2.1 Role
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.
3. THE LIQUID
MILK MARKET[1]
Market size:
The total milk market is worth more than £6
billion a year, of which the liquid milk market accounts for £3
billion.
Sales:
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).
Consumption:
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.
4. MILK'S
NUTRITIONAL CONTRIBUTION
TO THE
NATION'S
DIET
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
CONTRIBUTION OF MILK AND DAIRY PRODUCTS TO
CONSUMPTION OF FOOD NUTRIENTS
| 1997 | Energyvalue
| Protein | Calcium
| Vitamin A |
| Liquid milk | 8% | 14%
| 39% | 8% |
| Other dairy products | 8% |
7% | 17% | 15% |
| Total dairy products | 16% |
21% | 56% | 23%
|
| Total all foods | 100 | 100
| 100 | 100 |
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.
5. IMAGE OF
MILK
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. GENERIC MARKETING
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
ADDITIONAL NET REVENUE FOR EVERY EXTRA £1 SPENT ON
ADVERTISING
| Generic | Revenue effect
| Brands | Revenue effect
|
| Cheese | £2 |
Haagen-dazs | £2 |
| Butter | £4 | Hovis
| £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. MECHANISMS FOR
FUNDING
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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