Convenience stores introduced my children to the wonders of strawberry milk. Chocolate milk had long captured their attention through the school lunch line, but strawberry milk was something out of the ordinary at the most ubiquitous of retailers—the convenience store. My family isn’t the only one buying flavored milk, among other types of fluid milk, at convenience stores lately.
“In 2020, many customers choose convenience stores as their primary shopping trip for staples, including fluid milk. Sales of fluid milk in 2020 were higher in nearly all months of the year compared with 2019,” said Jayme Gough, research manager, NACS.
JUST THE FACTS: The fluid milk category saw sales rise 6.5% to an average of $49,790 per store in 2020.
While fluid milk is one of the smallest categories in convenience retail, the category saw sales rise 6.5% to an average of $49,790 per store in 2020, according to the NACS State of the Industry (SOI) Report. “This bump was likely the result of increased store traffic for ‘necessary home staples’ during the first year of the pandemic,” Gough said.
Gross margins for milk also rose in 2020, from 23.23% to 23.82%, which helped boost gross profit per store 9.2% to a total of $11,859 yearly. “What the pandemic in 2020 did was remind shoppers that c-stores often stock pantry essentials, like fluid milk, and those shoppers will be more apt to thinkof c-stores for future fill-in grocery trips,” Gough said. “Despite shoppers feeling comfortable returning to grocery stores for their staples, NACS CSX data show monthly fluid milk sales are higher than 2020 in all but one month so far in 2021.”
At the Adkins Store in Charles City, Virginia, sales of fluid milk have stayed about the same over the past year. “We haven’t adjusted our inventory because of the pandemic at all,” said cashier Holly Owens.
In 2020, the pandemic pushed sales of fluid milk up at Byrne Dairy and Deli’s 62 stores. “In 2021, we were able to retain those sales and even improve on them in the category,” said Peter Elliott, director of marketing for the Syracuse, New York-based chain. “With our dairy history, our core customers expect an extensive milk selection at our stores. But during the pandemic, we were able to introduce new customers to our milk, and we’ve been able to turn many of those into repeat customers.”
Source: NACS State of the Industry Report of 2020 Data
A FLUID OPPORTUNITY
Milk has long been a staple in convenience stores, although some retailers, like The Station in Kiawah Island, South Carolina, have dropped the category entirely. “Our customers weren’t buying fluid milk, so we stopped carrying milk,” a manager said.
While Adkins Store has a tiny section, Owens said the retailer doesn’t plan to discontinue fluid milk. “Everyone needs milk sometimes,” she said. “We’re always going to carry it because it’s a main grocery staple.”
Like its name suggests, Byrne Dairy and Deli is all-in on fluid milk. Each location has six cooler doors of branded milk, including gallons and glass half gallons of whole, skim, 1% and 2% white milk, plus creamer products. “These are the sizes and types of milk our customers want,” Elliott said. “Our customers expect choices of fluid milk, and we want to deliver that to them.”
The milk category is growing through innovations, such as flavors, high protein, lactose-free and cold brew with milk products.
For years, the outlook for fluid milk sales and consumption hasn’t been rosy. “However, per capita consumption of dairy in the United States has been steadily rising lately,” said Paul Ziemnisky, executive vice president of global innovation partnerships for Dairy Management Inc. (DMI). According to the U.S. Department of Agriculture, in 2020, dairy consumption reached 655 pounds per person in the United States, the highest level since 1960. With signs pointing to continued growth, fluid milk presents “a lot of opportunity for convenience store operators,” he said.
Nearly all households purchase dairy, with milk part of the largest number of trips. “Milk builds shopper baskets,” Ziemnisky said. “Having new, innovative milk items, such as grab-and-go and single-serve items that deliver value-added benefits can reinvigorate this category at convenience.”
DMI research has found that focusing on dairy’s benefits can attract Gen Z customers to the category. For example, highlighting dairy’s contributions to immunity, calmness, energy and digestive health can draw younger consumers to fluid milk and other dairy products. “The milk category is growing through innovations, such as flavors, high protein, lactose-free and cold brew with milk products,” Ziemnisky noted.
Despite shoppers feeling comfortable returning to grocery for their staples, NACS CSX data shows monthly fluid milk sales higher than 2020 in all but one month so far in 2021.
MILKY FLAVORS
Kids flock to fluid milk with flavors, which has proven to be a sales booster at convenience stores. Flavored milk captured 20.8% of category sales in 2020, according to 2021 NACS SOI data. “Flavored milk has done especially well at convenience stores the past two years. Of the top three subcategories of milk, only flavored milk monthly sales have been greater so far in 2021 than they were in 2020, according to CSX data,” Gough pointed out. “This represents an area where convenience stores can focus on to drive fluid milk growth.”
The flavored milk category grew 3.1% through October 2021, which translates into more than 5.6 million gallons in 2021, according to Retail-IRI data. The Adkins Store sees the value in having flavored milk alternatives in its small fluid milk section. “We have chocolate and strawberry milk in addition to our whole milk gallons,” Owens said, “and we do sell quite a bit of the flavored milk.”
For more information about NACS category definitions, visit www.cnvenience.org/categorydefinitions. Source: NACS State of the Industry Report of 2020 Data
Byrne Dairy and Deli offers its own branded flavored milk, including chocolate milk in half gallon glass bottles and other seasonal varieties throughout the year. “For example, we have mint milk around St. Patrick’s Day and strawberry milk in June,” Elliott said. Other flavors have included Christmas cookie milk in December. “We used to have only chocolate as an alternative to white,” he said. “My grandfather debuted mint milk around St. Patrick’s Day in the 1970s, and that was such a hit, we’ve brought it back every year, plus added other seasonal flavors, too.”
Plant-based milks have grown considerably more popular in recent years and are showing up in more convenience stores. For example, Oatly Original and Chocolate flavors in single-serve packages are stocked alongside regular milk beverages. “At select convenience locations, including at 3,500 7-Eleven locations nationwide, we also offer Oatly Original in 64-ounce cartons,” said Stephen Dean, vice president, foodservice/small format North America at Oatly. “It’s a brand-new option in most convenience retailers, so it’s still too early to measure sales across the channel. We’re excited that retailers are bringing the product on shelves and that their interest in alternative milks, like Oatly, is strong.”
Dean pointed to growth for alternative milks like Oatly in U.S. grocery stores as exploding once consumers knew they could count on supermarkets to carry it. “Once consumers know they can find alternative milks in the convenience channel, the growth could be tremendous, especially in the next few years. The plant-based movement continues to grow, and we see tremendous upside in the convenience channel for us in the future,” he said.
Source: CSX; www.csxllc.com
SELLING A STAPLE
Most fluid milk sales at c-stores are because of necessity. That’s the main reason why Adkins Store carries gallon whole milk. “We’re always going to keep our gallon whole milk because it’s a kitchen staple—our customers want the convenience of picking up a gallon on their way home from work or when they’re filling the gas tank,” Owen said.
To keep the category fresh, Byrne Dairy and Deli runs biweekly sales on milk, rotating throughout the gallon or half-gallon options, such as 1% milk on sale one week, then 2% on sale the next. “People don’t switch from 2% to whole milk because of a sale,” Elliott said, “but we do find it can move a little more product with these regular sales.”
With customers returning to their pre-pandemic shopping habits, fluid milk sales may not return to the highs the category experienced in 2020, but that doesn’t mean the category doesn’t have room to grow at convenience stores. “We feel having our branded, fresh milk sets us apart from the competition,” Elliott said. “Our customers have trusted our milk for years, and we continue to keep that trust by offering the best milk possible.”