20 November 1998

SHOULD PRODUCERS SAY YES TO £10m CAMPAIGN?

Many within the UK dairy industry hope farmers will give a resounding yes next week to

the NFUs proposal that they help fund a £10m advertising campaign aimed at boosting

milk sales. But are they right to do so? FWis Vicky Houchin and Johann Tasker report

ITS been a difficult year for Poul Christensen, chairman of Milk Marque. His customers accuse him of overcharging for milk, his farmer-suppliers say the price is too low, and his organisation is being investigated amid claims that it has abused its dominant position in an effort to rig the market.

The Monopolies and Mergers Commission inquiry, launched last January, aims to address all those allegations. But whatever the outcome when the MMC findings are released next spring, many farmers will remain understandably aggrieved that Milk Marques prices are arguably the lowest in the land.

The farmers have Mr Christensens sympathy. At the European Dairy Farming Event in September, things were so bad that he finally gave vent to mounting frustration that there were easier ways of making money than selling milk.

"It still seems extraordinary to me that milk is cheaper than a bottle of water," says Mr Christensen.

The NFU hopes to come to Mr Christensens rescue – at least indirectly. It wants to ease the downward price trend by helping to fund an annual £10m milk advertising campaign. Union leaders have asked their dairy farmer members for assistance and next week local NFU council members will deliver their decision.

Will producers say yes? Most commentators say theyd be misguided not to. Since the summer, the outlook for dairy farmers has barely improved. Seasonal bonuses aside, dairy farmers are under immense pressure to make ends meet at the sort of prices they receive from Milk Marque.

Two months ago, the company was the only milk buyer paying farmers less than 19p/litre. The recent introduction of a bonus payment of 0.3p/litre will do little to boost Milk Marques average price of 17.57p/litre paid so far this year, says Stephen Bates, a dairy industry analyst based at Wye College. Indeed, it is £20,000 a year less than the average 100-cow dairy farmer would receive selling milk to the Southern Co-op.

Falling consumption

But the slump in milk prices is largely due to a massive drop in consumption rather than anything to do with Milk Marque alone. Over the past ten years, annual liquid milk consumption has fallen by about 500 million litres. Figures due to be released by MAFF are expected to show a further decline.

The NFU forecasts that a £10m annual advertising campaign would increase annual raw milk sales by as much as 135m litres. It claims milk prices would be boosted by 0.24ppl in the process, giving farmers £4.76 for every £1 spent on advertising. That means a dairy farmer donating £200 each year to the campaign would receive roughly £1000 from increased milk sales.

By any calculation, the figures look good on paper, not least for farmers who sell to Milk Marque. The company supplies more than 50% of the raw milk in the country and is now seen as putting a floor in the market price.

But many farmers argue they can ill afford to invest in a project when the outcome is anything but certain. They are worried in case any subsequent price increase fails to find its way back to the farm-gate and fear that the projects outcome is far from certain.

Not so, claims Winston Fletcher, chairman of London-based advertising agents Delaney Fletcher Bozell. A well-planned UK campaign is almost certain to succeed, he says. Mr Fletcher worked on the "milk moustache" campaign in the USA which boosted sales by using supermodels to give milk a young, trendy and sexy image that consumers found hard to resist.

The argument is that improving the perception for milk will boost consumption and therefore prices. And once a consumer pays more for a pint of milk, a proportion of the price rise will then find its way back to the farm gate, at least in theory.

"One of the major achievements of the US campaign was to make milk glamorous again," Mr Fletcher says. "The importance is to enhance consumers attitudes to milk and improve their demand for the product."

Supermarket campaign

Supermarket bosses agree. Marks and Spencers has already taken the plunge and launched its own milk advertising campaign. The two-month promotion, launched earlier this autumn, concentrated on decoration rather than price and advertising was placed throughout the stores.

The project, which targeted all M&S shops, was financed jointly by the retailer and an unnamed supplier. Sales of fresh milk increased and the company hopes to repeat the project in the future.

"It is well worth farmers contributing to such a campaign," said Yves Fourcade, M&S dairy department merchandiser. "It is either a campaign, or a decline in sales year after year. With the competition from soft drinks growing, it is important to act now or it will be too late."

Sainsburys too has pledged its support for a national milk advertising campaign. But unlike M&S, it has no plans to promote milk unless farmers contribute to the cost.

"We are totally supportive of a generic advertising campaign," says Andrew Freestone, Sainsburys category manager for fresh milk. "It is desperately needed and long overdue. However it is imperative that the industry gets its act together and organises something now."

Mr Freestone agrees that such a campaign will boost milk sales as well as consumers perceptions of the product. So does Gill Turner, assistant brand manager with the Quality Milk and Dairy Products marketing company which promotes Breakfast Milk.

Ms Turner believes that any increase in consumption will only be maintained by continued marketing support and a change in consumers attitudes. The fall in milk consumption is at least partly due to a lack of generic advertising and the misguided perception that milk is a high fat product, she says.

Some dairy farmers remain cautious, however. Marshall Taylor, who has a 150-cow dairy herd near Taunton, questions whether farmers money would be better aimed at marketing and reorganisation of the dairy industry as a whole. Mr Taylor believes farmers should question where their money will end up.

But even he realises that farmers must do something to offset milk prices from falling further. Milk needs a boost as quickly as possible because the benefits of any generic campaign will take a while to filter back to the farmer.

"We need to act within the next two years or farmers wont have the money to invest," he says. &#42

A high-tech industry…but UK milk still sells cheaper than mineral water.

Super model Naomi Campbell was enlisted to boost US milk sales.