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Posts Tagged ‘cravendale’

Can Marketing Save Milk?

In Advertising, Marketing, politics, Uncategorized on July 20, 2012 at 8:02 am

I have a lot of sympathy for the current protests by farmers about the pressure on their bottom line. I’m sure it’s a horrible position to know that all your hard work – often built on years of knowledge and tradition – is essentially bankrupting you.

However, this is not a first.  This issue of supermarket price pressure has been rumbling on for years:

2004 – UK milk processors clash over prices
2
009 – Milk price cuts hit dairy farmers hard

Farmers aren’t very effusive people, and the National Farmers Union doesn’t seem to be a  protest organisation, so such protest really are a sign of desperation for these people. However, whilst raising public awareness may help a little, protest rarely wins out over economics. The public wants cheap milk. The supermarkets want to supply it. That won’t change.

But if protest won’t work, what will?

1. Refuse to supply

The obvious option would be to refuse to supply – en bloc.  I don’t know much about the logistics of importing milk, but it would seem difficult for all the UK’s fresh milk to come from abroad. Back in 2010 raw milk was only traded across the UK border from Ireland into Northern Ireland. It’s a hard option, and could be a long game, but sometimes a line has to be drawn.

The difficulty here, though, is the farmers’ own conservatism. As mentioned above, I don’t see the National Farmers Union as an effective Trade Union, in the traditional sense – at least, I haven’t heard from an NFU representative yet in the press (again, please comment and correct me if I am wrong – I presume they lobby behind the scenes in some way?). Without that power of unity, there’ll always be some bastard waiting to undercut the other.

So without that option, how can farmers solve the conundrum? Well, maybe marketing can help.

2. Move up the supply chain

The supermarkets may be taking all the public flack here, but as this graphic suggests (I have not researched the source data, but thanks to @OurCowMolly for the reference) the processors have a large part of the value chain, taking up some of that money the supermarket pays, which could go direct to farmers:

Milk production value chain

The Milk Production Value Chain

A standard tenet of marketing strategy is that is you are a manufacturer of a mature product, eventually your margin will disappear as your product becomes commoditised. When this happens, you either need to diversify (eg/ find something else to farm) or move up the value chain.

I cannot find a reference for this, but I was reading that in Sheffield milk processing was done cooperatively, with a fair price, until the processing plant was taken over by Wiseman, with resulting reduction in price paid to farmers (sources anyone?).

Economically, a bigger processing plant makes sense, as it can reduce overall costs of production. The problem is, however, exactly that mentioned above – you come onto the radar of the big boys.

However, from what I can find out, milk processing is not a particularly complicated process, and not reliant on the kind of advanced manufacturing processes that requires a large cost infrastructure. Machinery is easily available.

Perhaps farmers processing their own milk and supply directly to their local supermarkets is an option?  Sure, it will require change, investment, and negotiation, but cutting out the processors gives the potential to offer supermarkets an equal price, but with more money to the farmer?

Now, this is such an obvious solution, it must have been tried (and failed?) so I invite people to comment and let me know why this doesn’t work.

3. Build a brand

A bottle of Tesco body spray is about 99p. A bottle of Lynx is about £3. Both are smells in a can. The difference is brand value. It’s a hard and nebulous concept to understand and implement, but all you really need is a marketer, a budget, and a design agency (and a consistent taste – this bit may be the hardest bit. again, not enough knowledge to say.

This is already happening in the milk industry with Cravendale‘s irreverent adverts squarely aimed at generating demand through teenagers for a branded milk product. Cravendale is owned by Arla, one of the processors, and presumably helps them get more profit from supermarket distribution.

Competing against Cravendale’s budgets would be hard for farmers, but a ‘Fair Trade’ type brand may not.  This type of branding works similar to the ‘Intel Inside‘ style of marketing, where it can be carried by the users/distributors themselves to add value to their own products by guaranteeing the ‘fairness’ (in terms of price and condition) given to the producers.

This approach would seem ideal given the current scenario. Why is their a ‘Fair Trade’ icon for Kenyan coffee or Chilean wine, but not British milk?

Based on this graphic (again, thanks to  @OurCowMolly for the reference) Sainsbury’s, Waitrose et al would jump at the chance to get added social kudos for giving a decent price, and with supermarket wars as they are, if their ‘Fair Trade’ milk tempted consumers to pay a little more, the others would soon follow.

Milk prices

So what do you need to kick this kind of thing off. Well, will, really.

Maybe while today’s protests are going on, the farmers can discuss the minimum standards of production they are willing to commit to (eg/ adding some schtick in about treating cattle well will play well with liberals), come up with a logo, and start lobbying the public direct with the idea.

Supermarkets obviously don’t listen their supplier, but they do listen to their customers.  You’ve got the public’s attention – use it.