The dairy department receives its fair share of coverage and much of it revolves around price. This is understandable given that price (and quality) are generally the most important factors to Australian shoppers. Yet winning in dairy requires more than just a focus on value. You need a deeper understanding of how shoppers approach different categories and what is most relevant to them.
So, how do shoppers approach dairy categories and what levers can you pull to best satisfy their needs?
Building on a solid foundation
Overall, dairy categories are doing a good job of responding to shoppers’ needs. Last year, 58% were satisfied with the overall experience they had in dairy. That’s higher than the year before and compares favourably with other departments. Fresh food, for example, has an overall satisfaction rating of 50%.
Within this result, dairy categories perform above average in both price and product-related metrics. That means delivery is relatively strong in areas such as offers, healthy choices, provenance, and authenticity.
Conversely, the department only performs in line with others when it comes to assortment and execution. This suggests retailers and suppliers could do more in areas like innovation, merchandising and enjoyment at shelf.
Every category in the store has its own identity. That identity defines how shoppers approach the category as well as the impact it has for the retailer. It also dictates what levers to pull to maximise its performance. The dairy department includes a diverse set of categories with quite different characteristics.
Get the basics right
On one hand, a category like butter is a trip driver. It’s relatively more planned than the average category but less differentiated from one retailer to the next. The opportunity to trade shoppers up to more premium products is quite limited. However butter is a category that shoppers are very keen not to run out of. Getting it right is extremely important for both retailers and suppliers.
There are three key things to focus on. The first is maintaining excellent availability. The second is ensuring simplicity at shelf through tight ranging. Thirdly, traffic-driving categories require a strong and consistent price position if they are to perform optimally.
On the other hand, “differentiating” categories play quite a different role. Shoppers are far more likely to buy these categories on impulse. When delivered well, they can help build loyalty and offer good potential to drive higher price points with less need for deep discounts.
Within dairy, a host of categories including desserts, specialty cheese, dips, and flavoured milk fall under this heading. The ingredients required for success here are quite different than for something like butter or standard white milk.
Now the differentiators
Differentiators require more investment on in-store theater and display to make them stand out. Innovation and newness are crucial, with more range rotation in evidence and less space assigned to individual products.
Another consideration is whether to emphasise engagement with shoppers before or during the shopping trip.
Talk when shoppers are listening!
Four of the twenty most planned categories sit in the dairy department, including white milk, which is the most highly planned of all. So you need to communicate with shoppers in these categories before they enter the store.
Categories like milk and eggs tend to be very regular purchases, so engagement should focus on messaging around key brands. Yoghurt shoppers, however, are significantly more likely than average to choose one retailer over another based on promotions. So deals should also form part of any pre-store comms investment.
For dairy desserts or chilled ready meals, the buying decision is much more likely to be made in-store. In fact, chilled ready meals is the 6th most impulsive category in the entire store, with desserts ranked 26th out of 208 categories.
One in four dessert shoppers who said they bought on impulse also said they did so because an in-store display caught their eye. That’s nearly 2.5 times more than the average for all categories. In chilled ready meals, displays attract one in five shoppers, but twice as many as the average report that a promotion instore led to them making a purchase in the category. So it becomes very clear to see where investment should be funnelled to drive the best results.
Rise to the top
Price, quality, and freshness are clearly very important factors in the dairy department but scratch beneath the surface and it’s also clear to see that shoppers are looking for more than just those three ingredients. While satisfaction is rising, more work could be done in some areas to improve performance further.
A full understanding of your category’s role and impact is essential. Only then can you pinpoint exactly which levers to pull, and work with your partners to ensure strong execution. Once you apply that deep understanding, through both your pre-store engagement and your in-store delivery, then you put yourself in a strong position to rise to the top of this diverse department.
Related insight: The Dairy Case – Insights for your next retailer conversation >>
Article written by senior insights director David Shukri, originally published in the March 2020 edition of Retail World, and posted here with permission.
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