Dairy Crest: In good shape with consumer focused innovation

Three years ago, Dairy Crest, the UK’s leading dairy company, stepped up its commitment to innovation and adopted new strategies aimed at bringing products to market quicker. The start of a new decade is a good time to evaluate whether this increased focus and change of emphasis has been successful.

Dairy Crest owns three of the most successful dairy brands in the UK, Cathedral City (cheese), Clover (dairy spreads) and Country Life (butter). It also supplies approximately one third of the country’s fresh milk through its doorstep delivery service and sales to the major retailers and to smaller food service customers.

Milk, cheese and butter are traditional products that do not, on the face of it, lend themselves to innovation. However, Dairy Crest recognised that innovation was essential for it to grow its sales and the business has been successful in using innovative new products and services to strengthen both its branded and own-label product range.

Recent launches of reduced-fat and environmentally friendly products confirm Dairy Crest’s commitment to a programme of con­tinuous innovation. In addition, the business has invested heavily in its cheese packing and doorstep delivery services to improve its capability in these areas.

Martyn Wilks, Executive Managing Director of Dairy Crest’s Foods Division, with overall responsibility for innovation at the company explains, “Innovation forms a key part of our vision and values. We are building our future around the consumer and have recognised that we have to meet consumers’ needs for us to be successful.

“One of our key values is that we will constantly look for new and better ways of doing things. We have set ourselves the target that over time, 10 per cent of our annual turnover will come from new, consumer-led products and services.”

Over the past three years, Dairy Crest has implemented a strategy that delivers new products and new services, with more focus on fewer, larger projects, a simpler process and a real determination to increase the speed of delivery. The business has created a Portfolio Review Team who selects and prioritises new product initiatives which can then be tested for consumer acceptance and feasibility before going forward for development.

Understanding the consumer

As part of the increased focus, a major study of dairy consumers carried out by the business in 2007 identified three key drivers behind the demand for dairy products, health, taste (pleasure) and convenience (now). These come together as ‘dairy for life’, an overriding vision for the dairy category and consumer behaviour.

More recent trends suggest that concern for the environment should be added into that list. As a result, Dairy Crest has focused its inno­vation in recent years on two main areas, ‘lighter’ or reduced-fat products and more environmentally friendly packaging.

In addition, in order to improve the con­venience of its doorstep delivery, Dairy Crest has developed a new internet-based service from its milkmen.

Lighter products – choice but no compromise

Milk and dairy products are highly nutritious, but they do contain quite high levels of saturated fat. The challenge for Dairy Crest was could they reduce the saturated fat in the products they produced without compromising on taste or quality? The answer from the consumer has been a resounding yes.

Over the past three years, Dairy Crest has introduced lighter versions of its three key brands and these now account for a sizeable part of these brands’ total sales (see Table 1 on page 39). Encouragingly for the business, much of the increase in sales has come from new consumers rather than cannibalisation.

These new products have been supported by strong advertising campaigns which have undoubtedly added to their success.

Dairy Crest has not restricted its drive to offer reduced fat alternatives just to its brands. It has also worked with Sainsbury’s to create one per cent fat milk that consumers can use instead of higher fat milks (full fat milk has up to four per cent fat and semi-skimmed up to two per cent). This has proved a great success, and approximately eight per cent of Sainsbury’s own-label milk sales are now made up of one per cent fat milk.

Looking forward, there are plans in place to offer one per cent fat milk to all of Dairy Crest’s 1.3 million doorstep customers and to smaller shops and food service customers through Dairy Crest’s Country Life milk brand.

Supported by Foods Standards Agency

Although driven by the consumer, these inno­vative new products have been supported by the Foods Standards Agency. The FSA are looking to work with food manufacturers to make food healthier. The work done by Dairy Crest to lower the saturated fat in its products is completely in line with this agenda and has been welcomed by the FSA.

Environmentally friendly packaging

The second area that Dairy Crest has chosen to focus its resources on is environmentally friendly packaging. Just as consumers will not accept reduced-fat products that compromise on taste or quality, they want environmental improvements to packaging to be achieved without reducing its functionality.

Dairy Crest has a history of developing innovative packaging. It led the way by introducing resealable packaging for cheese for its Cathedral City brand back in 2003 and its convenience continues to be welcomed by consumers.

Milk in a bag

In the summer of 2008, Dairy Crest rolled out an innovative, low-waste alternative to plastic milk bottles, achieving a 75 per cent reduction in milk packaging waste (in comparison to a standard two pint plastic milk bottle). Milk was packed into recyclable bags that worked with a specially designed reusable jug. The bags were made from very strong low density plastic and fitted within the reusable jug – JUGITTM – which contained a spike that pierced the bag, formed a no-leak seal and delivered milk through the spout. Dairy Crest again worked with Sainsbury who became the first retailer to list the new product. JUGITTM is now also available in Waitrose and will soon be seen rolling out to other retailers. The number of bags sold since its launch is approaching two million and the company claims to have saved 46 tons of packaging materials – the equivalent of 39 Mini’s!

Based on consumer feedback, Dairy Crest has plans to introduce a new jug and extend the distribution of JUGITTM later this year.

Recycled bottles

More recently Dairy Crest has developed the UK’s first recyclable plastic milk bottle, which contains 10 per cent recycled material. The new material is made from previously used bottles and is an important step towards reducing the level of plastic milk bottle waste that had previously been disposed of in landfill.

milk&more

The third leg of Dairy Crest’s drive for innovative growth has been achieved in one of the company’s most traditional areas. Over the past two years, Dairy Crest has developed an internet-based system that allows its doorstep customers to communicate with their milkman and place orders for milk and a range of other products without having to leave a message in a bottle. Payment is by direct debit or credit or debit card, increasing its convenience for its customers. This new service, milkandmore.co.uk, was rolled out nationally in September 2009 and Dairy Crest has targeted to sign up 250,000 customers by April 2010.

Mike Sheldon, Managing Director of Dairy Crest’s Household Division is pleased with the progress the innovative new service is making: “When we talked to our customers, they told us that they wanted to retain all the good, traditional aspects of their milkman delivering to their doorstep, but they wanted more.

“They wanted a wider range of products that meant they didn’t have to drive to a convenience store if they ran out of an important food item and they wanted to order and pay over the internet. milk&more allows our customers to order until 9pm for delivery the following morning.

“We are well on the way to achieving our first customer target and expect to make further progress from there during 2010. Our milkmen love it too as they can provide a better service and don’t have to worry about collecting cash from milk&more customers.”

New investment in cheese packing

Looking forward, the company will not be drawn on what else it has in the pipeline but points to its recent significant investment in a new cheese packing facility as an example of its ongoing commitment to continuous improvement. The new packing plant, adjacent to its national distribution centre in Nuneaton, has cost approximately GBP 26 million and is arguably the most advanced in the world. Cathedral City cheese is deboxed, unwrapped, cut and then packed and distributed to the major retailers automatically with no manual intervention.

Consumer remains key

The concept of retaining all the good, traditional aspects of dairy but increasing the relevance for modern-day consumers is an overriding theme in Dairy Crest’s innovation strategy.

Dairy Crest is proud of the progress it has made with innovation over the past three years. Innovation has been established as a key part of its strategy and has helped Dairy Crest move forward in a challenging economic environment. The company’s success has been recognised externally too, with a report commissioned by the European Commission into the competitiveness of the European Dairy Industry ranking Dairy Crest as the most innovative dairy company in the UK and seventh overall in the world.

Nevertheless, the real winner has been the consumer and that is where Dairy Crest intends to stay focused. As Martyn Wilks says: “We are confident we have the right strategy and systems in place to deliver innovative new products and services. The real challenge is to make sure we keep up with the consumer and their increasingly high expectations. I am really pleased that we have shown that we can do this.”