Over the past few years, the dairy industry has proven its resilience and ability to meet consumer needs. One trend that will continue to reshape the dairy industry into the future is the Business to Consumer (B2C) model, with more dairy manufacturers taking the initiative to offer their products directly to end consumers. Consumer behavior shaped by digital and social media has strongly promoted the development of the B2C model, which was further accelerated by the pandemic.
The digital and e-commerce revolution has drastically changed how dairy brands are reaching their customers. According to Digital Commerce 360 and the US Department of Commerce, in just eight weeks at the start of the COVID-19 pandemic in 2020, US e-commerce retails sales sped up penetration by three-plus years, reaching 27% penetration by the end of April 2020.
“E-commerce is a smart growth strategy for the dairy industry,” said Beau Hayden, vice president of insights, Dairy Management, Inc. (DMI) during a webinar with Midwest Dairy Association. “It’s really about evaluation and how behaviors changed over the course [of the pandemic]. Eighty-four percent of folk purchase food or beverages online, compared to 76% pre-COVID.”
Smart growth and strategy
According to Hayden, pricing is still a trigger for online shopping in particular because consumers can go from one retailer to another to compare prices, as well as shipping and delivery information.
“The price is still a key decision factor and we’ll see that especially with Gen Z, where we’re seeing they do compare prices for one product across multiple websites or opening multiple tabs.”
The customer journey has also changed dramatically with the rise of e-commerce, a lot of which rides on optimized, detailed product display pages and encouraging customer advocacy with online reviews, link sharing and social media posts about the products.
Hayden discussed his previous work with an unnamed dairy brand and how the company was able to increase its e-commerce engagement exponentially by optimizing the product pages and imagery.
“They were humming along decent from an e-comm perspective,” he said. “Once we engaged with them and updated their product content and imagery — basically their entire product display page — we were seeing results of 350% year-over-year. Prior to that they were at 78% year-over-year natural growth of the category online.”
The company Hayden worked with is also using e-commerce to test out new products before taking them into larger markets.
“They’re throwing those products for a test-and-learn even quicker online, because they might not have the sales data to have a cut in at a retailer immediately behind it. But they’re able to get that because of the long tail that’s available from an online perspective,” he said. “Just being able to have a single point of distribution, even if it’s online with a new innovative product, you’re able to get at least some KPIs or sales numbers, and then take that in with your briefcase when you go and sell into a physical store.”
With online sales expected to reach more than $250 billion by 2025, Danone North America is prioritizing innovation for the virtual shelf.
In April 2021, the company launched a direct-to-consumer website for its So Delicious brand of plant-based dairy products.
“We saw a need to meet and attract new consumers that were just engaging with direct-to-consumer platforms or just engaging in digital commerce,” said Kristina Cole, president of sales and chief customer and commercial officer at Danone North America. “It’s very small for us. It’s a test and we’re learning our way through it.”
While the direct-to-consumer channel accounts for a small part of the overall business, it also offers benefits beyond incremental sales, she added.
“It allows you to get real-time information from consumers to help inform what they’re really looking for,” she said. “It used to take six to eight months to know you had an item that was going to work. Now you know in days. You can launch a new flavor and get instant feedback. It allows you to tweak your innovation strategy and can help inform future innovation.”
The direct-to-consumer platform is one of several recent e-commerce investments. The company launched Honest to Goodness in March 2021, which was its first brand to be sold exclusively across online channels. Featuring coffee creamers made with vanilla sourced from Madagascar, Danone is using online displays to highlight the brand’s social and environmental initiatives.
“With the virtual shelf, you can develop a strategy or storytelling narrative that’s more in depth than what you can do in the brick-and-mortar world,” Cole said.
Danone’s focus on storytelling expands beyond its first digital-only brand. The company is leveraging the virtual shelf to engage with consumers and drive sales across all channels, including traditional brick-and-mortar.
“Consumers are doing more research than ever before, and they’re much better informed about products and ingredients,” Cole said. “Whether they’re engaging at the brick-and-mortar shelf or at the virtual shelf, they’ve probably made that purchase decision before they click to add an item in their basket or before they go and purchase in-store.”
She pointed to the Two Good yogurt brand as an example. The brand supports social and environmental causes through Danone’s One Cup, Less Hunger program, which aims to reduce food waste and food insecurity. It also works with Full Harvest, a startup rescuing surplus and imperfect produce, to source ingredients that would otherwise go to waste. Communicating those initiatives online has been key to the brand’s success, Cole said.
“The ability to story tell with regard to the purpose-driven nature of that launch was a critical element in the innovation strategy,” she said. “That’s something that digital commerce allows versus a traditional way of shopping and engaging with products.”
Leveraging the virtual shelf to engage with and better understand consumers will be key to Danone’s omnichannel strategy going forward. The company expects e-commerce adoption will continue accelerating.
“We’re going to continue to invest in online, but it’s under the halo of a commercial strategy that meets consumers both online and in-store,” Cole said. “Ultimately, it’s about meeting the consumer wherever they shop.”
– Editor’s Note: Sam Danley of Food Business News contributed to this story.