Spotlight on the dairy department

The dairy department is a critical revenue generator for retailers, taking up only 4 percent of store space but delivering 13 percent of store profits, says \"Dairy Meal Solutions: Merchandising Works,\" an April 2012 report from The Innovation Center for U.S. Dairy, Rosemont, Ill. Therefore, retailers will want to make sure this well-shopped department contains plenty of private label products to entice shoppers and increase profit margins.

But its not enough to simply place these products on shelves – retailers also have to properly merchandise them.

To learn what retailers are doing well and not so well here, we visited the dairy departments of three limited-assortment stores – a Save-A-Lot store in Prospect Heights, Ill.; an ALDI store in Mount Prospect, Ill.; and a Trader Joes store in Evanston, Ill. – all three of which opened between March and September of last year. Our visits to the first two stores took place late on a Monday afternoon in late January, while our visit to the third took place the following morning.

Save-A-Lot
General observations: The Save-a-Lot stores dairy department is an L-shaped section comprising doored refrigerators running along roughly one-third of the stores back wall, and an open refrigerated case running along roughly one-third of the connecting wall on the left (looking into the store from the front entrance). A small, separate area in the bottom left-hand corner of the store houses a small row of doored freezers for ice cream and frozen novelties.

We found \"Shockingly Low Prices!\" stickers beneath several of the Save-A-Lot stores private brand products to communicate their value.

Foot traffic was very light in the store during our visit. Unlike the other two stores we visited, the Save-A-Lot store offered a number of national brand options in most dairy categories. Private brands here include Coburn Farms (yogurt, eggs, sour cream, cheese and more), Home Churned (butter and butter substitutes), Morning Delight (pastry dough), Worlds Fair (basic ice cream and frozen novelties), Crown Creamery (premium ice cream), TODAY (value-tier products) and more.

The upside:

• The store was clean and shelves were organized.
• On a display next to the ice cream section, the retailer placed a large group of Worlds Fair ice cream cones and toppings.
• The store hung \"Shockingly Low Prices!\" stickers beneath several store brand products.

The downside:

• Certain areas of the dairy department were poorly stocked.
• The Save-A-Lot store does not carry milk under its own brand.
• Several store brand and national brand products were mislabeled. For example, the retailer stuck a \"Coburn Farms Mozzarella Chunk\" label beneath Kraft Sharp Cheddar Natural Cheese.

ALDI
General observations: The ALDI store we visited houses its dairy products in an L-shaped section comprising doored refrigerators and an open refrigerated case lining the entire back wall, as well as a refrigerated case taking up roughly a quarter of the right-hand wall (looking into the store from the front entrance). It also merchandises ice cream and frozen novelties behind a small set of freezer doors on the right-hand wall, closer to the front of the store.

The ALDI store we visited placed red price tags underneath select products to communicate a \"New Low Price.\"

Foot traffic was moderate during our visit. Store brands we found here include Priano (Italian products), Happy Farms (cheese), Specially Selected (premium products), Fit & Active (better-for-you products), Benita (Hispanic products), Sundae Shoppe (ice cream and frozen novelties), Simply Nature (natural and organic products), Friendly Farms (milk, yogurt and more) and more.

The upside:

• The department was clean and organized.
• The store had a sign on a refrigerator door communicating that its Friendly Farms milk is from dairy farmers that pledge not to feed their cows artificial growth hormones.
• The store placed red price tags underneath select products to communicate a \"New Low Price.\" It also placed \"Special Buy\" tags underneath limited-time store brand items, \"Look Whats New\" tags beneath recent introductions, and tags with the \"USDA Organic\" logo beneath organic offerings.

The downside:

• We found a number of out-of-stock ice cream and milk products.
• Several SKUs lacked a price tag.

Trader Joes
General observations: The dairy section of the Trader Joes store comprises an open freezer coffin case in one aisle for ice cream and frozen novelties, and open refrigerated cases lining almost the entire back wall for the rest of the dairy products (looking into the store from the front entrance).

The Trader Joes store placed several Trader Joes hot sauces next to the case of egg cartons.

Foot traffic was somewhat heavy. Brands we found here include Trader Joes and Trader Giottos (for Italian-style products).

The upside:

• The department was the most neat and organized of all the stores we visited.
• The store placed tags with totem poles over their price tags to let customers know some products were temporarily unavailable.
• The store was merchandising Trader Joes hot sauces next to the case of egg cartons, and Trader Joes Chia Seeds between the yogurt and milk cases.
• On a tag for Trader Joes Shredded Mozzarella Cheese, the store placed a smaller tag saying, \"Makes Your Pizza Nights Cheesy & Easy!\"

The downside:

• Given that our visit took place around 9:30 a.m., we were surprised to find a number of out-of-stock products in the dairy section.
• We noticed some inconsistencies in branding. For example, while some bags of Italian cheese varieties are branded with the Trader Giottos name, others are branded with the Trader Joes name.

Cross-merchandise, package to sell
Many meals consumed by U.S. families today contain a dairy component. Therefore, cross-merchandising and cross-marketing store brand dairy products such as cheese with other ingredients and meal components can be very effective in getting shoppers to buy.

\"Cross-merchandise [through] themed ads,\" advises Steven Cilento, director of sales with Biazzo Dairy Products Inc., Ridgefield, N.J. \"For example, [in] an Italian ad, use a branded pasta with private label sauce, Ricotta and mozzarella, all at one cost.\"

Packaging, too, plays a critical role in merchandising own-brand dairy products. Pamela Zager, marketing director with Alpina Foods, Batavia, N.Y., says retailers should use color to their advantage. As an example, she points to Alpinas redesign of its Greek yogurt containers to differentiate them with an \"eye-catching Greek-themed design.\"

But remember that \"less is more\" when it comes to developing enticing packaging.

\"Keep your design simple and neat,\" Zager states. \"Too much information can deter consumers.\"

And consider keeping the prime eye-level position on shelves for the category leaders – not necessarily for your own brands – to draw in consumers and \"encourage category consideration,\" Zager suggests.