Raw Milk US National Marketing Strategy - Essay Example

RAW MILK US NATIONAL MARKETING STRATEGY Lecturer: Introduction Raw milk is milk that has not been treated in any way. It does not include colostrum. It has not been subjected to any processing step nor received any pathogen elimination action. Its quality and composition has also not been altered in any way. The result is that it often has disease causing organisms that are specified by legislation and must not exceed a set threshold. It is milked from organically fed cattle, rapidly cooled to 370F, then packaged and sold without subjecting it to any form of processing (WSDA, 2011). Retail Raw Milk includes fluid whole milk, hand-skimmed cream and milk, which has been hand-skimmed. This means a plant cannot use a homogenizer, separator or any other automated apparatus to isolated raw milk from cream. Retail Raw Milk does not include chocolate or flavoured milk, or cultured fluid milk. It cannot be applied in producing other food products such as yogurt, butter, puddings, or ice cream (Dimitri & Oberholtzer, 2009). Despite recommendations by the American Academy of Paediatrics (AAP), American Medical Association (AMA), Centres for Disease Control (CDC), and Food and Drug Administration (FDA) that raw milk not be sold directly to consumers due to it having harmful bacteria like Campylobacter jejuni, Salmonella, Escherichia coli 0157:H7 and Listeria monocytogenes, raw milk sale is legal in 32 (64%) of the American states. 9 states have made it illegal to sell raw milk, 17 have made it illegal to sell raw milk for human consumption, while the remaining states have some form of legislation that regulates raw milk trade and consumption. It is projected that there may be changes in raw milk associated legislation as more states debate the issue. There are no laws prohibiting raw milk sale for other animals’ consumptions though there is, however, a federal ban on interstate trade on raw milk for human consumption (Dimitri & Venezia, 2007; Durham, 2007). Raw milk, from cattle fed in grass, has been promoted as a source of naturally occurring conjugated linoleic acid (CLA) and antimicrobials in solution. It is important to note that production of raw milk follows more stringent hygiene standards than milk meant for processing (WSDA, 2011). Raw milk is a low involvement product as it is cheaper that processed milk, frequently purchased as a matter of routine, and has a short shelf life. For the low involvement products, the consumer gives very little thought, and forms no feeling of the product until after purchase and consumption. The implication is that cognition of the product will lead to a purchase behaviour that will finally result in an attitude. Based on this assessment, identification of raw milk as a low involvement product, the advertisement strategy adopted will make use of low involvement media as they bring about change from cognition to behaviour to attitude (Kotler et al., 2008). Milk is a convenience good as it is frequently bought by consumers with minimum effort to survey other offerings (Armstrong, 2009). Discussion Background of raw milk marketing in the USA Approximately 3.04 percent of Americans consume raw milk. Based on the 2010 census, this figure translates to 9.4 million Americans. This is a very small percentage when compared to the American population that stands at 309 million of which 299.6 do not consume raw milk. It is, however, encouraging to note that while raw milk sales increased by about 10 percent across the country, the sale of processed milk declined by approximately 2.5 percent for the year 2010 (United States Census Bureau, 2014). Overall, the consumption of milk and milk products has seen a steady decline. This decline has been attributed to competition from other beverages and alternative products, a declining proportion of children. Children are the largest consumer of milk and milk products in the United States. Currently, children under 5 years of age are 6.4% while those under 18 years of age are 23.5% of the population with the number with the number set to experience a steady decline (Wolf, 2006). Raw milk pricing has traditionally been linked a classification price plan that groups raw milk into different price classes based on the intended use. There are four milk classes; class I is the most expensive class and is raw milk intended direct human consumption; class II is raw milk intended for processing into frozen dessert, ice cream, sour cream and yoghurt products; class III is raw milk intended for making cheese; and class IV is raw milk intended for processing into milk powders and butter. Between January 2012 and April 2014 raw milk prices have increased by 34.2%, rising from $19 to $25.50 for every 1 lb. Between 2012 and 2013 the price increased by 8% while between 2013 and 2014 the price increased by 23.8 percent (Schnepf, 2013; United States Census Bureau, 2014). Raw milk is prone to short-term, seasonal and long-term price ebbs and flows. Short term price ebbs and flows can be experienced from day to day or during the day. Some of the major causes of short term changes in milk prices are; supply, demand and competition from alternative beverages including other milk products. Seasonal price ebbs and flows are experienced with changes in weather patterns as the year progresses. The seasonal weather changes determine milk production and therefore its availability. Long-term price changes are determined by demand and supply curves. Prices will always increase as supply reduces and demand increases. The reverse is also true (Silk, 2006). Raw milk production has decreased steadily from 12 million litres in 1970 to 9 million litres 1997, though milk production per cow improved for the same time period from 9700 pounds to 19000 pounds. Raw milk producing farms decreased from 650000 to 90000, and herd size increased from 20 to 100 cow heads for the same time period. All 50 American states produce raw milk with the top milk producers being California, Wisconsin, Idaho, New York, New Mexico, Michigan, Minnesota, Texas, Pennsylvania, and Washington. From the list of top milk producing states, it is clear that the largest milk producing states are to the North and West of the country. The shorter the marketing chain the higher the chance that the producers will get high returns and the consumers will spend less for more milk (Richman & Pepinski, 2008; Schnepf, 2013). Raw milk marketing in the USA follows either of two channels; from milk producer to consumer with no intermediaries; and from milk producer to milk hawker to consumer where the milk hawker is the only intermediary. The intermediary performs certain marketing functions like sourcing, retailing and transporting the raw milk. All the players in the chain expect high returns and maximum profits with the consumers expecting low prices for higher quality products while the producers expect higher prices. This clarifies why, sale of raw milk from milk producers directly to the consumers or through milk hawkers has been on the surge in the face of campaigns by AAP, AMA, CDC and FDA on the dangers associated with raw milk. Milk farmers may not automatically gain from the short marketing chain i.e. intermediaries may pay the same prices as what the milk farmers get from milk hawkers and consumers. Nevertheless, milk producers from time to time prefer selling raw milk directly to milk hawkers and consumers for the reason that they pay promptly. Another reason for the direct sale could be because of remoteness to other marketing channels. The principal drawback of direct raw milk sales to consumers is the total absence of quality control and possibility of adulteration. Quality control is conducted by regular inspection of production units, otherwise the produced raw milk is not tested (Durham, 2007). Raw milk marketing strategy This report has developed a new marketing campaign strategy for the marketing of raw milk, because of the negative countrywide campaign by AAP, AMA, CDC and FDA. The proposed marketing strategy focuses on lower prices, hygienic conditions employed in producing raw milk, its organic nature as cattle only consume fresh grass, and the fact that treating milk destroys some of the bacteria that are beneficial and changes nutrients composition in milk products. Direct marketing by farmers will also be beneficial as it allows for greater profitability to farmers and lower prices for consumers. The current legislation on raw milk production regulates the safety and cleanliness of raw milk production. They demand that risks of milk contamination be reduced during the production and packaging process (WSDA, 2011). Given that raw milk is a low involvement product, marketing will make use of low involvement media like radio and media to market the product and bring about a desired behaviour change. Raw milk will also be linked to daily household and personal needs, and promotional material will be presented as slice-of-life commercials (Kotler et al., 2008). This report also recognised the advantages of developing raw milk as a high involvement product by conducting effective brand management. Building a raw milk brand and relating it to the daily needs and benefits consumer segment, social class and lifestyle will facilitate the building of raw milk brand loyalty (Armstrong, 2009). The marketing strategy also identified raw milk as a low involvement/low thinking product in which the consumer expends little effort in thinking of the product and purchasing it. Purchases are resultant of habit such that the consumer is a habitual purchaser who reacts to need and only tends to purchase the brand that they are used to. It is, therefore, imperative that a raw milk brand loyalty be created and maintained with the promotional strategies focusing on the creation of brand recall. All advertisements will focus on entertainment orientation, raw milk facts and social appeal (Armstrong, 2009). Conclusion The aim of the marketing strategy it to inform consumers of the availability of raw milk and ensure that at least 75% of the American population is aware of raw milk within 8 months of the campaign beginning and create 40% raw milk brand awareness in organic food consumers in America by increasing the potential consumers’ knowledge of raw milk, offer facts on its benefits and address any potential risks or concerns raised in the market analysis (knowledge), create a positive attitude towards raw milk and ensure that at least 60% of raw milk consumers provide a positive review of the product (attitude change/improvement), and ensure that at least 40% of raw milk buyers return for the product in subsequent buys and 30% of organic food consumers buy raw milk consistently in the long run (behaviour change; Silk, 2006). The marketing strategy adopted in this report may prove to be challenging in the long run as the customers are driven by social pressures (given that raw milk is a low involvement product) thereby making brand loyalty short lived. References Armstrong, G. (2009). Marketing: An Introduction. New York: Prentice Hall. Dimitri, C. & Venezia, K. (2007). Retail and Consumer Aspects of the Organic Milk Market, Outlook Report LDP-M-155-01. Washington: United States Department of Agriculture. Dimitry, C. & Oberholtzer, L. (2009). Marketing US Organic Foods: Recent trends from farms to consumers. Washington: United States Department of Agriculture. Durham, A. (2007). The Impact of Environmental and Health Motivations on the Organic Share of Purchases. Agricultural and Resource Economics Review, 36(2), 304-320. Kotler, P., Armstrong, G., Wong, V. & Saunders, J. (2008). Principles of Marketing. New York: Prentice Hall. Richman, N. & Pepinski, K. (2008). The Organic Market in the Four Corners States: Opportunities for Growth. Fort Collins, Colorado: Colorado State University. Schnepf, R. (2013). Consumers and Food Price Inflation. Washington: Congressional Research Service. Silk, A. (2006). What is Marketing? New York: Harvard Business School Press. United States Census Bureau (2014). State and County Quick Facts. Retrieved 24th May, 2014, from http://quickfacts.census.gov/qfd/states/00000.html Wolf, T. (2006). Assessing Producer Options and Obstacles for Organic Agriculture, proceedings from Organic Agriculture: Innovations in Organic Marketing, Technology, and Research symposium, October 2-7, 2005. WSDA (2011). Retail Raw Milk: A Quick Guide for Producer-Processor. Washington: Washington State Department of Agriculture. Read More