Amazon Fresh, other online grocery retailers change way dairy sells

Grace Connatser
Wisconsin State Farmer
With the COVID-19 pandemic changing the way people shop, it's also changing the way dairy products sell to consumers – for better or worse.

With the COVID-19 pandemic changing the way people shop, it's also changing the way dairy products sell to consumers – for better or worse.

While dairy products represent 10% of shelf space in a typical brick-and-mortar grocery store, they only represent 3% of shopping space when it comes to the digital versions of those stores. Many in the dairy industry have called grocery ecommerce spaces the "Wild West" because of its pay-to-play nature, since every pixel on the screen comes at a cost. Despite that cost, though, experts warn dairy brands should invest now rather than later if they want to reap the rewards.

Paul Zieminsky and Beau Hayden, executive vice president of global innovation partnerships and vice president of insights: sales & trust at Dairy Management, Inc., respectively, were guests on the Dairy Stream podcast produced by the Dairy Business Association July 21.

Zieminsky said every part of the digital space counts when it comes to dairy marketing and advertising to consumers because companies are clamoring over each other to own the space that ultimately reaches the eyes of every consumer shopping online.

Paul Zieminsky

"When you go online, if you're working on your phone, you've got a three by six inch phone. ... All that space is for sale online," Zieminsky said. "I tell people sometimes it's like the Wild West. You'll see a lot of startups, if they're well-funded ... try to buy the space up."

Online consumers also tend to spend 36% more on average than those shopping in physical stores, Hayden said, and when dairy is in the shopping basket, those consumers tend to spend a third more money than the average. That means dairy has serious purchasing power in the online retail space, and as more services like Amazon Fresh begin to realize that, the more they are looking to the dairy industry to promote those products online.

Beau Hayden

"(These are) products and ancillary adjacencies that typically Amazon Fresh would not be leveraging... allowing dairy to be the hero for Amazon Fresh to drive bigger baskets," Hayden said. "It's an extremely successful model, and we have all the support from the leadership team to keep chasing down these opportunities."

Zieminsky and Hayden said dairy brands should start working on telling their brand's story right now to take advantage of the way the "consumer journey" is evolving from linear to circular. There are more tools available now than ever to take advantage of those marketing opportunities in the digital space, they said. Amazon Fresh offers a brand storytelling toolkit for those who have a marketplace space on their website where the brand can share their background, values and other important information to connect with consumers.

Amazon Fresh has been especially receptive to marketing ideas from DMI, such as developing the "consumer decision tree" which maps out a consumer's thought process on which dairy products to buy from end to end. For instance, a family wanting to make homemade pizza for dinner will need to buy cheese, and Amazon's decision tree process can help them figure out what kind of cheese they need to get.

Overall, Zieminsky said the partnership has not only helped grow dairy product sales in ecommerce spaces, but it's also helped Amazon hit higher sales targets due to the extra spending dairy consumers typically do.

Online consumers also tend to spend 36% more on average than those shopping in physical stores, Hayden said, and when dairy is in the shopping basket, those consumers tend to spend a third more money than the average.

"(We told them) here's the real facts about dairy. Ninety-plus percent of households will move significant volume and consumers for you," Zieminsky said. "They put (dairy) very front and center ... because they realized it helps them hit their their sales targets."

Hayden said another important component of the partnership is scouring online spaces for new marketing promotion and activation ideas, like looking at Google search trends and social media channels. Recipe ideas that include dairy are especially effective for what he called "forward-moving action" among consumers (also known as action-oriented marketing) which gets consumers to make active choices that drive engagement with the product.

In general, technology will evolve to fit consumer's needs in the way of making things quicker and easier, especially when they're short for time, Zieminsky said. While many people still enjoy going to physical stores on weekends and getting their groceries, parents and other busy people just head straight for the phone or computer to place an order for their groceries when they're short on time. And because of that lack of time, paid-for marketing opportunities are more valuable than ever.

"We can do visual placements. We have digital coupons, those can be targeted or non-targeted. We can target those that actually have purchased alternative beverages, or those that are lapsed users of our own categories," Hayden said. "(For example) I bought 2% milk a month ago, I haven't been back – now I can target you with a promotion or a digital coupon. There's paid advertising both on the retailer site and off-site."