Producing basic milk is becoming less profitable for dairies, estimates the Council of Quebec Dairy Industrialists (CILQ). Meanwhile, the retail space devoted to this product – whose minimum and maximum price is regulated – is decreasing in favor of value-added milk which allows for a slightly better profit margin. And this trend could continue.
“We all know that basic milk [que l’on retrouve dans des contenants en carton sans bouchon en plastique et en sac]it’s a market that has no margins,” says Charles Langlois, President and CEO of the CILQ.
Result: although retailers made a commitment a few years ago with the Régie des marchés Agricoles et Alimentaires du Québec (RMAAQ) – which sets the floor price and the ceiling price for this product – to offer basic milk to allow consumers to have an affordable choice, this product is losing ground in the fridges of supermarkets and convenience stores, note the experts interviewed.
This decrease in space was also confirmed by Jean-François Lapointe, dairy product category manager for the Pasquier food markets, whose two stores are located in Saint-Jean-sur-Richelieu and Delson.
The space occupied by basic milk is less important than before, he said on the phone, as he stood in front of the refrigerators of dairy products at the grocery store in Saint-Jean-sur- Richelieu.
Basic milk takes up about 25% of the total space, premium milk [avec bouchon de plastique, finement filtré] represents 40%, and the other products [sans lactose, biologiques]the rest of the counter.
Jean-François Lapointe, dairy products category manager for Pasquier food markets
In dollar terms, the retailer recorded a 19.6% increase in base milk sales over the past year, compared to a 30.6% increase for premium milk and 21.3% for organic milks and lactose free.
“The reality in food is that shelves and fridges are finite spaces. Each row of value-added milk that we bring in is necessarily a row of regular milk that we remove,” says Pascal Thériault, agronomist and economist at McGill University.
“We drink a lot less milk than we used to drink. It is to the advantage of the consumer and the retailer to have value-added milks because we are talking about milks that have much longer shelf lives. »
As for the retailers’ margin on value-added milk, Mr. Thériault believes that it cannot be “infinite”, in particular because of the competition. At Pasquier, Mr. Lapointe speaks of a “slight margin”.
“When we sell 4 liters of basic milk at the floor price, it’s not complicated, we make 0% margin on it,” he admits. By searching the various retailers’ websites, a 4-litre bag of basic milk (2%) currently sells for $7.49, compared to $8.19 for finely filtered milk.
Less and less space?
If retailers and dairy manufacturers assure that they do not want to “give up” the basic milk market, the space it occupies in the fridge could however continue to decrease, according to the CILQ. The group, which notably represents dairies and other processors such as cheese factories, does not hide its “surprise” and its dissatisfaction following the decision of the RMAAQ rendered last week stipulating in particular that consumers will pay for their liter of milk at 2% fat two hundred more from 1er February 2023. This increase, of approximately 1%, is clearly insufficient, according to Mr. Langlois. “The message we’re getting is that our increases in production costs aren’t significant,” he says bluntly. It can have consequences. »
The lack of recognition of dairies’ costs is likely to make this product even less profitable, which could result in reducing its availability on the shelves in favor of value-added milks.
Charles Langlois, President and CEO of the Quebec Dairy Industrial Council
Last week, during a public meeting of the RMAAQ dealing with requests for adjustment of the retail price of fluid milk from 1er February 2023, the Association of convenience store merchants and grocers of Quebec had suggested that some of its members could stop selling the traditional milk carton if the margins continued to melt like snow in the sun.