Dairy fight gears up with Hershey license

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Morningstar Foods hopes Hershey's name can help boost its presence in the thriving flavored milk category.

Through a pending licensing agreement with Hershey Foods Corp., Morningstar, a unit of the second-largest dairy processor and distributor Suiza Foods, plans to kick off a line of chocolate and strawberry-flavored milk under the Hershey's moniker Oct. 27. The launch is intended to help Suiza battle Nestle USA's Nesquik, the branded leader in the $617 million flavored milk segment, and build Suiza's share of the growing category beyond its current 1.6% stake.


In the past, Hershey has licensed its name to local dairies to distribute Hershey's-branded chocolate and strawberry milk. But the products haven't been nationally distributed, nor has the company concentrated on the area in the past few years, said Dorothy Pharmer, licensing manager at Hershey. The soon-to-be-final agreement with Morningstar would leverage Suiza's national distribution network to pit Hershey against Nestle in the booming category, which grew 14.2% for the 52 weeks ended May 21, according to Information Resources Inc.

Morningstar initially plans to launch the low-fat and non-fat milk in quart and half-gallon cartons that feature the Hershey's name boldly across the carton vertically with a graphic of splashing chocolate or strawberry milk along the bottom, according to a Midwest retail executive. Morningstar will support the line with TV and print ads, likely from agency of record DDB Worldwide, Dallas, beginning in January, the retail executive said.

Down the road, Morningstar plans to launch the flavored varieties in pints, the size Nestle has concentrated on to build its ready-to-drink version of Nesquik. Last year, Nestle spent $1.5 million in measured media on Nesquik -- renamed from Quik in March '99 -- according to Competitive Media Reporting.

Nestle recently converted its Nesquik single-serve offerings, which come in chocolate, strawberry and new banana flavors, from traditional cardboard cartons to the resealable plastic containers popularized by leading dairy player Dean Foods, which introduced its por-table Milk Chugs three years ago.

Dean has a 12.6% share of flavored milk, spread among its various regional brands, and recently acquired the fluid milk operations of Midwest dairy Land O'Lakes, which had developed its own portable, resealable milk packaging under the Grip 'N Go name. The latest flavors for Grip 'N Go include Chocolate Shake and Grippacino! Chocolate Shake, a blend of vienna roast coffee and 99% fat-free milk.


Suiza, like rival Dean Foods, is trying to decommoditize the milk category and compete in the larger beverage universe. In February, Suiza expanded a test of value-added milk products Kidsmilk, Fitmilk and Lifemilk (AA, Jan. 10), which are supported by an unprecedented $3 million TV, radio and outdoor campaign from DDB, Dallas. It also introduced a line of soy milk under the Sun Soy name. Suiza's flavored Flav-O-Rich milk grew 65.6% to $9.7 million in sales, according to IRI, while Nestle owns a 12.7% share of flavored milk with sales of $77 million.

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