Arla UK's Cravendale milk brand has seen its strong growth stunted by cheaper, supermarket milk in recent weeks, reminding processors how easily private label could destabilise branded dairy growth in Britain.
Arla said supermarkets cutting retail milk prices were responsible for slower sales of its flagship milk brand, Cravendale, over the last eight weeks.
The news serves to remind branded dairy producers of the threat private label products continue to pose simply by being cheaper.
Arla said in a statement that it was reviewing ways to restore growth to Cravendale, which proved so popular early last year that demand exceeded supply in places. The group has already extended the range to include flavoured products, called 'Cravendale Hint Of…', and one-shot versions for consumers on-the-go.
Branded dairy sales in general have soared in the UK over the last couple of years, thanks to greater investment from the top processors as they attempt to cut their reliance on less profitable commodity markets.
The most recent figures from the country's Milk Development Council show that branded milk sales grew 23 per cent between 2003 and 2004, while branded cheese went up 11 per cent.
The rise has helped the major dairy processors to protect margins from intense cost pressures.
However, as the number of branded products on the market has grown, processors have had to fight harder to get their products noticed.
For example, Arla rival Robert Wiseman will this summer launch a £2m advert campaign to promote its "The One" fresh milk brand.
Competition is particularly fierce in the milk market, where household purchases fell by around 900m litres between 1995 and 2004, and where processors must also battle against the traditional consumer view of milk as a staple, commodity purchase.
Cravendale's loss of momentum following price cuts on private label milk suggest price is still a dominant factor for consumers when buying milk.
Private label milk, albeit supplied by Arla, Wiseman and others, still dominates the UK market.
And, to make matters harder for brands, private label has also begun eating into their added value territory.
Top supermarkets have begun to develop new, premium private label categories. Tesco, for example, recently launched a cholesterol-lowering milk called Reducol to target growing consumer demand for heart health foods.