The Marketing Channel of Dairy Products

Marketing Channel:

There are two types of marketing channels for dairy products. The first one is  Fluid milk channels and the second one is Processed dairy product channels

Fluid milk channels:

Fluid milk marketing methods have changed considerably over the years. In the 1930s, over 75 percent of all milk was home-delivered. Sometimes, we can see that milk is delivered seven days per week or it may be in quart-sized glass containers.

During the 2nd world war, as an economic measure, delivery was cut to every other day. In the 1950s, only 50 percent of milk was delivered to the home. That’s why producers introduce disposable containers. By the 1970s, 90 percent of all fluid milk was sold in grocery stores. Moreover, most milk containers were disposable. But a variety of containers was available. Fluid milk processing is characterized as an oligopolistic industry.

Most dairy companies perform their own distribution functions. These include milk delivery to grocery stores, restaurants, and institutions. Besides, There are also independent distributors. They pick up milk at the dairy plant dock for delivery to retailers, schools, or homes. Then packaged milk is largely an undifferentiated product. Therefore, dealers compete on the basis of price and services.

Processed dairy product channels:

Processed dairy products, such as cheese, butter, yogurt, sweets, ice cream, and chocolate, are less bulky and perishable than fluid milk. This means they can be produced near areas of concentrated milk production and shipped to distant markets. However, Processed dairy products can be stored for considerable periods of time.  This also influences their marketing and pricing patterns.

Processed dairy product marketing channels have undergone decentralization, like so many other food industries. The ice cream was made locally and distributed through ice cream parlors in earlier years. The chain store and supermarket revolutions, along with the growth of large, national dairy companies, altered these market channels and encouraged more direct sales. Today, supermarkets are the chief outlet for processed dairy products. And dairy processors ship directly to chain store warehouses or to individual retail stores.

A study of the milk marketing system in any country has shown that there are at least 7 different marketing channels as shown below:

Milk Marketing ChannelsNumber of intermediaries
Producer-milk hawker-consumer1
Producer-processor- retailer-consumer2
Producer-dairy co-operative -processor- retailer consumer3
Producer-milk transporter-processor – retailer-consumer3
Producer-milk trader-processor-retailer-consumer3

Pricing System:

There are two grades of firm milk- fluid Grade A and manufacturing Grade B. grade A milk meets strict sanitary standards and is eligible for sale to the consumer as beverage milk. Grade B milk meets somewhat lower standards, which are acceptable because it undergoes processing at higher temperatures than pasteurized fluid milk. This grading system makes a difference in price setting.

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