I am British but I live in the US now. Each morning, whilst I was growing up, I would be woken by the sound of a 'milk float' - an electric truck that milkman use in the UK. It is a very distictive sound. I have been in the US for many years and on a recent trip back to the UK I heard that familiar sound again. It suddenly occured to me - I have never heard that sound in the US or even heard of a milkman. What is so different between the US and the UK where large distribution firms can make a profit delivering one product (although I hear they now deliver fruit juice and eggs aswell)in the UK and no firm has exploited that in the US?
Milk is a very important commodity in both economies. Looking at the "got milk?" campaign run in the USA (www.whymilk.com) and the "3 a day" campaign in the UK (www.milk.co.uk) leaves no doubt that both countries value milk's nutritional benefits. But why is there one huge distribution choice that is so different?
How can it be economically viable that the delivery of one item each day (at a cost of $1 dollar per bottle) add up? There is only so much milk the average houshold can consume. But it is viable because this has been happening in the UK for over 50 years...no corporation would operate at a loss for that long. Are the milk consumption habits different in the UK? Does the milk have to be fresh every morning and waiting on the doorstep for consumption right away? I don't think so. Supermarkets in the UK sell milk in various sized containers - just like in the USA. Is it just tradition? Is the UK more nostalgic about its industries than the US and reluctant not to let go of the familiar sound in the mornings?
Having lived in both places I tend to think the prolonged use of the milkman in the UK is based on nostalgia. Could they survive without door to door milk delivery - of course. In the USA, a service that you could live without (like this one) would either die or not be a success in the first place. The US consumer is driven by "what makes sense"...and the milkman just doesn't.
There is a lesson here for marketers. Customer are not only loyal to brands but also to traditions and choices. Think about the series "Cheers" - its always the same 6 people sitting at the bar. They could get the same beer elsewhere but they like the tradition in this distribution method. This is exactly the same for milk deliveries in the UK and just like Woody Harrelson behind the bar - in the UK they also have their favourite Milkmen (www.milkdeliveries.co.uk/doorstep) - see milkman of the year 2005.
Chris
Chris,
I believe you may be showing your age as milkmen are increasingly rare - they maybe a few kept on in the same way that some brewries still keep shire horses and drays for the delivery of beer.
Does the answer not lie to a certain extent in the governmental control of much of the UK's food production dating from WW2?
With production and distribution being controlled nationwide as well as the price / quantities that farmers could expect - this distorted the normal market and these regulations stayed in place until comparatively recently.
You may also wish to consider the rise of tetrapak rather than the requirements to deliver milk in heavy bottles. Rising living standards also have meant that many people - even in England can now afford a refridgerator unit that would mean that milk no longer needs to be delivered daily.
The reform of the milk marketing arrangements in the UK came about because both the Government and the Milk Marketing Boards (MMBs) had independently come to the conclusion that the Milk Marketing Schemes were outmoded and needed to be replaced. These decisions were made in the light of market developments, including the growth of consumer demand for a widening range of milk products and the intensification of competition from imports. Proposals were, therefore put forward by the MMBs to move to a more diverse and competitive marketing structure within which producers and processors alike would be able to take advantage of normal commercial freedoms (i.e. sell/buy milk and milk products to/from whoever they choose). The MMB was abolished following a public consultation exercise in October 1994.
Brokering co-operatives
Milk Marque was established in November 1994 when the statutory monopoly conferred on four Milk Marketing Boards for the collection and sale of milk in Great Britain ended. Milk Marque was the successor to the England and Wales MMB (EWMMB). Following the Monopolies and Mergers Commission Report, Milk Marque had used its monopoly position to increase milk prices over and above what they would have been in a freely competitive market. The rules applying to monopolies had, therefore, been broken. It should be stressed that the Government accepted the findings of the MMC Report, but not the recommendation that the Milk Marque should be broken up. Rather, Milk Marque were given the option to reform their selling system. In the event, Milk Marque voluntarily chose to split themselves into three roughly equal sized successor organisations.
Resignation Campaign
The campaign began in 2000, to try and get producers who sold their milk to processing companies to switch to one of the farmer owned co-operatives. At this time approximately 50% of producers were under contract to a processing company and 50% sold their milk to farmer owned co-ops. Co-ops enable producers sell to which of the co-ops gave them the best price, and they do not have to sell their milk only to one co-op. The Dairy companies reaction to this was non aggressive, they stated that prices were generally higher with themselves but if producers wished to leave they were free to do so. There are no figures available at present to suggest how many did leave the processing companies, but it is thought that a large number have decided to use the farmer co-operatives.
Where can I find information on the MMB/RMMB Milk Marketing Boards? (History)
The Milk Marketing Boards (MMBs) were originally conceived in the 1930s with the aim of increasing and maintaining producer incomes; these incomes had been put under pressure as dairy companies expanded and became more powerful. The UK Government's response to these problems was the first Agriculture Act passed in 1930, which provided the legal basis for the creation of producer marketing organisations, if producers of any farm commodities so wished. In the dairy sector, the National Farmers Union drew up a Milk Marketing Scheme for England and Wales in 1933. Further Schemes followed in Scotland in 1933 and 1934, (founding the Scottish MMB, the North of Scotland MMB and the Aberdeen and District MMB), and Northern Ireland in 1955 (founding the Northern Ireland MB). The basis of the Milk Marketing Schemes was thus to provide for orderly marketing of milk and an organised representation of producer interests to balance that of the dairy companies. The Boards became responsible for all the milk produced by dairy farmers, selling it on their behalf and pooling the returns in order to provide equal returns according to the proportion of milk consigned by each producer. The Milk Boards have been described as essentially dairy farmer co-operatives with legally constituted powers. Although the description of a co-operative implies an organisation where members join voluntarily, this was not the case with the MMBs. In the case of MMBs, all milk producers had to be registered with the MMBs apart from a few exceptions, and sell them their milk. The Boards for their part were required to buy milk from these producers and find a market for the milk offered to them. This means that Boards acted not only as sole purchasers but also as monopoly suppliers of milk to the dairies in their respective areas. Under the Milk Marketing Scheme the price of milk had to be negotiated and agreed by the MMB (representing dairy farmers) and the Dairy Trade Federation (representing the dairy companies). One of the main aims of the Scheme was to enable the MMB on behalf of the thousands of individual dairy farmers to negotiate as a single body with the small number of powerful buyers, thus creating a fair balance of competition between the two groups. The price of milk had been based on the principal of "end-use". In essence, the price of raw milk varied according to the product for which it was to be used: its "end use". The returns from the sale of milk were then pooled by the MMB to pay dairy farmers. The system had generally worked well to the benefit of dairy farmers, industry and consumers. But latterly the customers of the marketing boards had become more and more concerned about pricing policy and its relationship to competition law. The reform of the milk marketing arrangements in the UK came about because both the Government and the Milk Marketing Boards had independently come to the conclusion that the Milk Marketing Schemes were outmoded and needed to be replaced. These decisions were made in the light of market developments, including the growth of consumer demand for a widening range of milk products and the intensification of competition from imports. Proposals were, therefore put forward by the MMBs to move to a more diverse and competitive marketing structure within which producers and processors alike would be able to take advantage of normal commercial freedoms (i.e. sell/buy milk and milk products to/from whoever they choose). The MMB was abolished following a public consultation exercise in October 1994.
Why does the Government not intervene in the price of milk?
The price of milk is a commercial matter, for negotiation between the parties concerned.
The price of milk in supermarkets
The pricing of goods in any UK supermarket is a matter for the commercial judgement of the supermarket(s) concerned. However, you may wish to be made aware of the Competition Commission's report on supermarkets, this can be found on their website click here. The Commission concluded that the industry is broadly competitive and that overall excessive prices are not being charged nor excessive profits earned. One area of concern was, nevertheless, a number of practices engaged in by the larger supermarkets, which, because of their buyer power, adversely affected the competitiveness of some of their suppliers, including farmers. The Commission recommended that a Code of Practice should be established which would put relations between supermarkets and their suppliers on a clearer and more predictable basis and that it be binding on the larger supermarkets. The Secretary of State for Trade and Industry has now announced her backing for the Code and the four leading supermarket chains (Asda, Safeway, Sainsbury and Tesco) have been asked to commit themselves to abide by it.
Where can I find information on the MDC?
Please click here to go to the MDC website or click here for MDC page
Will doorstep deliveries be discontinued?
The Government recognises the importance of this service, particularly in rural areas, and is keen to see milk deliveries continue. Although the proportion of milk delivered to the doorstep has declined in recent years as consumers have decided to purchase their milk elsewhere the rate of decrease has now fallen. The future of the service, particularly in rural areas, would seem to lie in deliveries not only of milk, but also of a number of other products at the same time. The government is confident that the commercial companies and individual franchisees who deliver milk to our doorsteps are doing everything that can be done to protect the future of this service.
Posted by: Gavin | January 23, 2006 at 12:57 PM
Chris,
I believe you may be showing your age as milkmen are increasingly rare - they maybe a few kept on in the same way that some brewries still keep shire horses and drays for the delivery of beer.
Does the answer not lie to a certain extent in the governmental control of much of the UK's food production dating from WW2?
With production and distribution being controlled nationwide as well as the price / quantities that farmers could expect - this distorted the normal market and these regulations stayed in place until comparatively recently.
You may also wish to consider the rise of tetrapak rather than the requirements to deliver milk in heavy bottles. Rising living standards also have meant that many people - even in England can now afford a refridgerator unit that would mean that milk no longer needs to be delivered daily.
The reform of the milk marketing arrangements in the UK came about because both the Government and the Milk Marketing Boards (MMBs) had independently come to the conclusion that the Milk Marketing Schemes were outmoded and needed to be replaced. These decisions were made in the light of market developments, including the growth of consumer demand for a widening range of milk products and the intensification of competition from imports. Proposals were, therefore put forward by the MMBs to move to a more diverse and competitive marketing structure within which producers and processors alike would be able to take advantage of normal commercial freedoms (i.e. sell/buy milk and milk products to/from whoever they choose). The MMB was abolished following a public consultation exercise in October 1994.
Brokering co-operatives
Milk Marque was established in November 1994 when the statutory monopoly conferred on four Milk Marketing Boards for the collection and sale of milk in Great Britain ended. Milk Marque was the successor to the England and Wales MMB (EWMMB). Following the Monopolies and Mergers Commission Report, Milk Marque had used its monopoly position to increase milk prices over and above what they would have been in a freely competitive market. The rules applying to monopolies had, therefore, been broken. It should be stressed that the Government accepted the findings of the MMC Report, but not the recommendation that the Milk Marque should be broken up. Rather, Milk Marque were given the option to reform their selling system. In the event, Milk Marque voluntarily chose to split themselves into three roughly equal sized successor organisations.
Resignation Campaign
The campaign began in 2000, to try and get producers who sold their milk to processing companies to switch to one of the farmer owned co-operatives. At this time approximately 50% of producers were under contract to a processing company and 50% sold their milk to farmer owned co-ops. Co-ops enable producers sell to which of the co-ops gave them the best price, and they do not have to sell their milk only to one co-op. The Dairy companies reaction to this was non aggressive, they stated that prices were generally higher with themselves but if producers wished to leave they were free to do so. There are no figures available at present to suggest how many did leave the processing companies, but it is thought that a large number have decided to use the farmer co-operatives.
Where can I find information on the MMB/RMMB Milk Marketing Boards? (History)
The Milk Marketing Boards (MMBs) were originally conceived in the 1930s with the aim of increasing and maintaining producer incomes; these incomes had been put under pressure as dairy companies expanded and became more powerful. The UK Government's response to these problems was the first Agriculture Act passed in 1930, which provided the legal basis for the creation of producer marketing organisations, if producers of any farm commodities so wished. In the dairy sector, the National Farmers Union drew up a Milk Marketing Scheme for England and Wales in 1933. Further Schemes followed in Scotland in 1933 and 1934, (founding the Scottish MMB, the North of Scotland MMB and the Aberdeen and District MMB), and Northern Ireland in 1955 (founding the Northern Ireland MB). The basis of the Milk Marketing Schemes was thus to provide for orderly marketing of milk and an organised representation of producer interests to balance that of the dairy companies. The Boards became responsible for all the milk produced by dairy farmers, selling it on their behalf and pooling the returns in order to provide equal returns according to the proportion of milk consigned by each producer. The Milk Boards have been described as essentially dairy farmer co-operatives with legally constituted powers. Although the description of a co-operative implies an organisation where members join voluntarily, this was not the case with the MMBs. In the case of MMBs, all milk producers had to be registered with the MMBs apart from a few exceptions, and sell them their milk. The Boards for their part were required to buy milk from these producers and find a market for the milk offered to them. This means that Boards acted not only as sole purchasers but also as monopoly suppliers of milk to the dairies in their respective areas. Under the Milk Marketing Scheme the price of milk had to be negotiated and agreed by the MMB (representing dairy farmers) and the Dairy Trade Federation (representing the dairy companies). One of the main aims of the Scheme was to enable the MMB on behalf of the thousands of individual dairy farmers to negotiate as a single body with the small number of powerful buyers, thus creating a fair balance of competition between the two groups. The price of milk had been based on the principal of "end-use". In essence, the price of raw milk varied according to the product for which it was to be used: its "end use". The returns from the sale of milk were then pooled by the MMB to pay dairy farmers. The system had generally worked well to the benefit of dairy farmers, industry and consumers. But latterly the customers of the marketing boards had become more and more concerned about pricing policy and its relationship to competition law. The reform of the milk marketing arrangements in the UK came about because both the Government and the Milk Marketing Boards had independently come to the conclusion that the Milk Marketing Schemes were outmoded and needed to be replaced. These decisions were made in the light of market developments, including the growth of consumer demand for a widening range of milk products and the intensification of competition from imports. Proposals were, therefore put forward by the MMBs to move to a more diverse and competitive marketing structure within which producers and processors alike would be able to take advantage of normal commercial freedoms (i.e. sell/buy milk and milk products to/from whoever they choose). The MMB was abolished following a public consultation exercise in October 1994.
Why does the Government not intervene in the price of milk?
The price of milk is a commercial matter, for negotiation between the parties concerned.
The price of milk in supermarkets
The pricing of goods in any UK supermarket is a matter for the commercial judgement of the supermarket(s) concerned. However, you may wish to be made aware of the Competition Commission's report on supermarkets, this can be found on their website click here. The Commission concluded that the industry is broadly competitive and that overall excessive prices are not being charged nor excessive profits earned. One area of concern was, nevertheless, a number of practices engaged in by the larger supermarkets, which, because of their buyer power, adversely affected the competitiveness of some of their suppliers, including farmers. The Commission recommended that a Code of Practice should be established which would put relations between supermarkets and their suppliers on a clearer and more predictable basis and that it be binding on the larger supermarkets. The Secretary of State for Trade and Industry has now announced her backing for the Code and the four leading supermarket chains (Asda, Safeway, Sainsbury and Tesco) have been asked to commit themselves to abide by it.
Where can I find information on the MDC?
Please click here to go to the MDC website or click here for MDC page
Will doorstep deliveries be discontinued?
The Government recognises the importance of this service, particularly in rural areas, and is keen to see milk deliveries continue. Although the proportion of milk delivered to the doorstep has declined in recent years as consumers have decided to purchase their milk elsewhere the rate of decrease has now fallen. The future of the service, particularly in rural areas, would seem to lie in deliveries not only of milk, but also of a number of other products at the same time. The government is confident that the commercial companies and individual franchisees who deliver milk to our doorsteps are doing everything that can be done to protect the future of this service.
Posted by: Gavin | January 23, 2006 at 12:57 PM
The movie Charlie and the Chocolate Factory is one of the worst movies I have ever seen and yet, it comes to my mind as I read what you guys have written. Charlie’s father worked in a factory but was replaced by a robot who could do the job faster and at a cheaper cost. Charlie’s grandfather worked in Wonka’s chocolate factory until one day he was replaced by more efficient and discreet humpalumpas.
As technology enables improvement, efficiency and efficacy, industries find faster and cheaper ways to meet consumers’ needs in consideration of the technology, infrastructure, and labor available to them in their markets. The UK is a country of traditions; the US is a country of habits.
Thus, what makes sense in England might not make sense in the United States. Despite our urge to view everything under a global perspective, the truth is that in the same way a product might undergo a process of glocalization, distribution systems need to adapt specifically to the market they are fulfilling as well.
Moreover, there is no common system for establishing retail margins and they vary considerably between countries and even between localities within the same country. Two similar distribution systems may work at different costs as a result of conditions directly related to the system itself.
Let us not forget the obvious: size of territories, population, people/area concentration, consumption habits and variability, infrastructure, localization of plants, road infrastructure, transportation costs, packaging. There are many factors to be considered in the distribution of milk.
The milkman, as well as the man who came to pick up our garbage instead of us having to go to the dumpster, are reminiscences of older times when distribution was a service more than a cost. Unfortunately, traditions can only survive if they can adapt to the needs of modern life.
Why would we want a milkman bringing us three daily bottles of milk if we do not want milk everyday? Isn’t it easier to go to the supermarket or, just go on-line Harris-Teeter.com and get them to deliver milk to me and while they are at it, vegetables, meat and soda?
In Charlie and the Chocolate factory, Charlie’s father is re-hired by the company who dumps him but now with a different role, to fix the robot that replaced him. Under this scenario, Mr. Milkman might still be an asset for a milk distributing company, if the market has the necessary conditions to support it. At the end of the day, with or without Mr. Milkman, people in the US and in the UK will still drink milk. How they buy it is the least relevant factor in a drink-milk campaign. After all, who knows? In the future we might be opening a pre-installed faucet to pour ourselves a glass of fresh, prepaid milk!
Posted by: Gabriela Gonzalez-Pineda | February 06, 2006 at 03:21 PM