Disruptive Distribution Case Study: Dean’s Milk Leaves the Porch

Some folks still remember milkmen and the glass bottles they delivered door to door. For about fifty years in much of the U.S., your milk came to you. Dean’s changed all that. Around 1930, Dean’s, one tiny rural milk processor among thousands across the country, broke from the pack and chose to distribute its milk indirectly, through grocers.

Over the years, Dean’s had learned how grocers operated, what grocers and consumers needed, and what they liked or didn’t. Dean’s decided to back a new form of packaging, the paper carton. Cartons were light. They didn’t break or need to be recycled, washed, or handled with the same care as glass. They could be folded for volume shipment and storage. Cartons changed the economics of milk distribution fundamentally. And they moved milk delivery from the customer’s back door to the refrigerated closet of any grocer with the wherewithal to put one in. Inexpensive milk in cartons, in other words, became the booster rocket for the launch of the supermarket in the 1950s, a staple that was obtainable in no other outlet.

In itself, the new carton packaging wasn’t enough to accomplish that. For twenty years, Dean’s patiently taught the safety and convenience of cartons to consumers, who almost to a woman distrusted the flimsy paper boxes. By the time supermarket chains were beginning to their extended surge, Dean’s had won consumers over. And only Dean’s was ready to serve them through the growing chain stores. Dean’s then leveraged its inside track with the supers to drive down processing and distribution costs, meanwhile buying up regional milk processors one at a time. Even as late as 1980, no producer controlled more than a few percent of the liquid milk market. Today, Dean’s is the largest liquid milk producer in the world, with a 35-40% share in the U.S.