Through checkoff, the nation’sdairy farmers and importers have the collective power to innovate, change and grow sales and trust. That was the message Tom Gallagher, CEO of Dairy Management Inc. (DMI) that manages the dairy checkoff program, gave to nearly 1,000 farmer and industry representatives at the joint annual meeting of the National Dairy Promotion and Research Board, National Milk Producers Federation and United Dairy Industry Association in Phoenix.

Other industry leaders also spoke at the conference. “While it’s difficult to imagine one person affecting demand for their product, through the checkoff they have a voice, a very loud voice that can dominate the marketplace," he said, noting the checkoff works to “multiply the checkoff’s investment with other people’s resources and money, to increase sales and build consumer trust, and ensure homes for increasing dairy production.”

Gallagher offered examples in global and domestic markets:

Export market: Studies by Rabobank and the Bain Company project that billions of potential dairy sales are available globally. This includes 1.3 billion pounds of potential sales of UHT milk in China by 2020.

Domestic market: “This is still where the vast majority of your product goes,” Gallagher said. “The domestic market is not a mature market – there are substantial areas for growth.” Closing that gap is a “great opportunity for the checkoff.

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“We do this by innovating so we can get people – whether in Singapore or Atlanta – the dairy products they want, where they want them and how they want them. Our goal is to stimulate the industry to turn potential sales into actual sales. Actual sales don’t just happen on their own.”

“I remember when we had to beg other countries to take our excess dairy products,” said Paul Rovey, Arizona dairy producer and chairman of Dairy Management Inc., which manages the national dairy checkoff program with funding by NDB and UDIA. “Today, one out of every seven tanker loads of milk is exported.”

For 2013, exports are on track to total $6.5 billion in sales – a 25-percent increase from 2012, and the fourth consecutive record year for U.S. dairy exports.

Furthermore, Neil Hoff, a Texas dairy producer and UDIA Chairman, explained how the checkoff is working to turn around the decades-long decline in fluid milk sales.

“At the direction of producer leaders, checkoff staff has met with nearly 200 executives from 50 companies that include fluid milk processors, dairy cooperatives, retailers and suppliers to identify the underlying factors to stabilize and grow fluid milk sales,” Hoff said. “Innovation is critical to fluid milk’s survival.”

Hoff said the checkoff and processors are putting muscle behind the effort.

“To date, the checkoff has invested $9 million to turn around sales and bring consumers back to the category. Building on our strategy to use other people’s financial and human resources, others have invested $81 million so far,” he added.

The opportunity is enormous as it’s anticipated that investments in the next five years will total hundreds of millions of dollars.

Representatives from Dairy Farmers of America and Shamrock Foods Co. joined Hoff in sharing how the industry is investing in manufacturing, packaging and marketing innovation to bring shoppers back to the dairy case.

Hoff reminded producers that progress will take time. “Our challenges didn’t occur overnight and solutions won’t be realized overnight,” he said. “This is a decades-long, industry-wide commitment to innovation.”

Sales increase when companies innovate product, packaging and messaging to consumers, he said. The checkoff’s role is to “get companies to do things they wouldn’t have done, or do them faster, and to use other people’s resources to meet dairy checkoff priorities.”

Examples of how the checkoff has turned potential sales into actual sales:

  • Pizza: Since the start of the partnership with Domino’s in 2009, 10 billion pounds of additional milk have moved through the pizza category.
  • Pizza globally: The checkoff’s work with Domino’s, Pizza Hut and Papa John’s has moved more than 100 million pounds of U.S. cheese into the Pacific Rim.
  • McDonald’s: The partnership with McDonald’s has become the model for other checkoff partnerships. DMI provides expert staff in food science, sustainability, nutrition and schools at McDonald’s headquarters, resulting in billions of pounds of additional sales.
  • Taco Bell: In 2013, its first year of partnership with DMI, Taco Bell estimates it will move 1.7 billion pounds of milk; it projects to use 2 billion pounds in 2014. Its parent company, Yum Brands, has asked DMI to look across all of its businesses to provide counsel on developing a strategic nutrition approach for its menus.
  • Food safety: The Innovation Center for U.S. Dairy, whose board includes 34 chairmen or CEOs in the dairy industry, has enlisted the support of 350 companies, including co-ops, processors and retailers. These companies dedicate more than 1,000 staff members and money and other resources to work on checkoff priorities.
  • USDA grants to farmers and universities: Earlier this year, as a result of the work of the Innovation Center’s Sustainability Council, USDA awarded $10 million to land grant universities to fund on-farm research programs in sustainability. This is in addition to $110 million in grants the checkoff has received for conservation improvements, research, renewable energy and improved efficiency, Gallagher said.
  • Nutrition and product research: In addition to a $13 million investment from DMI, the dairy checkoff has brought in another $75 million of funding from government grants, companies and countries.
  • Fuel Up to Play 60 (FUTP 60): In only three years, with the work of state and regional dairy checkoff staffs, FUTP 60 has reached a number of important milestones, including: 14 million students are eating healthier; 14 million students are more physically active; 1.5 million students are eating school breakfast at school that includes milk, cheese and yogurt; 85 percent of these students take fluid milk with their meal.

The industry also needs to be innovative in its consumer messaging, Gallagher said, using the power of all 50,000 farm-families working together.

“We have the potential as an industry, farmers and partners, to dominate the conversation,” he said. “Just as we turn potential sales into actual sales, we can turn uninformed consumers into dairy advocates.”

Although dairy has made great progress, dairy advocates need to do five things to achieve success in maintaining consumer confidence, Gallagher said:

  • Make your voice heard. Create an emotional connection with the consumer. Tell them about your families, your treatment of the land and the care of your animals.
  • Engage in real-time conversations. “By the time a story makes it to the newspapers or nightly news, consumers have already heard it, commented on it, shared it and moved on. We need to enter conversations as they are occurring.”
  • Capitalize on the trust. “Consumers no longer trust government. They no longer trust big business. They no longer trust media. They want to hear from friends and family. They want to hear from employees of companies. They want to hear from you as farmers. You are their most trusted source of information in this country today about where their food comes from.”
  • Choose consumer-friendly words. Say dairy “companies” instead of “processors” or “farmers” instead of “producers” or “caring for animals” instead of “animal welfare.”
  • Make all our voices heard. “All of us – the farmer, the driver who picks up your milk, the plant worker, and dairy company employees – can make a difference when we speak together as an industry.”

“When we do these five things, we won’t be just another voice in the marketplace – we will be the voice that dominates the marketplace,” Gallagher said. PD

—From Dairy Management Inc. news releases

PHOTO
Tom Gallagher, CEO of Dairy Management Inc. addresses dairy farmers recently in Phoenix. Photo courtesy of DMI.