CEOs share what dairy checkoff dollars are doing for farmers
MADISON – “My job is real simple,” says Tom Gallagher, CEO of Dairy Management Inc., the national dairy promotion and research group that is funded by farmers’ checkoff dollars. “I have to get the industry to do things with your product after it leaves the farm that consumers want.”
Gallagher spoke to dairy farmers March 13 during an annual business conference organized by the Professional Dairy Producers of Wisconsin. He was joined in talking about how dairy checkoff dollars are used, by Chad Vincent, CEO of Dairy Farmers of Wisconsin.
Per capita consumption of milk in the United States has been declining steadily for decades, said Gallagher. The real growth has been in cheese and especially in cheese destined for making pizza and in cheese used in fast food outlets.
Since much of the growth in dairy sales comes in the form of pizza, Gallagher said checkoff funds have been helpful in convincing pizza purveyors to add more cheese to their offerings. He mentioned that Domino’s Pizza was using about 3 ½ ounces of cheese for its medium pizza until DMI helped them create a pizza with 6 ounces or more. At that point the pizza chain spent $50 million to advertise the new cheesier pizza, he said.
Food scientists from DMI have also “cracked the code” on cheese melting characteristics for Taco Bell and did over 2,000 test runs on cheese for Pizza Hut.
Dairy Management Inc., has also been influential in creating healthy pizzas for school lunch programs which are wildly popular with kids, he said.
Back when McDonalds was thinking about developing premium coffee drinks for their fast food restaurants, DMI offered to do product development for the company if they agreed they wouldn’t use soy “milk.” They agreed and the rest is café-au-lait history. McDonalds now uses 600 million pounds of milk in their coffee drinks.
One thing that happens when the dairy checkoff gets the ball rolling with one of these major players in the U.S. food industry is that others in that category notice and imitate it, he said.
“You have to plant a lot of trees and then others populate the forest.”
Higher fat dairy
Fat is back in the diets of U.S. consumers, Gallagher said, and products with fat are moving better now than low-fat products. The dairy checkoff has funded 58 studies showing the value of fat in human diets and human health. Those studies spawned dozens of others that reached the same conclusions – the old low-fat dietary guidelines were wrong.
As a result of all the studies, the top ten medical associations – including the American Medical Association and the American Dietetic Association -- agree that the low-fat guidelines needed to be changed.
"This is research on dietary guidelines that no one else was doing. We have to have the nutritional science,” Gallagher said.
However, whole milk is still not allowed in schools because the dietary guidelines need to be changed in order to get it back in the hands of school lunch programs.
Dairy Marketing Inc. as a branch of the national check-off funded program, is not allowed to do any lobbying to make changes in laws. It is also not involved in dairy exports. Back in 1995, he explained, the U.S. Dairy Export Council was formed to “create one voice for exports” for the dairy industry. Back then exports accounted for 3 percent of U.S. milk production and now it accounts for 15 percent, Gallagher said.
“If you are trying to export, you’d probably call USDEC to find out what the requirements are,” he said. “Without the checkoff, farmers are the tail end of the dog in the marketing chain. It’s the difference between consumer demand and unmet demand.”
When there is a downward trend, the mission of the checkoff organization is to fix it if we can, said Gallagher. “We try to stimulate them to do something different than whatever they’ve been doing.”
The industry needs product development specialists, he said, and that’s what DMI provides for various businesses that market food – as they did for McDonald’s and Domino’s and others.
Fluid milk consumption has been in a steady decline in the United States for decades. The “Got Milk?” advertising campaign, which was paid for by the California Milk Processors Board began 25 years ago. It was later licensed for use by other milk processors and dairy farmers. It became one of the most famous ad campaigns ever, was known around the world and won numerous awards yet failed to increase fluid milk consumption.
Gallagher said the spending on that campaign was at the level of Coca-Cola but milk consumption still dropped.
Dairy advertising has switched from television ads to a social media presence, he said, which is “so critical because consumers don’t want the one-way push” that is baked into TV commercials.
One area where fluid milk consumption can be affected comes with different packaging. Surveys show, he said, that fewer than 17 percent of U.S. consumers have one meal per week at home. Given that trend sales of milk in gallon jugs has plummeted. Still, many dairy companies are reluctant to make any changes in their packaging because it would require new investments and their margins are already tight.
Gallagher said that in a marketing trial, DMI worked with the Chicago-based grocery delivery service called Peapod, which serves customers in the Midwest and Northeast. The test marketing plan cost DMI about $13,000 and was able to show an increase in milk consumption of 4.5 percent among customers of the service.
That was a precursor to a meeting with Amazon as that company gets further into the grocery business. “We are pretty optimistic we’ll have a deal with Amazon,” he said.
“With fluid milk you have to be there or you’ll give up your space. I’m more optimistic about milk than I’ve ever been,” Gallagher added.
There are 10,000 schools where meal service has converted to round, single-serve milk containers. “We’re ripe for growth but we need to give them what they want.”
Chad Vincent, CEO of the state’s check-off funded Dairy Farmers of Wisconsin (the marketing and promotion group formerly known as the Wisconsin Milk Marketing Board) shared the session with Gallagher. In Wisconsin, “we’re all about the cheese,” he said.
As a state, Wisconsin makes 26 percent of U.S. cheese and almost half of the nation’s specialty cheese. Since 2012 specialty cheese has experienced 24 percent growth. “This is where the money is being made, where the growth is coming from,” he said.
Vincent said that he often hears from people who have relatives living in other regions who say they can’t find good, Wisconsin cheese. “I can assure you that 98 percent of the nation’s supermarkets carry Wisconsin cheese,” he said. The old cheese and arm logo for Wisconsin cheese has been revamped to say “Proudly Wisconsin Cheese.”
Awareness has increased 15 percent, he said, since the logo change was made.
The state promotion group also works with food purveyors like Culver’s restaurants, a chain that is now in 37 states because those partnerships help move Wisconsin cheese. The DFW also funds half of the budget of the Center for Dairy Research on the University of Wisconsin campus.
As with DMI, the DFW cannot participate in lobbying and has nothing to do with setting the price of milk. “We also do not make or deliver any products,” he said. “We are all about building trust and sales.”
The 90/90 rule
Ninety percent of Wisconsin’s milk gets made into cheese and 90 percent of that cheese goes out of state for sale. “That’s why we’re spending time and assets outside Wisconsin,” he said. “Here everyone already knows and loves cheese.”
That is also why farmers who fund DFW’s programs often comment that they don’t see their advertising.
Studies done by DFW show that consumers’ level of trust for the dairy industry is 58 percent – the same level of trust they said they have in tech companies. Trust in the health care system stood at 47 percent. Polling also showed that 74 percent of consumers believe that farmers provide a safe and nutritious product and 75 percent said they believe dairy is a safe product.
Vincent shared parts of video vignettes designed to tell farmers’ stories and showcase their love of the land and of their animals. The first, about a dairy farm woman who is also a mom and a marathon runner, got one million views in its first month. “If we’re not framing the story, then someone else will,” Vincent said.
Both the state and national checkoff organizations are involved in a program called Fuel Up to Play 60 with the National Football League and other partners. Vincent said in the last three years the program has involved 3 million students and 90 percent of the participants report eating and drinking more dairy products.