How data analytics, supply chain ‘ecosystems’ fit DMI’s global strategy for U.S. Dairy

DMI CEO Tom Gallagher shared this slide with August ‘open mic’ call participants as consumer data confirm a current focuse on health and economics — even though global supply chain transformation is pursued on an accelerating scale.

By Sherry Bunting, excerpts summarized from Farmshine, August 21 and 28, 2020

CHICAGO, Ill. — Early in the pandemic, consumers were initially focused on health drivers in food purchases and then began moving toward economics. But with the resurgence of Covid cases across the country, data insights show “consumers are now back to a focus on health again,” said Tom Gallagher, CEO of Dairy Management Inc. (DMI).

Consumer insights and purchasing patterns pre- and post-Covid were discussed in an early August DMI ‘open mic’ call with Gallagher, as well as DMI president Barb O’Brien, board chair Marilyn Hershey and Inmar Intelligence CEO David Mounts.

Health and value were expressed as big opportunities for dairy. But the underlying message of food transformation was also clear in the discussion of how consumer data analytics and supply chain ‘ecosystems’ are integrated and streamlined to fit the dairy checkoff’s global strategy for the future of ‘U.S. Dairy’ — including new product innovation and the relationship DMI now has as Amazon’s dairy ‘category captain’.

Gallagher sent graphs indicating the percentage of change in fluid milk sales rising during the Coronavirus pandemic corresponds with increased sales of cereal.

“We think this is important, showing there are multiple reasons — no one reason why — during ‘panic buying’ consumers bought what they bought,” he said. “Cereal and milk have historically been tied. Cereal has been on a decline for years.”

Gallagher noted that as more people eat breakfast at home, new opportunities are presented beyond cereal and milk.

“This is an opportunity for us for innovation and marketing,” said Gallagher. “One of the reasons we lost fluid milk consumers is that their spending away from home was a big percentage on breakfast, and the white gallon is not suited to that.”

He said new breakfast ideas are coming out. For example, Kraft is getting into the breakfast game with new “breakfast mac and cheese.”

Gallagher also stressed a statistic he looks at, which is the “velocity” of money.

“This is simply the rate of spending and saving. Americans are at the lowest rate of spending since the 1950s and 60s,” he said, explaining that savings rates show a second reason for opportunity as Americans are on more of a savings trend since the pandemic.

“If we can get into the ‘right product’ and the ‘right positioning’ and the ‘right marketing’, people will want our product, and we’ve got that, but innovation needs to be done too,” said Gallagher. “As the unemployment rates ease, the money will be there for people to pay a little more (for innovative products).”

Dairy positioning for in-home meals is something the industry has not seen for decades, said Gallagher. He explained that before Covid, 10% of consumers were eating at home 90% of the time. After Covid, 50% of consumers were eating at home 90% of the time. More people eating at home — even after Covid — presents “huge new opportunities for us,” he said.

E-commerce was highlighted as one of those opportunities.

“Change is happening in an ‘omnichanneled’ world,” said David Mounts of Inmar Intelligence. He described media networks, digital networks for in-store, curbside, delivery and online, and how Amazon is integrating all of these as not just a retailer, but also a merchant, a media company and data company in the ‘strike zone’ of everyday business.

“We saw this opportunity a few years back and did a program on home delivery that was extremely successful,” Gallagher reported.

O’Brien noted that this gave DMI the experience to work with Amazon.

“E-commerce will change the supply chain,” she said. “As of June 14, internet purchasing surged 70%, so we are pleased we anticipated that growth, and now we see Covid has accelerated it.”

DMI has been working with Amazon for two years. Then, a year ago, Amazon named DMI as dairy “category captain.” Since then, DMI has been helping Amazon “navigate the whole dairy category with dairy 101 for their entire grocery leadership team,” O’Brien explained. “From the beginning, we were able to position ourselves as category experts and brand agnostic. We gave them a deep dive into each sector, and in the end, demonstrated the dairy category as a driver.”

As category captain, DMI will work deeper into Amazon’s e-commerce business across 31 sales regions to identify sources and tie consumer shopping experiences online through a promotion portal that puts it right at the internet point of purchase and can measure consumer response.

DMI will work with MilkPEP and other partners on this, she said.

“It was important to first prove the size and value of dairy to Amazon, where placing their investments,” said O’Brien. “Because competition is stiff in plant-based allocation, we now have been able to come back with data, with proof of what dairy can do for their business, so we think opportunities will continue.”

Mounts also highlighted e-commerce.

“This is a time for digital transformation to accelerate in the retail environment,” he said. “The entire retail industry got caught under-invested in digital readiness for what happened in this pandemic. Now massive resources across the retail industry are in catch-up mode.”

‘Real time’ consumer shopping data during the pandemic was also shared by David Mounts of InMar Analytics during the recent ‘open mic’ call. Slide from presentation

Inmar’s analytics show consumer behavior has changed to fewer trips to the store, buying more at each trip with total retail sales up 10% over year ago and some dairy categories up by more than that. Retail sales of fluid milk have settled in at 4 to 5% over year ago and butter up 46%, for example.

Total supermarket baskets are up 15% per trip, and the number of trips are down 6% right through end of July, “so this is real time data,” said Mounts.

Online shopping spiked 6 times higher than year ago in March and is up 2 to 3 times over year ago for the year to date.

Mounts said the number of people who have registered to be online grocery shoppers is increasing at rates of 100%, with the majority seeking value and savings as priorities.

“Consumers are also thinking about in-home health and wellness, ways to boost immunity and stay healthy,” said Mounts.

“Dairy is such a positive for consumers in retail. It is a core part of strong at-home food sales,” Mounts observed. “Dairy is an anchor for at-home meal planning and stock-up trips, and its always part of every shopping list.

“That’s where we think the opportunity exists — right now — as consumers shift from list-buying to ‘solutioning,’ and the occasion now is one that requires planning and thoughtfulness to have more value,” he explained.

Meanwhile, as retailers have been transitioning through their supply issues, “they are understanding new in-home categories and assortments to be more dynamic,” he said. They are being more data-driven to be more agile.”

At the same time, he said “manufacturers are focusing on their core — their most productive products — and are streamlining and trimming.”

These trends set the stage for a more centralized, streamlined and globalized dairy supply chain at a time when consumers are showing they want to be more – not less – connected to where their food comes from and to know more about the nutritional benefits.

“Consumers will deal with fewer players,” said Mounts, emphasizing the point that, “The mindset of the consumer, retailer and manufacturer must adapt to set the right priorities.”

Those priorities are being set within the tools of technology. According to Mounts, investment in technology and data tools support the strategic pillars of DMI and its partners, which Gallagher said are geared for dairy to be “viewed as an industry leader setting the gold standard on environment and animal treatment, and fitting into the efficient and healthy lifestyles of consumers.”

Searchable apps for phones, in-home voice activation systems tied to marketing outlets, namely Amazon, these tools “bring consumer preferences and marketing targets together for effective campaigns that demonstrate super strong value to consumers,” Mounts explained. “By connecting data into such platforms, the advantage for advertisers is they see it generate sales.”

But the conversations will change, and the level of personalization will increase in the food sector around the data, according to Mounts. “The digital assets are more efficient, and you talk directly to people you want to speak with and are going where the buying audience is to capture them.”

“That’s where we need to be,” said Gallagher. “This is the information the industry looks to DMI to share and will be used to create partnerships with industry.

“We won’t get the drinker or eater back if we do not do these things,” he asserts. “Farmers are great and we have a great product, but it still requires innovation. Until whole milk is recommended for kids, and even when it is, we still need innovation to get it to the kids in a style that they like.”

Mounts said innovation is a “team sport, and the key to speeding it up is to create the ecosystem, the environment, that inspires others to come in and bring solutions.”

Where dairy farmers are most familiar with the production playing field, Gallagher sees DMI as the entity that expands the dairy supply chain ecosystem to bring in other resources globally. In short, DMI has identified itself as U.S. Dairy’s supply-chain integrator and expander. Gallagher said checkoff partnerships are regional, national and international — along with the industry and National Milk Producers Federation.

“Working together as one is our hope for the future,” Gallagher insisted. “If we do not have that unity, then we are small players in a big marketplace.”

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