Checkoff leaders describe dairy transformation, milk-based blends, dual-purpose processing

During the 2021 Pa. Dairy Summit in February, dairy checkoff leaders presented a “virtual” breakout session on ‘what dairy checkoff has done lately’. Some key concepts discussed were transformation, trust, supply chain infrastructure and how DMI’s unified marketing plan is driving the industry’s “Dairy Transformation” plan and framework (also known as Dairy 2030). In a previous article, the sustainability and net-zero part of the equation was covered.

By Sherry Bunting, Farmshine, March 5, 2021

HARRISBURG, Pa. — As part of the 2021 Pennsylvania Dairy Summit, virtual attendees had the option of ‘attending’ a zoom session sponsored by American Dairy Association Northeast (ADANE), entitled What has dairy checkoff done for you lately? Moderated by Jayne Sebright, executive director of Pennsylvania’s Center for Dairy Excellence, the guests included Rick Naczi, CEO of ADANE, Barb O’Brien, DMI president, Karen Scanlon, senior VP of sustainability, Paul Ziemnisky, executive VP of global innovation partnerships, and Marilyn Hershey, DMI chair.

The first part of the program was a history lesson on how and why DMI (Dairy Management Inc) was formed to “bring greater efficiency” to how checkoff dollars are used. Leaders stated that DMI “eliminates millions spent in redundant money.” A graph was displayed showing that since the formation of DMI in 1995, total dairy disappearance has risen, along with milk production, to record levels.

A key point made is that DMI leaders see the unified and integrated plan “has helped the dairy industry grow, to help fulfill the dairy producers’ goal of growth.”

Leaders acknowledged that consumers trust farmers, but they believe checkoff’s role is defined as “educating consumers about that trust.”

Paul Ziemnisky gave a look at the future of dairy beverages, going so far as to say new processing facilities will need to be built as beverage plants able to handle all kinds of ingredients for the blended products of the future. In essence, he said, the future of fluid milk is “dual purpose” processing plants.

“We have taken milk to the energy arena, the cold brew with milk arena. We’re adding plants to dairy, making lactose-free dairy to address gut health. Our partners have led, and we have driven growth by over 1 billion pounds,” he said.

Touching on full fat dairy, O’Brien said DMI is “leveraging” the growth in full fat science.

A pressing question of farmers was asked: “Why do we not see television ads?”

The answer, said O’Brien, is “We are going to market differently from the consumer standpoint with less traditional TV ads and shifting to social and retail media channels like other companies are doing. We are looking to our partners, dairy brands, and foodservice brands to elevate their presence and elevate dairy’s presence within that,” she explained.

Ziemnisky pointed out the significant growth in foodservice investment in promoting products that highlight cheese within their own advertising channels.

“For the fluid milk category to be successful,” he said, “Brands need to establish the relationship with consumers.”

Hershey noted that the list of companies that advertised in the Super Bowl 10 years ago include Blockbuster video, Gateway computers, companies that are not in business any more, indicating that television ads are a large investment of ‘past’ industries (even though this year’s Super Bowl had ads by milk’s up-and-coming new competitors).

O’Brien and Hershey explained that DMI and MilkPEP (the fluid milk processor checkoff fund of over $90 million a year) work in “lockstep on consumer understanding, messaging and coordinating with the science.”

“We (DMI) are investing in thought-leadership and university partnerships while they (MilkPEP) have a consumer-focused charter,” said O’Brien.

An example she gave is Amazon launching into groceries in 2017 and ramping up in the last 12 months.

“They won’t settle for being second or third in 10 years, and we (DMI) get to be the ones to educate them on dairy,” she said, stating that Amazon Fresh dairy offerings today are 90% cows’ milk. “That could have been 50/50. We are a voice for dairy in the category.”

This led into further discussion of DMI’s target and the move to blended product partnerships.

Ziemnisky said “90% of consumers who buy plant-based drinks also buy milk today. The urban/suburban mom trying to get in shape is looking for low fat and looking for flavor. We have to give her more flavor. She is looking for advanced nutrition and things to energize her. She’s buying 27 gallons of traditional milk and 5 gallons of plant-based beverage a year because we did not give her almond flavor and oat flavor. She has to trust that we will give her the products she is looking for.”

Toward that end, said Ziemnisky, “We are blending to specific consumers around their dietary needs.”

“We will see the beverage space set up differently and our manufacturing plants will need to be set up as dual plants to make milk-based beverages because that is where the consumer is going, and it is our job to keep them where dairy is front and center,” he explained, noting that these blends “are shelved with milk so that the consumer is not walking over to the plant-based aisle.”

(In most stores, the plant-based is shelved in the dairy aisle so it’s hard to know how these blended products pull sales from solo-dairy or solo-plant.)

Ziemnisky noted, as farmers have heard before, that, “We have to be relevant, to develop formulations that make sure dairy is front and center, but provide the taste, nutrition and sustainability consumers are looking for.”

O’Brien said DMI’s mandate has been to “build trust” and address “shared priorities” while streamlining dairy promotion to be more efficient.

“We know accountability is absolutely critical,” said Hershey. “Farmers make the program and budget decisions through the significant farmer input” of United Dairy Industry Association (UDIA), the portion of the national branch that represents the state and regional promotion entities.

The bottom line, DMI leaders explained, is that the national decisions, strategies and unified marketing plan are ultimately governed by DMI’s board of 15 farmers, with two-thirds of dairy funding still residing with local leadership, but aligning with the “unified marketing plan” as all the state and regional organizations making up UDIA giving 2.5 cents of the local dime to DMI.

DMI works on two levels, said O’Brien, one being as a “global umbrella that farmers have created to address threats over time.”

The other level, they talked about was the domestic side, focused on youth wellness, developing a “deep bench” of nutrition experts and organizations to work with, and engaging on hunger with the food bank system.

On that “global umbrella” level, they explained that the U.S. Dairy Export Council, formed in 1995 receives $20 million annually in checkoff funds and is made up of the membership of 125 dairy companies, including cooperatives.

The Innovation Center for U.S. Dairy was later formed in 2008-09, with World Wildlife Fund (WWF) at the table right from the beginning  “to bring farmers, cooperatives, manufacturers and customers around common sustainability metrics.” Essentially, WWF has been involved from the beginning in the shaping of the FARM program and the sustainability metrics that are part of DMI’s Net Zero Initiative.

O’Brien and Hershey talked about GENYOUth (formed in 2008-09), saying it was “founded by farmers and brings tens of millions of dollars in from other sources to support dairy’s commitment to youth wellness in schools.”

O’Brien noted that since its founding, GENYOUth has “brought in” $100 million from companies outside the dairy industry to achieve the goal of what they calculate to be over 800 million servings of milk per year, and accounting for what they say are school sales of 400 million “incremental” pounds of milk.

In existence for 12 years, with an annual budget of around $10 million, $4 million of which is line-item national and regional checkoff funding, the percentages show the GENYOUth budget now includes more outside money than inside money; however, there is no clear accounting for the ‘vehicle’ costs of the various staff and fixtures, which would likely be additional. Furthermore, there’s the $6 million paid annually to the NFL, which is DMI’s GENYOUth ‘partner’. The purpose of this money was not divulged by DMI leaders during the session. 

Leaders also spent a good portion of time talking about how GENYOUth “worked tirelessly” to raise $17 million of “other people’s money” to support the distribution of milk to schools as cafeterias shut down during the pandemic. They maintained that without these efforts by GENYOUth, milk and dairy products would not have flowed steadily to children through schools. They said GENYOUth grants were given to 14,000 schools to pay for things like coolers for off-site meal distribution.

“We have insured milk and dairy products got to schools during the pandemic,” said O’Brien. She and Naczi both shared how they believe their organizations “pivoted and kept milk flowing” through schools, food banks, CFAP food boxes and other government feeding programs as well as “educating” schools on how to use the waivers for milk and dairy food sizes and packaging during the pandemic. They described national and regional checkoff organizations as the logistical coordinators for the flow of dairy to hunger channels – even though much of this was connected to the USDA CFAP programs.

They also explained how ADANE staff worked with stores to get the purchase-limit signs removed and to keep the dairy cases stocked during the height of the pandemic shut down last spring.

“We knew foodservice channels would get disrupted and looked at how to be sure dairy was going with and through the industry. With the retail influx of volume (purchases), we looked at how we can work across the supply chain,” said O’Brien, adding that dairy outperformed the growth in the rest of the retail sector by three percentage points during the pandemic.

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