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By Sherry Bunting, Farmshine, Friday, Jan. 10, 2020
CHICAGO, Ill. — The Coca-Cola Company announced Friday (Jan. 3) that it has acquired the remaining stake in fairlife LLC from its joint venture partner Select Milk Producers, a 99-member cooperative run and founded by Dr. Mike and Sue McCloskey. Mike McCloskey is also co-founder and chairman of the board of Fair Oaks Farms, and he was chairman of the Sustainability Initiative of DMI’s Innovation Center for U.S. Dairy in 2014, when fairlife was officially launched.
As a result of the recent transaction, Coca-Cola now owns 100% of fairlife, up from its previous 42.5% minority stake, according to company statements.
Financial terms were not disclosed.
According to a company statement, fairlife will continue to operate as a standalone business and will continue to be based in Chicago, where the brand got its start as a joint venture of Select Milk Producers and Coca-Cola, and received partnership grants for research and promotion through the Innovation Center of the checkoff-funded Dairy Management Inc. (DMI).
“We are excited for the next chapter of fairlife’s growth and innovation,” said fairlife CEO Tim Doelman in a press release, emphasizing the strength and scale of the Coca-Cola Company.
“It’s important for fairlife to continue to operate as a standalone business based in Chicago,” stated Jim Dinkins, president of Coca-Cola North America in a press release. “This will continue to give Tim and his team the space and running room they need to innovate and build the fairlife brand in a unique and fast-changing category.”
The fairlife LLC launched in 2012 to make use of a patented cold-filtration process known as ultrafiltration, which removes some natural sugars (lactose) while concentrating milk’s protein and calcium. The launch began with a high-protein milkshake called Core Power and has grown to offer a portfolio of products in what Coca-Cola calls “the fast-growing value-added dairy category in North America.”
In addition to Core Power, the line of products includes fairlife ultrafiltered milk with 50% more protein and 50% less sugar, fairlife DHA with DHA Omega-3 fatty acids, fairlife (drinkable) smart snacks, fairlife nutrition plan (shakes), and the new fairlife creamers for coffee.
Coca-Cola reports fairlife sales have grown by double-digits each year since 2014, playing a big role in what the company sees as steady growth of value-added dairy products in contrast with the traditional fluid milk category. The brand has been supported by the reach of Coca Cola’s distribution, both through the Minute Maid system and Coca-Cola bottlers across the country.
According to IRI data, fairlife’s first-year sales were $62 million, representing 0.36% of market share in 2014. According to Nielsen AMC, fairlife surpassed $500 million in retail sales last year, an 8-fold increase and representing just shy of 3% of market share.
A new fairlife milk facility is under construction in Goodyear, Arizona to expand production beyond its current plants in Waco, Texas and Coopersville, Michigan. In 2018, fairlife launched its products for sale in Canada and will begin local production and sourcing in Ontario this spring.
According to Dinkins, Coca-Cola “will continue to ensure that fairlife has the best distribution possible and will be here to provide resources and expertise in areas such as sustainability and supply chain management to make the brand stronger and better for the future.”
In the same week as the Coca-Cola announcement on acquiring whole ownership of fairlife, a joint public statement was released by fairlife and Fair Oaks Farms announcing their new and evolving four-part animal and worker care platform as their long term response to the animal abuse videos that became public last June involving one of the 12 separate dairies at Fair Oaks Farms. This was also mentioned in the ownership transaction press packet.
“To guide this journey, we’ve assembled a fairlife Animal Welfare Advisory Council to ensure we are both learning and leading for the short- and long-term,” Doelman stated in a public statement. “We’re working with our supplying farmers to outline more detailed animal welfare policies… investing with and in our farmers … And we continue to require that every farm in our supply chain is subject to regular third-party unannounced audits with clear action plans for learning and improvement after each audit.”
DMI officials have indicated funding promotion and exhibits at Fair Oaks Farms’ visitor center an hour south of Chicago in Indiana. However, DMI indicates that its financial grants to fairlife for promotion ended in 2019. To receive DMI promotion funding, companies with approved innovations must spend a comparatively larger amount of their own funds.
Available tax forms for 2017 and 2018 list DMI grants to fairlife of $8 million for promotion in each of those years, and prior support was available from affiliated research and development resources in the Chicago suburbs of Rosemont where DMI and Fonterra are both located.
Ultrafiltration is a process that can vary by dairy product application and is used around the world. A 2018 Transparency Market Research report pegged Coca-Cola among the companies it listed as “key players operating in the global ultrafiltered milk market, along with HP Hood LLC, Idaho Milk Products Inc., Fonterra Co-operative Group, Kerry Group, Tatura Milk Industries Ltd., Darigold Ingredients Company, Erie Foods International Inc., Enka Sut Company, Grassland Dairy Products and others.”
In 2017, the FDA said ultrafiltered milk could be used to make any fresh cheese product.
While fairlife milk is still considered a fresh product with a 90-day shelf-life, some products in the lineup are shelf-stable and aseptically packaged.
Dr. McCloskey confirmed in a presentation on “the road to innovation” at the 2016 Georgia Dairy Conference that fairlife ultrafiltered milk was at that time designated a Class I fluid milk product; however, some of the other beverages in the lineup are Class II.
The former Ag Secretary instrumental in removing whole milk from schools is now the highest-paid executive at Dairy Management Inc. (DMI) whose virtual $1 million/year in 2018 came from dairy farmers who are going bankrupt.
Farmshine Editor’s Note: Sherry Bunting has written a lengthy, well researched commentary on how the dairy economy and dairy product promotion and marketing evolved over the past decade with Tom Vilsack at the helm. Vilsack served as USDA Secretary in the Obama Administration and is the current chief of the U.S. Dairy Export Council (USDEC), an affiliate of Dairy Management, Inc. Wherever he has been since 2009, Vilsack is unquestionably one of America’s most powerful influencers when it comes to dairying. And the outcome has seldom been favorable to the nation’s milk producers. Part I of this reportappeared in the December 6th edition of Farmshine, page 20. Part II follows
In my journalistic pursuits of the past decade, two statements by checkoff-paid executives and dairy checkoff board members now reverberate in my mind:
1) On milk as a beverage: “Fluid milk is dead, we have to stop beating that horse and innovate for these new beverage markets.” – 2016 during questions after a presentation by a USDEC checkoff-paid employee at a meeting of dairy policy analysts and economists.
2) On dietary guidelines and school milk: “They are a different breed. We have our own plan. We have a friend inside the White House. We are already working with someone on this. And we finally have a drink that consumers want (fairlife).” — 2015 phone call to me from a DMI board member who also served on DFA’s board, challenging an article I had written that year. In the course of our conversation, he made this comment in response to my question to him asking why the dairy industry was being silent on the 2015 Dietary Guidelines that year, and why dairy was not joining forces with beef to push the solid science on animal fat as revealed in Nina Teicholz’s book Big Fat Surprise. I had also asked him why they weren’t supporting the beef industry’s opposition to the “sustainability” driven parts of the 2015 dietary guidelines.
In his Ag Secretary role in 2010, Vilsack was instrumental in the creation of GENYOUth through the MOU signed between USDA, National Dairy Council (Dairy Checkoff) and the NFL. (In fact, as Ag Secretary, Vilsack appointed some of the current Dairy Board members who then hired him at the end of the Obama administration as a DMI executive vice president and CEO of USDEC.)
USDA Photo from Feb. 4, 2011 where then Agriculture Secretary Tom Vilsack spoke to young people at the Fuel Up to Play 60 (FUTP60) event held at the Sheraton Hotel in Dallas, Texas before the 2011 Super Bowl, the same day that the MOU was signed between NFL, USDA, Dairy Checkoff and GENYOUth to focus on ending childhood obesity with fat-free / low-fat foods and beverages and 60 minutes of daily exercise. And so, a decade later… here we are so much farther down this wrong road.
Today, GENYOUth is the bus on which more companies each year are hitching a ride into the schools — paid for primarily by dairy farmers in effect funding their own demise. Meanwhile, dairy farmers are the only ones not free to fully promote their best product, being relegated and regulated to government speech on fat-free / low-fat.
When Vilsack was presented the Vanguard Award during the 2017 GENYOUth Gala aboard the U.S.S. Intrepid in New York City Harbor, former President Bill Clinton spoke his accolades, and congratulated him on being the one to overcome the hurdle of getting beverage calories included in the school meal calculations. It is the very thing the current Senate Bill seeking to allow whole milk in schools would reverse.
Bill Clinton, a vegan, went on in his 2017 GENYOUth Gala speech to emphasize how beverages were a “huge” problem in the obesity epidemic, that we don’t think about how many calories kids consume in a drink, and that regulating school beverages was a big step forward on that front.
He was talking about whole milk. Whole milk is named, specifically, on the list of beverages prohibited from sale on school grounds during school hours.
And yet plenty of PepsiCo beverages — made specially to meet the 60-calorie threshold with a combination of high fructose corn syrup and sucralose, including Gatorade and Mountain Dew Kickstart — are welcomed on those school lunch “smart snacks” acceptable beverage lists.
Vilsack started with DMI six days after the Obama Administration ended in January 2017. But 2018 was his first full year as a DMI executive, and he has been busy earning his highest-paid status.
In May, Vilsack wrote about how the U.S. dairy industry would meet its new goals to export 20% of production, and he praised the record level of exports in 2018 as “a banner year for exporters.” (We all know 2018 was anything BUT banner for dairy farmers paying his salary. In fact, export volumes were higher in 2018 than in 2017 and 2019 while prices paid to farmers were lower in 2018 than in 2017 and 2019.)
In June, Vilsack testified before Congress that the government should partner with the dairy industry to pay ‘pilot farms’ to develop and test the innovations “U.S. Dairy” will need in order to reach the Net Zero emissions goal he has been instrumental in setting. In fact, Senators referred to him as ‘the president of dairy innovation.’
The ultimate vehicle for those practices after they are tested on pilot farms will be the dairy checkoff-funded and NMPF-administrated FARM program initiated through the Innovation Center for U.S. Dairy.
At that “sustainability” hearing of the Senate Ag Committee in June, Vilsack earnestly stated that the Net Zero project – and government assistance for pilot farms to find the practices to achieve it — was essential for the U.S. dairy industry to have an edge in international markets.
In November, Vilsack endorsed former vice president Joe Biden for President of the United States and praised his candidacy “for including a path to addressing climate change while at the same time helping the rural economy and creating jobs by investing in green infrastructure, renewable fuels and low-carbon manufacturing,” according to an article about the Vilsack endorsement of Biden in the Nov. 23 edition of the Des Moines Register.
In fact, the Register article stated that Vilsack “helped write Biden’s plan for rural America.” But that’s not political involvement by a checkoff executive, is it?
It is interesting that when dairy checkoff board members are asked by the farmers paying the checkoff why they can’t stand up for whole milk in schools, the response they always get is: “That’s politics, and we can’t get into that.” Of course, the rules and regs of USDA overseeing checkoff are then cited forward and backward.
But, when it comes to Vilsack’s hands in the political pie – not to mention dairy farmers’ pockets – there are no rules and it’s all good. In fact, it’s encouraged because it’s part of the plan, the future of dairy, of food.
Vilsack is, after all, the dairy checkoff’s highest-paid executive, who is most culpable in his former position as Ag Secretary for putting the last nail in the fluid milk coffin. His policies on milk in schools and the fat-free / low-fat ‘government speech’ that now defines milk promotion, have at the very least contributed to – if not accelerated — the loss of fluid milk sales in the past decade of steepest decline.
In 2015, when confronted with what investigations have revealed about the science on animal fat, especially milk fat – according to the new and previously buried research — Vilsack said the preponderance of the evidence still favored low-fat diets. And with that proclamation, he signed the 2015 Dietary Guidelines that accelerated taking dairy markets – and our nation’s children – down the wrong road.
Think about this. From 2010 to 2018, the era in which the alliance between Vilsack’s USDA and the dairy checkoff was initiated and bloomed and in which he is now the highest paid executive – DMI controlled $140 to $159 million annually in mandatory dairy farmer funds. In that pool of funds, 25% went to salaries and other costs associated with core operations and another 30% went to contractors for promotion in ways that could be considered ‘core operations.’
In 2018, as in previous years, the NFL received $5 million; Edelman, the world’s largest PR firm, received $16 million; Fairlife $8 million, Domino’s $9 million, a marketing firm for GENYOUth with ties to Edelman $4 million, McDonald’s $5 million, and Vilsack got his virtual million.
Yes, folks, hindsight is 20/20. And here we are on the eve of 2020 with former Ag Secretary Vilsack – who was paid a $999,421 salary in 2018 from mandatory dairy producer checkoff funds and is now the top-paid DMI executive — to thank for the removal of whole milk and whole dairy products from our schools. And no one cares to ask him to testify to Congress about why whole milk should be allowed in schools, but he is politically involved in so many other discussions.
The dairy industry had and has Tom Vilsack — or vice versa.
Memorandum of Understanding (MOU) was signed on Friday, Feb. 4, 2011 at Sheraton Hotel in Dallas, TX. The MOU outlines the joint commitment of the National Football League (NFL), Department of Agriculture, National Dairy Council (NDC), and Gen YOUth Foundation, to end childhood obesity. (Signing L to R President of the National Dairy Council Jean Regalie, Agriculture Secretary Tom Vilsack, NFL Commissioner Roger Goodell, and GENYOUth Foundation CEO Alexis Glick)
Today, DMI IRS 990 forms show that Dairy Checkoff pays Tom Vilsack just shy of $1 million/year as DMI’s highest paid executive; Dairy Checkoff pays the world’s largest PR firm Edelman $15 to $17 million/year as the purpose-driven brain-trust behind the GENYOUth and Innovation Center ‘sustainability’ concepts; Dairy Checkoff pays the GENYOUth CEO over $200,000/year to run the foundation; Dairy Checkoff pays the core operations of GENYOUth to the tune of $1.5 million; Dairy Checkoff has USDA attorneys at every meeting and on every conference call to approve promotion projects and messages (government speech); and Dairy Checkoff pays the NFL $5 to $7 million annually for their part in this “promotion.” Meanwhile, NFL promotes its brand through flag-football sets to FUTP60-participating schools; USDA markets and enforces dietary guidelines with the financial assistance of dairy farmers through the checkoff; and other companies participating in GENYOUth, most notably PepsiCo, are able to market their own pet projects, products, brands and influence to kids while the dairy farmers are regulated to government speech. Dairy Checkoff touts the FUTP60 breakfast carts as serving milk with every breakfast, but only fat-free and 1% are promoted and permitted, and USDA’s own studies show that this fat-free and 1% low-fat school milk is among the most frequently discarded items. The entire deal ignores the fact that the dietary guidelines have exacerbated the obesity and diabetes trend, that children are not getting the valuable nutrients from the milk they are served if they don’t like the taste of fat-free and 1% and throw it away to buy something else. And the deal further ignores studies showing that body fatness was lower and Vit. D status higher in children drinking whole milk as compared with children drinking 1% low-fat milk. What will it take to see positive change when the very government figure who was influential in getting us here is now the dairy industry leader that the industry organizations revere and who is looked at by USDA, Congress and other policymakers as speaking for dairy? If he took whole milk out of the schools, and he now ‘speaks for dairy’ and is ‘believed’ to be so concerned about kids, who else matters in the discussion? Does the government care about the over 15,000 online and 5000 by mail signatures of dairy farmers, parents, grandparents, students, teachers, coaches, school boards, town boards, county commissioners, state lawmakers, health experts, nutrition experts, athletes, nurses, doctors, and generally comcerned citizens among these signatures asking for the choice of whole milk in schools?
This could be an opportunity to look at the strength of Dean’s holdings and consider a different path forward, one that returns some of the regional branding power to farmers and consumers in the regions served by Dean’s 60 milk processing plants.
Dean Foods accounts for one-third of the milk bottled in the U.S., and the roots of its holdings go back to family operations with brands that were once – and some still are – household names.
In focus groups and shopper surveys, consumers demonstrate they understand what it means to buy local. They understand that buying local – especially fresh staples like milk – means keeping their dollars working in their communities. Consumers also say they want to help local farms. And they want to see clear labeling to know where their milk comes from.
Meanwhile, surveys show the gallon and half-gallon jug are still the most popular packaging among real milk buyers. Even though the category as a whole is declining, it is still a huge category and one that has not been tended or nurtured or cared for in more than a decade. In fact, the category has seen the deck stacked against it by government rules and government speech.
Taste is also important to consumers, as is nutrition. Where fluid milk is concerned, these two areas have also been lacking because checkoff-funded promotion became government speech that pushed fat-free and low-fat milk to the point where consumers have no idea what real milk tastes like – until they switch to whole milk, and they are.
Folks, this is an opportunity to chart a new path for fresh fluid milk, to breathe some life into it. We see it in whole milk sales that are rising. Just think what could be accomplished if significant resources were devoted to truly revitalizing milk.
As the dairy industry streamlines behind innovation and checkoff-funded partnerships to disrupt the dairy case — to be more like the plant-based non-dairy disruptors — there is still a majority of consumers choosing real milk, and more of them are choosing real whole milk as whole milk today is the top seller in the category, and whole flavored milk is growing by double-digits.
Can we disrupt all the disruption with a disruptive back-to-the-future original? I think so. But now is the time to hit it hard. A few years from now will be too late.
Dean Foods has the network and the facilities and the history a savvy consortium of buyers could tap into for going back to local or regional emphasis with brands. The DairyPure national branding experiment started out strong, but in the past few years has been squeezed-out by large retailers – and notably Walmart — pushing their own store brands with loss-leading strategies while hoisting the price of Dean DairyPure much higher.
And that’s part of the problem. Stores think it’s okay to loss-lead with milk, but they are not willing to eat that loss themselves. We need them at the regional dairy future table as well.
In the bankruptcy proceedings at hand, some of Dean Foods’ unsecured bondholders are protesting a rapid sale of assets to DFA in what they say equates to a “fire sale” that doesn’t maximize value. Did Dean receive a proposal from them too before filing bankruptcy? Sources indicate bondholders offered restructuring terms before the bankruptcy filing that would have changed the current picture for Dean Foods.
Will these bondholders that are opposing sale to DFA make an offer now? Can Dean Foods’ assets be sold piece by piece to be broken up more regionally? These questions don’t have clear answers at this time.
What is clear is that payments for milk by Dean to DFA are being delayed five business days as bondholders want to be sure they are truly ‘critical vendor’ payments and that there are no shenanigans between the would-be buyer and seller.
What is also clear is that Dean and DFA have a history, and that history includes the good, the bad, and yes, the ugly.
DFA was there every step of the way as mergers and acquisitions led Dean Foods on its path to become the nation’s largest milk bottler. DFA is Dean’s largest supplier of milk, and DFA leaders are on record stating that Dean Foods is the largest buyer of DFA milk.
If DFA purchases “substantially all” of Dean’s assets, we know more rapid consolidation of the fluid milk market will occur. DFA’s leaders — as well as the leaders of all the prominent organizations in the dairy industry, including the dairy checkoff — have been clear if we’re paying attention. The future they see is in moving away from investing in fresh fluid milk and moving toward ultrafiltration and aseptic packaging and blending and innovating for beverages that can be supplied to anywhere from anywhere without transporting milk’s water-volume by tanker.
Those are more of the ingredients for a monopolization of milk that may not even be considered by the Department of Justice. Without another offer or series of regional offers on the table, DFA would stand as the only option — other than complete failure of the firm under bankruptcy. This, alone, could put the sale to DFA on the fast track as sources talk about bankruptcy clauses that allow purchases to occur — without DOJ approval — when failure is the only other option.
Who will tend this store, nurture these customers, satisfy consumer desires to buy-local and ‘help farmers’ and their new-found eagerness to learn more about real fresh whole milk nutrition?
If states and regions don’t work to keep fresh milk facilities in their midst, the global message on ‘sustainability’, ‘carbon footprint’, ‘flexitarian diets,’ and ‘planetary boundaries’ will overtake the public consciousness, and the choices disrupting and diluting the dairy case will overtake fresh fluid milk.
In business today, that’s all we hear: Innovate and disrupt. Maybe it’s time to disrupt the disruptors, to put together a fresh fluid milk branding and packaging campaign that makes milk new again.
Tom Gallagher is “setting the record straight about the value of the annual GENYOUth Gala, which has garnered millions of dollars for our youth wellness efforts without spending any checkoff dollars,” according to the Oct. 24 weekly checkoff update emailed by American Dairy Association Northeast.
Gallagher is CEO of Dairy Management Inc. (DMI) and chairman of Youth Improved Inc., doing business as GENYOUth, and he writes about the Gala set for Dec. 4 in Manhattan.
Let’s take a look.
Gallagher says the Gala “will resemble a Hollywood red carpet event” and tells us it’s understandable to see it as being “a bit on the extravagant side.” He states that the “formal-attire affair is held each year in New York City, drawing famous athletes and CEOs from some of the nation’s most recognized companies.”
Gallagher reminds us that this ‘formula’ mixes dairy farmers with corporate influencers!
“It’s a very different look and a very different strategy from the traditional efforts done to support dairy farmers’ priorities,” he writes, asking dairy farmers to “not get blinded by the glitz and glamour of the evening and instead look deeper into the strategic aspect.”
As reported in the September 20th edition of Farmshine, the ‘formula’ since 2008 has led to the creation of a growing number of tax-exempt organizations with aliases under the DMI umbrella, most of them through the Innovation Center, known to the IRS as Dairy Center for Strategic Innovation and Collaboration doing business as Innovation Center for U.S. Dairy.
The ‘formula’ brings certain multi-national corporations, dairy innovators and dairy production integrators into these tax-exempt organization boards that then influence how dairy farmer promotion dollars are spent via partnerships.
The ‘formula’ also brought in World Wildlife Fund (WWF) to be the stamp-of-approval partner for “sustainability” platforms, including the FARM program. And yet, WWF promotes vegan diets to solve climate change, and USDA, under Vilsack, was instrumental in pushing whole milk out of schools. Some partners, right?
It is disconcerting, to say the least, to hear DMI staff, who are paid with mandatory farmer-funds, speak at a September seminar in Pennsylvania stating that, “We want to move consumers away from the ‘habit’ of reaching for the jug and get them to be looking for these new and innovative products.”
You see, DMI is helping to shape future consumers toward the diluted diets the ‘thought leaders’ promote for our futures. These are touted by USDA through Dietary Guidelines and enforcement of ‘government speech’ in dairy promotion. Diet dilution is embraced by the Edelman company, via their sponsorship and social marketing assistance with the EAT FreSH Initiative that promotes “eating according to planetary boundaries,” meaning less dairy and animal products.
As a key link, Edelman, the purpose-driven social marketing company was instrumental in DMI’s formation of GENYOUth. (Edelman is paid $15 to $17 million a year in dairy checkoff funds as a contractor for DMI according to 2016-17 IRS 990s.)
The ‘strategic aspect’ is clear: Throw a Gala, bedazzle a few dairy producer board members to rub elbows with the elite corporate CEOs and ‘thought leaders’, and everyone goes home feeling good because they think they are working on shared ‘health’ and ‘sustainability’ goals.
One fox in the henhouse is PepsiCo. Did you know PepsiCo assisted USDA with the development of a Smart Snacks website where school foodservice directors go for lists of products and beverages that are designed to meet the USDA requirements for calories, fat, salt, etc.? Most of them courtesy of PepsiCo?
Guess what is not on the Smart Snacks list? Whole Milk.
Guess what is on the list? Mountain Dew Kickstart energy drink, Gatorade, Doritos, Breakfast bars, Breakfast cookies, and on and on – courtesy of PepsiCo.
Gallagher states that the Gala “supports a goal that is near and dear to every dairy farmer I have ever met – childhood health and wellness.”
Gallagher also tells us: “Not a single farmer checkoff dollar is used to put on the event. The Gala is underwritten through third-party sponsorships, table sales and on-site auction purchases.”
Well, that’s a relief, right? But think again.
According to IRS 990 forms, the supposed partner of dairy farmers in this effort – the NFL — has donated anywhere from less than $500,000 to a little over $1 million annually to GENYOUth, but at the same time, DMI paid the NFL $5 to $7 million annually for promotion !(according to 2016-17 IRS 990s)
In addition, over 50% of GENYOUth’s total annual expenditures as an organization comes from dairy farmers via their mandatory nickel and the dime. Yes, one can say those regional funds are linked to breakfast carts in schools, but the checkoff nickel portion funds the operating budget, and more.
The carton of milk with every breakfast is the same fat-free and 1% milk that USDA’s own studies show is often discarded. The soupy sweet hot pink yogurt doesn’t come close to the real thing; many children turn away from it. The cheese, well they’ll eat that, but it too is fat-free.
What populates the breakfast cart heavily, according to children, is Quaker (PepsiCo) oatmeal bars with chocolate, breakfast cookies, a foil wrapped item similar to a pop-tart, and if you get there early – you’ll find apples or bananas.
Meanwhile, when corporates boarding the GENYOUth schoolbus for this “access” donate to buy ‘grab n go’ breakfast cars or sponsor a table at the Gala, and earmark funds for pet programs. When SAP donates, their funds go specifically for GENYOUth’s recent addition of the AdVenture Capital program, where students can learn about marketing and being entrepreneurs and leaders.
The USDA (MyPlate) is now concerned about students getting enough sleep, so the sleep industry, like Sleep Number, board the GENYOUth schoolbus with donations, and a new sleep program is added to GENYOUth messaging.
GENYOUth has become a marketing vehicle for the ‘foxes’ — cleverly disguised as a school health and wellness program — founded and primarily funded by the ‘hens.’
In fact, dairy farmers are the only ones involved in GENYOUth that are producing a truly healthful product but are not free to truly provide or promote it to the kids.
“One of the great responsibilities we have as your dairy checkoff is to use your investment as wisely and strategically as we can,” writes Gallagher. “This is why we seek globally recognized partnerships that can extend your commitment on goals that matter to you.”
At the Dec. 4, 2019 Gala in Manhattan, the theme will be “Rise, by lifting others.” It’s clear that dairy farmers are doing GENYOUth’s heavy lifting, but for whose priorities? And who is rising? Are our schoolchildren really better off? Are our farmers?
A decade of this ‘formula’ – and the millions spent by dairy farmers annually — have resulted in ‘partners’ profiting while dairy farmer freedom and competitive position diminishes. Meanwhile, new generations of children and adults do not know what real milk and dairy products taste like, and they know absolutely zero about the nutrition in them.
Addendum after publication:
The latest to board the GENYOUth schoolbus, complete with name and logo-swoosh for its program, is Nike with the “Nike Game Growers”. The program seeks to increase school sports participation — especially among middle-school-aged girls — by having a competition among student teams presenting their ideas for how to grow sports participation at their schools. The Womens National Basketball Association (WNBA) and National Basketball Association (NBA) are also involved in the Nike Game Growers platform. The swoosh has come under fire for its competitive dealings in high school team apparel contracts and recently by female athletes who’ve been sponsored by Nike in ‘elite’ camp teams telling of health impacts from dietary restrictions aimed at keeping them super thin.
The Dec. 4, 2019 GENYOUth Gala (Galabration) Host Committee is made up of: Tom Gallagher, DMI CEO; Alexis Glick, GENYOUth CEO; Roger Goodell, NFL Commissioner; Audrey Donahoe, National Dairy Council Chair; Richard Edelman, Edelman CEO; Carla Hall, former co-host, The Chew famed chef, author and TV personality; Howie Long, commentator, FOX Sports, NFL Hall of Fame; Jeff Miller, NFL EVP Health and Safety; Steve H. Nelson, former United Healthcare CEO; Donald “DJ” Paoni, SAP North America President; Claressa Shields, two-time Olympic Gold Medalist Boxer; DeMaurice Smith, NFL Players Association Executive Director; Selwyn Vickers, M.D., Dean, University of Alabama School of Medicine; Tom Vilsack, President and CEO U.S. Dairy Export Council and former Secretary of Agriculture; Russell Weiner, Domino’s COO and President; and Dr. David Satcher, 16th U.S. Surgeon General emeritus.
By Sherry Bunting, Farmshine, Friday, Sept. 13, 2019
CHICAGO, Ill. – ‘Proprietary’ describes much of what the Innovation Center for U.S. Dairy initiates as a checkoff-funded industry collaboration under the umbrella of Dairy Management Inc. (DMI).
Some of that work is so proprietary, even the 81 voting DMI board members don’t see details as they vote to approve partnerships, new product developments, promotion grants to launch new products, as well as the ‘sustainability’ initiatives and alliances that come from this collaboration and filter down as requirements for all dairy farms through their respective processor and cooperative milk buyers via the FARM program.
Board members are quick to point out that USDA and DMI attorneys are privy to proprietary details that are kept confidential. They point out that food industry partners and processors must show they are investing more than they are receiving, and that their “innovation” has potential to be a ‘catalyst’ for others to follow.
DMI describes program accomplishments in the IRS 990 form, specifying that, “DMI partners with foodservice industry leaders to help create dairy-based innovation to drive dairy sales and build trust in dairy products.”
The description details the way partnerships are boosting dairy use, especially cheese, by restaurant chains.
At the same time, DMI describes its strategy to revitalize fluid milk by ‘reinventing the consumer milk experience.’ (Reinventing milk was examined in a separate article in the August 23 edition of Farmshine.)
The Innovation Center for U.S. Dairy (under the official tax-exempt name of “Dairy Center for Strategic Innovation and Collaboration, doing business as Innovation Center for U.S. Dairy”) fuels these partnerships with mandatory checkoff funds and is the place where these partnerships are born from the board of DMI staff and processor / co-op chairs and CEOs. (See related article).
Here, we examine the mainly cheesey partnerships DMI has pursued since 2009-10. That is the year in which the Innovation Center for U.S. Dairy was formed under DMI.
In 2017, (DMI) had four domestic, U.S.-focused partners: Dominos, Pizza Hut, Taco Bell and McDonalds. Based upon the success of our U.S. partnerships with Yum! Brands, which includes Taco Bell, Pizza Hut and KFC, we expanded our partnership focus and added two pilot international partnerships in 2017 — KFC, focused on Latin America and Pizza Hut, focused on Southeast Asia.
“The goal of the international partnerships is to increase U.S. Dairy Exports to these markets,” the DMI 990 form states. “DMI partners with these large catalytic companies because they are industry leaders who have the potential to deliver incremental and sustainable dairy sales. Moreover, these partners are closely watched by others in foodservice. Their innovation, whether product-based or technology based, created a catalytic effect, where others follow their actions. These partners were chosen because they commit to invest in innovation and marketing in support of dairy-based products: and they are willing to partner on other dairy industry priorities.”
According to the report, DMI supports a range of programs and initiatives with these influential and global foodservice industry leaders. The programs focus on providing dairy expertise and investment in the areas of consumer insights, new product development, new store and new technology testing, consumer communications and corporate social responsibility. Further, DMI provides on-site scientists and/or culinary experts who lead product development of dairy-based food and beverage products.
The main agencies of DMI handling these proprietary partnerships are the Innovation Center for U.S. Dairy and the U.S. Dairy Export Council (USDEC), which are both listed under the control of DMI on the form and are both under the leadership of former Secretary of Agriculture Tom Vilsack.
DMI also “provides expertise and consultants in the areas of marketing, consumer insights and research, nutrition, sustainability, animal care, food safety, regulatory environment and dairy communications.”
As a signal of success, DMI states that dairy is represented in 70% of their collective menu items among these partners and that these partners spent $11.1 billion between 2012 and 2017, collectively, on advertising their menus, including items that are “dairy-based” like pizza, tacos, ice cream and coffee drinks. But there is no data on how much of the total $11.1 billion was spent on actually advertising the dairy-based menu items.
DMI states that since these partnerships began in 2009, the combined milk equivalent tonnage of these partners, collectively, “has grown by 2.2 billion milk pounds, averaging 4% growth per year (since 2009).”
This is close to the overall global trend of 3% growth in cheese consumption annually.
In the 990 discussion, specific menu items are noted as examples, as well as how ice cream and cheese are reformulated by in-house experts provided by DMI.
Working with Domino’s, DMI helped “create the ‘Smart Slice’ School Pizza, which was in more than 10,500 schools by 2017 and meets the USDA dietary guidelines for being fat-free or lower in fat than regular cheese pizza.”
Also in 2017, Dominos began promoting awareness of the Undeniably Dairy campaign by including “farmer messaging” on 7 million pizza boxes weekly nationwide. DMI states that this “helped Dominos grow milk equivalent tonnage by 8.5% in 2017.”
DMI also partnered with Pizza Hut on the “cheese in more places” products, including the Ultimate Cheesy Crust Pizza with 16 pockets stuffed with nearly one pound of cheese.
As for Taco Bell, DMI states that this partnership has helped the restaurant chain evolve in how they use dairy, from incorporating it as a garnish to being more of a key ingredient …growing their milk equivalent tonnage by 7% in 2017.
However, partners like Taco Bell have also initiated “stealth health” menu-boarding since 2017, to encourage customers to consider condiments other than cheese and sour cream, such as salsa and pico de gala. And partner McDonald’s removed the ‘cheeseburger’ option from the Happy Meal menu last year. A customer can ask for a slice of cheese on the burger, but that option does not appear on the menu board. It’s called “stealth health.”
As for the international partnerships, DMI states that U.S. cheese sales at Pizza Hut Asia Pacific increased 29% in 2017. In fact, DMI leaders communicate that consumers in China, for example, look to the U.S. with confidence in food safety. They say their market research shows that the larger and more technologically progressive our farms are here, the happier moms are to buy U.S. dairy there. In fact, dairy checkoff leaders note in communications that small farms with older facilities conger-up images of concern for consumers in China who have not forgotten their 2014 melamine scare, which the Chinese government ultimately blamed on milk handlers for the network of small farms in China.
While cheese sales increased through these partnerships from 2009 through 2017, according to DMI, fluid milk sales declined even faster in those years than the 30-year trendline
Global supply chain structures also became more prominent as multi-national dairy ingredient suppliers connect with DMI partner-brands.
On the fluid milk side, DMI’s stated goal is to “reinvent the milk experience for consumers.” At the same time, the overall goals are focused on dairy innovation via business plans and structures that are more global in nature, focus on foodservice chains that represent domestic and overseas markets and utilize further processed, reformulated, and blended dairy ingredients while also creating menu items that use these proprietary ingredients to fit USDA’s low-fat dietary guidelines as the restaurant trade moves into ‘stealth health’ mode.
CHICAGO, Ill. — As the path of dairy checkoff promotion continues to evolve — especially since 2008 when a series of memorandums of understanding were signed by Dairy Management Inc. (DMI) and the National Dairy Council (NDC) with then USDA Secretary Tom Vilsack — the money flows increasingly toward DMI partnerships, agency services and executive staff through sub-agencies of DMI that facilitate the proprietary partnerships.
In particular the Innovation Center, working closely with USDEC, is the vehicle for pre-competitive “proprietary” dairy innovations.
In fact, this innovation really began through a relationship between Fonterra USA and DMI as early as the 2006-08 time frame. Their respective ‘test kitchens’ are just three miles apart on the outskirts of Chicago, where milk proteins and ingredients, concentrators, extenders and utilization characteristics have been the focus of proprietary work.
As DMI CEO Tom Gallagher stated at a dairy conference in Wisconsin in March, food scientists from DMI have “cracked the code” on cheese-melting characteristics for partners like Taco Bell and Pizza Hut. He also talked about the new pizza cheese innovations with Dominos to meet USDA school lunch rules, calling them “wildly popular with students.”
From that March presentation at the Professional Dairy Producers of Wisconsin conference in Madison, the Wisconsin State Farmer quoted Gallagher summing up his job: “My job is real simple. I have to get the industry to do things with your product after it leaves the farm — that consumers want.”
Toward that end, Gallagher explained to the shift away from television ads and other “one-way” promotions to social media “conversations” and industry “partnerships.” It has shifted from promoting milk and dairy to providing product development specialists working for DMI’s partners — like McDonald’s, Dominos, Taco Bell and others — to get them to “do stuff” that puts more dairy in the fast-food pipeline (look for more on this in a future article).
A key driver of the shifting direction of checkoff promotion is the world renown Edelman company, with its headquarters in Chicago — 17 miles east of DMI’s offices and just two miles from the Chicago headquarters of Fairlife LLC, two miles from the Chicago offices of Coca-Cola and a mile and a half from PepsiCo’s Chicago offices.
According to Richard Edelman, in his May 2017 blog post at the company’s website, the Edelman company (known worldwide simply as Edelman) has been the public relations and communications firm for DMI for over 20 years.
In this particular post, Richard Edelman writes about the launch of DMI’s Innovation Center for U.S. Dairy in 2008 and how he is looking forward to the leadership of the former USDA Secretary Tom Vilsack coming on board that year (2017) as president and CEO of checkoff-funded USDEC and Innovation Center for U.S. Dairy (after signing MOU’s with DMI while Secretary in 2008-09).
This Edelman blog post covers the launch of the Undeniably Dairy campaign that month (May 2017), calling it the first time Edelman has had a project “bringing together a fully integrated campaign at this scale.”
With offices worldwide and mergers throughout the advertising and public relations industry, Edelman is the world’s largest such firm and is open about their re-alignment of clientele around “social responsibility” and “global environmental sustainability.” In fact, they’ve dropped clients with businesses not deemed “environmentally sustainable.”
Edelman and its clients — such as PepsiCo, Danone, Unilever and others — are listed as prime sponsors buying-in to the EAT Forums that are pushing the EAT Lancet report about the ideal global diet of cutting per-capita animal protein consumption – meat, dairy and eggs – by more than 75% over the next 10 years to “reduce the environmental impact of feeding 10 billion people.”
The firm was instrumental in setting up GENYOUth in 2008 and recommending CEO Alexis Glick as its coordinator. Not only are DMI and PepsiCo clients of Edelman, so is the National Football League. The NFL has a longstanding relationship with PepsiCo that predates the GENYOUth / Fuel Up to Play 60 alliance with dairy checkoff.
And, while PepsiCo is an Edelman client, Coca Cola is a headline client of Edelman’s spinoff Zeno Group, a global integrated communications agency founded 20 years ago by Richard Edelman’s father Daniel J. Edelman after Richard had taken over the reins of Edelman.
So what do the numbers tell us about the above-mentioned relationships?
According to the IRS 990 forms filed by DMI for tax-year 2017, the Daniel J. Edelman, Inc. company, mind-bending mastermind of “social marketing”, was paid $15.3 million in 2016 and $17.8 million in 2017 for “agency services.” That was 11.5% of DMI’s total budget of $155 million in 2017.
DMI paid NFL Properties LLC, New York, N.Y., $5.12 million in 2016 and $5.63 million in 2017 for “Promotion.” Is this the pay-to-play cost of the GENYOUth alliance and MOU? After all, the NFL is positioned as a partner with dairy farmers in the “dairy-farmer-initiated” GENYOUth. The NFL was in on the MOU signing with DMI and Tom Vilsack while he was Secretary of Agriculture.
But, while the NFL’s annual contributions to dairy checkoff’s GENYOUth are listed on GENYOUth IRS 990s as ranging from $370,000 in 2014 to $945,000 in 2017, DMI lists checkoff payments to NFL Properties of between $5 and $6 million for 2016 and 2017 on the DMI IRS 990.
It’s all about the kids, right? There’s more here than kids and breakfast carts.
Meanwhile, fluid milk sales continued to decline, even more rapidly over the 2008-18 decade as low-fat and fat-free school promotion and provision was dairy checkoff’s best play while the plant-based alternatives continue blitzing consumers with – you guessed it — television ads and “one-way” promotions that DMI says “don’t work.”
The alt-beverage industry has worked with Edelman client PepsiCo on its low-fat product portfolio through a variety of incubator projects involving plant-based alternatives for dairy products.
The alt-beverage industry is working closely with Edelman client Danone, which has set a goal to transition much of its yogurt market into plant-based alternatives over the next 5 to 10 years, opening the world’s largest plant-based yogurt facility in upstate Pennsylvania earlier this year.
The alt-beverage industry has even convinced the nation’s largest dairy-farmer-owned cooperative, DFA, to invest in alternative beverage production assets and to innovate with a DMI-checkoff-funded product innovation — a new blend of low-fat, lactose-free dairy milk combined with 50% almond or oat beverage that rolled out in Minnesota in August 2019, with sights set on the Northeast by 2020.
DMI is spending checkoff dollars in search of the next fairlife on which to hang dairy promotion’s hat.
Incidentally, Fairlife LLC received $8 million in DMI checkoff funds in 2017 for “promotion,” according to the most recent publicly-available IRS 990 documents.
So, what else can be learned from DMI’s IRS 990 returns in 2017?
For starters, they had $2 million fewer dollars to work with compared with 2016. Total revenue controlled by DMI was $155 million, along with the unified marketing plan that filters down through regional agencies spending the other half of the dairy farmer checkoff revenues that total right around $320 million. Some state dairy promotion order boards, like in New York, automatically give 25% of their budget (2.5 cents of the state’s dime) to DMI as a matter of course. For other boards, the pass-through may be more, or less.
Looking at program areas, the most recent IRS 990 for 2017 shows that $110 million of the $155 million in checkoff funds under direct management of DMI was described to the IRS as “program funding revenue,” $39.5 million as “core funding revenue” and $5.6 million as “contract services revenue.”
Of the total $155 million in revenue for 2017, DMI categorized $82.2 million as “domestic marketing”, $17.1 million as “export”, while $7.85 million was research, and nearly $7 million for contract services and other expenses.
Since we know that Edelman received $17.6 million from DMI for “agency services” in 2017, it’s clear that some of that is in a category other than “contract services.”
Compensation of board officers, directors and trustees totaled just shy of $3 million.
Other salaries and wages totaled $17.6 million, with pensions and contributions $3.1 million, other employee benefits $2.3 million, and payroll taxes $1.37 million.
Legal, accounting and other totaled around $550,000, office expenses $1.5 million, information technology $2.7 million, rents or occupancy $1.65 million.
In total compensation from DMI and related agencies under DMI control, the highest paid staff in 2017 was executive vice president Dr. Greg Miller (Doctor Dairy), who heads up NDC’s Dairy Research, at $1,546,760.
Listed as a “former highest-compensated employee”, Daniel Chavka, one of several DMI chief financial officers, was paid $769,475. Chief financial officer Carolyn Gibbs was second-highest, paid staff at $1,191,557 through July, and another CFO Quinton Bailey earned $246,542 in 2017.
DMI CEO Tom Gallagher was paid $899,810, followed by executive vice president Jean Ragalie-Carr at $857,406. She is a registered dietician serving as National Dairy Council president.
Fifth-highest paid officer is former Secretary of Agriculture Tom Vilsack in his first year as a DMI executive vice president, serving as president and CEO of DMI’s USDEC. From DMI and related agencies under DMI control, Vilsack was paid $800,557 in 2017.
DMI president Barb O’Brien was compensated $649,419 in 2017.
Additionally, two other DMI executive vice presidents Mark Leitner and Elizabeth Engelmann were compensated $638,041 and $478,809, respectively, in 2017.
The total for items related to salaries, other compensation, and employee benefits for 2017 was listed at $27.37 million – 17.7% of total revenue in 2017.
The agency services of Edelman, at $17.8 million, was 11.5% of total 2017 DMI revenue.
The $8 million paid to Fairlife LLC was 5% of total revenue.
DMI travel was listed at $3.55 million, while the line item for conferences, conventions and meetings was $1.46 million in 2017.
The DMI board chair (listed as Paul Rovey in 2017) was paid $25,000. Other board officers and members of the executive board saw compensation ranging from $1800 to $8600, while many board directors were listed as receiving zero compensation.
CHICAGO, Ill. – Since Dairy Management Inc (DMI) was formed, it has grown to include (and control) many agencies and partnerships that put much of the work into the zone of “proprietary,” even to the 81 voting DMI board members.
In the portion of the most recent 2017 IRS 990 form, where DMI is asked to describe its program accomplishments, the responses specify that, “DMI partners with foodservice industry leaders to help create dairy-based innovation to drive dairy sales and build trust in dairy products.”
The response describes 2017 activity in detail.
While the work done to boost cheese use by restaurant chains resulted in increases of milk equivalent tonnage that are quite impressive, according to DMI (look for more on that in a future article), it is the fluid milk sector reinvention that we will examine here.
In its 990 description of fluid milk partnerships, DMI states: “The dairy checkoff program, working with committed milk processors, embarked on a comprehensive revitalization strategy to reinvent the milk experience for consumers.”
What does that mean?
DMI explains: “The focus includes milk as a standalone beverage as well as an ingredient in other beverage segments such as coffee, tea, smoothies, energy drinks and more.”
As part of this “comprehensive revitalization” effort, the DMI board approved partnerships since 2010 with eight companies they deem as leaders and innovators in the milk and beverage arena, including: Dairy Farmers of America (DFA), which just recently launched the Live Real Farms Dairy + Almond and Dairy + Oat ‘milk’ comprised of half low-fat lactose-free dairy milk and half almond or oat beverage; Darigold/Northwest Dairy Association, which among other new fluid milk products markets a fat-free creamer it calls ‘fat-free half-and-half’ (a contradiction in terms).
Also among the eight are these current partners as of 2017: The Kroger Company, which sources 80% of its milk to Select Milk Producers / Fair Oaks; Shamrock Farms, which partnered with DMI on the Rockin Refuel brand found in chains like Subway nationwide; and Coca-Cola/Fairlife.
Specifically, the 990 form reports that, “The Checkoff program supported Lactaid innovation, marketing and health professional outreach, which spurred innovation and growth in the lactose-free segment overall.”
The 990 description states that the dairy checkoff supported innovation in extended shelf-life brands as well.
But its signature is fairlife, according to the 2017 form 990, which states: “DMI assisted and invested in the national 2015 launch of fairlife milk. The goal was to create a national fluid milk brand leveraging the resources and scale of Coca-Cola. Fairlife has been a tremendous success and continues to grow, achieving dollar sales of $250 million,” according to DMI.
“This is a feat that fewer than 1% of new products achieve,” DMI states further, adding that, “About 50% of consumers repeat their purchase of fairlife, a good predictor of its success moving forward. Based upon fairlife’s initial success, fairlife’s owners have announced (in 2017) the addition of two new production lines to meet consumer demand.”
Those production lines, according to DMI, were planned for installation in 2018. Production lines are also planned for Canada as the product was piloted there in 2018.
According to DMI, a new fairlife plant in Arizona is set to begin production in late 2019.
Other partnership products, such as Shamrock’s Rockin Refuel and the coffee and tea latte drinks with Shamrock and with Kroger were mentioned in the fluid milk portion of DMI’s 990 description of accomplishments.
In summary, states DMI, “Our partnerships are already stimulating change in the industry and fundamentally changing the way the fluid milk industry does business by driving investment in modern infrastructure and by creating new products.”
In fact, according to the DMI 990 form, the agency states that the lactose-free milk segment grew by 15% in 2016 and 11.5% in 2017.
Meanwhile, diet and health professionals are increasingly recognizing the benefits of regular whole milk and the A2 milk on digestive sensitivity. This is something that is not promoted by any mandatory dairy checkoff organization and whether it is conventional whole milk or A2 milk, there is no need to further process the milk to obtain the benefits on digestive sensitivity or lactose intolerance.
For example, New York City registered dietician, certified diabetes educator and author Laura Cipullo writes: “When someone eats full-fat dairy versus low-fat dairy, the fat will actually delay the absorption of the milk’s sugar (lactose). As a result, blood sugar rises more slowly over a longer period of time. Consequently, insulin follows this same pattern. Less circulating insulin means less risk for development of insulin resistance and diabetes.”
This was further supported at the recent hearing in Harrisburg, Pa. that focused on getting whole milk back in schools.
During the hearing and rally, registered dietician and nutrition professor Dr. Althea Zanecoskey stated that whole milk provides ‘satiety’, helping those consuming it stay fuller, longer. She said studies show how children consuming whole milk, compared with low-fat (1%) milk, had lower body fatness and less risk of obesity. They also had higher vitamin D status. It took three cups of low-fat milk to get the vitamin D status seen in children after consuming just one cup of whole milk. Vitamin D is a nutrient of concern, according to medical professionals finding it lacking in children and youth.
Whole milk, in and of itself, checks all the boxes.
According to Cipullo, the milkfat found in whole milk “calms digestive sensitivity.”
In fact, according to various expert comments at the USDA Dietary Guidelines docket in the Federal Register, the beneficial milkfat consumed in Whole Milk, reduces the amount of lactose per 8-oz serving, and even more important, as stated above, the milkfat in Whole Milk slows the absorption of the lactose.
Cipullo explains: “Full-fat dairy is lower in lactose, making it easier for individuals with lactose intolerance to digest compared to low-fat or no-fat dairy,” she writes. “Meanwhile one specific fatty acid contained in dairy is known to aid in gastrointestinal health, and according to a 2013 review from Polish researchers, may actually hold promise in the treatment of IBS and promoting healthy gut bacteria.”
While the innovators partner with dairy checkoff to “reinvent the milk experience”, there is evidence now that a simple solution — that would benefit all dairy farmers paying into the mandatory dairy checkoff from all markets — would be to promote and support real, simple, un-fooled-around-with whole milk.
USDA’s oversight and the flawed Dietary Guidelines are the only obstacles standing in the way, despite a growing list of research-based information showing that whole milk holds beneficial keys to health, not harm, when it comes to long-term cardiovascular disease risk, obesity, body mass index, diabetes and other metabolic disorders, digestive health and sensitivity, vitamin D status, nutrient density, nutrient absorption, satiety (feeling fuller, longer), memory and cognitive focus, as well as mood and mental sharpness. Not to mention the more than a dozen essential nutrients that ride along when people choose whole milk because it tastes good instead of opting for empty calories from other non-dairy beverages.
DMI shows its goals for innovation, further processing, blending, and marketing of ‘dairy-based’ or ‘dairy-included’ beverages as a market-building path for the future.
But at the same time, stronger promotion of the original, purely perfect Real Whole Milk would resonate with consumers, because most do not know anything about milk, and when they learn the truth, it opens their eyes to whole milk as a choice.
Whole milk could be ‘reinvented’ just as it is, with better packaging and the freedom to actually promote it. But due to USDA’s control of the message and direction of dairy checkoff, and the proprietary nature of the many partnerships that the checkoff funds, it may be time to reinvent the mandatory dairy checkoff.
MINNEAPOLIS, Minn. – The news of DFA’s new Dairy Plus Blends – a half lactose-free low-fat milk / half plant-based beverage concoction broke mid-July. DFA’s Live Real Farms brand website showed Lund and Byerly’s stores as the place to buy the Dairy + Almond and Dairy + Oat, but a visit to two stores on the list at the Minneapolis city limits did not have the beverages in the dairy case – yet.
Looking at the packaging, a first impression is: Wow, why doesn’t 100% milk packaging look this good. If only the agencies managing mandatory milk promotion funds and dairy-farmer-owned co-ops put as much thought into packaging and marketing 100% Real Whole Milk as they do for a diluted “innovation,” imagine what could be accomplished!
A further examination of the new Dairy Plus Blends packaging brought this thought: Why use words such as “Purely Perfect” and “Original” for a blend, when such words would seem best reserved for marketing the actual original, purely perfect 100% Real Whole Milk that the DFA member-owner dairy farmers produce and that actually results in the dairy-checkoff promotion funds.
We asked DFA for some background. In fact, we sent 11 questions to DFA and to DMI communications staffs because we were aware that DFA’s Live Real Farms brand is part of a checkoff-supported partnership between DMI and DFA to innovate products in the fluid milk space under the auspices of DMI’s Innovation Center for U.S. Dairy.
We first wanted to know, why the blend? Why not just create an almond FLAVORED 100% real milk beverage? Because, after all, the new Dairy Plus Blends have half the calories, but they also have half the natural nutrients and only slightly more than half the protein of real 100% dairy milk.
It seemed like value was being subtracted, not added.
We all know that almond beverage has barely any almond in it, being mostly filtered water and some additives, so it seemed like the product is an offering of diluted milk. Since we couldn’t find any on the shelf yet at Lund and Byerly’s in Minneapolis, we aren’t sure if consumers will be asked to pay more – for less.
Of course, the packaging does have more. It touches all the right chords.
DFA was kind enough to answer some of our questions, although we have heard nothing back yet from DMI.
“In an effort to meet the demands of modern consumers, Live Real Farms has launched a new beverage, Dairy Plus Blends, which combines all the nutritional benefits of real cow’s milk with the flavor and texture of alternative beverage options like almond or oat,” stated Rachel Kyllo, senior vice president of growth and innovation at Live Real Farms, a DFA-owned brand.
The reply came by email to the questions we submitted.
“All the nutritional benefits of real cow’s milk”? (The label says 5 grams of protein per 8-ounce serving, not 8, and the other naturally occurring nutrients in real cow’s milk are also reduced.)
Kyllo continues in the reply:
“Nearly 50% of consumers who buy plant-based beverages also have dairy milk in the fridge, so they’re buying both products,” she writes. “This product is not about pivoting away from dairy, instead we saw an opportunity to fulfill a need as people like almond or oat drinks for certain things and dairy for others. This product combines the two into a new, different-tasting drink that’s still ultimately rooted in real, wholesome dairy.”
We wanted to know DMI’s part in developing this concept, seeing that dairy farmers mandatorily pay a checkoff promotion fee on every 100 pounds of milk they sell.
DFA’s response stated that, “The overall product concept for Dairy Plus Blends was developed along with DMI and the Innovation Center for U.S. Dairy. Consumer focus groups were conducted with Millennial and Gen X primary shoppers. Overall feedback was positive regarding the product concept, taste and packaging.”
We wanted to know more about how the product will roll out.
“Dairy Plus Blends are now being test marketed at more than 300 retail stores in Minnesota,” the DFA response stated. “If successful in test, the brand plans to roll out more broadly across the United States, beginning in the Central and Northeastern regions of the U.S.”
DFA has already been bottling plant-based alternatives in copacking arrangements in the Midwest. And, the Cumberland Dairy plant in New Jersey, formerly owned by the Catalana family, and purchased in 2017 by DFA, bottles plant-based beverages also as the Catalanas still operate the plant and retained ownership of their plant-based beverage investments.
We also wanted to know how the real dairy milk that makes up 50% of the new Dairy Plus Blends is classified for Federal Order pricing, but that question was not answered.
And, we wanted to know if DFA in its “partnership to innovate” with DMI has any plans to innovate the marketing and packaging of 100% Real Whole Dairy Milk in such a pleasing and attractive way as they have with the Dairy Plus Blends? That question was not answered either.
We also wondered if this “blend” will pull dairy milk drinkers as they hear all this talk about becoming “flexitarian” – cutting back on foods that come from cows and adding more foods that come from plants to, you know, save the earth and all.
Along these lines, DFA’s response attributed to Kyllo at Live Real Farms was: “We’re confident milk will continue to have a place on family tables for years to come, but we also understand and appreciate that consumers have choices in what they drink today. We think Dairy Plus Blends offer a refreshing taste experience and provides a unique way to get dairy in front of consumers who might explore other beverage options.”
We wonder if this is an invitation by a dairy-farmer-owned cooperative, funded in part by dairy-farmer-checkoff to lure consumers into experimenting with something new instead of dairy milk or will it appeal to people who have no intention of drinking 100% real dairy milk? It’s hard to tell, but it’s worth watching.
Some advocates of this kind of experimentation say that the fluid milk market needs more lactose-free choices. There are already lactose-free milk choices, there is also A2 for other types of digestive sensitivity, and there’s one thing everyone seems to be forgetting. Whole milk is more easily digested by people with these sensitivities. There’s actual real proof of this now, not just personal experience, but that’s a story for another day.
In this time of continued fluid milk sales losses, farm milk prices below breakeven for five years and dairy farms exiting the business, why does the dairy-checkoff not re-brand and re-market and innovate the packaging and promotion of Real 100% Whole Milk that is virtually 97% fat-free and loaded with natural goodness? Why not actually partner to innovate the brand-promotion MILK? What a novel idea!
Oops, that’s right. I think USDA lawyers would have a problem with that.
One thing that is impressive coming out of Live Real Farms is the Wholesome Smoothie line of Whole Milk yogurt smoothies last year. DFA says it plans to develop “a robust product line with the launch of additional, innovative products over the next three to five years.”
GORDONVILLE, Pa. — “You are hearing the negatives, not the positives,” said Marilyn Hershey about the dairy checkoff during a meeting requested by Lancaster County dairy farmers hosted here in Gordonville on Friday, April 12.
Hershey has a dairy farm with her husband Duane in neighboring Chester County, and she serves as the national chairperson of the Dairy Management Inc. (DMI) board.
Approximately 12 of the expected 30 farmers attended the meeting with a range of topics on their minds, in particular fluid milk sales and whole milk promotion.
Hershey got involved in dairy promotion eight years ago, serving first on the National Dairy Board, then becoming vice chair of DMI, the board that combines various boards, before becoming chairperson two years ago. National Dairy Board has term limits, whereas the DMI board does not.
Accompanying Hershey for the discussion was Harold Shaulis of Somerset County, who served 25 years on state, regional and national checkoff boards. Having sold his cows, he is no longer a board member, but helps with promotion.
Shaulis said the bottom line in dairy promotion is to sell more milk. He said total per-capita dairy consumption has grown since the 1980s, even though fluid milk sales have declined (Fig. 1). He also talked about trade missions to China and Southeast Asia.
“We are in a global market. One out of six loads of milk a day is exported, and we want to see that grow,” he said.
In addition to exports, Hershey said consumers are eating more dairy products, overall. “The National Dairy Council has funded 20 years of research on butter to get it back in the mainstream. We got butter into McDonalds in place of margarine, and 80% of McDonalds’ sales have a dairy ingredient in them,” she explained as an example of DMI’s partnership strategy.
By email, after the meeting, Hershey furnished the previously requested list of National Dairy Council research we will explore for a future edition.
However, a perusal of the science summaries section of National Dairy Council’s own website, where a few summaries are available, each download is prefaced with these words: “Low-fat and fat-free dairy foods are part of the Dietary Guidelines for Americans (DGA) and American Heart Association (AHA) dietary recommendations. You can download our full report, which shows further support for consuming low-fat or fat-free dairy foods as recommended in the 2015 DGA.”
The website also talks about “nourishing communities,” about farm animal care and sustainability measures (FARM program) adopted and funded by checkoff dollars that tie in with the low-fat and fat-free dietary theme.
Undeniably Dairy replaces Real Seal
Cross-referenced to the National Dairy Council website is the Undeniably Dairy campaign. Hershey said this promotes positive messages to targeted audiences with school curriculum and through social media.
At this website, the “nourishing communities” theme continues as well as the reinforcement of low-fat and fat-free dairy.
Hershey provided a handout on Undeniably Dairy and said: “We are targeting the ‘conflicted health seeker’ with four messages: Responsibly produced, nutrient rich, locally driven, real enjoyment.”
“We want Undeniably Dairy to replace the Real Seal. That is the goal,” said Hershey. “We are combining MilkPEP’s ‘Love What’s Real’ campaign with our Undeniably Dairy campaign.”
The Real Seal was previously owned by UDIA / DMI, but it is now the property of National Milk Producers Federation (NMPF). The Real Seal can only be used on milk and dairy products that contain real dairy ingredients, no imitation dairy ingredients and are made with milk produced and processed in the USA.
This posed a problem for DMI, since importers must pay a small checkoff fee for dairy promotion, so the dairy checkoff stopped promoting the Real Seal and came up with Undeniably Dairy two years ago.
Hershey fielded questions about the requirements for using the Undeniably Dairy Seal. How might those requirements differ from the Real Seal? She did not have the specifics and promised to get back with those details.
“We don’t just have a foot in the schools, we are IN the schools,” said Hershey. “Companies would kill to have what we have in the schools.”
The Northeast program is strong because there are seven football teams here so the program can affect a large number of kids in the Northeast, according to Hershey.
Asked what is on the breakfast carts, she said: “Yogurt, cheese, milk, fruits and vegetables, and some have smoothie machines.”
She said the Grab N Go Breakfast Carts have ice packs to keep the milk cold. She also stated that every dime ADA Northeast sends in to GENYOUth is returned to the Northeast region to fund FUTP60 and breakfast carts as well as other foodservice equipment grants to schools. (See ADA Northeast 2017 Annual Report here)
“We buy the carts, and we have multi-year contracts with the schools to keep milk on the carts,” said Hershey.
Acknowledging that the milk provided is fat-free or 1%, she stressed that, “As independent dairy producers, we can advocate for whole milk, but DMI, FUTP60, and GENYOUth cannot influence policy,” she explained.
“You have to go to your co-ops and Farm Bureau and G.T. Thompson to get that done. We can’t do it,” said Shaulis.
Shalis said the FUTP60 breakfast carts “absolutely sell more milk.”
He reported that 95,000 more children participated in school breakfast in 2018 compared with 2017. “That’s 95,000 more servings of milk since they have to take a milk.”
“But do they like it?” asked one farmer.
Hershey quickly replied: “It doesn’t matter if it’s 3%, 1%, 2% or 0%, they are getting the same nutrition. Even though they are not getting the fat content, they are getting the nutrients.”
A discussion of fat-soluble nutrients and bioavailability of nutrients ensued.
When asked if DMI, yes or no, believes 1% and fat-free milk are equal to whole milk, Hershey said: “We have no control over what we serve or promote in the schools. With that carton of 1% milk, we want children to know they are getting the nutrition, we can’t address the fat.”
When asked what DMI can do about 20-plus years of having the low-fat diet-heart hypothesis “forced on us,” Hershey’s reply was that, “It took 20 years to get here and it will take a while to turn it around.”
She informed the group that the American Heart Association has already written a letter to Congress signed by 18 health organizations protesting the House Bill 832: Whole Milk for Healthy Kids Act.
“They are against the bill, so there is a battle in front of us,” Hershey said.
On the positive side, Hershey said farmers can thank Dr. Greg Miller, global chief science officer for the National Dairy Council, for his use of the research on full-fat dairy. She also said dairy farmers can thank the dairy scientists in each partnering company’s kitchen as DMI develops new products for Pizza Hut, Taco Bell, Domino’s and McDonalds.
Beyond the fat
“Lots of things with school milk need changing, not just the fat,” said Hershey as she dove into the innovations side of DMI’s strategy.
“I appreciate that the fat content is your focus, but it has to be the right temperature, delivered correctly and packaged correctly,” she said. “We are working on this with processors.”
She said that giving high school teens the same packaging as kindergarteners doesn’t fly. She cited research showing that when schools switched from paper cartons to plastic bottles, milk sales grew by double-digits in the first year, and waste was down by 20% in those schools.
“School milk got a lot of discussion there,” Hershey reported. “But, let’s not get lost in this whole milk point. There is a huge price difference (between whole milk and 1% or fat-free), and school contracts are lost by one-quarter of a penny per carton.”
Some of the farmers in attendance said that didn’t matter unless other beverages can compete for those contracts. The bottom line would be whole milk going into the schools.
Time was also spent talking about the trend toward smaller containers and ultra-high temperature (UHT) pasteurization. “All the milk in Europe is UHT, and it tastes good,” said Shaulis.
Some of the farmers in the room disagreed, sharing their concerns that UHT leaves a less valuable product nutritionally and in flavor. To which, Hershey and Shaulis said the entire food industry is going that way, and there’s nothing they can do about that.
“What we have to try to do (in promotion) is stand by the value milk has and promote what we are able to promote,” said Hershey.
She shared figures showing that overall fluid milk sales represent 18% of total milk production: “79% of consumers are not eating meals as a family. Everything is grab and go. That’s where we need to be,” said Hershey. “We have to meet consumers where they are with our innovation and packaging.”
Citing fairlife, she explained how “that product came through our fluid milk committee, and now others are following. Darigold has a new high protein ‘fitness’ drink. DFA has a couple things coming out under the Live Real Farms label. Kroger and Shamrock are coming out with beverages – all this year. These products have a lot of milk in them,” she said.
Farmers learned that these new products are not Class I products. They are largely Class II.
“We partner on these products,” said Hershey. “We give money for research. They do the product research. We only contribute to the research to try and get the innovation out there in order to survive.”
“We gave up on selling milk. ‘Got Milk’ did nothing,” Shaulis added. “Generic milk advertising doesn’t work.”
Farmers wanted more statistics to back up this claim, and they referenced the overwhelming reaction among consumers to the 97 Milk Baleboards and campaign done voluntarily at a grassroots level, starting in Lebanon County, Pennsylvania with signs and baleboards now in five states and spreading nationwide and internationally through the website and social media.
Hershey did share the news that retail data show whole milk sales grew more in the first quarter of 2019 than the already higher whole milk sales in 2018.
She later sent an email stating that in the Northeast, retail sales data show 40% of fluid milk sales are coming from whole milk sales. She also reported that, nationally, whole milk sales as a percentage of total fluid milk sales rose from 29.7% in 2014 to 39.3% currently.
As one farmer noted, “DMI has done a good job promoting cheese, what we are asking for is more focus on fluid whole milk than we are seeing now.”
Hershey had explained that the national checkoff boards are represented geographically by milk volume.
Some wondered if making the checkoff voluntary would allow them to put money into promoting local whole milk, and to take on the imitations head-to-head without the restrictive oversight of USDA.
“It’s all or nothing. That’s how the whole world of checkoff programs work,” said Shaulis. “These farmers on the board look at every penny spent, and they look at what is best for the industry while regions look at what is best for their region.”
‘Let’s have dairy-based protein in 3-D printers and whatever comes next.’
Schools represent more consumer touch-points for milk than all other sectors, combined
By Sherry Bunting, Farmshine, Friday, March 22, 2019
CHICAGO, Ill. — The fluid milk category is receiving much attention after a decade of rapid declines in sales. What does the CEO of the national dairy checkoff organization DMI have to say on the topic?
For starters, he says the dairy industry should stop blaming the alternative beverages and start looking at its own failures.
In his CEO’s Report, delivered at the February DMI board meeting, DMI CEO Tom Gallagher addressed the fluid milk question. While no press release or public statement or copy of the CEO’s Report was provided to Farmshine, a video was posted to the private Dairy Checkoff facebook page and was subsequently provided to Farmshine by a dairy farmer participant.
Since Gallagher states while giving his “CEO’s Report” that this information is ‘public’ and that “we want you to take pictures of it and share it, do what you want with it, it’s yours.” So we are sharing with Farmshine readers what was shared with us by dairy farmers what was shared with dairy farmers via the closed facebook group.
Gallagher began his report talking about farmer engagement.
“The power of the industry is within the industry, it’s the farmer,” he said. “We can commit to activating the dairy farmer at the local and national levels, then we can have a big voice, especially, on what it is that your checkoff really does.”
He talked about the changing world of consumer influence, saying that, “When you think about the things we need to do, more and more they are moving away from the things we are familiar with.”
From there, he referenced a presenter for the following day who would be talking about the future, about 3-D printing of food.
“Well, it’s not the future because you can go on Amazon today, and for $2000, buy a 3-D printer that will print dessert for you,” said Gallagher. “We think, why would people eat that? They don’t like processed foods. But the people who make those and the food production people — and hopefully dairy protein will be in that, not plant protein — they don’t need the 90% of people consuming your product. They just need 5 or 10 or 4% to have a very successful business. If that’s what people are going to be doing, we need to be there.”
Gallagher announced that DMI will be buying a 3-D printer, a few of them. “We’ll buy one, and we’re going to figure it out and we’ll figure out how to approach these 3-D printing companies with dairy-based proteins in foods to be used in them,” he said. “We can’t afford to be nickeled and dimed with 4% of consumers here and 5% there.”
He went on to observe that just 4% of consumers identify as vegan and that vegetarians are also a small number. “What is really driving plant-based foods and beverages is not predominantly the vegan movement, it’s because these companies are investing hundreds of millions of dollars and are getting really good at taste, are phenomenal at marketing and great at innovation.”
He referenced diets that promote being vegan or vegetarian before 6:00 and other consumer trends.
“I think our goal is it is not either-or, it can be both… We have to be honest with ourselves, there will be plant-based beverages out there, and people will buy them, and they will gain share, not because people are vegan or concerned about sustainability… it’s because the food and beverage companies are doing a great job at what they do,” Gallagher said.
“If we do the same job in the dairy industry, we will be just fine. But if we sit back like we did with fluid milk, we will be where we are with fluid milk,” he added.
Referencing a report in the 1980s before the checkoff was authorized by Congress, Gallagher said: “That report laid out everything that needed to be done for fluid milk, and that same report would be valid today because none of it was done — not until fairlife and a few other things.”
“It’s not that the bad guy came and took it (fluid milk sales), it’s that us, the dairy industry collectively, did not keep growing and innovating and doing what we should do,” said Gallagher from a marketing, not policy, standpoint. “Instead of getting in a lather about plant-based food companies, let’s do what we are supposed to be doing as an industry.
“Let’s do marketing. Let’s do innovation. Let’s have dairy-based protein in 3-D printers and whatever comes next. That’s were we need to be,” said Gallagher. When it comes to policy, nutritional values and sustainability discussions, that’s another discussion we need to enter into.”
In the breakdown on sales, he said foodservice milk is up slightly even though retail and other sectors are down. The data was by servings, and he explained how sales figures are pieced together and how program evaluations fit into those.
He also talked about a meeting DMI had with the top persons from the five top coops for packaged fluid milk salesn — DFA, Select, Prairie Farms, Darigold and Maryland-Virginia — along with Jim Mulhern of NMPF, Tom Vilsack of USDEC, Rick Naczi of ADANE, Marilyn Hershey, president of DMI, along with a former CEO of fairlife with some insights.
“We came out of that meeting as positive about fluid milk as ever on how the industry can work together to change the trajectory,” said Gallagher, explaining that they looked at how much of fluid consumption is really pushed down into Class II, and to see if getting and including that number, what that would do to the per-capita fluid milk consumption numbers.
“The group focused on kids. Kids is the deal — at 6 billion containers a year, when everything else is 5.3 billion,” said Gallagher. “So while schools only represent 7.7% of consumption, it represents more touch-points with consumers than everything else combined. So, they, on their own, quickly came to the conclusion that we have got to deal with the kids for a variety of reasons — sales and trust. And they asked DMI to put together a portfolio of products for kids inside of schools and outside of schools. What are the niches that need to be filled? What’s the right packaging? What needs to be in the bottle? And we can do that,” he said.
Depending on the results of the next meeting, the circle could be expanded. And regulatory, legislative and standards of identity issues were brought up that DMI can’t be involved in, but NMPF can.
Author’s note:Meanwhile, all of those kids in school, those 6 billion touch-points for milk every year that surpass all other touch-points for milk, combined, are forced to consume (or discard) fat-free or 1% milk. The simple answer would be to give them whole milk that tastes good so they know what milk is vs. trying to re-invent the wheel. As an industry, we can’t know what the per-capita fluid milk consumption figures would look like today if the 60 billion touch-points over the past 10 years had been permitted by the government to consume whole milk. Before reinventing some pre-competitive proprietary wheel, shouldn’t those touch-points (schoolkids) have an opportunity to try real whole milk?