DMI umbrella covers seen and unseen

New tax-exempt entities form — some with aliases — as checkoff funds flow to partnerships

By Sherry Bunting, Farmshine, Sept. 20, 2019

CHICAGO, Ill. — The Dairy Management Inc. (DMI) umbrella keeps expanding to include a growing number and assortment of tax-exempt 501c3 and 501c 6 organizations, all having addresses of record being either DMI headquarters at 10255 W. Higgins Road, Suite 900, Rosemont, Illinois, or National Milk Producers Federation (NMPF) headquarters at 2107 Wilson Blvd., Suite 600, Arlington, Virginia.

Several file their public IRS 990 forms under alias names, so these forms are a challenge to find. Some of the boards of these related organizations are not announced except on these IRS forms.

In reviewing IRS 990’s, many of these boards are comprised of the executive staff of prominent multinational dairy supply chain companies as well as executive staff and board chairs for prominent dairy cooperatives based in the U.S. and from other countries.

In addition to those IRS forms we could find for 2016-17, there are new organizations that are being formed since 2016-17, for which no IRS forms are yet publicly available.

One up-and-coming new organization is the so-called Center for Dairy Excellence, which is the product of the U.S. Dairy Export Council and the Innovation Center for U.S Dairy under their Dairy Sustainability Initiative and Dairy Sustainability Alliance.

At a recent dairy risk management seminar in Harrisburg, Pa., a panel of DMI staff mentioned the new “Center for Dairy Excellence”, which they said is unrelated to Pennsylvania’s Center for Dairy Excellence, it just happens to use the same name.

An internet search shows the information about this new center is available in the password-protected “members-only” area of USDEC’s website, but the word is that it will be a new hub for product innovation and sustainability.

One point the DMI panelists made really hit home: “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.”

Products that are rooted in what is increasingly the very hands-on work of national dairy checkoff through these proprietary partnerships that are facilitated by this growing series of related tax-exempt organizations that are then able to push decisions about how checkoff funds are used further into the proprietary pre-competitive hands of the global dairy supply chain and multinational corporations that serve on these related boards.

The companies involved benefit from DMI’s ability to use tax-exempt status to conduct new product research and market testing paid for by dairy farmers under entities such as the Dairy Research Institute — a 501c3 organization that files under the alias name of Dairy Science Institute Inc. and includes several university laboratory sites, including Cornell, where the new fake butter made with water and 10% milkfat was recently discovered and paid for by New York dairy promotion dollars (reported in Farmshine Sept. 6, 2019).

The Dairy Research Institute is referenced at the websites for National Dairy Council and the Innovation Center for U.S. Dairy, but most of the links to their work are in a password-protected “members-only” area. Attempts to sign up to view this information were denied.

Yes, dairy farmers pay for the research, the market testing, and so forth, and the companies then bring these products into the marketplace via the national dairy checkoff funding stream via the tax-exempt status of the Innovation Center for U.S. Dairy.

Having gathered as many related IRS 990 forms as we could find (due to the confusing use of alias names), there are some interesting things to learn about how the vehicle of dairy industry consolidation and trends in promotion and research have been forming since 2008 — right under our noses — and how the mandatory dairy farmer checkoff continues to fuel the global supply chain engine.

IRS 990 forms show how executive staff for large multi-national companies – some of them based in other countries – are influential in charting this course under the mantra of “pre-competitive collaboration”, which of course makes it all confidential and proprietary.

These related organization boards include leaders of companies and cooperatives based not just in the U.S. but also in New Zealand, China, Netherlands, Canada and Denmark as they acquire assets and form joint ventures in the U.S.

The 2011 implementation of the 7.5-cent import promotion checkoff that perhaps gave entities like Fonterra the entitlement to help shape this direction, leading UDIA to transfer ownership of the Real Seal to NMPF, which now charges companies a licensing fee to use the Real Seal. (More on that another day.)

While a main focus of the USDEC and U.S. Dairy efforts is to increase exports, it is interesting to note that these gains have had a reverse effect on dairy farm milk price revenue, according to a recent study by dairy economist and supply chain expert Chuck Nicholson (more on that, too, another day).

Suffice it to say for now that export volumes were higher in 2016 and 2018 compared with 2017 and 2019, while dairy farm level milk prices were lower in 2016 and 2018 compared with 2017 and 2019. In fact, former Ag Secretary Tom Vilsack called 2018 “a banner year for exporters.” For dairy farmers, 2018 was anything but banner.

Meanwhile, Tom Vilsack, president and CEO of USDEC and a primary leader on the board of U.S. Dairy, is heavily promoting two of DMI’s new internal campaigns: 1) The “Next Five Percent” campaign wants to move exports from 15% of U.S. milk production to 20% within the next two years, and 2) The Net Zero Initiative wants the entire dairy supply chain at net zero emissions by 2050.

Let’s open the DMI umbrella with a short summary on some of the DMI-funded 501c3’s and 6’s by their known names and aliases. (We published a timeline for some of the major pieces under the umbrella in Keep in mind that NMPF is intrinsically involved in at least two: USDEC and Innovation Center for U.S. Dairy. These are the two organizations spawning a growing number of new tax-exempt organizations under DMI’s umbrella.

U.S. Dairy Export Council

USDEC and NMPF share offices at 2107 Wilson Blvd., Suite 600, Arlington, Virginia, just outside of Washington D.C., according to forms filed with the IRS. According to financial audits, DMI and NMPF trade and buy services from each other, and NMPF rented offices from DMI in Arlington until 2016 when these offices were sold.

In 2017, USDEC listed NMPF as an independent contractor paid $1.85 million for “trade services”.

USDEC paid DMI $6.5 million for management services in 2017, while also listing $6.4 million in salaries and employee compensation.

USDEC’s total revenue was $24.6 mil in 2017, of which $1.43 mil came from membership dues, $5.7 mil from government grants and $17.1 mil from DMI. This means that USDEC received 71% of its funding from national mandatory dairy checkoff and 23% from government grants with just 6% of its funding coming from the membership dues paid by the corporations and cooperatives that are significantly represented on the USDEC board of 140 directors.

The chief financial officer for USDEC in 2017 was Carolyn Gibbs, who was also listed as the CFO for the Innovation Center for U.S. Dairy. Halfway through 2017, she left this position to become a principal officer of Newtrient LLC, another related organization formed under the DMI umbrella in 2017. IRS forms for this organization are not yet publicly available.

Before coming to DMI, Gibbs spent 13 years at Kraft Foods, Inc. Her consulting work today with Newtrient LLC is described as “industry outreach, strategy, Net Zero Initiative, and project continuity.”

Innovation Center for U.S. Dairy

The Innovation Center for U.S. Dairy — a 501c6 formed in 2008 — is officially known to the IRS as Dairy Center for Strategic Innovation and Collaboration doing business as Innovation Center for U.S. Dairy. The national dairy checkoff organizations increasingly refer to this organization simply as “U.S. Dairy,” and the website for some of its activities is USDairy.com.

According to DMI’s IRS 990 form, this organization is directly controlled by DMI.

The “collaboration” has a small budget of around $115,000 for each of the past three years and no paid staff. But it is the hub of new tax-exempt organizations as well as trademarked initiatives.

Innovation Center for U.S. Dairy describes its reason for tax-exempt status on the 990 forms, as follows: “…to provide a forum for the dairy industry to identify opportunities to increase dairy sales through pre-competitive collaboration. It combines the collective resources of the dairy industry to provide consumers with nutritious dairy products and foster industry innovation for healthy people, healthy products and a healthy planet.”

On its 990 forms, U.S. Dairy lists its board of directors — a who’s who of chief executive officers and board chairs for prominent dairy cooperatives as well as multinational dairy processors. The board also includes DMI CEO Tom Gallagher and of course Vilsack.

The Dairy Sustainability Alliance

A key subset of The Innovation Center for U.S. Dairy is The Dairy Sustainability Alliance, trademarked by DMI in June 2017. A search for The Dairy Sustainability Alliance at guidestar.org, a database of non-profits, brings up Global Dairy Platform Inc.

Global Dairy Platform Inc.

Global Dairy Platform is a tax-exempt organization formed and incorporated as a 501c6 in 2012 and it lists its physical address as DMI headquarters in Rosemont, Illinois.

It describes its tax-exempt justification as follows: “A pre-competitive collaboration of dairy sector organizations, the Global Dairy Platform works with its global membership, scientific and academic leaders and other industry collaborators to align and support the international dairy industry to promote sustainable dairy nutrition.”

Chaired by Rick Smith, president and CEO of Dairy Farmers of America (DFA), the Global Dairy Platform (GDP), has a board of 12 executives representing the following corporations, cooperatives and organizations: Fonterra (New Zealand), Saputo (Canada-based multinational), Leprino (multinational), Land O’Lakes, Meiji Holdings Ltd. (China), FrielandCamprino (Dutch multinational), Arla (Denmark multinational), China Mengniu Dairy Company and the International Dairy Federation.

Donald Moore was paid nearly $600,000 as GDP executive director in 2016, the most recent IRS 990 form available. Moore currently also serves as chairman of the International Agri-Food Network and the Private Sector Mechanism to the United Nations Committee on World Food Security.

DMI senior vice president Dr. Greg Miller is listed as the research lead for the GDP, and he is currently also serving on a food and sustainability committee with the UN World Health Organization. He was the highest paid DMI executive in 2017 at $1.49 mil (including benefit package and deferments).

GDP had revenue of $3.74 million from DMI in 2017 — $2.6 mil for program services and $1.12 mil in the form of grants in 2016. According to the IRS 990, $583,329 of this revenue came from the import checkoff assessment. Research projects accounted for $1.85 million of expenses.

Newtrient LLC

Until July of 2017, Carolyn Gibbs was listed as chief financial officer of USDEC and the Innovation Center for U.S. Dairy, where she assisted with the launch of Newtrient LLC, another tax-exempt 501c6 formed in 2018, according to Gibbs’ bio at newtrient.com.

Newtrient falls under the Dairy Sustainability Alliance (Global Dairy Platform), which comes under the Dairy Sustainability Initiative.

No IRS 990 forms are available yet for Newtrient LLC.

Newtrient is described at its website (newtrient.com) as “an entity focused on turning waste into renewable energy and other commercially viable products, while reducing dairy’s environmental footprint and improving economic returns for dairy farmers.”

Dairy Research Institute

The Dairy Research Institute is a name trademarked by DMI, but the IRS recognizes this 501c3 as Dairy Science Institute Inc. doing business as Dairy Research Institute with a physical address at DMI headquarters in Rosemont, Ill.

The Institute describes its tax-exempt status to the IRS as “created to strengthen the dairy industry’s access to and investment in the technical research required to drive innovation and demand for dairy products and ingredients globally. The Institute works with and through industry, academic, government and commercial partners to drive pre-competitive research in nutrition, products and sustainability on behalf of the Innovation Center for U.S. Dairy, the National Dairy Council and other partners.”

The Institute is primarily funded by DMI with reported revenue of $1 million in 2016 and $785,935 in 2017. However, from 2013 through 2017, the Institute received a total of $24.3 million from DMI, including it’s first-year startup grant of $19.16 mil. in 2013.

Its officers are listed as Dr. Gregory Miller, president, Tom Gallagher, chairman and Carolyn Gibbs, CFO through July 2017 (before heading over to Newtrient and being replaced by Quinton Bailey).

Dr. Miller is also the research lead for Global Dairy Platform and chief science officer for the National Dairy Council (NDC), a 501c3 tax-exempt organization formed in 1969 and today controlled by United Dairy Industry Association (UDIA) and managed by DMI.

GENYOUth

While the sustainability organizational rollouts have been ongoing since 2009-10 memorandums were signed between USDA and DMI, another organization was simultaneously formed while Tom Vilsack was Ag Secretary in 2010 through a three-way memorandum of understanding between National Dairy Council, USDA and the National Foodball League.

This 501c3, of course, is Youth Improved Inc. doing business as GENYOUth, describing its tax-exempt status as “activating programs that create healthy, active students and schools, empowering youth as change-agents in their local communities, engaging a network of private and public partners that share our goal to create a healthy, successful future for students, schools and communities nationwide.”

DMI is listed as GENYOUth’s controlling organization and paid one of its partners, the NFL, $5.6 million for promotion in 2017, according to IRS filings. 

At the same time, in 2017, GENYOUth’s most expensive “charitable activity” was listed as Fuel Up to Play 60, costing $5.4 million and giving considerable advertising exposure to the NFL among future fans. That year, the NFL contributed less than $1 million to GENYOUth.

Alexis Glick, a television personality until 2009, has been GENYOUth’s CEO since its inception in 2010. In both 2016 and 2017, she was paid $259,584 as “compensation for services provided under an independent contractor agreement.”

Other employee compensation totaled $517,165, including vice president Mark Block, at $221,000. Pension plans and other employee benefits totaled $110,026 and other professional fees paid to contractors totaled $2.36 million.

Since 2010, the organization has brought donors to the table including some of the multinational dairy and foodservice corporations DMI is working with in other tax-exempt product innovation and ‘sustainability’ ventures.

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DMI’s innovation = secret projects with strategic partners

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.

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DMI by the numbers, proprietary path of partners is paved

By Sherry Bunting, Farmshine, August 30, 2019

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.

Innovation Center for U.S. Dairy, U.S. Dairy Export Council, GENYOUth, Newtrient LLC, are a few of the vehicles for “proprietary” industry partnerships, which DMI refers to as ‘leveraging industry resources.’

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.

Edelman, fairlife (Coca Cola) and NFL Properties are the Top 3 Contractors paid by DMI in 2017, as shown on the IRS 990.

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.

To be continued

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DMI’s mission has undeniably strayed

By Sherry Bunting, Farmshine, August 23, 2019

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.

Does milk need reinventing?  Simply-unfooled-around-with whole milk checks all the boxes for health and flavor. Meanwhile, DMI states in a 2017 IRS form 990 that it has a “comprehensive revitalization strategy to reinvent the milk experience for consumers.” Since whole milk was pulled from schools in 2009, more young people are growing up believing they are lactose intolerant. Meanwhile, the innovations brought to market with DMI partners over this time period are dairy-based low-fat lactose-free and blended beverages. However, a growing body of research shows science-based reasons why the fat-free and low-fat milk consumption promoted to youth by the dairy checkoff through FUTP60 and GENYouth, in partnership with USDA, may actually be creating much of the new and milder forms of digestive sensitivity that could be avoided by simply consuming regular whole milk. Graphic by Sherry Bunting

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Value added? Or subtracted? DMI, DFA partner on new blend

By Sherry Bunting, Farmshine, July 26, 2019

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.”

We’ll be paying attention to all of them.

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Timeline tells the story

Consumer ‘trust-building’ (or activist placating) becomes heavy-hand on the farm

By Sherry Bunting, from Farmshine, May 10, 2019

BROWNSTOWN, Pa. — Dairy promotion has been an organized deal for over 100 years, since the formation of the National Dairy Council in 1915. It’s an understatement to say times, they are a-changing.

There’s a difference between reacting to change and being proactive to get ahead of “the next thing.” And there’s a fine line between being intuitive and proactive to influence the direction of that “next thing” as compared with charting a course that actually positions an industry to require its dairy farmers to implement x-y-and-z in order to sell milk.

Yes, it’s better to be at the table than to be the meal carved on the table by others. But when dairy producer checkoff funds — paid by all dairy producers — are used to launch products that benefit only some producers in more vertically-integrated processing structures or to launch programs that lead ultimately to requirements that determine who can sell milk, those are red flags.

As the accompanying timeline illustrates, a lot has been going on since DMI was established in 1995 to manage the checkoff and develop unified marketing plans. That was also the year the U.S. Dairy Export Council (USDEC) was created.

What is even more apparent is the proliferation of logo’d programs, initiatives and strategies put forth since the 2008 creation of the Innovation Center for U.S. Dairy. This followed closely on the heels of the U.S. Supreme Court decision protecting checkoff speech as “government speech” and insulating the dairy checkoff from future court challenges in terms of the rights of producers paying the checkoff and the ability of outside organizations to challenge dairy promotion messages.

The formation of the Innovation Center for U.S. Dairy brought the processing, manufacturing and other industry sectors within the inner circle of checkoff promotion, education, and ‘streamlining’ strategies. Unification of the dairy industry is a worthy goal from a marketing perspective; however, there is a fine line between streamlining and steam-rolling, and it is important to pay attention to this because these efforts are dairy-producer-checkoff-funded and should therefore benefit — and certainly not harm — all producers paying in mandatorily.

DMI’s Innovation Center is where GENYOUth was born. Under the legal non-profit name of Youth Improved Incorporated, GENYOUth aligns with USDA dietary policy.

In fact, the Innovation Center is the entity from which two Memorandums of Understanding were signed with USDA, one involving GENYOUth and the other involving the Dairy Sustainability Guidelines and Framework.

The Innovation Center is also where new products are born, like fairlife, deemed the dairy checkoff’s fluid milk “success story.” Others are following suit (like the July launch of DFA’s Live Real Farms half dairy / half almond or oat ‘milks’ aka Dairy + Almonds and Dairy + Oats).

The Innovation Center is also where producer checkoff dollars fund the National Dairy FARM program (Farmers Assuring Responsible Management) program and its three sectors by which dairies are increasingly controlled: Animal Care, Environmental Care, and Workforce Development.

While FARM is administered and managed by National Milk Producers Federation (NMPF), it is funded by DMI via dairy producer checkoff monies. According to the FARM program website, 98% of U.S. milk production is “enrolled” in FARM (via processors and cooperatives).

We are seeing evidence that the animal care portion — and in the not too distant future the sustainability and employee care portions — are being implemented with ever-increasing mandatory authority. FARM can now over-ride Veterinary Client-Patient Relationships, federal and state regulatory milk inspections and affect legal contracts to sell milk.

What started as a voluntary program to help farms improve while demonstrating to consumers the ways in which dairy farms care for animals, environment and employees, is morphing today into a mandatory auditing and probation tool with as much or more power as legal contracts and food safety inspections.

The Innovation Center for U.S. Dairy is also the entity where producer checkoff funds are used to develop Sustainability Guidelines, Frameworks and Alliances, which are leading to goals, benchmarks, and now practices. These developments are in the staging process to become mandatory as part of the increasingly “regulatory” approach of the producer-checkoff-funded FARM program.

We got a glimpse of the direction of DMI on “sustainability” in a 2018 Report by DMI CEO Tom Gallagher.

Among the “five keys to building and maintaining consumer and thought-leader trust” outlined by Gallagher in a 2018 report, global nutrition policy and sustainability ranked at the top.

On the global nutrition side, DMI seeks to “work with external groups that are educating the United Nations on what policy should look like,” Gallagher reported. He also linked the 2020 U.S. Dietary Guidelines now being evaluated by a USDA-appointed committee to being the “guidelines that will ultimately focus on how we will achieve the 2030 Sustainable Development Goals.”

He noted that Dr. Greg Miller, head of the science and research of the National Dairy Council, is involved in global discussion to “help U.S. Dairy remain a key player as dietary and sustainability standards are worked out.”

As part of this, Gallagher mentioned the Global Sustainability Framework and Reporting, developed under the Innovation Center for U.S. Dairy and now being made part of the FARM program. “A unified voice that represents the entire dairy community is essential to reinforce consumer trust. This has been core to our programs, through organizations such as the farmer-founded Innovation Center for U.S. Dairy,” said Gallagher in the 2018 DMI Report.

“As the dominant dairy community organization for the U.S. market, the Innovation Center will use the Dairy Sustainability Framework (DSF) to demonstrate global leadership in sustainable food systems,” he said. “The DSF was developed to provide overarching goals and alignment of dairy’s actions globally on the path to sustainability.”

Part of the Innovation Center’s path in this way is its partnering alliance with World Wildlife Fund (WWF) in developing the DSF.

“The DSF will enable Dairy to take an all-encompassing approach to sustainability through a common language and alignment of international activity,” said Gallagher, “and through this generate a common sustainability commitment that can be expressed at global, regional, national and organizational levels.”

These are Edelman-style techniques for building consumer trust. Edelman is the Chicago-based firm with offices worldwide, that has been working for DMI for 20 years, and increasingly over the past 10 years.

In fact, Edelman developed the Undeniably Dairy campaign, which DMI leadership has stated on record is designed to be a new seal for dairy products in the future. DMI states that the goal is to replace the REAL Seal that used to be owned by ADA / UDIA and then DMI but is now owned by NMPF.

The Innovation Center, via DMI, is also part of a relatively new initiative called Newtrient LLC, focused on sustainability, and in particular, manure management systems with a heavy emphasis on methane digesters.

According to its website www.newtrient.com, Newtrient LLC was founded in 2015 by 12 dairy cooperatives — DFA, Land O’Lakes, Maryland-Virginia, Select Milk Producers, Agri-Mark, Darigold, Prairie Farms, Michigan Milk Producers, Southeast Milk, Tillamook, United Dairymen of Arizona, and Foremost Farms. At its website, under “Dairy Leadership”, the logos of these co-ops are shown, and the explanatory paragraph states the ground-floor involvement of Dairy Checkoff and it goes this way:

“Newtrient’s founding entities include leading dairy cooperatives from across the U.S. representing nearly 20,000 dairy farmers — and producing one-half of the nation’s milk supply — as well as the two associations that advance the entire dairy industry in terms of promotion, research, education, innovation, issues management, international trade and public policy,” the statement reads. Though not named, the description of the two associations at the end of that sentence would be DMI and NMPF.

“These organizations recognize the need to bring manure management technologies and providers together with dairy farmers, researchers and other stakeholders in order to seize the opportunities from manure, while supporting environmental sustainability,” the statement reads.

In a sense, the Dairy Checkoff continues doing promotion, education and research, but is morphing with increased momentum since 2008-09 toward developing the unified voice and streamlined template by which dairy farmers will be measured for future participation in milk markets.

The Innovation Center for U.S. Dairy works like an “incubator” hatching new products, technologies, programs, guidelines, frameworks and strategies that not only unify the dairy industry message, but also streamline its participants.

With 98% of U.S. milk production enrolled in its premier programs, like FARM, the producer-funded direction is one that now possesses the increasing authority to mandate dairy farm practices, in some cases to a micromanagement level – all in the name of that beginning notion of building consumer trust.

The logos on the accompanying timeline tell this story.

Meanwhile, it appears that the idea of regionally-sustained dairy-sourcing is becoming diluted as Dairy Checkoff board decisions are weighted by shifting milk volume geographies.

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Related links

Who is empowering whom? 1/11/19: https://wp.me/p329u7-1rG

Funding their own demise? 1/18/19: https://wp.me/p329u7-1rW

Finances raise eyebrows 2/1/19:  https://wp.me/p329u7-1sP

4th and 40 backed up to our own endzone 2/8/19: https://wp.me/p329u7-1t2

Money spent, points missed 2/8/19: https://wp.me/p329u7-1sX

How did we get here 2/15/19: https://wp.me/p329u7-1u3

Animal Ag in globalists’ crosshairs 2/15/19: https://wp.me/p329u7-1u9

‘Government speech’ rules, producers have little say 2/22/19: https://wp.me/p329u7-1uI

With science fiction, they socially herd us 3/1/19: https://wp.me/p329u7-1uO

Need for more digging is obvious 3/8/19: https://wp.me/p329u7-1v6

Keep zigging? or time to zag? 3/10/19: https://wp.me/p329u7-1ve

Should dairy farmers be forced to fund government speech?: https://wp.me/p329u7-1ve

DMI CEO on fluid milk 3/22/19: https://wp.me/p329u7-1vL

Funding real milk’s demise? 3/29/19: https://wp.me/p329u7-1vU

Peeling back the layers, 4/5/19 https://wp.me/p329u7-1wn

Truth and thoughts: a tragedy government won’t accept: https://wp.me/p329u7-1wN

Farmers bring questions to DMI chair 4/19/19: https://wp.me/p329u7-1×0

Childhood Nutrition Reauthorization in D.C. 4/26/19: https://wp.me/p329u7-1wF

Vilsack reveals Net Zero Project 5/24/19: https://wp.me/p329u7-1yf

“Government is between you and the consumer” 6/14/19: https://wp.me/p329u7-1xW

Farmers bring questions to DMI chair

By Sherry Bunting, Farmshine, April 19, 2019

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.


After a Q&A session with farmers, DMI chairperson Marilyn Hershey supplied this graphic of how dairy consumption has increased while product share has changed from 1985 through 2018. The chart represents National Milk Producers Federation (NMPF) analysis of USDA commercial disappearance. According to USDA, the agency’s commercial disappearance figures include imports and most exports.

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.


This screenshot of the landing page for the Undeniably Dairy campaign’s website (https://www.discoverundeniablydairy.com/) illustrates the nourishing communities theme that DMI chair Marilyn Hershey says targets “conflicted health seekers.” She also said: “We want Undeniably Dairy to replace the Real Seal. That is the goal.”

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.”

More interesting is where DMI wants to take the campaign.

“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.

In the schools

Fielding questions on the school breakfast carts, Hershey explained that GENYOUth is the umbrella organization, and Fuel Up to Play 60 (FUTP60) is the boots on the ground.

“We don’t just have a foot in the schools, we are IN the schools,” said Hershey. “Companies would love 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)

Hershey confirmed that the GENYOUth Gala raises more money than it spends by getting funds from other donors to buy more carts. She explained, as previously reported in Farmshine, that PepsiCo gave $1 million to translate FUTP60 into Spanish and pay for more breakfast carts. She said PepsiCo made a large 2018 commitment to the program, and that’s why PepsiCo recognized with the Vanguard Award at the 2018 Gala.

“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.

What we can do is put out our research and promote research,” said Hershey.

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.

“Kids want to drink their milk from a bottle because that’s how they drink everything else,” said Hershey, noting that Rick Naczi, executive director of ADA Northeast, pointed this out at a fluid milk meeting DMI had in Chicago in February.

“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.”

Farmers were concerned that if they continue to be forced to pay into a checkoff program that represents their market less and less, what does the future hold for them?

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.”

To be continued.


DMI chairperson Marilyn Hershey and former board member Harold Shaulis met with dairy farmers for a question-and-answer session in Lancaster County, Pennsylvania on Friday, April 12. Hershey explained that DMI, the board she chairs, combines the National Dairy Board and the UDIA board. In this way, DMI brings together the national 5-cent spending with the portion of the 10 regional cents that is brought into national efforts under the unified marketing plan.