Dairy promotion’s 2006 industry vision will help U.S. dairy producers grow their businesses by working to convert milk into products consumers really want, said Tom Gallagher, chief executive officer of Dairy Management Inc.™ (DMI), which manages the national dairy checkoff program. Gallagher spoke with more than 1,000 dairy producers and other industry representatives attending the 2005 National Dairy Board/United Dairy Industry Association/National Milk Producers Federation Joint Annual Meeting in San Francisco.

Much of today’s dairy industry is production-driven, as opposed to consumer-driven, and thereby ignores unmet demand, Gallagher said. Total growth of dairy in traditional forms – such as white milk in gallons, American-style cheeses sold domestically, and mozzarella – will grow only slightly over the long haul. 

“This depicts current dairy sales in a production-driven industry. The problem is, this approach ignores potential sales,” Gallagher said, adding that the industry must define the market by what consumers want.

Address unmet demand
This shift involves “working in partnership with those who manage and control the means of production to develop products that fulfill unmet consumer demand and increase total sales,” Gallagher said. “If we cannot grow sales, then demand doesn’t matter, no matter how large it becomes.”

Top growth areas from filling unmet demand include:

Single-serve milk.
 “As you know, many people believe that fluid milk simply cannot grow – it’s a mature market,” Gallagher said. “But for all of you who believe that fluid milk cannot grow, I’m here to tell you that is absolutely false.”

Gallagher pointed to more than 250 million pounds of additional sales that have already been realized through efforts with fast-food restaurant chains. The dairy checkoff aims to help stimulate even more sales by working with Burger King, Sonic Drive-In and other chains. “That’s growing your business. That’s meeting unmet demand,” he said.

Even more opportunity is on the horizon, as Coca-Cola and Pepsi prepare to step up activity in the fluid milk business. “For example, Coke is now marketing and distributing ‘Bravo! Foods Milk Slammers®’ with an aggressive business plan that calls for sales in retail, foodservice and school channels,” Gallagher said.

Coke has a fleet of trucks, second in number only to United Parcel Service, that deliver products daily nationwide. They also maintain more than 2 million vending machines that can sell milk.

“One sale per day in 10 percent of these machines in hospitals, offices and schools would mean an additional 75 million units sold each year,” Gallagher said. “That’s meeting unmet demand.”

The dairy checkoff will help stimulate these changes by creating strategic partnerships with Coke, Bravo! Foods and their milk suppliers to stimulate new sales.

Growth will happen through innovation in fresh fluid, extended shelf-life milk, and aseptic products, Gallagher said. He added that the checkoff plans to create alliances with “milk processors, bottle suppliers, blow molders, filler manufacturers, label providers, and sleeve manufacturers to spur production capacity of the plastic bottle.

Cheese is another area of unmet demand. Innovation is the key to growth.

By 2010, total global dairy demand could increase by 2.4 billion pounds, primarily in cheese, says Gallagher. The countries most likely to fill that demand will fall short by nearly 1.4 billion pounds, leaving nearly a billion pounds of unmet demand. The United States can help fill that gap.

U.S. retail sales can improve through the introduction of more Hispanic cheeses, kid cuts, snacking cheeses, and other product innovations. Partnerships with dairy cooperatives and processors also can help meet unmet cheese demand through new cheese-friendly menu items at national restaurant chains.

Dairy ingredients are moving more quickly than ever with the help of the dairy checkoff. Gallagher highlighted several partnerships that are underway:

  • A whey consortium developed with 15 international companies.
  • A whey research project co-funded with two global companies, Fonterra and Dairy Australia, to develop whey health-related claims that can help the dairy industry compete more strongly with soy.
  • An upcoming worldwide research and promotion effort to address potential research redundancies, make producer-funded research programs more effective, and make dairy more competitive worldwide with soy.

“Through partnerships and innovation, consumption can grow as quickly as the industry can accommodate change, as quickly as the industry can innovate, as quickly as the industry can give consumers what they want,” Gallagher said. “That is growing your business.”

For more information about producer-funded dairy promotion programs, visit www.dairycheckoff.com.

Dairy Management Inc.