Forbes: The dairy industry 'has nobody to blame but itself’

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Declining milk consumption has been partly to blame for the economic difficulties facing the dairy industry.

Exactly, how did it come to this?

Forbes magazine is out with an article entitled, “How the milk industry went sour, and what every business can learn from it.”  To see the article, click here.

According to the article, the dairy industry has nobody to blame but itself.

Essentially, the article points out, the dairy industry has focused on cows and production efficiency instead of consumers.

The article cites the emergence of niche markets that fell into the laps of competing beverage manufacturers, along with the failure to come up with convenient packaging for on-the-go consumers.

The article says the industry should have defined itself as a “dairy-based nutrition provider” rather than a milk business.

“Other companies, such as United Parcel Services and IBM, successfully stepped back and defined what businesses they were in to create value-added services that built on their core products,” the Forbes article said. “UPS is not just a package shipper; it’s a logistics manager.”

The article concludes by saying the industry needs to do “some serious soul-searching.”

Dairy Herd Management has written about this problem for a number of years, including this recent editorial and this story from 1999. 



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Beth    
pa  |  January, 07, 2013 at 09:24 AM

That is a nice thought and probably true but unlike UPS and IBM, the dairy industry is comprised of thousands of entities with their own business plan. Do we as an industry want to go to a vertically integrated system which would almost be a necessity to achieve this outcome? Even Co-ops with a large processing base are becoming more difficult to work with under the guise of consumer demand but what is really just political correctness. Do we as hard-working, family owned and operated businesses want to cede our future to the whims of processors? That is what it would take to have a cohesive marketing plan. One name, one product and no future for the smaller business that wants to do things better. I also find it disheartening that this piece references the dairy industry and essentially lumps the producer in with the processor. We make a good quality product for a ridiculous price and they control too much of what we do. Yet in the end they haven't followed market trends and foreign demand to re-tool their plants to provide what the consumer wants. The brightest spot lately is the construction of plants to produce Greek yogurt. Now all we need to do is have the USDA recognize it as a good protein source and add it to the school lunch requirements. Remember what milk in school lunches did for dairy sales? It takes 3 times as much milk to make Greek yogurt so think what that could do.

Brad    
MN  |  January, 07, 2013 at 10:53 AM

All good comments Beth. Agree with your assessments of the mega processors, coops or otherwise. Continually we are asked to become more efficient at the grassroots level while we see our processors very slow to move. Frustrating. Agreed, vertical integration may be a worthwile alternative with the growth in the artisan cheese market and greek yogurt. It is imperative we take a page out of the book of some of the more adaptive organizations that continue to "sell" the consumer what they want, not "tell" the consumer what they want.

N.E.MI dairy producer    
Posen, MI  |  January, 07, 2013 at 11:14 AM

Totally agree with Beth and Brad. We have promoted our high quality wholesome milk and our lifestyle to consumers for years.

Eric    
PA  |  January, 07, 2013 at 11:59 AM

Our milk price is based mostly on politics more than supply and demand. I used to think I was self employed, but now I think I work for the government without any benefits.

Steve    
WI  |  January, 07, 2013 at 12:38 PM

Mr Gallagher finally stated fluid milk consumption is going down for the past 30 to 40 years, really! You would have thought they, DMI would have changed ther advertising by now, any other industry would have.maybe it is time for a change in the people who are running our promotion program. The old saying doing the same thing over and over and expecting different results is the definition of insanity!

Londa    
Iowa  |  January, 07, 2013 at 04:17 PM

I have always wondered what kind of checkoff results could be achieved if private advertising companies had to compete for our checkoff dollars based on results. Looking at the success that some dairies have had processing and distributing their own milk is quite remarkable; the common theme from reading about those dairies is the challenge they overcame of marketing their product. Maybe a few lessons could be learned from their playbook. My personal thought on this is that it is a good thing our marketers are not personal employees of the dairies they work for.

Harry    
NY  |  January, 07, 2013 at 06:10 PM

I may not be the sharpest tool in the shed concerning marketing. However, it seems evident that class III milk (cheese) is the largest determiner of blend price. Thats not anything new, but I believe that several years ago many inefficent cheese making plants built new state of the art facilities, which comes down to now being able to make incredible amounts of cheese quickly, thus filling warehouses instantly and satisifying cheese buyers more quickly. At the CME where cheese is traded, I see no reason for the few cheese buyers that there are to get very excited about bidding the price up. And class III is based on that trading. Theres alot of cheese, and not alot of competition for it. Also, any milk that goes into regular or greek yogurt prices at class II. Both II and III are below cost of production. So in reality you can make all the cheese and yogurt you want, but until those above cost of production dairyman will not be profitable. I do not believe there is enough price discovery going on. Vertical integration, while there is some of that going on, ends up as unfriendly to the industry. We need more competition, not less. Look at the consolidation of processors. Has that helped dairymen?

Ashley    
CO  |  January, 08, 2013 at 09:30 AM

I agree with both Beth and Brad. The producers work their tail off to produce a safe and wholesome product, but the processors and Coops fail to market these products. The consumption of liquid milk continues to fall, yet study after study illustrates how good milk is for you. Why is it the results of these studies never make it to the consumer? Why is it that there isn't an ad out there showing customers the value of milk as a great post-workout beverage to replenish vitamins lost? Why aren't studies showing how long-term milk consumption improves children's attention span and cognitive ability being used to show the consumer the importance of including dairy in a well-balanced diet? I apologize if either of these marketing campaigns have been used, but if they have they have been done poorly as I have no recollection of them. The last successful ad campaign that was put out there was Got Milk? in 1993. It's time for a new one...

Dave    
PA  |  January, 09, 2013 at 08:21 PM

I will say that each dairy farm has the means the to change their future. Do not wait for the PROCESSOR to change. No need to integrate. YOU change. The problem has been defined. How about marketing your own yogurt, cheese. milk, and ice cream???? There are thousands of farms that could once again supply milk products to your neighborhoods. Forget the dairy check off. You market your brand. Deliver to their doorstep, provide a service, promote local.... It will require you to to take your future into your hands. Change your focus from production to marketing. From taking what they give you, to you setting your own price. This is not for the SLOPPY producers. Nor is it for the faint of heart. But it IS VERY PROFITABLE


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