Friday, January 25, 2019

Dairy Forum 2019: “Nobody is more respected than the farmer.”

Source: MilkPEP

Speaking at the International Dairy Foods Association’s Dairy Forum 2019 in Orlando this past week, Beth Ford, president and CEO, Land O’Lakes Inc., said, “Nobody is more respected than the farmer.” I just cannot get that phrase out of my head. It’s something the dairy industry owns and something we need to talk about.

While the consensus at this annual meeting of dairy industry executives was that plant-based products are here to stay, those plant-based products cannot trace the almond, coconut, pea, etc., back to the farm or farmer. Milk, as is, or in the form of butter, cheese, ice cream, yogurt, etc., can be tracked back. It’s a story to tell and one that makes dairy real to today’s consumers.

It’s an opportunity for the dairy industry to open the throttle and stay relevant in the marketplace. That’s what the keynote speaker—Ken Schmidt, former director of communications strategy at Harley-Davidson Motor Company—left Dairy Forum attendees with after he drove his bike out of the Ritz-Carlton Ballroom. (Wowza! It was a spectacular presentation.)

Dairy processors recognize that plant-based products are not going away, and in some categories, such as yogurt, can be an important part of their business. To read more on this, link HERE to the article “Culture clash – Yogurt innovation driving category disruption,” which I wrote for Food Business News and features research and insights presented at Dairy Forum 2019.

Those of us who attended the final breakfast session of Dairy Forum 2019 were fortunate to hear McKinsey & Company consultants share findings from independent research conducted in partnership with IDFA this past fall. The study captured insights from in-depth interviews with 30 CEOs of international dairy companies and findings from a survey of more than 1,000 American households to chart consumer preferences that are shaping the domestic dairy market.

Slide source: McKinsey & Company

“The success of our industry lies in our ability to partner together to move dairy forward,” said Michael Dykes, IDFA president and CEO. “This is just the start of the way we’ll use these findings to transform our industry for continued prosperity.”

Based on the research, the consultants believe U.S. dairy companies should consider four strategic responses--innovating to capture domestic growth, revamping the supply chain to serve a new type of demand, exporting to markets with high projected dairy deficits and attractive trade agreement groundwork, and investing directly in deficit markets to maximize long-term success--to create a winning growth formula for dairy. Focusing on the U.S. market, the consultants suggest dairy companies adopt a strategy combining innovation that supports a diverse range of consumer preferences along with a revamped supply chain to serve new types of demand.

Slide source: McKinsey & Company

“Dairy consumers are trying new things,” said Christina Adams, associate partner at McKinsey. “Our research showed that 41% of dairy consumers have tried a new dairy brand in the last 12 months. As a result, 48% now buy both, the new and the original brand.”

About one fourth (24%) stick with the new brand while the others (28%) return to the original. It’s the small brands, however, that are driving dairy growth.

And interestingly, big and small companies have similar success launching new brands. Both have about a 25% four-year survival rate. Tactics that comprise a winning strategy, Adams said, include a focus on identifying growth spaces through analytics, making quick and small investments instead of big bets and investing in new supply chain capabilities.

Slide source: McKinsey & Company

It’s not that companies are not introducing new products. It’s just that many are taking too long to respond to marketplace trends and therefore the product loses relevancy. The McKinsey study showed that 83% of dairy companies have grown their product offerings in the past five years, and while doing so, nearly two-thirds (64%) still don’t have enough consumer insights to get it right, according to Roberto Uchoa de Paula, senior partner at McKinsey.

Land O’Lakes’ Ford suggested the previous day that it is paramount that dairy processors evolve their innovation efforts in order to win in a rapidly transforming marketplace.

“Today people want to try new things,” she said. “Entrepreneurs understand the speed of innovation.”

Slide source: McKinsey & Company

Entrepreneurs do business differently and don’t let corporate structure box them in, she said. They also know when to pull the plug and start over. Large dairy processors need to embrace this new way of doing business.

Adams explained the role of agile innovation in dairy foods product development. Agile by definition means “able to move quickly and easily.” In recent times, it has come to mean “relating to or denoting a method of project management, which is characterized by the division of tasks into short phases of work and frequent reassessment and adaptation of plans.”

It’s really quite simple and has long been the approach of entrepreneurs, if for no other reason, simply because of their small size. With agile innovation, a company empowers a small, focused, cross-functional team that basically analyzes, tests, designs and builds until the product is just right. This is done quickly, using resources on hand. Gone are the days of expensive market trials.

Ford explained that Land O’Lakes will test product concepts at farmers’ markets in order to get quick feedback.

Slide source: McKinsey & Company

Agile innovation is a process that is transparent to everyone, often with the team “living” together in an off-site office space. Daily briefings are common and prevent debates or holdups. Speed is the name of the game.

Perishable dairy products are uniquely poised to be agile, as they have a short shelf life and can easily be tweaked for improvement or simply changed to stay exciting. Limited-time offerings (LTO) are a strategic approach to stating connected to consumers.

It’s classic supply and demand. Shoppers recognize if they don’t purchase the LTO when it hits the store shelf, it may not be available the next shopping trip. They present consumers with an opportunity to explore seasonal flavors, in particular those associated with a holiday. They encourage purchase and often serve as a means to help one get in the spirit. To many, purchasing products that recognize local sports teams or national competitions show a sign of support. Even when food dollars are tight, consumers may dig a little deeper into their pockets to participate.

Limited runs of flavored milk present an opportunity to make it a more desirable beverage. The Hartman Group, Bellevue, Wash., conducted research on what it calls beverage culture. Beverage culture includes shared beliefs and behaviors around drinking, including beliefs around what is appropriate to drink, when, how and with whom. Beverage culture matters because it defines what choices an individual can make.

Most Americans (65%)--especially Millennials--always have a beverage on hand, according to The Hartman Groups’ research. Nearly half (46%) of Americans love to try a new beverage, with Millennials (64%) leading the way. A whopping 47% of Americans say they will often pay a bit more for a beverage that is higher quality or a more interesting flavor, while 62% say beverages play an important role in health and wellness.

That’s where the new MilkPEP consumer campaign--Milk. Love What’s Real—comes into play. The campaign was launched at Dairy Forum, alongside marketing programs offered by Dairy Management Inc. (DMI). The goal is to have the dairy community come together to re-ignite the milk category and increase trust and relevance in dairy among consumers.

“Real milk is the real deal. We’re painfully aware there’s increasing competition and changing consumer habits and demands, but milk is still a top choice for so many people because it’s got so much going for it,” said Julia Kadison, MilkPEP’s CEO. “And today, there’s even more reason to connect people to milk in real and salient ways, making sure that they recognize and realize the importance milk plays in their daily lives.”

The campaign was inspired by insight that people today are craving authenticity in a world where so much is fake. Milk has something worth sharing: real food made by real people, and contributing to so many things that really matter in Americans’ lives.

“Over the past year, the community has come together through the Innovation Center for U.S. Dairy to share the story of dairy from farm to table,” said Beth Engelmann, chief marketing and communications officer at DMI. “As we continue to build on the momentum of Undeniably Dairy, our campaign to increase trust and relevance with consumers, we are excited for the partnership and collaboration with MilkPEP, under the theme of real, showcasing that there is no substitute for real dairy. The community also continues to work together on priority areas that will reinforce dairy’s role in sustainable nutrition while highlighting our commitments to animal care, environmental stewardship and innovating to meet consumers’ evolving tastes and nutritional needs. Our shared goal is to connect consumers to the great work of the dairy community and to the people behind the nutritious, responsibly produced and real dairy foods they love.”

Check out this Land O'Lakes video about future farmers:

Just remember, “Nobody is more respected than the farmer.” The industry can trace real dairy foods back to real dairy farmers. That’s how to dominate the marketplace.

It was wonderful to visit with so many of you at Dairy Forum. Would love your feedback on this blog by dropping me a note HERE.

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