Dairy Checkoff Leaders Highlight Keys To Industry’s Future at Annual Meeting

The checkoff’s mission of growing sales and building trust is key to assuring a prosperous future for the dairy industry, Dairy Management Inc. (DMI) CEO Tom Gallagher said during the 2017 joint annual meeting of the United Dairy Industry Association, National Dairy Promotion and Research Board, and National Milk Producers Federation (NMPF) in Anaheim, Calif.
Speaking to more than 800 dairy farmers and industry representatives, Gallagher described how the checkoff has grown per capita consumption through several key areas, including exports and foodservice partnerships.
He shared how DMI’s “go-to-market” approach proactively works in partnership with the supply chain to expand dairy markets and helps to fill a market need. He said DMI, which oversees the checkoff, allocates funds to stimulate unmet demand through product development, innovation and marketing.
“Our job is to figure out where to use resources in the market chain,” Gallagher said. “Unmet demand is the key. Demand is not the function of what people buy – it’s the function of what we offer them. If we offer innovative products, whether it’s global or domestic, we know we can increase consumption.”
Gallagher said, according to NMPF, U.S. per capita dairy consumption reached 591 pounds in 2016 – up from 566 in 2010 – and credited cheese and butter as the primary drivers for this growth.
Cheese reached its highest consumption level ever in 2016, fueled by at-home use and out-of-the-home ingredient use, especially at foodservice. Per capita cheese consumption in 2016 was 36.3 pounds.
“It’s growing and will continue to grow. In fact, domestic cheese has carried the day in terms of sales the last four or five years,” Gallagher said.
Butter also is enjoying a comeback, thanks to consumers’ acceptance of dairy fats and their desire to consume real foods. Butter reached its highest consumption mark since 1968 at 5.7 pounds per capita in 2016.
Gallagher said the long-term trajectory of per capita dairy consumption remains on a positive path thanks to the checkoff’s work with partners, including McDonald’s, Domino’s, Taco Bell and Pizza Hut. He said since the start of DMI’s partnerships, dairy sales have grown 25 percent.
Gallagher cited recent examples of checkoff successes, including:

  • McDonald’s replacing margarine and canola oil with butter that equaled approximately 700 million milk pounds annually.
  • The checkoff-led launch of Taco Bell Quesalupa, which has five times more cheese than a regular taco, equating to 60 million milk equivalent pounds.
  • Pizza Hut’s Grilled Cheese Stuffed Crust Pizza, produced with checkoff resources and insights, which features more than 1 pound of cheese on every pizza. This has led to more than 25 million milk equivalent pounds.

Beyond dairy consumption growth domestically, Gallagher said exports of U.S. dairy are providing a boost. They have more than quadrupled since 2000 – to nearly $5 billion in 2016 – thanks to growth in the top five markets: Mexico ($1.2 billion), Southeast Asia ($671 million), Canada ($632 million), China ($384 million) and South America ($280 million).
“As we look to the future, exports will play an increasing role in growing dairy sales,” Gallagher said.
A key to that growth is the checkoff’s partnership with Yum! Brands, which has nearly 44,000 restaurants in more than 135 countries. The company’s restaurant brands – KFC, Pizza Hut and Taco Bell – are global leaders of the chicken, pizza and Mexican-style food categories.
DMI facilitated innovation sessions with Pizza Hut in Asia Pacific and created a “Cheese University” taught by a checkoff scientist to educate the culinary teams on ways to use U.S. cheese. Gallagher said the emphasis is already yielding results. Through August, U.S. cheese use at Pizza Hut Asia Pacific is up 35 percent versus year ago.
Beyond sales, Gallagher said the need to continue growing consumer trust is equally as important to the dairy industry’s future.
“What keeps me awake at night is trust and the farmers’ right to farm,” he said.
Key to building trust is educating consumers who want more information about where their food comes from. They want to know about nutrients. They want to know their food is responsibly produced and locally sourced. They want delicious taste and enjoyment.
Gallagher said the Undeniably Dairy campaign, launched earlier this year, will help set the record straight and build trust.
The Undeniably Dairy effort was created through the Innovation Center for U.S. Dairy, a forum that leverages the collective power of the dairy community to address the expectations of consumers through shared best practices and accountability.
The industrywide collaboration is beginning to make a difference, with 170 companies actively engaged, said Barb O’Brien, who serves as president of DMI and the Innovation Center for U.S. Dairy.
“We need to continue to build two-way engagement with consumers,” O’Brien said. “We are operating in an environment where negative marketing and absence claims are taking the day. Many of those claims cross the line.
“With our campaign, we have launched a very positive and proactive way of communicating. It starts with listening and understanding what is on consumers’ minds. We’re working to shift the tone and tell our story in a meaningful way. Undeniably Dairy truly does establish that two-way dialogue.”
A new extension of Undeniably Dairy is a partnership with Discovery Education. Beth Engelmann, chief marketing communications officer for DMI, said the school-based program aims to connect kids to where their food comes from through tools such as a virtual tour of a dairy farm and social media interaction between classrooms and farmers. Discovery Education works with 50 percent of all K-12 schools with the potential to reach 38 million students.
Gallagher concluded his remarks by emphasizing the need to embrace change that he says is inevitable and goes “right to the heart of trust.”
“We don’t need to fear change,” he said. “We need to lead the change, and when we do, we’ll be at the table when consumers, retailers and others have misperceptions. We’ll be at the table talking to them, educating them and influencing their decisions.”
For more information about the dairy checkoff, visit www.dairy.org. For information about Undeniably Dairy, visit www.undeniablydairy.org.