Dairy Management Inc.Through their checkoff, the nation's dairy farmers and importers have the "collective power" to innovate, change and grow sales and trust, said Tom Gallagher, CEO of Dairy Management Inc.(DMI), which manages the national dairy checkoff program.

Tom Gallagher"While it's difficult to imagine one person affecting demand for their product, through the checkoff they have a voice, a very loud voice that can dominate the marketplace," Gallagher said.

Dairy farmers and importers can realize this power through their checkoff. Through its numerous partnerships, DMI is turning potential sales into actual sales by innovating product, packaging and consumer messaging, Gallagher said. He made these comments to nearly 1,000 farmer and industry representatives at the 2013 National Dairy Promotion and Research Board/National Milk Producers Federation/United Dairy Industry Association (UDIA) Joint Annual Meeting in Phoenix.

Gallagher said the checkoff works to "multiply the checkoff's investment with other people's resources and money, to increase sales and build consumer trust, and ensure homes for increasing dairy production."

Where will those homes be? Gallagher offered examples in global and domestic markets.

Export market – Studies by Rabobank and the Bain Company project that billions of potential dairy sales are available globally. This includes 1.3 billion pounds of potential sales of UHT milk in China by 2020.

Domestic market – "This is still where the vast majority of your product goes," Gallagher said. "The domestic market is not a mature market – there are substantial areas for growth."

Closing that gap is a "great opportunity for the checkoff," he added.

"We do this by innovating so we can get people – whether in Singapore or Atlanta – the dairy products they want, where they want them and how they want them. Our goal is to stimulate the industry to turn potential sales into actual sales. Actual sales don't just happen on their own," he said.

Sales increase when companies innovate product, packaging and messaging to consumers, he said. The checkoff's role is to "get companies to do things they wouldn't have done, or do them faster, and to use other people's resources to meet dairy checkoff priorities."

Sales Successes

Gallagher offered these examples of how the checkoff has turned potential sales into actual sales.

1) Pizza – Since the start of the partnership with Domino's in 2009, 10 billion pounds of additional milk have moved through the pizza category.

2) Pizza Globally – The checkoff's work with Domino's, Pizza Hut and Papa John's has moved more than 100 million pounds of U.S. cheese into the Pacific Rim.

3) McDonald's – The partnership with McDonald's has become the model for other checkoff partnerships. DMI provides expert staff in food science, sustainability, nutrition and schools at McDonald's headquarters, resulting in billions of pounds of additional sales.

4) Taco Bell – In 2013, its first year of partnership with DMI, Taco Bell estimates it will move 1.7 billion pounds of milk; it projects to use 2 billion pounds in 2014. Its parent company, Yum Brands, has asked DMI to look across all of its businesses to provide counsel on developing a strategic nutrition approach for its menus.

5) Food Safety – The Innovation Center for U.S. Dairy®, whose board includes 34 chairmen or CEOs in the dairy industry, has enlisted the support of 350 companies, including co-ops, processors and retailers. These companies dedicate more than 1,000 staff members and money and other resources to work on checkoff priorities. "In the past two years, the Innovation Center's Food Safety Committee has trained more than 1,200 people at plant level – at no cost to the checkoff," Gallagher said.

6) USDA Grants to Farmers and Universities – Earlier this year, as a result of the work of the Innovation Center's Sustainability Council, USDA awarded $10 million to land grant universities to fund on-farm research programs in sustainability. This is in addition to $110 million in grants the checkoff has received for conservation improvements, research, renewable energy and improved efficiency, Gallagher said.

7) Nutrition and Product Research – In addition to a $13 million investment from DMI, the dairy checkoff has brought in another $75 million of funding from government grants, companies and countries. "That $88 million goes to dairy centers and land grant universities to accelerate important research, such as the value of milk fat in the diet," Gallagher said.

8) Fuel Up to Play 60(FUTP 60) – In only three years, with the work of state and regional dairy checkoff staffs, FUTP 60 has reached a number of important milestones, including:

  • 14 million students are eating healthier
  • 14 million students are more physically active
  • 1.5 million students are eating school breakfast at school that includes milk, cheese and yogurt; 85 percent of these students take fluid milk with their meal.
  • 80 business cases developed by state and regional dairy checkoff organizations "prove that we have the models to sell more dairy." The models "give students a better product experience, increase sales and create the positive life-long values toward dairy," Gallagher said.

Partner contributions to expand FUTP 60 have reached $5.5 million. This includes $250,000 from Domino's several years ago and money from other companies, including Quaker, Jamba Juice and Microsoft.

"These examples are just part of the story of how the dairy checkoff is turning potential sales into actual sales," Gallagher concluded.

SIDEBAR: Your Farmer Voice to Consumers

Just as dairy needs to be innovative with products and packaging to increase sales, the industry also needs to be innovative in its consumer messaging, using the power of all 50,000 farm families working together.

"Anti-animal ag activists and self-serving lawyers will only increase their assault on farming," Gallagher said. "They will spew out information based on a foundation of fear, not a foundation of science. Activists are very good at marketing fear, and are especially good at communicating using Twitter, Facebook, blogs and other social media," he said.

"We have the potential as an industry, farmers and partners, to dominate the conversation. Just as we turn potential sales into actual sales, we can turn uninformed consumers into dairy advocates," Gallagher said.

Farmers are especially important in this effort, Gallagher said, because "people believe the farmer. They need to hear the collective power of your voice."

Although dairy has made great progress, dairy advocates need to do five things to achieve success in maintaining consumer confidence:

1) Make your voice heard. Create an emotional connection with the consumer. Tell them about your families, your treatment of the land and the care of your animals.

2) Engage in real-time conversations. "By the time a story makes it to the newspapers or nightly news, consumers have already heard it, commented on it, shared it and moved on. We need to enter conversations as they are occurring."

3) Capitalize on the trust. "Consumers no longer trust government. They no longer trust big business. They no longer trust media. They want to hear from friends and family. They want to hear from employees of companies. They want to hear from you as farmers. You are their most trusted source of information in this country today about where their food comes from."

4) Choose consumer-friendly words. Say dairy "companies" instead of "processors", or "farmers" instead of "producers", or "caring for animals" instead of "animal welfare."

5) Make all our voices heard. "All of us – the farmer, the driver who picks up your milk, the plant worker, and dairy company employees – can make a difference when we speak together as an industry."

"When we do these five things, we won't be just another voice in the marketplace – we will be THE voice that dominates the marketplace," Gallagher said.

This will help turn uninformed consumers into dairy advocates, to protect farmers' freedom to operate, build sales and consumer trust, he said.

Return to Industry Buzz.