The 21-minute interview was published on April 3.
Loss of demand:
About 50 percent of the cheese produced in the United States moves either directly into food service — such as restaurants, pizza chains and schools — or to companies that prepare cheese products for food service. In a matter of days, half the restaurants closed and nearly 80 percent of Americans are now sheltering at home.
“In Wisconsin, where we’re really the cheese kings, you’ve lost a massive market for product.”
Dairy products are flying off the shelves at grocery stores, but only one-third of cheese goes into retail markets. So that demand is not enough to make up for the food service losses.
“Half our market share has been decimated in an unprecedented fashion and we are struggling as an industry to make up for that.”
Farmers, processors and others in the industry are working closely together to find solutions.
“This has the entire industry buzzing and sharing ideas, and even sharing milk and moving milk in different directions. Everyone is trying at their highest potential to get every drop of milk processed in Wisconsin and around the country.”
“It’s just proven to be too great a challenge in where we saw some of the milk just couldn’t find a home.”
There are many aspects to the challenges. In addition to the lost food service market, dairy exports have dropped off and processing plant employees have had to use social distancing for their safety, which is the right thing to do but has slowed productivity.
“Packaging lines are moving slower so you’re losing the ability to process some milk… You’re going to basically take in less milk so you can move at a slower pace. And you’ve had some plants go to fewer days of production because they simply don’t have a sale for the end product.”
Processor and farmer communication:
Processors and farmers have done a good job of communicating. That is critically important.
“We can’t look at this issue as an us-versus-them. This is an industry that needs to be united against a common enemy of an illness that has put America on pause for a while. This is not a processor decision that they would have made in any scenario. To see this sort of cutback and to see milk begin to back up in the system is never the goal. The goal is always to get that milk processed.”
Short- and long-term changes:
“I think it’s an opportunity … for all of us in the dairy chain to look at how we do business and whether we will be more diversified at the dairy plant level.”
The food service and retail supply chains are so much different, from the types of products to the packaging to what is required on labels. For example, shredded cheese that goes to a restaurant in bulk might come in 10-pound bags, far larger than what a customer sees at the grocery store.
“So it makes sense that you’ve had dairy plants specialize because these are such different markets. It’s difficult to say I am both a food service supplier and a retail supplier. It is done, and a lot of people have that mix that is allowing them to shift to retail right now, but some companies have devoted a lot more energy to the food service side.”
Making this switch is a long-term fix.
“In the short term, it’s really about what can they do to move milk to other companies that can use it, to reduce their make so that they stay in business and keep moving milk through their facility, (whether they) can find markets in food service as we see in the next few weeks, and hope, restaurants come back online around the country.”