Strength in Numbers
September 1, 2005
Strength in Numbers
by James Dudlicek
Quality Chekd continues to provide its members with a recipe for success in the dairy industry.
It started with the use of a common trademark and has become much more. Moving into its seventh decade, Quality Chekd Dairies Inc. continues to provide volume purchasing, quality assurance and marketing services to scores of regional and independent dairy processors throughout the United States and Latin America.
Created to help smaller operators hold their own against the biggest players in the post-World War II era, Quality Chekd (QC) has evolved into an organization that helps its members take on an ever-dynamic market: rising costs of ingredients and fuel, an increased focus on food safety issues, the changing appetites and nutritional demands of consumers across the country.
“The number-one thing in my mind has always been that Quality Chekd represents a formula for success,” says Peter Horvath, managing director of the Naperville, Ill.-based company. “The one common element we see in the membership is the focus on quality and food safety, and the trademark, and how that all ties together. And you can truly see the companies that have embraced that process, when that process becomes part of their culture, how successful those companies are.”
Most visible to consumers familiar with QC is the logo, a red check mark inside a blue letter Q serving as a signal that the product contained in the package meets or surpasses some of the highest quality standards in the industry.
“One of the things about our trademark — and we’ve done a lot of research on it — is that people will recognize it as being something of very high quality,” says Tom Bruce, QC membership development director. “All of our research has come through as saying it’s something that differentiates us from other products in the dairy case.”
While QC markets some products under its own brand, the logo is more of a stamp of approval of the member’s brand, explains Molly Murphy, marketing and sales director. “It’s an endorsement of the local dairy brand that represents they’ve reached our standards for quality and food safety,” she says.
But as the industry has changed, so has QC, and the organization has constantly updated its services to provide members with an invaluable support system. Pooled resources — financial as well as intellectual — have given members a leg up in tackling the challenges facing all dairy companies doing business today.
“Regarding new revenue opportunities, QCS Purchasing [see sidebar, “Golden Savings”] was the first step for us to start identifying a new future for how we generate revenue and bring new members into the organization,” Horvath says. “We are basically a not-for-profit organization. We run on a zero-sum budget. Our objective is to break even against operational expenses. Traditionally, we have sent cash dividends back to our members, year in and year out, based on their participation in the program. This is in addition to purchasing dividends they may receive.”
While packaging materials, ingredients and equipment are among the most common purchases for which QC helps its members, the past year has brought another challenge to doing business: the upward-spiraling cost of gasoline. “To address that, through our purchasing alliance, we are coming up with a couple of fuel program alternatives to help members contain these costs,” Horvath says. “That’s another way in which we’ve tried to help our members stay ahead of the curve.”
QCS Purchasing LLC is “one of the largest purchasing networks that I’m aware of in the food industry,” Horvath says of the entity that encompasses some $370 million in purchasing power. “We cover everything from refrigeration to packaging to ingredients. Over the years, we’ve established very good relationships with our vendor partners. They are frequently a key source of ideas for new products, packaging designs and retail opportunities, so we rely very heavily on them. Since forming this new partnership, we have increased dividends exponentially while cutting operating costs in half. It was win-win for everybody.”
Meanwhile, as the cost of doing business is going up industry-wide, QC recognizes the need by its members to shore up revenues by helping boost consumption of beverage milk, which is flat or ebbing despite campaigns like “got milk?” and a growing body of evidence supporting milk as a boon to good health.
“When milk consumption remains flat, it is probably a good year for us,” Bruce says. “We constantly have to be thinking about new ways to gain revenues, just because there’s not as many opportunities in white milk as there once was.”
Facing stiff competition from the entire beverage industry means looking more closely at niche markets into which dairy processors can easily fit, Murphy says. “To compete in the milk industry as we know it, there are opportunities to branch off and create some new opportunities, such as natural foods,” she says. “The milk industry has been beating its head against soy; instead, we can join them. If they’re taking our shelf space, we might as well compete with the theft. I think the new school milk program has opened our eyes, that [kids] definitely are consumers. We can’t rest on our laurels that the schools have to buy milk because that’s what’s mandated. So I think there’s selling opportunities, flavor opportunities to help us compete with what’s been the standard in the industry.”
Horvath says that means expanding beyond the high volume-competitive price mentality that has dominated processors for such a long time. “What we’re starting to see from many of our owners is a shift in terms of how they view their selling opportunities. The high volume-low price model is still there, but even these companies see new niche opportunities,” he says. “When you’re looking at niches in a marketplace of 280 million people, it’s a substantial opportunity, compared to some other countries across the world where you may have 20 or 30 million people in any given market. So to say ‘niche,’ you have to put it in perspective. I think there are some very good opportunities out there; it just takes a different mindset.”
The independent nature of most QC members makes them flexible enough to handle such changes, Murphy adds. “Being small enough, it’s easy to switch and make those adjustments,” she says, “versus a major corporation, where you have to go through a little more to get creative.”
As far as school milk is concerned, QC isn’t taking sides in the paper-versus-plastic debate, suggesting that marketing and flavor offerings also play a role in boosting youth consumption. “You take the alternatives to the schools and let the schools decide,” Murphy says. “As we understand it, some regions are willing to pay a price variation and some are not.”
Horvath elaborates on the regional nature of the issue. “One of our members would tell you, everything sounded great when they were bidding out plastic until they got to the school lunch director and said it’s going to cost 3 or 4 cents more per unit,” he says. “The school lunch director is saying, ‘The kids get the same nutritional value out of that 8 ounces of fluid milk, why would I pay 4 cents more for different packaging?’”
The business model under which the organization operates today has evolved over 60 years, starting with the common use of a trademark. “That is still the predominant service and value that the members join Quality Chekd for,” Horvath says. “Quality food safety was a direct result of the national exposure of a trademark. The company was trying to maintain standards within the production environment for the common use of the trademark across the country by a number of independent companies.”
QC added pooled purchasing services in the 1960s, then technical and management training in the ’90s. “So basically the model we operate under is based on a ‘one shoe fits all’ philosophy,” Horvath explains. “What we’re starting to do now is look at that and redefine the value in these services, trying to anticipate what future needs are going to be and adapting the organization to meet those challenges.”
The services are constantly evolving, Murphy says. “We’re all out in the field and listening to what the members are saying,” she says, “and based on what we’re hearing them say, we try to complement and add service or value to what they’re telling us they need.”
Professional services also include distribution, marketing and planning, notes Steve Drabek, human resource and training director.
QC’s mission statement, Horvath stresses, “clearly identifies our goal is to assist each and every member in helping them to grow their business. And that’s truly what we try to focus on when we look at how we are evolving our services.”
QC also helps members adapt to new technology as it becomes available. “We’ve partnered up with a number of companies on new technology — handhelds, computer programs, onboard-type systems, fleet designs — that help improve efficiency of their routing systems, and help reduce costs like the increase in fuel,” Drabek explains. “This is becoming one of those critical areas. We also go in and work with them on their routing programs and help redesign them, looking not only at their branches but the overall routing systems.”
Further, QC assists members with human resource issues as well, Drabek notes. “That’s one of their biggest challenges,” he says, echoing a sentiment expressed by numerous processors, “finding and retaining good people.”
The ‘Q’ in QC
Quality Chekd’s quality and food safety department draws on a combined 60-plus years of experience in the dairy industry. “Sixty to 70 percent of our time is spent out with each of the members,” says Dan Stockwell, quality and food safety director. “We get to all members at least once a year, spending from two days to a week. We are pairs of eyes that have seen a lot of things in the past and can help them with their problems. If they have quality problems, we troubleshoot and bring our expertise to help define those problems and reach solutions.”
Sharing ideas among member plants is key, Stockwell says. “With our broad exposure to the plants, we carry that information with us. Just recently I was at one of our members in Mexico, and I observed two excellent best practices that I don’t think we’ve ever seen here in the states, and those will be shared,” he says. “We also focus heavily on the regulatory end of the business. We are well represented, by Dennis Gaalswyk, director of operations and regulatory, on a number of task forces with IDFA and other organizations. With the changing environment on, for example, the GMP modernization that FDA is focusing on, the biosecurity legislation, the allergen labeling that’s effective the first of the year … we are able to keep [members] abreast of what’s happening in those arenas.”
Quality programs are front and center, for which QC has a longtime partnership with Homewood, Ill.-based Silliker Inc. to ensure members meet QC standards. “Members send samples to Silliker labs every month. This is our barometer to see where members need help and if they’re meeting our standards,” Stockwell says. “We have used Silliker for the last 20 years to manage this program. We have recently enhanced that program and have given Silliker more ownership within that activity. We are now in a situation where the results our members receive are in real time; they will be available online.”
Training programs include numerous on-site and regional technical training. “The unique thing we have is, with our experience, we focus solely on those things that a dairy can relate to — dairy-specific issues,” Stockwell explains. “An example would be HACCP; our sole focus is on those points a dairy needs to understand.”
QC’s quality team, including its outside partners, also works with members to help them reduce waste, resolve shrinkage issues and make recommendations on other ways to help their bottom line. “Our function is to get out there and protect the trademark,” Stockwell says. “The trademark is our backbone.”
To Market, To Market
QC members who meet the association’s standards earn the right for their own branded products to carry the QC trademark. But the group also offers some QC-branded products, manufactured by select members and available nationally.
“The signature [product] is any brand that’s out there that bears the Quality Chekd trademark. They have to earn the right to wear that mark. It’s the preeminent quality approval in the dairy industry,” Murphy says. “Along with that, we have products that carry just the Quality Chekd brand, because of economies of scale in manufacturing. That may be butter, whipping cream, etc., products that require special processor manufacturing.”
In the “if you can’t beat ‘em, join ‘em” department, QC this past year launched a soy beverage in two flavors. “We did the package design; we worked with a company on the formulation based on our members’ requests. We’re also working on some other flavored beverage alternatives to launch,” Murphy says. “We develop four ice cream flavors every calendar year with radio spots and point of sale [marketing] to support that, and members can use those flavors based on whether their market is a target for those flavors.”
Overall, QC’s role is one of a consultant for members who would be hard-pressed to conduct its own costly market research. “We buy [market research] information, something the dairies don’t need to do. Liz [Dorn, marketing and training manager] works with them in manipulating that information to use it as a valuable sales tool with consumers and retailers,” Murphy says. “We try to spot trends and tell them what’s going on in the industry, because we travel coast to coast. We see a lot of things in the stores, and we make recommendations and suggestions, and challenge some of the things they’re doing out there, to make sure they’re competing to the best of their ability.”
In addition, members have access to stock package designs, a photo library to incorporate images into their own designs and stock formulations. “We have what we call the QC Toolbox, which is trend information that goes out on a quarterly basis; it’s also on the Web site,” Murphy says. “If members want to know the latest information for ice cream flavors to what’s happening with dollar stores, they don’t have to do the research — it’s a quick and easy way for them to get updated. And we have two Web sites; one is a public area and one is for members only, where they can get lab reports, information on meetings and all the proprietary information about Quality Chekd.”
Murphy also works with some members on annual marketing plans. “We can go to their facilities as an outside ear and help them, whether it’s strategic planning or marketing plans,” she says. “We’re kind of an independent ear that will make recommendations, suggestions and observations about what we see, and hopefully they can evolve and create some change.”
That said, is it a concern that some QC member companies are competing against each other in common marketing areas?
“Obviously the trademark is a nationally recognized trademark used by 22 companies. There is some overlap in the distribution and market areas, so you can say there is some competition between members in that regard,” Horvath says. “These are all independent companies. As technology allows them to broaden their distribution range — that’s happening more and more — so is the competitive nature of the group. They’re all out there fighting for increased share of market, increased share of stomach in an ever-competitive marketplace.”
What areas does QC’s leadership see as crucial to growth of the association and its members? They lie beyond the business model that has served the group well for more than six decades.
“We’re not relying on that as much as we have in the past because obviously with a consolidated market and the way that Quality Chekd has been operating as an organization, those opportunities have become fewer and farther between,” Horvath says. “So we are adapting how we go to market or how we service the membership. We’re just now in the middle of that evolution. We started with QCS Purchasing — that was a major change for our company; it brought tremendous value to the members, both in better buying and reduced overhead cost.
“The other side is trying to find other ways to leverage the skills that we have in the organization. These skills are still very relevant in the market. It’s just a matter of how you apply those skills in a business sense — flexible services and business opportunities, more so than we’ve ever had.”
Bruce says QC must grow to include more services that “appeal to a broader base of people in our business.”
Horvath adds: “And look at ourselves almost in the sense of being independent consultants and trying to maintain that kind of approach where the value is basically determined by the use of the service. If there’s a demand for it, the service will thrive, and if there’s no demand for it, then we probably need to shift gears.”
Murphy says opportunities abound in the changing marketplace. “There’s more competition,” she says, “so how do we — as a group — compete better, more effectively and smarter?”
Many smaller independent companies continue to look toward national resources to take on challenges, Horvath says. “Latin America is another opportunity we’ve continued to develop,” he says. “We have seen the membership there grow considerably, and a lot of that is predicated on what we do in terms of quality and technical consultation. Being a U.S.-based organization is very highly regarded in those markets in terms of our levels of advanced expertise in dairy technology.”
Among the technology that Horvath sees playing a larger role in QC’s future is extended shelf life (ESL) processing. “It has been on the market for some time, but we just launched a soy product, and rather than have each dairy produce it in HTST with short shelf-life codes, we went to one of our members who was able to pack the product in ESL,” he says. “We then help them distribute it to a number of independent dairy companies, so there’s economies of scale working again.”
QC also needs to help its members leverage their experience in fresh distribution as a competitive advantage. “They run these trucks six or seven days a week and are running by all kinds of retail opportunities,” Horvath says. “So, it’s not just a matter of them taking their white milk products but to find other products they can mix in because of the refrigeration expertise they have.”
What will QC look like five years from now? “With the evolution of the marketplace and our membership base, it’s created new opportunities for us that we may not have had in place 10 or 15 years ago,” Horvath says. “One of the key success elements in our evolution is going to be the flexibility of how we adapt to these changes, in terms of the services, how we apply the services and how we view membership. Our board of directors is currently considering new opportunities to help us identify what we need to do in order to continue to create value. It’s been a change that has been going on here for a few years. So we do expect to see a broader line of services, services that may look a little different in the future than they do today, but really driven more by what the marketplace has dictated and by what the membership is asking of us.”
The QC management team offers many ideas on what makes their organization unique to the dairy industry.
“One of the strengths Quality Chekd has is a well-defined process for an awards and recognition program that ties back to all these standards and practices that we’ve established,” Stockwell says. “This has been an intense quality driver for our membership because it is quite an achievement when those standards have been reached.”
QC excels by providing members with “support that’s very specific to them,” Drabek offers. That comes from a pooling of vast resources, as Horvath outlines in detail.
“We are a community in which we create many opportunities during the course of a year for learning and improvement,” he says. “Each one of our departments has one to two committee meetings each year. We do regional workshops. We do local on-site workshops. We have a training department that spends, on average, up to 85 percent of its time in the field for learning and improvement opportunities. Finally, we have two major member and vendor partner meetings each year, which are also heavily focused on learning, improvement and networking.”
Ultimately, it comes down to a wealth of industry expertise. “All of us come from backgrounds with various experiences in the dairy market or in markets that have fed into dairy,” Horvath says. “We also have outside resources that are committed to the dairy industry that we frequently bring in to help the members. These are the things that truly differentiate Quality Chekd and make us unique as an organization.”
And it’s a team effort, Murphy stresses. “It’s integrating our philosophy, which focuses on the trademark, which represents quality and food safety,” she says. “When members commit to the Quality Chekd process and incorporate the guidelines, the results are phenomenal.” m
An Idea Whose Time Had Come
Quality Chekd was created to take on the post-WWII business climate.
World War II’s strict rationing of milk, cream, butterfat and sugar meant ice cream and dairy plants were able to sell all the products they were able to manufacture with these ingredients in such short supply.
Looking ahead to peacetime, the big three dairy processors of that era — Sealtest, Borden and Meadow Gold — prepared their own aggressive merchandising campaigns to seize their shares of the postwar market. Facing this strong competition were smaller, independent processors not equipped to forge similar plans on their own.
So, five of these smaller manufacturers set out to create a strategy. Ultimately, they hired a Chicago advertising agency to create a program that included a common trademark to be used with each company’s established name, a carton design and a year’s merchandising program.
Thus Quality Chekd was born in October 1944 with 21 charter members; the group held its first general membership meeting in Chicago in April 1945. It was the first time a group of independently owned dairy companies had voluntarily formed themselves into a cooperative group with a national trade name and a professionally planned program.
The number of members increased consistently each year from 1944 to 1955, when the total reached 156. While the number of members dropped after 1955, total member sales volume continued to increase each year beyond, even as the dairy industry entered the era of mergers and consolidations. The 21 charter members had sales volume of $15 million in 1944; total member sales volume surpassed $242 million by 1965; approached $3 billion by 1994, Quality Chekd’s 50th anniversary; and reached $4 billion in 2005.
Quality Chekd’s first headquarters was a cubicle in a Cincinnati office building, then moved to Chicago and eventually to the suburb of LaGrange, Ill., in 1955. After a stretch in nearby Hinsdale, the company finally settled in Naperville in 1987.
While adapting to a changing economic and consumer climate, the Quality Chekd mission remains constant: to help make its members more competitive through strategic purchasing, unified marketing, human resource guidance, training and unsurpassed product testing and quality.
SOURCE: Quality Chekd: An Idea Whose Time Has Come, 1944-1994.
QC members are located across the Western Hemisphere.
Quality Chekd members from across the United States and Latin America represent some of the best dairies in the marketplace. These companies encompass more than 60 facilities that generate $4 billion annually in sales of milk, ice cream, juice, cultured products and other dairy food items.
Las Vegas, Nev.
Creamland Dairies Inc.
Curly’s Dairy Inc.
Dairy Rich Ice Cream Co.
Deluxe Ice Cream Co.
Eberhard’s Dairy Products
Galliker Dairy Co.
(including Potomac Farms, Cumberland, Md.)
Gandy’s Dairy Products Inc.
Hiland Dairy Foods Co.
Hiland-Roberts Ice Cream Co.
Hilmar Cheese Co. Inc.
Junction City, Ore.
North Aurora, Ill.
Oregon Ice Cream Co.
Producers Dairy Foods Inc.
Roberts Dairy Co.
Sinton Dairy Foods Co.
Colorado Springs, Colo.
Smith Dairy Products Co.
(includes Smith Dairy-Wayne Division, Richmond, Ind.)
Sunshine Dairy Foods Co.
Superior Dairy Inc.
Super Store Industries
Umpqua Dairy Products Co.
United Dairy Inc.
Niagara Falls, N.Y.
Western Quality Foods
Cedar City, Utah
Bogota, Colombia, South America
Empresas Lacteas Foremost, S.A. de C.V.
San Salvador, El Salvador, Central America
Gomez Palacio Dgo., Mexico
San Nicholás de los Garza, Mexico
Manantiales de Tehuácan S.A. de C.V.
Bosques de las Lomas, Mexico
Santa Clara Productas Lacteas S.A. de C.V.
Pachua Hgo., Mexico
Quality Chekd Awards
At its annual spring management and leadership conference, Quality Chekd (QC) honors member companies for accomplishments in marketing, production and overall company achievements with the following awards:
Harlie F. Zimmerman Award
This award recognizes the QC member dairy that creates and executes the best overall marketing plan and promotional materials to enhance brand awareness and get results. Harlie F. Zimmerman was QC’s managing director from 1949 to 1980.
Wayne Gingrich Award
This award recognizes the single best production plant within the organization. It highlights superior performance in finished product quality, plant operations and quality systems. Wayne Gingrich joined QC in 1955 and was its first quality and production director. He remained with the organization until 1980.
Irving B. Weber Award
Patterned after the Malcolm Baldrige National Quality Award, the Weber Award recognizes the best overall company achievements in manufacturing excellence, customer satisfaction, management leadership and highest product quality. Member companies are invited to apply after having met Production Merit of Excellence Award levels. Irving B. Weber was a co-founder of QC and served as president of its board for 25 years during his half century of involvement with the organization.
New purchasing alliance brings even greater benefits to Quality Chekd members.
QCS Purchasing LLC was formed on January 1, 2005, when Quality Chekd (QC) and Florida-based SECO & Golden 100 fully integrated their purchasing units in a move aimed at bringing member dairy companies more buying power and purchasing benefits.
Based in Deland, Fla., QCS’ creation formalized a joint venture that began in 2001 to benefit both organizations’ member companies. Since the consolidation, QCS has taken its cooperative purchasing programs to a new level by bringing together a wealth of resources from which the membership can choose to create value-based packages tailored to their specific needs.
Members can create customized benefit programs from expanded services including new volume purchasing discounts, marketing and sales programs, quality and food safety technical training, management performance seminars and human resource services, import/export network opportunities and strategic partnerships with Quality Milk and Silliker Labs.
The partners continue to explore new cost-saving opportunities and evaluate the array of purchasing programs and resources to bring added value to members. QCS programs continue to provide reduced costs in packaging, commodities, ingredients, chemicals and other valuable offerings crucial to dairy and agricultural businesses.
“Our combined membership has already begun to see immediate cost efficiencies, while our suppliers are benefiting from one face, one single point of contact,” says Ron Edmundson, SECO & Golden 100 president and chief executive officer, and president of QCS.
SECO & Golden 100 Inc. is a member-owned purchasing cooperative formed in 1945 by a group of southeastern dairy producers and processors who sought to improve their bargaining power by combining and leveraging their purchase requirements. Today, the membership of 37 companies comprises a select group of ag-based co-ops and proprietary companies involved in the production of food and dairy products.$OMN_arttitle="Strength in Numbers";?>