On the Right Track

Tipton’s keynote address sets the tonefor a packed Forum program.

Dairy processors and producers need to iron out their differences so they can work together to take on the world.

That was the gist of the keynote address by Connie Tipton, president and chief executive officer of the International Dairy Foods Association (IDFA), on the first full day of the 2005 Dairy Forum, January 9 to 12 in Orlando, Fla.

Citing examples of a “shrinking dairy globe,” Tipton urged industry leaders to “act globally — now — as the only way to get on the right track here at home and in international markets. I believe the U.S. dairy industry can and must take control of our future by acting now to make sure future world trade agreements and domestic policies don’t hamper our ability to compete and put us on the wrong track.”

Among the coming changes Tipton says bode well for the industry are increased non-subsidized world trade, continued lower domestic production costs and increasing demand for dairy products, especially in developing countries.

As worldwide demand increases, global trade policies improve and technology makes strides abroad, “how well positioned are we here at home for the global dairy business?” Tipton asked.

In some ways, very well, she said — in terms of production, exports and product reputation — but somewhat lagging in new product development, which Tipton blames partly on domestic policies.

“I don’t think I’ll shock anyone by saying U.S. dairy policy right now is on the wrong track. It does not help us gear up for global growth. In fact, it hampers us,” she said. For example, standards of identity are inflexible, the Class I definition is too restrictive, and the federal order pricing system is outdated.

“How can we expect companies to invest in new milk-drink products like those in other parts of the world,” Tipton said, “when our system effectively discourages that investment?”

Runaway raw costs also hamper investment in new products and proprietary technology, according to industry leaders speaking as part of an executive panel discussion at one of the Forum sessions.

“The impact is huge on sales. It diverts dollars used to grow our lines,” said Tim Kahn, chief operating officer of Dreyer’s Grand Ice Cream. “We’re going to kill demand generation.”

John Jeter, president and CEO of Hilmar Cheese Co., agreed. “We devote a lot of resources to managing margins rather than innovating,” he said.

But John Kaneb, chairman of HP Hood, said commodities volatility is a normal part of doing business. “You learn to live with it,” he said. “If what to do about it invites more government [intervention], I’d say the cure is worse than the disease.”

In fact, despite the tumultuous raw costs of the past year, Hood is spending “tens of millions upgrading technology,” Kaneb said.

Jeter said that “in general, the dairy industry is probably behind with innovation. The biggest decision we make is what product class we’re in, and that stifles innovation. Companies that devote significant resources to innovations do stand out. We really need to look at these policies.”

Kahn suggested dropping standards of identity. “It’s not working anymore,” he said. “We’d be better off partnering [with producers] to increase the overall usage of dairy products. … The willingness of the producer to cut some slack to allow innovation would help everybody.”

A closer processor-producer relationship for the overall good was the subject of discussion at a session featuring Tipton and Jerry Kozak, president and CEO of the National Milk Producers Federation (NMPF).

Tipton and Kozak noted the oft-at-odds groups have partnered successfully in the past year to increase school milk opportunities and dairy’s presence in the new federal nutrition standards.

Other sessions over the three-day conference dealt with legislative and policy issues, the World Trade Organization Doha round, food safety, milk-based beverages, crisis management, milk from cloned cows and progress of the ongoing Healthy Weight with Dairy promotion.

More news from the 2005 Dairy Forum can be found at www.idfa.org.