Terrorists May Target Milk Supply” — Understandably wary in the face of the ongoing terrorist threat that hit home with a vengeance on September 11, 2001, Americans were alarmed by this headline that splashed across newspapers and cable news networks this past spring.

For most consumers, the concern began when it was reported that the Agriculture Department had discovered the school lunch program was particularly vulnerable to terrorist attack. What’s more, milk — long considered a near-perfect example of a wholesome, healthy product — could very well become one of the most likely targets for tampering with biological or chemical agents.

TOP 10 WHOLE MILK BRANDS*
	$ Sales (In Millions)	% Change vs. Year Ago	Dollar Share	Unit Sales (In Millions)	% Change vs. Year Ago
Total Category	$3,256.4	0.2%	100.0%	1,240.9	-4.7%
Private Label	2,086.4	-1.6	64.1	795.7	-5.3
Borden Milk Products LP	50.5	15.8	1.6	17.9	10.2
Horizon Organic	40.1	29.7	1.2	10.9	26.3
Tuscan Farms	33.4	43.0	1.0	13.6	33.4
Garelick Farms	32.3	8.4	1.0	14.2	0.4
Lactaid 100	30.7	3.0	0.9	8.7	1.3
Pet	29.3	4.1	0.9	10.8	-4.1
Prairie Farms	29.0	-2.0	0.9	11.8	-6.8
Mayfield	26.9	-4.7	0.8	8.1	-12.4
Dean’s	26.4	-5.6	0.8	11.7	-13.3
* Total sales in supermarkets, drug stores and mass merchandisers, excluding Wal-Mart, for the 52-week period ending July 10, 2005. SOURCE: Information Resources Inc.

Under pressure from the Department of Health and Human Services (HHS), the National Academy of Sciences (NAS) temporarily delayed publication of its own research paper on the vulnerability of milk, which Stewart Simonson, assistant secretary of HHS, charged was “a road map for terrorists.” The NAS pledged to review the paper, which Simonson contended provided too much detail on potentially vulnerable areas of the milk supply, processing and distribution systems. Its mere publication, he argued, “could have very serious health and national security consequences.”

The article, penned by Stanford University professor Dr. Lawrence Wein, theorized that hundreds of thousands of people could be poisoned if terrorists were to exploit vulnerabilities in milk processing. Included within was information on milk pasteurization, the dose of botulinum toxin for humans, the toxin’s heat sensitivity and the capacities of the silos in which milk is stored.

While this scenario is certainly frightening enough to strike fear in the hearts of many Americans, milk processors remain confident that the vast majority of consumers won’t be fazed by the story. In fact, industry officials were quick to respond, noting that the scenarios described in Wein’s article are unlikely, due to safeguards taken by processors and producers.

“The milk industry has always been one of those targets that people could target to cause problems for America, but I think consumers will be realistic and realize that they need to be vigilant, but not overly concerned,” says Ron Schroder, director of marketing, Swiss Valley Farms, Davenport, Iowa. “The industry as a whole has such a great track record of assuring the safety of the milk supply in this country, and that outweighs any negative media attention.”

Much of that good track record was acquired when addressing the first reported American case of mad cow disease (the popular name for bovine spongiform encephalopathy, or BSE), which was discovered in a Washington state dairy cow in 2003. Having long ago prepared for such an event, industry groups leaped into action, assuaging fears that it might be possible to contract the disease through milk consumption, which it isn’t.

TOP 10 SKIM/LOWFAT MILK BRANDS*
	$ Sales (In Millions)	% Change vs. Year Ago	Dollar Share	Unit Sales (In Millions)	% Change vs. Year Ago
Total Category	$6,799.1	3.8%	100.0%	2,762.3	0.5%
Private Label	4,254.4	3.5	62.7	1,773.1	1.9
Lactaid 100	201.1	11.4	3.0	61.5	5.6
Horizon Organic	111.9	25.5	1.6	31.6	21.5
Kemps	92.3	2.2	1.4	35.7	-4.9
Dean’s	81.7	2.9	1.2	38.2	-4.0
Garelick Farms	72.7	9.3	1.1	30.8	1.6
Hood	70.1	9.3	1.0	26.7	3.3
Prairie Farms	69.7	-4.3	1.0	30.2	-8.6
Mayfield	63.1	1.6	0.9	18.5	-6.3
Land O’Lakes	55.5	17.8	0.8	23.4	15.7
* Total sales in supermarkets, drug stores and mass merchandisers, excluding Wal-Mart, for the 52-week period ending July 10, 2005. SOURCE: Information Resources Inc.

TOP 10 FLAVORED MILK/EGGNOG/BUTTERMILK BRANDS*
	$ Sales (In Millions)	% Change vs. Year Ago	Dollar Share	Unit Sales (In Millions)	% Change vs. Year Ago
Total Category	$724.4	0.6%	100.0%	393.9	-4.5%
Private Label	213.1	8.7	29.4	117.3	5.2
Nestlé Nesquik	101.5	-6.8	14.0	59.4	-6.6
Dean’s	29.4	-7.0	4.1	16.6	-13.7
Kemps	16.7	-5.6	2.3	8.6	-12.0
Hershey’s-Morningstar	15.1	-26.4	2.1	7.6	-32.9
Mayfield	13.2	4.6	1.8	6.2	-3.9
Prairie Farms	12.3	12.6	1.7	6.9	6.3
Borden Milk Products LP	11.8	-8.8	1.6	5.4	-13.0
Garelick Farms	11.5	2.1	1.6	5.7	-6.2
Land O’Lakes	11.4	26.6	1.6	5.8	20.9
* Total sales in supermarkets, drug stores and mass merchandisers, excluding Wal-Mart, for the 52-week period ending July 10, 2005. SOURCE: Information Resources Inc.

The specter of BSE reared its ugly head once again just days after stories surfaced about terrorists possibly targeting the U.S. milk supply. America’s second case of the disease — the first in a U.S.-born animal — was confirmed in June, only to be followed by a third suspected case in July.

So far, American consumers don’t seem overly alarmed by these most recent discoveries. According to a recent Food Safety Monitor survey by The NPD Group, Port Washington, N.Y., 98 percent of adults reported having heard or read something about the disease. Just 22 percent considered themselves “very worried” about the disease, however.

“This is not to suggest that mad cow disease isn’t a serious issue,” says Harry Balzer, NPD vice president. “If we ever see herds of cows with this disease and start having the bovine bonfires seen in Britain a few years ago, then we can expect a change in consumer behavior, but not with the limited scale seen at this time.”

That’s certainly good news for a milk industry already struggling to recover from last year’s high prices and fighting an ongoing battle with competitive beverages determined to steal its share of stomach. According to Chicago-based Information Resources Inc. (IRI), whole milk sales inched up 0.2 percent in dollars, but fell 4.7 percent in units throughout supermarkets, drug stores and mass merchandisers (excluding Wal-Mart) during the 52-week period ending July 10, 2005.

Even flavored milk, which has been often cited as the savior of the industry, failed to live up to its lofty expectations, rising a meager 0.6 percent in dollars, but falling 4.5 percent in units. According to Schroder, that’s because flavored milk is looked upon as more of a discretionary purchase and thus more likely to be impacted by price fluctuations than white milk.

Interestingly, only skim/lowfat milk managed to achieve any real gains, rising 3.8 percent and 0.5 percent, respectively. While consumers have largely abandoned the low-carb diet craze that swept the nation over the past two years, they seem to have retained a health-consciousness that carries over into their milk choices.

At the same time, scientific evidence related to the healthful nature of milk continues to emerge. Among the latest findings has been the most welcome news that simply adding calcium to other beverages does not make them nutritional substitutes for milk. Published in Nutrition Today, the study found that milk is the most reliable source of calcium and far superior to calcium-fortified soy and rice beverages, as well as many fortified orange juice brands. That’s because much of the calcium tends to settle to the bottom of fortified soy and rice beverages, a problem not resolved merely by consumers shaking the container.

“Hand shaking wasn’t enough,” explains Robert Heaney, M.D., of the Osteoporosis Research Center at Creighton University, Omaha, Neb. “We found that really vigorous shaking, such as with a hardware store paint shaker, would have been needed to suspend the calcium in these beverages, so you can put them in a glass and drink them.”

As consumers seek out healthier beverages, organic milk has experienced rapid growth. Last year, in fact, sales of organic milk at health food and conventional stores hit $834 million, according to ACNielsen LabelTrends. As a result, a number of companies previously hesitant to enter the market have finally thrown their hat into the ring – with smashing results.

After declining many offers to co-pack organic milk over nearly a 20-year period, Stonyfield Farms, Londonderry, N.H., finally gave in to pressure and partnered with Chelsea, Mass.-based HP Hood LLC to sell Stonyfield Farm Organic Milk.  Hood co-packs the milk and manages production and sales, while Stonyfield handles brand marketing. The ultrapasteurized product boasts a 70-day shelf-life and is sold in half-gallon gabletop cartons in four varieties: Fat-Free, Low-Fat (1%), Reduced-Fat (2%) and Whole.

“Organic milk is a very powerful and popular new segment, mostly because dairy, in general, is a primary entry point for consumers interested in organic and milk is the most consumed dairy product, of course,” says Gary Hirshberg, Stonyfield’s president and chief executive officer.

The organic milk market has become so strong, so quickly, that shortages have become a significant problem, as processors struggle to meet the rapidly growing demand. As a result, some stores have been receiving only 70 to 80 percent of their regular orders. This leaves organic milk producers seeking ways to meet that demand, while remaining true to the organic promise, which maintains that organic cows must be free of bovine growth hormones and most antibiotics. In addition, their feed and the land on which it is grown must be free of any synthetic herbicide, fungicide, pesticide or petroleum-based fertilizer for at least three years.

“Organic milk turns out to have been one of the wildest possible rides we could have ever been on, and we just happened to pick the wildest possible year in which to enter it,” Hirshberg says. “If I knew what was actually going to transpire, I would have waited one year.”

While battles still rage as to whether so-called “soymilk” really belongs in the dairy case, fluid milk processors find themselves facing an amazingly fast-growing soy beverage industry. Granted, soy beverage sales don’t come anywhere near the massive $10.2 billion milk market, but it’s an altogether different picture when you consider that milk sales have been decidedly lackluster, while sales of soy-based drinks grew 31 percent last year, according to ACNielsen’s executive report, “What’s Hot Around the Globe: Insights on Growth in Food and Beverages 2004.”

In previous years, fluid milk processors shrugged off any gains being reported by the soy beverage industry. In light of soy’s tremendous growth, that raises the obvious question: Is it a new ballgame now?

“It’s a ballgame, and they are on first base,” proclaims Molly Murphy, marketing and sales director, Quality Chekd Dairy Products Association, Naperville, Ill. “They might be rounding to second.”

Recognizing that soy beverages were taking valuable shelf space away from fluid milk, Quality Chekd decided to add a co-branded soy beverage to its offerings. As Murphy explains, “If you’re going to take my shelf space, let it be with something I’m selling you.”

Available in Chocolate, Vanilla and Original varieties, Quality Chekd Organic Soymilk is sold by four Quality Chekd member dairies: Hiland Dairy Foods Co., Springfield, Mo.; Umpqua Dairy Products Co., Roseburg, Ore.; Rockview Dairies Inc., Downey, Calif.; and Sinton Dairy Foods LLC, Colorado Springs, Colo.

La Farge, Wis.-based Organic Valley also recently introduced a soy beverage that doesn’t require any masking agents to cover the beany aftertaste that has turned off so many potential soy beverage consumers. That’s because Organic Valley uses beans that are “very consistent” genetically, explains Teresa Marquez, chief marketing executive. In addition, their unique process uses the whole bean, something she believes no other U.S.-based soy beverage manufacturer does.

Seeking to stave off competition and boost milk consumption, processors continue targeting kids in hopes of raising a whole new generation of milk drinkers. Of particular interest is the school milk program, in large part because it reaches virtually every school-age child from coast to coast. DMI has been encouraging processors to improve their school milk programs by offering more flavors and by switching to resealable plastic bottles.

“We see school milk as, if not the most important opportunity, then certainly one of the most important opportunities that milk processors and the dairy industry have sitting in front of them,” says Grant Prentice, executive vice president of marketing and business development, Dairy Management Inc. (DMI), Rosemont, Ill. “Our studies have shown when you upgrade the experience of the milk that’s delivered to school children by offering a good-tasting product in a variety of flavors in a plastic resealable package, you see significant sustained levels of consumption and growth year-on-year.”

To date, milk is offered in plastic, resealable bottles in just 1,500 of the nation’s 90,000 schools. In part, many schools have resisted the switch to plastic because bottled milk tends to cost more. Their reservations don’t end there, however, according to Annette Jim, director of marketing, Byrne Dairy Inc., Syracuse, N.Y.

“The schools are over-worried about issues like sugar content or caffeine levels or the fat in milk,” Jim says. “A lot of schools have banned whole milk, and we’ve seen some of our flavored milks go down as well.”

Those schools that have jumped on the bandwagon have experienced tremendous results. According to the National Dairy Council, the New Look of School Milk pilot program, involving 100,000 students in 146 schools across the country, revealed that milk consumption increased 37 percent, milk sales increased 18 percent and secondary lunch participation increased 5 percent when plastic, resealable bottles of flavored milk were offered.

“In some cases, we’ve seen 50 to 100 percent increases in milk consumption in schools that have adopted this practice, and it’s not just short-term improvement either,” says Prentice. “There’s a long-term benefit in that it increases a kid’s perception of milk as a competitive choice. If they can develop that perception early in life, we’ve got a much better chance of keeping them as milk drinkers when they enter their teen years and adulthood.”