The Price of Being Local
June 1, 2007
The Price of Being Local
I’m not the only one in this industry with a fondness for the Food Network, and of its many personalities, Alton Brown — with his blend of food science and fun — is one of my favorites.
I had the opportunity to see Brown among the speakers at the recent IDDBA conference, and enjoyed his dissection of today’s food trends and fads. Of particular interest was his take on the resonance of certain buzzwords with consumers at large. Amid the chorus of “organic” and “natural” (the true definitions of which many would be hard-pressed to provide), the concept Brown contends people really understand is “local” — food that’s produced not so very far away from where they live.
That got me to thinking about whether dairy — with its consolidation mania of the past decade or so — will find itself on the wrong side of that trend. It struck me as particularly significant because of the recent spate of acquisitions — illustrated in the Top 100 processors ranking this month — coming around the time this trend is picking up steam.
Several more independent, regional processors — Friendship Dairies, Crystal Cream & Butter and LuVel Dairy, for example — were scooped up by major players — Dean, Hood and Prairie Farms, in these cases. Whether or not this heralds the next consolidation tidal wave, we have yet to see.
Now, in cases where local management has a degree of autonomy, it may not matter. Dean units like Mayfield and Purity continue to operate, for the most part, like they did when independent, at least as far as consumers are concerned; these processors retain a deep identity with their Tennessee roots despite ownership in Dallas.
But if consolidation means plant closings and products being shipped across longer and longer distances (a practice that fuel prices have made undesirable), dairy will give up any claim to the “local” trend.
Shortly before press time, our top-ranked processor took a hit on Wall Street after trimming its earnings outlook, a move blamed on milk prices reaching new record levels.
The problem is further exacerbated, according to folks at Dean, by an oversupply of organic milk, due to a change in organic regulations that led many farmers to enter a one-year transition process before the new rule took effect. Some financial analysts doubt that Dean’s scale will completely protect the company from volatile commodities pricing.
As our category review of organic dairy products this month contends, the abundance of organic milk has led to increased product development in this segment, and perhaps will expose a greater number of consumers to trial.
Meanwhile, the elasticity of dairy in general will be stretched to the limit, as the gallon price for milk at retail approaches that of gasoline. Will credit-card companies start putting caps on grocery charges, too?$OMN_arttitle="The Price of Being Local";?> $OMN_artauthor="James Dudlicek";?>