Forward Contracting Leads Farm Bill Battle
August 1, 2007
Forward Contracting Leads Farm Bill Battle
Consumer perception of milk in the 1980s and early 1990s was significantly different than now. Fluid beverage milk sales declined precipitously from a peak of more than 60 billion pounds per year during the early ’70s to 54 billion pounds now. And, of course, on a per capita basis, the decline has been even more significant — 270 pounds per capita during the ’70s to 180 pounds now, a whopping 33 percent drop.
The declines are largely attributable to increased competition from a variety of new alternative beverages and to substantially increased marketing of competing lifestyle products, often positioned as “better for you.” The press is fascinated with and frequently touts these so-called healthier products providing a double whammy negative effect, i.e., lost sales and fewer store shelf facings.
Lifestyle marketing had its origins in what I call the “Birkenstock” cult, which was born out of the hippie phenomenon and was based on sustainability of the universe, sustainable agriculture, protection of the forests and the environment. Ben and Jerry’s ice cream perfected lifestyle marketing by combining it with cause marketing and donating a percentage of revenues to sustainability issues. The “Birkenstock” sustainability influence is now being combined with the “it’s better for you” image.
Lifestyle marketing comes in many images. Soymilk and organic products have fairly clear product definitions permitting consumers to rely on what they are. However, there are a number of other terms that are often used to convey “lifestyle” images. For example, “natural” has good marketing appeal, but the meaning of natural is not always clear; “local” is better imagery than more distant or foreign.
Humane treatment of animals is a very strong element of lifestyle marketing. Small, family-run companies versus large corporations is also an important concept of lifestyle marketers. The use of drugs, chemicals or confined spaces for animals is an anathema.
The cutting edge lifestyle retailer is Wild Oats. Perry Odak, former CEO of Wild Oats, was CEO of Ben & Jerry’s for several years as Ben and Jerry were phasing out of running the company they founded.
Whole Foods has positioned itself as a lifestyle retailer. They offer many organic products and their stores are smaller with a more intimate format. (Whole Foods is in the process of acquiring Wild Oats, although the merger is currently under judicial review.)
Safeway is rapidly and successfully repositioning itself in a more lifestyle format. In fact, the company calls it a “lifestyle” program and it provides more discretion to local managers in the selection of “local” products; friendlier, more service oriented with better trained employees; and more space allocated to organics (their “O” line). Safeway claims to have already reclaimed a large number of customers previously lost to Wal-Mart on the low price side of the retail food business as well as customers previously lost to Whole Foods, which is on the higher price side of Safeway.
Wal-Mart has moved to shore up its consumer appeal by increasing organic offerings including an increasing array of organic dairy products.
The organic food market is growing at a rate of 20 to 25 percent per year, and is valued at about $15 billion in annual sales, constituting about 2? to 3 percent of the total food and beverage market. Organic food and beverage sales are projected to have 6 to 7 percent of market share in five years.
Dairy and produce are the fastest-growing categories. Organic dairy products are about 3? percent of total dairy product sales and total about $2.5 billion. Sales of organic dairy products grew about 24 percent last year. Fruits and vegetables constitute about 38 percent of total organic food and beverage markets, and dairy is about 15 percent.
Tip Tipton, chairman and chief executive officer of the Washington, D.C.-based Tipton Group, is the former CEO of the International Dairy Foods Association.
John D. Utterback: 1918-2007
John Davis Utterback, 88, founder of Lexington, Ky.-based All Star Dairies Inc., died May 18. In 1958, Utterback founded All Star Dairies Inc., a dairy association with more than 190 members. At All Star, John served as president, chief executive officer and chairman of the board, and remained the driving force of the company for 43 years. In the dairy industry, Utterback is renowned for his entrepreneurial spirit and innovative thinking in product sales, marketing, purchasing and packaging. His exuberance for life, keen mind, inexhaustible dedication to his business and complete devotion to his family will be truly missed. Born in Lawrenceburg, Ky., on August 10, 1918, Utterback was one of five siblings. He received a bachelor’s degree in social sciences and elementary education from Penn State Teachers College in 1942 and a master’s degree in education from Columbia University in 1946. As a young adult, his interests included teaching, coaching basketball and guidance counseling. From 1942 to 1945, Utterback served in the U.S. Army Air Forces at Gardner Field in Santa Ana, Calif., and also at Mitchell Field in New York where he served as chief clerk. After working in sales and marketing for the Louis Sherry Co. in New York, Utterback founded Franchise Marketers in 1955, and served as president of Hopalong Cassidy Endorsements.
Stencil Receives WDPA Presidents Award
LaVern Stencil, president of Marathon Cheese, received the 2007 Wisconsin Dairy Products Association President’s Award July 15 at the 2007 Dairy Symposium at The Grand Geneva Resort in Lake Geneva, Wis. Stencil has spent more than 45 years at the Marathon, Wis.-based cheese processor, where he began working in 1961 in production. He served numerous positions over the years, rising through the ranks until 1997, when he became president. Stencil has been an integral part of the success and growth of Marathon Cheese; the company has two packaging operations in Wisconsin (Marathon and Medford), one in Booneville, Miss., and another in Mountain Home, Idaho. Stencil is a member of the Wisconsin Dairy Products Association’s board of directors, and also serves on the boards of the National Cheese Institute, Dairy State Academy and Marathon County United Way. This year’s winner was selected by the WDPA Board of Directors from a slate of nominees offered by the WDPA Presidents Advisory Committee. The nominees were chosen based on their contributions to the Wisconsin dairy industry and Wisconsin Dairy Products Association.