It is a well-known fact in the Midwest (and a source of amusement to some) that Iowa’s hog population is larger than its human population. But natives of the Hawkeye state take pride in their agricultural status. Despite the emphasis on pork, Iowa is a heavy-duty dairy state, ranking 12th in the nation in milk production (measured in pounds) in 2013.
According to the Food and Drug Administration’s Interstate Milk Shippers List, more than a dozen Grade A dairy processors operate plants in the state. They take advantage of the supply of high-quality milk and hard-working labor force. Three companies on the Dairy 100, our list of North America’s largest dairy processors, have their headquarters in Iowa: dairy co-op and cheesemaker Swiss Valley Farms (in Davenport); ice cream processor Wells Enterprises (LeMars) and Anderson Erickson Dairy (Des Moines). This last ranks No. 82 with revenues of $165 million in 2013, up from $162 million the previous year.
Iowa’s farming heritage has created a population that recognizes and values the nutrition and wholesomeness of dairy foods and beverages. From its one plant in Des Moines, (see related)Anderson Erickson Dairy supplies Iowa and some neighboring states with milk and Grade A foods including cottage cheese, yogurt (conventional and Greek) and sour cream. It sources its milk from local farmers. Besides making its own branded products, the dairy co-packs for other customers.
Anderson Erickson, or AE as the company is known, got its start in Des Moines in 1930 when William Anderson and his friend Iver Erickson went into business together. In 1938, Erickson bought out Anderson’s share but kept his friend’s name on the door. At that time, 150 dairies supplied the capital city with milk. It was a simpler era. Home delivery route drivers entered their customers’ houses freely. Some even had house keys, said CEO Miriam Erickson Brown, a grand-daughter of the founder and a daughter of Chairman Jim Erickson. Miriam’s younger brother Warren is the chief operating officer and chief financial officer. They have a sister who is not involved in the business.
Today, AE Dairy stands alone, having outlasted all the other dairies that once supplied Des Moines. “We’re a survivor,” said Erickson Brown. “We give our heart and soul to the business.”
A customer-driven business
Many dairies are operations-driven, putting a priority on manufacturing efficiencies over product quality. That is not to say AE Dairy doesn’t care about efficiency. But the reason the third-generation family-owned business has survived for nearly 85 years is a single-minded focus on the consumer. She is the one who shops, buys, serves and (hopefully) repurchases the company’s dairy foods and beverages again and again.
It is common to hear CEOs of hospitality businesses (especially cruise ships or resort hotels) talk about “delighting the customer” but that phrase is not typically voiced by the head of a dairy business. But that’s the mission of Erickson Brown. She wants every consumer to have a great experience with AE Dairy products every time.
“When you have excellence as your standard, your work is never finished – things can always be improved,” Erickson Brown said. And to get to that level is “a ton of work,” she admitted. “We care really deeply about the brand experience.”
The focus on quality permeates every level of the company. By learning what AE Dairy is all about, employees all become brand ambassadors, Erickson Brown said. So when a route driver in a grocery store is stocking shelves, he can explain to a consumer how AE Dairy’s chocolate milk differs from competitors’ (for one, AE uses three kinds of European cocoa). Employees know how to share product stories, like AE Dairy’s emphasis on using premium ingredients (it sampled dozens of vanilla flavorings before selecting one for its Greek yogurts). Those flecks in the egg nog? Everyone in the dairy knows that’s real nutmeg.
Standards are “ridiculously high”
The company’s brand position is expressed as “Ridiculously High Standards.” The standards focus on both customers and consumers, as well as the foods and beverages themselves. Full service route drivers learn to anticipate a retailer’s need, delivering products before a store runs out. The AE sales team partners with their accounts and will stock shelves and help train dairy managers even if that is not part of the service agreement. When a consumer complained about finding Cheerios in a gallon of milk, an AE Dairy employee delivered a fresh jug to her house. (The consumer later explained that her husband was responsible for the cereal.)
Internally, employees follow their own set of standards. They use a scorecard to track a number of metrics including quality, safety and efficiency. There are weekly inspections of the manufacturing equipment, a review of general housekeeping practices and a check of product freshness. Currently, the goal is to have 98% of production meet the end-of-code date.
And then there is the weekly Thursday taste test. A team that includes members from the plant and from the executive office tastes everything that was made that week. They check the foods for taste, color, texture and consistency. Some panel members earned tasting certifications from Iowa State University. Erickson Brown said she learned the standards from 29 years of on-the-job tasting.
The taste test team also inspects packages for ease of opening and scrutinizes the printing of labels and cartons. Sometimes, especially if they are developing a new flavor or product, they test competitive products. AE Dairy benchmarks itself against the competition, which Erickson Brown said includes other dairies, foods and beverages including “milk imitators,” meaning almond and soy milks.
If something is amiss, AE Dairy takes a forensic approach to finding out what went wrong. They traced one deviation to standards to a new supplier of ink to the dairy’s packaging vendor. Another time the tasting panel saw that the yogurt did not meet the standards for pieces of blueberries. They traced that failure back to the supplier’s fruit shipment.
The ingredient selection process provides another insight into AE Dairy’s Ridiculously High Standards and quality focus. It can take months (in the best case) and years (in the worst) to bring a product to market. For its low-fat and nonfat Strawberry-Rhubarb Pie yogurt, AE Dairy strove to develop authentic flavors and deliver them in a proscribed order. It wanted the strawberry taste to come through first, followed by rhubarb and then the pie crust.
Strawberry-rhubarb pies are a favorite of Iowans. “If you don’t get it right, (consumers) know,” said Marketing Director Kim Peter.
When AE Dairy switched to stevia to sweeten one of its chocolate milk offerings, the team made sure that the taste was just right before releasing the product to the market. It reviewed dozens of vanillas for AE Greek yogurt before selecting one that was both bold and delicate. The dairy wanted the vanilla flavor to linger.
Challenges and allies
Although the Des Moines competition has changed (there are no longer 150 dairies as in Iver Erickson’s day), AE Dairy still has its share of challenges. Milk consumption isn’t what it used to be. And while the Des Moines population (about 570,000 in the metropolitan area) is expected to continue to grow, it is still a small market. Jim Erickson’s decision to serve Kansas City, Mo., three hours south on Interstate 35, was a good move. Its metro area population is 2.34 million, nearly four times that of Des Moines. For comparison, the total population of Iowa is just over 3 million.
Challenges to the dairy industry come from parties as diverse as health advocates and animal-rights activists who question the benefits of milk. Erickson Brown said she appreciates and leans on the marketing and research efforts of industry partners, including the Milk Processor Education Program, Dairy Management Inc., and the farmers who supply AE Dairy with milk (who can speak to animal-care issues, when they arise). MilkPEP and DMI spend thousands of dollars on research and advertising, resulting in consumer insights and awareness that is shared with the industry. Individual milk processors can leverage those results in their own marketing.
MilkPEP’s current ad campaign promotes the value of protein in the diet. “They don’t define our strategy, but they do give us a head start” Erickson Brown said. The protein message forms “a foundation” for AE Dairy’s marketing and makes it more “relevant,” she said. The company promotes the protein in milk, yogurt and cottage cheese on product packaging, at in-store demonstrations and on its website.
As much as AE Dairy talks to consumers (through traditional advertising, social media and events), it does as much listening to what the general public is saying. Today’s “MRI moms,” as Erickson Brown describes them, look deeply into products and question everything, from nutrition to sustainability to animal care.
“You have to be tuned in to the customers. When the conversation gets tricky [like animal welfare], we have to provide a response,” she said.
On the positive side, Iowa’s agricultural culture and values work in favor of dairy, Erickson Brown said. For example, the population favors milk over fast-selling plant-based alternatives like almond milk. Values like serving a sit-down meal bring family members together. Breakfast at home is a hospitable place for a gallon of milk.
Erickson Brown calls milk “a multitasker in nutrition” and points out that it tastes good and is economical. To show consumers that they can do more with milk than drink it, AE Dairy works with a recipe development company. The recipes, available on the dairy’s website, through social media channels, and at sampling events, show how to incorporate milk, yogurt, sour cream and other foods into salads, appetizers, main courses, desserts and baked goods.
The CEO is also the target market
Erickson Brown grew up at the dairy. Early jobs including answering phones and running the paper shredder, she joked. After graduating from Wheaton College in Illinois where she studied speech communications, she worked outside of the family business before joining it in 1985. She held a variety of positions and ran the Kansas City operation before being named chief executive officer in 2006. She said her father was “brave” to put her in charge for a couple of reasons. One, she is a family member. Second, there were few women who were CEOs of dairies. Even today, there are only four women in charge of dairy operations on the Dairy 100. An advantage to being the CEO is that she represents the target market for dairy products, she said.
As a smaller dairy, AE is “scrappy” Erickson Brown said, acknowledging the company’s lean management structure. Employees’ passion for dairy and their willingness to do a lot of tasks, regardless of job title, means even the CEO posts to Facebook.
Erickson Brown credits her father with growing the dairy started by his father and William Anderson. Her grandfather, who ended his formal education at the eighth grade, created the AE logo, styled after a cattle brand. The red color reflects his love of tulips. The company plants 40,000 new tulip bulbs every year outside its headquarters. The community is invited to dig them up and take them home after they’ve bloomed in the spring. The Keep Iowa Beautiful organization recognized AE Dairy in 2013 with a corporate award for excellence for “maintaining the attractiveness and beauty” of its headquarters.
Jim Erickson, who also graduated from Wheaton College, joined the dairy in 1958. He said his father insisted upon quality in every aspect of the dairy. He held everyone to the same standards in the operation. His principles were quality and customer service.
All the right moves
In the 1960s, Jim Erickson saw the potential in yogurt, then a niche product. He brought it out of health food stores and into the mainstream, his daughter said, by changing the formula to make it milder and less tart.
Erickson modernized the operation with new equipment and packages. He converted the plant from vat pasteurizers to faster and higher-capacity high temperature/short time processors. Erickson worked with professors at Iowa State University to develop product standards.
Capital investment continues today. A new mix-proof valve cluster in the plant might not sound as sexy as the newest flavor of Greek yogurt, but it allows for flexibility in manufacturing, said Warren Erickson. For example, the company can process a short run of one flavored milk then quickly process a different flavor without shutting down the entire line for cleaning.
AE Dairy manufactures a full range of Grade A beverages and foods, including white and flavored milk, ice cream mix (packaged for retail sale and for commercial use), 50 flavors of Greek and conventional yogurt, cottage cheese, sour cream and dips. The company looks for flavor inspiration everywhere. An apricot-raspberry combination for yogurt came about after a visit to a farmers’ market, Erickson Brown said. A bath-and-body store is a seemingly unlikely place to inspire a food company. But Erickson Brown said the company’s pear-flavored yogurt was developed after she saw a sparkling pear body gel.
Customers include supermarkets, convenience stores, schools, institutional foodservice accounts (including soft-serve ice cream stores) and private label accounts. A fleet of 179 company-owned trucks serve 150 routes. An automotive shop on the 22-acre campus maintains 406 pieces of equipment.
Involved in the dairy industry
The success of a trade association depends in large part on the support of its members. Anderson Erickson Dairy is a long-time member of the International Dairy Foods Association and executives volunteer to serve on its committees. Miriam Erickson Brown serves on the board of IDFA’s Milk Industry Foundation and is its former chair. She and her father have received IDFA’s Soaring Eagle awards which recognize those who have provided exemplary leadership to the association.
The dairy industry benefits from IDFA’s educational and lobbying efforts. Erickson Brown cites the work IDFA has done on Capitol Hill, including its recent advocacy for clear and sensible labeling of foods and beverages and 2014’s farm bill.
AE Dairy also finds value in two other dairy-related organizations: the Milk Processor Education Program (Erickson Brown is an at-large member of the board and chairs the Breakfast at Home; and Branding committees) as well as the Innovation Center for U.S. Dairy, a unit of Dairy Management Inc. She is the past chair of the health and wellness committee of the Innovation Center, funded by the dairy producer check-off program. The insights about dairy nutrition that she gleaned from chairing these committees have helped to form AE Dairy’s marketing messages.
Deep roots in the community
Anderson Erickson Dairy is deeply involved in the Des Moines and Kansas City communities and in towns throughout Iowa. It reviews every request for product donations and rarely says no, Peter said. The dairy especially favors family-friendly groups that request support and tries to match products to the event (for example, giving chocolate milk, a refuel beverage, to road races). Peter said the donation program is more important to the company than couponing because it forms a relationship with the community.
AE Dairy supports numerous runs and walks. A favorite is Kansas City’s Trolley Run (a four-mile race) that raises funds for the Children’s Center for the Visually Impaired. In Des Moines, the dairy has adopted Brubaker Elementary School. The dairy has funded computers at the school, and employees volunteer to read to students there. Fifth-graders visit the company every week to learn about dairy foods and nutrition.
The Ericksons are active on numerous community boards including the Better Business Bureau, the Des Moines International Airport, Goodwill Industries of Central Iowa, the Governor’s Business Advisory Council, the Iowa Prayer Breakfast, Keep Iowa Beautiful, Partnership for A Drug Free Iowa, and Youth Homes of Mid America (a shelter for homeless boys).
A constant: consumers are the future
Jim Erickson has a collection of vintage quart glass milk bottles and he recalls the days when the company used to pack cottage cheese in glass jars. Family movies shot in the 1930s and 1940s depict a simpler time, showing delivery men hopping off their trucks and running into customers’ homes and navigating Iowa’s country roads during a particularly snowy winter.
Today, the trucks are fueled by bio-diesel and are covered in fleet graphics proclaiming the dairy’s “Ridiculously High Standards.” Erickson Brown said the company is always “dreaming, looking to the future” and “driving to the next thing.” A dozen products are in development, including new concepts and flavor extensions, although Erickson Brown wasn’t willing to discuss specifics.
Respecting the individual and communicating one-on-one is a value of both the Erickson family and AE Dairy. Personal letters and phone calls to consumers are authentic, which is especially important today when the public is wary and weary of marketing hype from companies saying one thing and doing another.
AE Dairy stays connected to the customer through every network available because it is not just nice to know what consumers are thinking, it is vital.
“If you don’t know what’s important to them, you won’t be around for long,” Erickson Brown said. She added that “you get a lot of love back” by communicating directly with the customer. That love is repaid, as shown in AE Dairy’s increasing sales and consumer loyalty. Iowans love their local dairy.