For Land O’Lakes Inc., based in the St. Paul, Minn., suburb of Arden Hills, net sales through the first six months of 2016 were $7.1 billion and net earnings were $238 million. The Arden Hills, Minn.-based dairy cooperative said these results were “significantly higher” compared to the same period in 2015. Land O’Lakes ended 2015 with net sales of $13 billion.
Chris Policinski is president and CEO of the co-op that has four business segments: dairy foods, feed, crop inputs and Sustain (its newest).
Beth Ford heads the Purina Animal Nutrition and U.S. Dairy Foods businesses. She holds the titles of group executive vice president and chief operating officer. Ford also is the co-op’s chief supply chain officer with accountability for all supply chain, operations, IT and R&D functions across the Land O’Lakes Inc. enterprise.
She joined Land O’Lakes in 2011 and was promoted to her current position in November 2015. Prior to joining the dairy co-op, Ford held senior and line leadership positions at Mobil Oil, Pepsi/Pepsi Bottling Group, Perseco, Scholastic, Hachette and International Flavors and Fragrances.
In 2015, the dairy foods segment contributed $4 billion, ranking it No. 6 on the Dairy 100, our ranking of the largest dairy processors based in North America. Sales in the feed division were $4.2 billion. Through the first half of 2016, the dairy foods segment saw higher results over the same period in 2015, due in part to less volatile markets and strong volumes and overall performance in the foodservice division, according to the co-op.
In late August, Ford spoke with Dairy Foods Editor-in-chief Jim Carper about product development, channel marketing, team building and hiring.
What follows is an edited transcript focusing on dairy-related issues at Land O’Lakes (the co-op) and Land O Lakes (the brand name). The complete interview is available in two parts on our All Things Dairy podcast page.
Dairy Foods: Land O’Lakes is in at least four areas — butter, branded cheese, foodservice and desserts. How do you grow these products and these categories?
Beth Ford: Butter, of course, was the product that started the whole Land O Lakes brand. We’ve continued to innovate on that butter platform, growing well above the category level. We are the category leader, and it’s because of innovation, like spreadables that we went to a number of years ago.
I was just with my R&D and innovation team. They were showing me the charts that indicated the last 16 to 17 products that we put out on the market are still out in the market and are generating significant levels of volume and profit for us.
People think of (butter) as “Boy, that’s an old-time” product category. Actually, we continue to innovate on butter and are growing at a healthy rate, at well above category. One of the other products we came out more recently with was the European butter, higher value.
Dairy Foods: Adweek wrote, “Butter pretty much sells itself.” Do you believe that?
Ford: Wouldn’t it all be easy if that’s the case? One of the things that our innovation team would say is, “Is it one of those things that you go by the shelf and you grab it?” You’ve always see the maiden [the image of the Indian woman] and you grab it. That is true to a point. But the fact is that there are other products that are growing in this butter category and I don’t know that it’s that simple.
We’re doing a couple of things that are interesting, like pumpkin pie spice butter for the holiday season. A quick in-and-out.
Then we’re working on a number of other things. We see in our research it’s those items that are with added health benefits — Omega-3 or those kinds of things — that are the pluses that consumers are going for, almost more than the “less than.”
We’re looking at that from a health platform perspective. We’re looking at that as an opportunity. We also look at convenience. We’re looking at packaging types.
Dairy Foods: What’s going on in cheese? That’s a big product category for Land O’Lakes.
Ford: Our processed cheese portfolio, especially in the foodservice area, is performing beautifully. That is a high area of growth for us.
We’ve also been focusing on our deli cheese business and really trying to wrap around our advertising. We still are the leader from a market share perspective in that deli cheese area, but it’s competitive. What we’re trying to do is focus on our advertising and our promotion.
Dairy Foods: Let’s step back and talk little bit more about the foodservice cheese. When you talk about foodservice, are these restaurants, or more institutional, like schools and universities?
Ford: It’s been more on the restaurant side that we are really seeing some nice growth. But also on the K-through-12 school business. Our performance cheese sauces are really, really doing well, for example butter sauce-based, cream sauce-based, hollandaise sauce-based.
Extra Melt is a terrific product for us in foodservice. While we can say K through 12 is growing, I would say, it’s also a big focus on the restaurant side of that equation.
Dairy Foods: So are these products that you’ve developed at your innovation center?
Ford: Absolutely. The Extra Melt brand and processed cheese is the industry gold standard. It’s something that has helped us distinguish Land O Lakes and our brand of products in the foodservice area.
Dairy Foods: How do you sell into the foodservice channel?
Ford: Some of it is direct and also we have a brokerage. We also are a category captain with Sysco. We’ve been trying to be a little bit more focused to say, “Where is it better for us to have the direct relationship and where will we work through our brokerage partners?”
Dairy Foods: Explain what you mean when you say you’re the category captain.
Ford: Sysco’s really tried an approach to say, “Help us grow a particular category across our portfolio and locations. As the most knowledgeable in these particular areas, help us think about the categories and the way we should position different products and grow different products.”
It’s an opportunity to work more as a partner rather than a supplier. It helps us distinguish the merchandising that would be most effective, the way that different products should be thought up in appearing in a category. It’s an important designation. It allows us to really think about growth in dairy and in that portfolio, with a key partner like Sysco versus just having it a supply-demand relationship.
Dairy Foods: Let’s talk about deli cheese and what’s going on with that in terms of shoppers, shopper insights, flavors and formats.
Ford: Deli cheese is a competitive environment. While we’re still a market leader in that area, that’s been a little bit more challenging for us because you have a number of players that are in the market place. Then you have “groce-staurants” (hot areas serving meals) inside of grocery stores now. And you have a deli which is playing such a significant role inside of supermarkets.
All of those are opportunities for growth, and some of them are growing above where retail is in supermarkets where we know for consumer packaging companies, that can be a bit more of a challenge.
Dairy is growing but other center storage areas are not growing as much. The deli cheese side for us is critical. If I’m working with my team and if we’re really focusing on the areas we need to win, those would be some of those areas. We continue to be a strong player but we need to do more to leverage our innovation portfolio and our partnership with some of these key customers to say, “We can grow at a better rate.”
Dairy Foods: As consumers spend more of their dollars in restaurants and in grocery stores, it sounds that you maybe hedged your bets by being in foodservice.
Ford: Consumers are making different choices right now. What’s been great is that even though there’s an evolution in the way the customer is thinking of food, dairy is a leading category. Dairy is still strong. We’ve seen the growth. I think that that’s been a little bit more challenging for other parts of the food industry, the packaged food industry.
Dairy Foods: You have a dessert product in Kozy Shack. Your annual report said your advertising agency partner will take Land O Lakes and Kozy Shack into the future. So what does that mean, taking it into the future?
Ford: Kozy Shack has performed beautifully. What we had hoped to do was take a brand that was simple, natural and leverage our “big pipe,” if you will, to say, “We’ve got more distribution, more capability.” Leverage our insights and our investments to grow appropriately, and we’ve done that actually, ahead of our plan. We continue to work on innovation in Kozy Shack in terms of product and distribution.
The Martin Agency is absolutely best in class. We are thrilled to have them with us in both the Land O Lakes core dairy area and in the Kozy Shack area.
In Land O Lakes, we’ve already launched the “Ad A Little Good” campaign. What we’re trying to do is really tell more directly the story of the culture and the products, and the way we think of Land O Lakes, to our consumers.
It’s really kind of flaunting the fact that we are farmer-owned. We’re going right from the cow to the shelf, and we know that consumers value that.
We also talk about the work we do internationally and in different communities around the countries to help in terms of food shortages. It’s a core area of our mission and our culture. And it’s a core area of our foundation where we focus our attention.
We want to tell that story. People say, “Well, butter. What is there new to talk about butter?” We say, “When you add butter to something, you add a little good.” But we also want to characterize it as, “If all of us could do a little good, wouldn’t it make the world a better place.” So we’re going to be showing that in our advertising.
On Kozy, we’ll probably do something a little, I don’t want to say “edgier,” but it’s more unique. We’ll tell more funny stories. I haven’t seen some of the final scripts yet, but I saw some of the storyboards and I liked it.
Kozy Shack has been growing nicely because of its simplicity. Where the consumer is right now, a simple ingredient that is something that is well understood. We’ve certainly indexed it strongly on rice pudding and things that are the simple formulas. So that is where you would see the advertising shift for Kozy.
Dairy Foods: It gives you another daypart, or several dayparts, right? It gives you a snack, it gives you a dessert. Maybe some people are already eating it for breakfast, too.
Ford: Boy, I like the way you think. Have you read our strategic plan? Because that is exactly right. What we would say is, “Jeepers, we’re not just playing against refrigerated dessert.” This product portfolio should index against a variety of dayparts, and you’re absolutely right.
Dairy Foods: Land O Lakes has a great brand name. You make some of your products and you license some of your products. Talk about the decisions when and where you’re going to make your own, and when and where you’re going to license to other dairy processors?
Ford: We haven’t really been discussing licensing to other dairy processors at this point. There was a period of time where we were in the fluid milk business and as you know we licensed that to Dean Foods and others. That’s been a good healthy partnership. We made a decision we weren’t going to be in that fluid milk business and we went that direction.
Dairy Foods: Do you as a company want to be in manufacturing of dairy products?
Ford: Well we are in manufacturing. As you know, we’ve got multiple dairy plants: butter-powder plants, cheese manufacturing plants and special ingredient plants (powders).
Do we want to be? Well, yes and we are. It’s part of our fully integrated model and we make the investments because we want to have, I don’t want to say “to have control.” We’d say, “It’s farm-to-fork.”
That’s the way we think of it from a farmer member perspective on the way to the retail shelf. So we are in manufacturing. We’ve invested in manufacturing. We acquired this year a plant in Hillsboro, Wis., that is a cream source plant for making butter. We’ll continue to look at our network. We always look at optimization of our network, and that’s the way we think of it. We don’t think of it on a plant-by-plant basis. We think of it as a dairy network. That distinction has helped us.
Dairy Foods: How so?
Ford: For example, I may make an investment in our facility in Orland, Calif., That plant supplies product into my Melrose, Minn., and Spencer, Wis., plants. So it allows me to be more cost-competitive. But also to have a network designed to support the production of the different product portfolios that I have.
Dairy Foods: What is it that Orland is making?
Ford: We’re making a low-fat Cheddar that goes into our processed cheese. Also, we have alternative cheese manufacturing in Melrose. So we’ll connect the dots. One of the reasons that I think it’s an advantage for some of our co-op members to be part of our network is it’s a national network, it’s not a regional play. So we are balancing the investments and the productivity and efficiencies of these plants across the national platform.