When I visited a cheesemaker last week, the CEO told me, “We’re a small company that acts like a big company.” Customers are surprised by the wide range of cheese flavors and formats this company can offer. The CEO explained that it is totally focused on what the customer wants and has reporting structures in place to measure and manage the business.
He has a clear strategy for growth and doesn’t deviate from it. I call that being confident. If only all big companies were so buttoned down. Some are, of course. Big companies have been on my mind for the last four weeks as we prepared the 22nd annual Dairy 100, our list of the largest dairy processors in North America. I’ve read a lot of annual reports by the publicly held dairies, dairy cooperatives and food manufacturers. Some themes common to these reports are:
- Developing new products and marketing them appropriately
- Investing in infrastructure
- Managing costs
- Recruiting and retaining employees
Kraft Foods (now merged with Heinz) in its annual report noted that competitive nature of food manufacturing. “Competitors include large national and international companies and numerous local and regional companies. We also compete with generic products and retailer brands, wholesalers and cooperatives. We compete primarily on the basis of product quality and innovation, brand recognition and loyalty, service, the ability to identify and satisfy consumer preferences, the introduction of new products and the effectiveness of our advertising campaigns and marketing programs, and price. Improving our market position or introducing a new product requires substantial advertising and promotional expenditures.”
New products, new marketing
Dairies won’t grow if they only sell what they’ve always been making. Consumers change, dietary guidelines change and food preferences change. As WhiteWave noted: “Our financial success depends on our ability to successfully predict changes in consumer preferences and demand, and develop successful new products in response.”
One product line that succeeded last year was International Delight. WhiteWave introduced flavor extensions of the coffee creamers, a new line called Iced Coffee Light and a Dunkin Donuts branded line of products. Sales in the segment increased 8.5% in 2014.
What are you doing to capture sales from the next generation? Baby boomers love Land O Lakes butter brand, and the dairy co-op wants to build similar loyalty with the millennial generation. “These younger consumers often look for simple, convenient and wholesome products.” The company noted success with Spreadable Butter with Canola Oil, Garlic & Herb Butter Spread and Sauté Express Meal Starters.
A marketing campaign for the co-op’s Kozy Shack pudding focused on simple ingredients, which helped double brand awareness and drive volume growth and profits. Magazine ads and free-standing inserts with the Sunday papers have yielded to social media campaigns, like the co-op’s “Pin A Meal, Give A Meal” Pinterest campaign.
Investing in infrastructure
Agropur, the Canadian co-op invested over Cdn$230 million in infrastructure and plants in 2014, including increasing the manufacturing capacity at its OKA cheese brand plant. The dairy cooperative registered the largest percentage gain in investment in property, plant and equipment among 12 companies analyzed by Dairy Foods. WhiteWave spent $300 million in manufacturing and distribution in North America and Europe. See our analysis here.
While it was investing in plants and equipment, and acquiring companies, Agropur also was keeping an eye on expenses. It said that by “pooling key services and streamlining work processes,” the co-op “also generated significant synergies, a necessity for achieving profitable growth in the context of intensified competition.” Net savings totaled $60 million on an annualized basis.
Land O Lakes said its Kozy Shack division “delivered $1.5 million of profit improvements by streamlining management of in-store promotions, advertisements and temporary price reductions.”
Recruiting and retaining employees
Dairies need plant operators, sales and marketing professionals, financial managers, food scientists and purchasing teams in order to run profitably. WhiteWave stated it this way: “We also depend on our ability to attract and retain qualified personnel to operate and expand our business. If we lose one or more members of our senior management team, or if we fail to attract talented new employees, our business and results of operations could be negatively affected.”
It is hard work to run a dairy of any size. The CEOs I speak with acknowledge that, but they also tell me it’s all worth it when they see a child enjoy their dairy products.
I’m interested in how you approach any or all of these strategies. Send me an email.