Guest Columns

Perspective:
Industry Issues

Leading dairy forward

Michael Dykes

Michael Dykes, president and CEO of the International Dairy Foods Association, contributes this column bimonthly for Cheese Market News®.

I just presided over my third Dairy Forum, the industry’s premier annual meeting for thought leadership and networking. It is extremely powerful when nearly 1,000 leaders and stakeholders in the U.S. dairy industry can come together to consider the issues we have in common and to discuss how we can work together to lead dairy forward.

I’m energized by all the conversations that took place and would like to share a quick reprise of my presentation about where dairy is headed. One clear takeaway message is this: What worked yesterday does not work today or may not work tomorrow.

For starters, we must embrace the disruptive technologies and trends that abound today. Then, as we think about our positioning for dairy’s path forward, three things are critically important: sustainability, innovation and trade.

Over the past few months, I have had several conversations with members about their mandates to retool operations with an eye on sustainability. They’re putting more and more resources and energy into reducing waste, shrinking carbon footprints, sourcing responsibly and contributing to their communities.

Kroger, for example, launched a “Zero Hunger/Zero Waste” campaign that aims to end hunger in communities they serve and eliminate waste in the company by 2025. Companies such as Danone and Unilever are seeking to be entirely carbon neutral or even carbon positive within the next 10 to 15 years. IDFA members also are among the 250 companies worldwide that have pledged to eliminate plastic waste by 2025, promising that 100 percent of plastic packaging will be 100 percent reused, recycled or composted.

Consumers today are demanding that their food comes from companies that hold environmental stewardship and social responsibility as core values. Consumers want food with a story, so we must continue to be vigilant in developing and promoting the dairy industry’s efforts to be sustainable.

We also have to keep spotlighting dairy’s positive role in well-balanced diets. We must intensify our efforts to make sure dairy gets into the “good food” categories. Fortunately, people on balance still have a positive view of animal protein. AC Nielsen reports the same, noting that 55 percent of U.S. households say high protein is an important attribute in their purchasing decisions.

But we can’t take anything for granted. The new Congress could wittingly or unwittingly hurt our industry based on current popular perceptions about the environment or nutrition. I promise that IDFA will be engaged and will continue to build our legislative and advocacy efforts.

Innovation is part of the same story. It’s about developing more products, better products and better packaging that meet consumer needs from the perspectives of nutrition, taste and convenience. As dairy foods companies and others in the supply chain take up the innovation challenge, you can be sure that IDFA is helping to pave the way. Our regulatory team is making great strides in urging FDA to have the standards of identity as flexible as possible to encourage new technology and to foster innovation.

Several companies are using incubators that help food industry entrepreneurs discover new products. Land O’Lakes has a Dairy Accelerator program that empowers dairy entrepreneurs and equips them to scale up their operations and achieve meaningful growth. The Chobani program offers similar assistance, helping small companies “with big heart and ideas to challenge the food industry, improve broken systems and make a difference.” Others like General Mills and Nestlé are buying small companies, infusing capital and marketing leverage while hoping to get smarter about innovation in return.

Can we do more at the industry level? I think we can.

Innovation also colors the trade story. Most everyone in the dairy industry agrees that expanding trade is critical to growing the U.S. industry. USDA says that domestic milk production will grow by another 33 billion pounds between now and 2028. Where is that going to go? Can we consume it all at home? USDA’s forecast says it doesn’t think so. And I don’t either.

We need to keep reminding the administration and Congress that trade skirmishes are doing untold damage to U.S. dairy industry prospects. We need to lift the steel and aluminum tariff situation with Mexico. We need movement on China trade and resolution on China tariffs. We cannot ignore the market opportunities with 1.5 billion people in China and the growing populations across Asia.

We applauded the announcement by the U.S. Trade Representative that the United States would begin trade negotiations with Japan during 2019. In addition, we recently asked U.S. officials to address our widening import disadvantage with New Zealand, Australia and now the European Union, which also is in conversations with Japan about trade.

But we must do more. We need to up our game in a big way and not let our competitors get ahead of us.
This thinking was reinforced by the research conducted by McKinsey & Company exclusively for IDFA and revealed at Dairy Forum. Modest growth forecasts, shifting consumer tastes and increased domestic competition will continue to push dairy executives to look for new models to capture growth.

The consultants recommend four strategic responses — innovating to capture domestic growth, revamping the supply chain, growing exports in markets with dairy deficits and attractive trade terms, and investing directly in deficit markets. The tactics, they say, should focus on identifying growth through analytics, making quick and small investments instead of big bets, and investing in new supply chain capabilities. These are just the highlights of the groundbreaking results.

All of these efforts will require leaders in the industry to listen, to learn and to lead bold change. It’s important to value winning together and acknowledge the need to do more with greater speed and a deeper commitment.

I am confident that this industry has the power, the leadership and the commitment to find a way to win. Let’s focus on winning together in the year ahead.

CMN

The views expressed by CMN’s guest columnists are their own opinions and do not necessarily reflect those of Cheese Market News®.

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