Dairy Checkoff Report

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Dairy Checkoff Report Update

• October 24, 2007

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Dairy Checkoff OverviewDairy Management, Inc.
(DMI)

• Founded in 1995 by United Dairy Industry
  Association (UDIA) and the National Dairy
  Research and Promotion Board (NDB)
• Operating company that manages domestic and
  international promotion programs
• Responsible for driving demand for U.S. produced
  dairy products

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Dairy Checkoff Overview

• UDIA is a governance structure monitored by USDA
• Federation formed in 1970 by a merger of National
  Dairy Council and American Dairy Association.
• UDIA oversees ADA and NDC still today
• NDB formed by Congress in 1983 as part of the
  Dairy and Tobacco Adjustment Act
• Purpose Strengthen demand for US dairy in
  domestic and foreign markets
• Checkoff Funding 15 cents total per
  hundredweight (10 cents to local UDIA and 5
  cents to NDB)

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U.S. Dairy Export Council

• Formed by DMI in 1995
• An independent membership organization that
  leverages the investments of dairy processors,
  exporters, milk producers and industry suppliers
  to increase dairy exports
• Funding from the Foreign Agricultural Service of
  USDA, USDEC members and DMI

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Midwest Dairy Association

• Mission
• Midwest Dairy Association implements programs
  that help increase sales and demand for dairy
  products and dairy ingredients and help improve
  the economic well-being of Midwest dairy
  producers.

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Midwest Dairy Association

• Who We Are
• MDA Started Jan. 1, 2000
• Predecessors go back over 80 years
• Covers 9 States
• Promote to 35 Million Consumers
• Funded by 14,000 Dairy Farmers (20 of all US
  Dairy Farmers)
• 19 Million Budget
• Part of 200 Million National Program

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Minnesota Division
North Dakota Division
North Dakota
Midwest Dairy Association
Minnesota
South Dakota Division
South Dakota
Chicago Division
Iowa
Iowa Division
Illinois
Kansas City Division
St.Louis Division
Missouri
Kansas
Oklahoma
Arkansas
Ozarks Division
Updated November, 2002
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MDA Who We Are
A Family of Partnerships
Dairy Farmers 15 cents (245 million)
MDA 10 cents (18 million)
NDB 5 cents (93.9 million)
DMI
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National Dairy Partnerships

• Natl Cheese Institute
• Cheese/calcium PR program

• Natl Milk Producers Fed.
• Milk research
• Policy information

DMI/MDA

• Intl Dairy Foods Assn
• MilkPEP program

• American Butter Inst.
• Butter website
• Butter PR program

• American Dairy Products Inst.
• Dairy ingredient marketing program
• Dairy product research

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Consumer Partnerships

• Schools
• Nutrition education
• School foodservice promotion

• Restaurant Operators
• New dairy menu offerings

DMI/MDA

• Retailers
• In-store dairy promotion

• Media
• Dairy food publicity
• Nutrition information

• Food Manufacturers
• Dairy ingredient usage

• Health Professionals
• Nutrition recommendations

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Midwest Dairy Association

• What We Do
• Apply upward pressure on the demand curve for
  commodity dairy products.
• Protect long term image of dairy products and the
  dairy industry.
• Fill in gaps in product, market, and nutrition
  information.
• Fill in gaps between the Brands.

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Midwest Dairy Association

• Traditional Tools Do We Use?
• 3-A-Day Advertising
• Restaurant Promotions
• Supermarket Promotions
• Classroom Nutrition Education
• School Cafeteria Promotions
• Product/Nutrition/Industry PR
• Ingredient Marketing

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Product A Profile

• Universal trial by age 2
• 97 household penetration
• 87 positive consumer perception of health
• 81 positive consumer perception of food value
  (Nov 06)
• Spot on the Food Guide Pyramid
• Mandatory serve in school lunch program
• Got Milk? one of top ad campaigns of all time
• One of top products that drives consumers to
  store
• Sales trends have been stable for 20 years.

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Product B Profile

• Low margin, commodity type product
• Limited availability85 of sales at retail (SIP
  data)
• 69 private labellittle brand support (IRI )
• 93 sold in single flavorwhite (USDA)
• 75 of kids choose other flavors..when offered
  (SMPT )
• 72 sales in bulk gallon ½ gallon jugs (IRI
  data)
• Outspent 11 to 1 by competitors (BMC Mktg
  Analysis)
• Negative demographic trends..aging population
• Sales trends have been flat for decades

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Half Full or Half Empty?
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Dairy Health and Wellness Platform
Dairy H/W Platform
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Competitive Beverage ContinuumMilk in Schools
Non-Competitive Highly
Competitive Traditional formulation
Enhanced formulation White milk
only Additional flavor Multiple
flavors One-color cardboard container Upgraded
paperboard Plastic, resealable
packaging Meal-line only A la carte
Multiple distribution points
(e.g., meal-line, a la carte, vending
in/out of cafeteria) Over 40 degrees, dated
cooling equipment, Cold, Visible,
Merchandised inadequate handling and
limited and Promoted merchandising
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Why Kids?Why are kids the first priority for
growing milk consumption?
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Kids Represent Twice the Milk Volume than their
Fair Share

Source"The Electronic Share of Intake Panel
(eSIP) study is conducted by TNS NFO. eSIP
monitors individuals beverage consumption both
at home and away from home through a national
panel of 36,000 individuals per year. Excludes
milk used for cereal, coffee, or as an ingredient
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Milks Slippery SlopeConsumption starts out
high, declines with age
2004
Teens 11 Milk Volume
Adults 52 Milk Volume
Kids 37 Milk Volume
SourceThe Electronic Share of Intake Panel
(eSIP) study is conducted by TNS NFO.    
eSIP monitors individuals beverage consumption
both at home and away from home through a
national panel of 36,000 individuals per year.
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Why Schools?Why focus on schools first to
access kids?
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Focus on School Milk

• 55 million kids go to school every day
• 400 million gallons of milk sold in schools
• 5 billion 8oz. cartons served per year 5
  billion product exposures!
• 36 million participate in school meals
• 28 million at lunch/8 million at breakfast
• School milk is declining in popularity among kids
• Milk continues to be a nutrition solution in
  schools
• Only 2 of kids meet the Food Guide Pryamid
  recommendations
• Milk and dairy products provide the most
  important source of calcium in children's diets
  and account for 75 of the calcium in the US food
  supply
• Milk must be offered in School Lunch and
  Breakfast programs
• School milk represents a huge area of opportunity
  for the industry
• Early brand identification, loyalty

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Industry Embracing 3-A-Day

• Strong retail support
• 29 of 30 top retail chains on board
• Wal-Mart, Safeway, Kroger (Ralphs), Albertsons,
  Costco, HyVee, Fareway, etc.
• 60 dairy manufacturers
• Swiss Valley Farms, Lactaid, Crystal Farms, Land
  OLakes, Borden, Kraft, Schreiber, Sargento,
  Tillamook, Nestle, Dannon, Yoplait, etc.
• 3-A-Day is on nearly 3 billion packages

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New health research findings

• Low fat dairy can help prevent high blood
  pressure
• Dairy can help prevent colon cancer
• Diet rich in dairy may reduce risk of diabetes,
  heart disease
• Dairy foods can help people LOSE weight

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Health Partners Support
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Key Foodservice Partnerships

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McDonalds Milk Launch

• McDonalds first fast food restaurant to
  introduce plastic, single-serve white/choc milk
  nationwide
• 13,500 locations
• McDonalds selling over 4 million milk jugs each
  week!
• Now at Wendys, Burger King, Subway, Sonic,
  Culvers and more in over 55,000 locations total

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Dominos Spot
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Protecting Dairys Image Crisis preparedness

• Industry wide speak with one voice to public
• Media misinformation
• Consumer skepticism
• Three-pronged approach
• Lead coordinated, unified industry effort
• Build industry response plan
• Train industry players, preparation drills,
  modify as necessary
• www.dairyresponse.com industry resource for
  co-ops, others in the industry

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Protecting Dairys Image Dietary Guidelines
Milk Group
New Dietary Guidelines and MyPyramid Food
Guidance Tool recommend 3 servings of dairy
products per day
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Ingredient Marketing
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Does It Work?

• How you know the checkoff works
• During the past three years, cheese and fluid
  milk advertising programs were responsible for
  selling an additional 1.5 billion pounds of milk
  annually (USDA).
• Since 1984 per capita consumption of dairy
  products has grown from 519 lbs to approximately
  605 lbs about 17!

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Americans Consuming More Dairy
Since the national dairy checkoff began in 1984,
per capita consumption of total milk has steadily
climbed. Total milk is the milk that goes into
all dairy products. Source NMPF, from USDA
data (milkfat basis)
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Checkoffs Three Purposes
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Checkoffs New Role

• Find a home for dairy farmers increasing
  production
• Make checkoff dollars go further
• Be a catalyst for industry change
• Work earlier in the value chain
• Work with industry to be consumer driven
• Create a growth market for dairy farmers by
  giving consumers what they want, when, where and
  how they want it.

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Unmet Demand
Unmet Demand
CURRENT CONSUMER SALES
POINTS OF AVAILABILITY
PRODUCTION FACILITIES
POTENTIAL SALES
COW
Our Focus
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Midwest Partner Criteria

• Benefit dairy farmers
• Be of strategic importance
• Have the ability to motivate others to follow
• Be innovative and willing to invest in new
  product development
• Be willing to invest in commercialization
• Have the ability to meet unmet demand
• Be aligned with dairy farmer values

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5 Key Areas of Growth

• Fluid Milk
• Cheese
• Hispanic Market
• Ingredients
• Exports

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Milk Growth Opportunities
Flavors Low-Sugar Shelf Stability Low Fat
Milk Minus Milk Plus
Single Serve
Multi-Serve
Multi Pack
Vending
Foodservice
Schools
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Cheese Platform Growth Opportunities

• Cheese Minus
• Fat
• Sodium
• Calories
• Lactose
• Cheese Plus
• Fortified
• Omega3
• Pro/Prebiotics

• Authentic/Robust
• Gouda
• Hispanic
• Varietal
• Specialty

• Snacks
• String cheese at FS
• Appetizer concepts

• Pizza
• Meal solution ctr
• Menu/Concept Development

Sandwiches Burger
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Dairy Aisle Reinvention
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Shaws Cheese Aisle Before
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Shaws After
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• Thank you!