FOR IMMEDIATE RELEASE

November 15, 2007



Contact:

David Pelzer
(847) 627-3233
davidp@rosedmi.com

Dairy Promotion Leader Cites Opportunities to Build Sales

DMI CEO Outlines Path to Long-Term Growth

ORLANDO, Fla. – U.S. dairy producers have a great opportunity to convert billions of pounds of consumer demand into increased sales, thus finding a home for increasing dairy production, according to Tom Gallagher, chief executive officer of Dairy Management Inc.™ (DMI), which manages the national dairy checkoff program.

Worldwide demand for dairy products will exceed supply for the long term, and the United States is poised to be the dominant player in filling this gap, Gallagher said, speaking at the 2007 National Dairy Promotion and Research Board (NDB)/United Dairy Industry Association (UDIA)/National Milk Producers Federation (NMPF) Joint Annual Meeting in Orlando, Fla. “Some studies put that number of demand over supply at up to 15 billion pounds,” he said, in remarks that identified an optimistic future for dairy producers if the industry responds to consumer needs.

To take advantage of these opportunities “to give consumers what they want, when and how they want it, we need to transition from a production-driven environment to a consumer-driven environment,” Gallagher said.

Fluid Milk and Cheese Partnerships

Today, in houses all across America, kids can choose from flavored milk in a single-serve plastic container, a drinkable yogurt, or other dairy-based drinks, Gallagher said. “These choices weren’t even available to consumers a few short years ago. And when those drinks weren’t available, what did those kids do? They grabbed soda, and they grabbed water.”

Today, because of the dairy checkoff’s work with schools, fluid milk processors and national restaurant chains, nearly 60,000 fast-food restaurants and more than 9,000 schools are selling hundreds of millions of pounds of additional milk, Gallagher said.

In addition, DMI has begun working with a major cheese company and a leading quick-serve restaurant chain to test string cheese in kids’ meals, Gallagher added. Just as what happened in fluid milk, “we want another domino effect with string cheese, to drive sales and give a new home for your production.”

In contrast, over the past 20 years, the industry failed to provide “the right product in the right package” to meet unmet consumer demand in schools, restaurants and other locations. “We lost share to other competitors, so that now bottled water sales exceeds milk sales,” he said.

Gallagher said that, to prevent repeating history, two factors must change:

Price volatility – Even though DMI programs this year are having an even bigger impact in the marketplace effect this year, the 25 percent increase in fluid milk gallons at retail (where more than 70 percent of fluid milk is sold) means there will be less fluid milk sold this year than last year, Gallagher predicted. “This is not because price is too high, but because the spikes are too much, too quick and too often,” he said.

Plant infrastructure – While other governments around the world provide financial incentives to modernize dairy plants, “our system encourages building plants that make what the U.S. government will clear, when needed, rather than what the consumer demands,” he said.

Dairy Innovation Center to Drive Sales

To help the U.S. dairy industry develop products to turn unmet demand into sales,

Gallagher announced the formation of a DMI-led innovation center for industry-wide collaboration in supplying sales data, nutrition information and research, and other information to dairy marketers. “The center will help the industry move bigger, faster, and smarter in developing products through innovation that will turn unmet demand into sales,” he said.

Dairy innovation needs to capture taste, price, functionality, nutrition, and an industry-wide focus on the social and environmental perceptions of consumers, Gallagher said.

Regarding the latter, the industry can “take that consumer focus and marry it with opportunities to grow the business,” Gallagher said. “We can help retailers and others to drive innovation. If we are part of dialogue, we can lead that discussion. The chapter on environmental factors has yet to be written. When it is, dairy farmers and the dairy industry need to control the pen.”

Building a Better Future

Gallagher painted a picture of a future dairy industry where:

  • The growing middle classes in China, India and other countries, as well as in the United States, rely on the U.S. dairy industry to meet their needs.
  • Kids drink more milk than bottled water.
  • Minimizing price volatility will help producers secure “equal footing” in the marketplace.
  • Dairy’s great story on social and environmental responsibility is clearly understood.
  • Innovation requires growth in dairy production to meet increasing consumer needs.

In closing, Gallagher said that, while transitioning from a production-oriented industry to a consumer-driven industry is difficult and controversial, it will allow more dairy producers “to thrive, not just survive.”

“The time for leadership is now,” he said. “The pen is in our hands. Let’s write a history that builds a better future.”

For more information about producer-funded checkoff programs, visit www.dairycheckoff.com.

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