The US dairy products manufacturing industry consists of about 1,200 companies that have combined annual revenue of $60 billion. The four major product segments are fluid milk and milk products ($30 billion); cheese ($20 billion); frozen desserts ($10 billion); and butter ($1 billion).

Robert John, CEO of   ‘Yummy Foods’ answers the following questions as his experience in dairy products.

Q. What strategies does the company have to improve profitability and margins?

A. We have increased profitability by more efficient production and distribution operations, or by creating products with higher profit margins. We also concentrated on making premium products, like gourmet Italian cheeses, or new products, such as “lite” and low-fat versions.

Q. What opportunities might the organic dairy market present for the company?

A. Organic dairy product revenue has expanded by 20 percent since 1990 and is now the fastest-growing segment of the organic food industry. A substantial market has emerged in the US for organic milk products made from cow milk that hasn’t been treated with antibiotics or hormones, and has been fed with corn or other feeds grown without synthetic fertilizers or pesticides. Organic dairy products are more expensive to produce, but command higher retail prices. Consumers are willing to pay a premium for organic foods, making the segment a very profitable part of the industry.

Q. How beneficial are cultured products to the company’s product mix?

A. Cultured dairy products are becoming a value-added trendy food, rather than a commodity. The segment, which includes cottage cheese, dips, sour cream, and yogurt, has revived its dollar and volume sales due to innovative packaging, promotion, processing, and ingredients.

Q. Has low US milk consumption rate affected the company’s business?

A. Total consumption of fluid milk in the US has been flat for the past 10 years. Milk consumption per person decreased 20 percent, while consumption of some other dairy products increased. Each year, the average American consumer drinks 23 gallons of milk, compared to 50 gallons of soft drinks and 26 gallons of coffee.

US personal consumption expenditures of bakery and pasta products, which include crackers and cookies, are forecast to grow at an annual compounded rate of 5 percent between 2008 and 2013. Sharon Mathew has been working as marketing personnel in ‘Yummy Foods’ speaks about the challenges and opportunities that the industry has.

Q. Who are Yummy Foods primary competitors? 

A. The cookie and cracker industry competes with a number of other impulse purchases and snacking options, including potato chips, nuts, energy bars, in-store bakery items, fast food, and baking at home. Cookies and crackers are indulgence items that are among the first foods eliminated or restricted for those trying to lose weight. We compete against one another, bidding for space on store shelves of major retailers and battling for consumer mindshare. 

Q. How do volatile ingredient prices affect the company?  

A. The price of critical commodity inputs such as wheat flour, shortening, soybean oil, corn sweetener, and chocolate can increase significantly due to poor farm yields, unpredictable weather patterns, high import tariffs, and government farm subsidies.  

Q. Does Yummy Foods make allergen- or gluten-free products?  

A. Yes, cause the demand for gluten-free cookies and crackers is growing, fueled by more diagnoses of celiac disease. Celiac disease sufferers can’t eat items containing wheat gluten, an ingredient common to all cookies and crackers containing wheat flour. Sales are also strong for products free of common allergens like peanuts, tree nuts, eggs, and dairy.

Q. In which countries the industry has opportunities for growth? 

A. While North America is the largest soft drinks market; the fastest growth is in markets in Asian countries. Due to highly populous and rapidly emerging markets such as China and India, consumption in Asia is projected to overtake that of North America’s by 2006. The five fastest-growing markets are all expected to be in Asia. 

Q. Can production of other drinks increase your market sale? 

A. Yes, as consumers are buying more beverages that are substitutes for solid food, including drinks loaded with vitamins and minerals. Soybean and yogurt-based drinks in the form of “smoothies” have sales close to $1 billion. Health-related beverages include single-serve nutrition drinks for children and vitamin drinks for older adults. 

Excerpt taken from First Research (www.firstresearch.com)

Grain milling is the milling of flour and rice; the malting of grains (primarily barley); and the mixing of prepared flour mixes and dough. This industry doesn’t include revenue from mills that prepare breakfast cereals, nor does it include meal ground from legumes or nuts.  

Q. Who are company’s main customers? 

A. Typical customers are commercial bakeries, fast food and quick service restaurants, cereal manufacturers, and food companies. 

Q. Does the company manufacture mixes or branded products? 

A. Yes, we manufacture bread mixes, dough, and branded products. 

Q. How do you market your products? 

A. Major types of marketing include trade publications, promotional events, trade shows, and customer visits. 

Q. How do you provide service to your customers? 

A. Since we sell consumer products, customer service typically includes a toll-free number and web-based customer assistance. 

Q. Do you have any joint ventures? 

A. We often develop consumer food products with major food companies to develop co-branded products. 

Q. Does your company offer alternative flours for consumers with health concerns? 

A. Yes, we offer gluten-free flours as too, because one of every 100 American suffers from celiac disease, an autoimmune disorder that reacts to gluten in wheat, barley, and rye. The only treatment for the disease is total elimination of gluten from the diet. Grains without gluten, such as rice, sorghum, amaranth, corn, and buckwheat, can be milled into flour and safely consumed by celiac disease sufferers. 

Q. What are the company’s major operating expenses? 

A. Common inputs in the grain milling industry include electricity; packaging materials, such as plastic, cardboard, and textile bags; wood for pallets; and equipment repairs. 

Excerpt taken from First Research (www.firstreasearch.com) and About (www.about.com) 

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