June 24, 2016

Hard Learned Dairy Lessons

 |  By: Dairy Talk

Last week, I had lunch with Mike Kruger, who is retiring July 1 after 35 years with the Midwest Dairy Association (MDA), 31 of which as its CEO.

Kruger had left word a couple of weeks ago that he wanted to meet to simply share thoughts and perspective on what he had learned over those three and half decades. It was a fascinating hour, again reminding me that the challenges the dairy industry faces today are not unlike those faced—and overcome—in years and by generations past.

First, as way of background, MDA is the regional dairy promotion organization that manages 10¢ of the 15¢/cwt dairy checkoff for 10 Midwest states, from Minnesota to the Dakotas and south to Arkansas and Illinois. It represents 8,000 dairy farmers, an eighth of the U.S. milk supply, and is responsible for dairy messaging to 38 million consumers.

Kruger came on board in 1981, and was baptized in the often fiery debate about a national, mandatory dairy checkoff. In the early 80s, the dairy industry was facing its greatest crisis since the turbulent, milk dumping years of the 1960s. Like today, warehouses were stacked to the rafters with surplus cheese.

The difference then was the surplus was largely held by the government, which was too often the buyer of first resort. “This was the tail-end of 30 years of decline in per capita dairy consumption,” says Kruger. The industry knew it must act on its own—or face inevitable decline. The checkoff passed, and a golden age of generic dairy advertising began.

“Generic advertising had an effect,” he says, “but everybody in the industry understood we couldn’t rely on government programs. So everyone, from farmers to processors to manufacturers, got focused on the market and consumers.”

Things started to turn around slowly, and eventually increasing cheese and pizza sales started to take off. The result was record demand, and empty cheese warehouses.

The industry had one advantage back then. “There were 25,000 dairy farmers in Minnesota alone in the 1980s, and no more than a handful had more than 100 cows. We were a very homogenous group; everybody was the same,” Kruger says.

In the Midwest today, there are still thousands of herds with less than a 100 cows, but they’re conventional, grazers, organic and robotic operations. And there are hundreds of commercial-sized farms that range in size from 500 cows to 50,000 or more.

Kruger’s fear is that dairy farmers lose their reliance on each other and start to differentiate against one another based on production practices. “Differentiation and negative claims are dangerous. How do we to compete in a way that isn’t based on consumer fears?” he says.

Another area of challenge—and opportunity—is export markets. Fifteen years ago, export markets for U.S. dairy products hardly existed. “Now, they are embedded in our future vitality,” says Kruger. The challenge now is competing in the global marketplace that is sometimes, if not often, affected by politics. Like in the 1980s, a commodity mindset will not work in exports.

Once again, farmers, processors and manufacturers must come together. They need to produce the kind of milk and dairy products that meet and exceed international food safety and animal care standards that global consumers crave and can’t live without. It’s the only way to create a sustainable export market. We’ve done it before, says Kruger, and we must do it once more.  

P.S. Thanks for lunch, Mike.