Episode 22 – Do Global Consumers Really Want U.S. Dairy?

We know that U.S. diets contain a lot of dairy but do international consumers crave our U.S. cheese, yogurt, butter, ice cream, etc…? Washington dairy farmer Lynne Rainey Wheeler talks with Rebecca MacKay Allen, Senior Vice President of Global Innovation Partnerships at Dairy Management Inc., and Will Loux, Vice President of Global Economic Affairs for U.S. Dairy Export Council, about how U.S. Dairy Export Council and Dairy Management Inc’s International Partnerships team up together to drive dairy sales internationally. We’ll also get to hear about exciting new overseas products and where the future of exports is going. Tune in to find out!

To learn more about the national dairy checkoff and your local dairy checkoffs, please visit www.usdairy.com.

Dairy Farmer Hosts:

  • Farmer Host: Lynne Rainey Wheeler

Dairy Farmer Guests:

  • Farmer Guest: Rebecca MacKay Allen, Senior Vice President of Global Innovation Partnerships at Dairy Management Inc.
  • Farmer Guest: Will Loux, Vice President of Global Economic Affairs for U.S. Dairy Export Council

Transcript (machine generated please ignore typos)

Lynne Rainey  0:00 

Do you really see it as sustainable growth on that export market?

Will Loux  0:04 

I really do. I think this is sustainable. I think as I said, five and the last six years, we’ve seen exports grow more than domestic consumption. We’ve got customers around the world who are changing their diets in many ways to incorporate more dairy. We’ve got rising populations, we’ve got rising incomes, and that really favors the dairy portfolio. We have a great story to tell on nutrition on sustainability. And we just have to be out there telling that story and I think as long as we have the supply available to export, I think we’re going to be able to find markets and customers ready for that product.

Lynne Rainey  0:44 

Hello, and welcome to your Dairy Checkoff podcast where we take a deep dive into topics that concern dairy farmers today. I’m Lynn Rainey, I’m a dairy farmer in Washington State. I also participate in the checkoff board for Washington State. And I’m excited to have a conversation today about dairy exports. It’s something relevant to all of us who farm in the United States, and it is the opportunity for growth in our industry. Joining us on the program today is Rebecca McKay, senior vice president of Global Innovation Partnerships at Dairy Management, Inc. and will Luxe, Vice President of Global Economic Affairs for the US dairy Export Council. Today we will be discussing how US dec, the US dairy Export Council and dairy management Inc, international partnership teams work together to drive dairy sales internationally, we’ll also get to hear about the exciting new products that are coming out and where the future of exports is going. So Rebecca, let’s start with you. Why don’t you tell me a little bit about your role at DMI

Rebecca MacKay Allen  1:46 

absolutely excited to be here as well. I am on our global innovation partnerships team and have the pleasure of working on the behalf of dairy farmers with marketplace partners foodservice operators, processors manufacturers to grow dairy utilization in marketing campaigns menu development and product development. Great.

Lynne Rainey  2:07 

Well, please share with me a little bit about your work with us.

Will Loux  2:10 

I am the Vice President for Global Economic Affairs where I lead our economics efforts where basically you can say I’m the nerd of the office, spend a lot of time checking out a lot of stats and numbers and trying to figure out where markets and price and trade are going.

Lynne Rainey  2:23 

Very important role at US DAC and really glad you’re here. Well, I would really like to jump right in. We refer to it as US Dec often it stands for us dairy Export Council. Can you tell me a little bit about what US DAC is?

Will Loux  2:38 

Yeah, absolutely. The US dairy Export Council or I usually say as a US Dec. We’re an industry organization and we are really formed as part of a collaboration between dairy farmers and processing companies and trading groups that are all really geared around the mission of increasing demand overseas. So we’re primarily funded through the checkoff through DMI. But we also have companies that are trying to export dairy products around the world who are critical pieces to that of driving demand overseas for us dairy products.

Lynne Rainey  3:08 

So something you just said resonates so strongly with me of driving that demand in outside markets outside of the United States, because we are producing more than the US is demanding to consume today. So that US DAC role with dairy farmers across the country is so important. When I think about US debt can you give me or tell me a good story about the effectiveness of us dec in other markets?

Will Loux  3:35 

Yeah, absolutely. I think one of the things that we’ve shown since us Dec was founded in 1995, there’s been a pretty steady march of growing exports overseas back when we were formed barely 2% of our production or 4% of our production was going overseas. Now we’re close to 18% of our production is heading overseas, because as you said, we’ve got a structural surplus effectively, but it’s really more so that that folks around the world want the dairy products that the US has. So that’s why we’re producing more not necessarily just because we have a need to go find a buyer. We have buyers who want us dairy products because of the work done by the Export Council. I think one of the key factors that we’ve seen this past year is we’ve had success globally. We broke the record for volume and value again in 2022 exported over $9.6 billion worth of dairy products. That’s a huge amount. We saw massive gains to Mexico, which is our largest market neighbor to the south who we’ve had great relationship with with many years and a true partnership between their industry and their consumers and the US dairy industry. So I think that’s a real success story. We had a lot of chatter going overseas this past year. And that’s been another one as well. We’re actually domestic consumption of cheddar this past year was down in fact through November of 2022. But our exports were up nearly 60% In terms of cheddar Exports overseas. And that’s done because, you know, we’ve been laying the groundwork of the reputation of USPS overseas. And what we’ve seen is really, we had an opportunity to grow that this year, our competitors were sitting on the sidelines. And we took advantage of that. But we wouldn’t have been able to, without the relationships. And without the work done in prior years,

Lynne Rainey  5:20 

it is great to hear that we are creating opportunities outside of the United States that will continue to grow for the product that we so passionately develop, and have an appetite to continue to do. So I am a younger producer. And I want to see the dairy industry in the United States continue to be the global leader, if given the opportunity. And so when I think about us, DEC, and the opportunities that you’re helping create, for us, it is vital. If we want to continue to produce at the scale that we produce and want to grow. Like to I would like to see us dairy grow

Will Loux  5:57 

because that growth is a key factor here. Five out of the last six years, exports have actually grown more than domestic consumption has, I mean, exports have really been our engine of growth 96% of the world’s population lives outside of the United States. These are really big demographic drivers that tell us to look around the world as part of a holistic picture where we need domestic consumption growing but we also really need to be capturing the opportunity that’s available to us in the export market. And I think you know, just going backwards a little bit about how US Dec does that we have offices around the world so that we know what’s going on in local market so we can be really quick on capturing opportunities as they arise but we also have been in the market a long time having programs to increase utilization of dairy ingredients which are really important piece of that puzzle. It’s not just cheese or butter that we think about it’s it’s really also those ingredients which make up a majority of our exports today

Lynne Rainey  6:54 

learning about us Dec wanting to support it and seeing DMI and then our checkoff dollars go to DMI and how do us DAC and DMI work together.

Will Loux  7:04 

Also from the US Dec perspective, we really work hand in glove with DMI obviously through the checkoff DMI is our largest funder of us deck. And that’s a huge component of why we’re able to do what we do overseas. Certainly we also have membership dues and grants from the US government to enable us to really build demand overseas, but DMI is a big contributor to that and really allows us to do what we do. But we also share information, we share resources, and we work together on research projects and on making sure our messaging around things like sustainability align, because the sustainability messages that work here in the United States don’t necessarily work as well overseas. So we have to figure out a way of balancing the research that we do with the research DMI does and finding ways of really just sharing that knowledge and working together. As

Lynne Rainey  7:53 

we talked about us Dec and the different areas of business that you guys work on on the international scale, what would you say is US tax focus.

Will Loux  8:02 

The big thing here is we’re building reputation and demand overseas. That’s a critical piece of what US dairy Export Council does. Because we’re kind of in many ways, the public face of the industry to international customers and buyers. They see, you know, our think USA dairy. And they know how these guys know what they’re talking about when it comes to formulations, how we can add more whey protein in a given bar or soup or drink or anything like that. So we offer technical support. We also offer of course trade policy support and market access support for our customers. So they know exactly what the tariff level is what regulations they need to adhere to. And we also offer insights support. That’s the team I work on, as well as our strategic insights team that works together to make sure that member companies who are actually doing the exporting are able to target their resources at the most effective markets and opportunities available to them. And I think

Lynne Rainey  8:58 

that’s important for dairy farmers to hear because as I ship my milk to the to a processor that exports, it’s good to know that they have a partnership with us Dec that’s going to help integrate into that marketplace effectively. And with a strong appropriate presence. All right, let’s talk about volatility. That’s something everyone is talking about and think it’s it affects every farmer we think about it all the time. We have some record years behind us. Why were the last few years so good in exports.

Will Loux  9:27 

Ultimately, what we’ve seen is a the investment that farmers that exporters that processors have done over the past 20 years are paying dividends today. We had a number of things go right for us in the international market. You had less milk production in Europe and less milk production in New Zealand. That gave us an opportunity and an opening to really capture that market because we had good demand and pretty much every major market with the big exception being China but everyone else was really wanting dairy products and they look to the US as the reliable supplier and that’s been a message. Our marketing teams have really been hammering home to customers around the world

Unknown Speaker  10:12 

my name is Steve Sepi. I’m the Executive Director for dairy farmers of Washington. Our organization represents about 300 dairy farms across Washington state and we strive to be their voice in the marketplace. Our average herd size is about 1000 cows per dairy and we have two distinct dairy regions in our state. We’re split down the middle by the Cascade Mountain Range. The east side of the state is a drier climate with dry lot dairies in the west side of the state is a wetter climate with more freestyle and pasture based dairies. Seattle Tacoma is our largest consumer market with just over 2 million people and our consumers in Washington tend to be progressive with a strong affinity for local products. Our mission it dairy farmers of Washington is to build trust and drive sales for Washington dairy through collaboration and innovation. It’s focused on driving regional impact for our dairy farmers through our four main business priorities which are sustainability, innovation, reputation and exports. We have 13 people on our team split into program areas of marketing and communications, business development, and sustainable nutrition. Our marketing and communications team is focused on building trust for dairy by reaching our target consumers where they’re at, which is primary and digital channels. Our business development team is focused on being a resource for our processors in the region by providing actionable sales and consumer insights and creating incremental sales opportunities in our primary sales channels, which include retail both brick and mortar and ecommerce food service and food access, which includes schools and food insecurity channels, as well as exports. Our sustainable nutrition team has focused on improving positioning for dairy by addressing barriers to consumption and engaging with influential thought leaders that work in relevant areas including governmental and non governmental agencies, universities and corporations. Exports are a critical part of our strategy with nearly half of the milk produced in Washington being exported. We’ve been focused over the last several years on partnering with our largest exporting processor and Co Op Northwest Area Association Dairygold to increase value added exports while continuing to grow overall volume. To do this, we helped establish a direct selling force located in market and have now turned our attention to driving value back to dairy farmers through sale of premium ingredients and expansion into additional product categories. Despite a competitive marketplace with more food choices for consumers popping up every single year, we have a lot to be optimistic about as the dairy industry, we will need to continue to focus on driving innovation and being consumer centric. But we have incredibly high household penetration and growing consumption domestically. And the growing global population that needs access to high quality protein is obviously a massive opportunity for us. I’m proud to work for dairy farmers, our team is able to remain grounded knowing that we are promoting a product that is good for consumers and good for the planet. It’s produced by people who work hard every day to literally feed the world and it doesn’t hurt that the products delicious.

Lynne Rainey  13:16 

The past couple of years have been good. What does it look like for 2023? And what are our biggest opportunities moving into this new year?

Will Loux  13:24 

Yeah, 2023 is gonna be a challenging year. I’m an economist all generally tell it to you straight and just kind of how it works. You know, we’ve got rising milk production in Europe. And we’ve got China who’s still pretty absent. So New Zealand is the primary supplier to China. So if China is absent, all of a sudden, even if New Zealand milk production is down, they have plenty of product for these other markets. So we’ve got more competition overseas. But I think we’re still in a good place. We continue to see rising milk production, we continue to see increased investment and export opportunities. We are competitive when it comes to ingredients. Certainly right now, we’ve got the Europeans trying to undercut us on cheese price. But otherwise, we’re in a pretty strong position, because I do see us as being reliable. And we might have hiccups here and there. 2023 is going to be more challenging for a variety of reasons. I’m still forecasting us to grow next year. So even with all these headwinds, I think there’s great opportunity for us. But we’ve got China, we’ve got Europe with more milk, and we’ve got New Zealand rerouting products. So ultimately, this is kind of when we put pedal to the metal almost like this is when we should be investing because we’ve got a real opportunity here, because I don’t see Europe or New Zealand really growing in their milk production over the long haul, but we’re kind of getting kind of a last gasp. But if we prove our reliability right now, then I think we can really succeed not just this year and 23 but ultimately going forward towards 2520 30.

Lynne Rainey  14:48 

You really see it as sustainable growth on that export market.

Will Loux  14:52 

I really do. I think this is sustainable. I think as I said, five in the last six years, we’ve seen exports grow more than domestic consumption. We’ve got customers around the world who are changing their diets in many ways to incorporate more dairy. We’ve got rising populations, we’ve got rising incomes. And that really favors the dairy portfolio, we have a great story to tell on nutrition on sustainability. And we just have to be out there telling that story. And I think as long as we have the supply available to export, I think we’re going to be able to find markets and customers ready for that product.

Lynne Rainey  15:24 

But I’d like to talk about some of our international partnerships, as we talked about moving our product abroad and entering into other countries and serving consumers needs. What is dma’s international partnerships? And how does it work?

Rebecca MacKay Allen  15:38 

Great question. And a really great segue from will, as he mentioned, is building reputation and demand that used to kind of build that US dairy brand and these priority markets internationally. And what we do on the DMI side is kind of take the learnings, the transference of a partnership model that has been very successful domestically working with food service companies, with manufacturers again to grow dairy and their menus and their products and their marketing campaigns and working with those international leaders in priority markets in the same way. So currently, we are focused very focused on pizza for a couple of reasons. We’ve had existing relationships with the number one and number two players in quick serve pizza, Domino’s and Pizza Hut. And also the growing demand for Western cuisines as well mentioned in international markets, and pizza being a great carrier for a lot of us cheese, but really exciting. This is sometimes hard for people to wrap their head around just kind of the opportunity. Those of us in the US have pizza on Friday night we have pizza, after ballgames, you know, we have lots of social and family occasions that involve pizza in some Asian markets. And in most of the markets where we have partnerships with those number one and number two brands, it really is more of a special occasion. It’s eaten just a couple of times a year. But as you can imagine just getting those families to order a couple more times a year and big populations in these countries where we have partnerships that opportunity to grow the frequency of pizza consumption and then the US cheese that is put on those pizzas is huge. So that is where our foodservice strategy lies internationally growing that opportunity for pizza as as a strong carrier for us cheese, strong partnerships with both Domino’s and Pizza Hut operating in the Middle East, Southeast Asia and looking to expand those further where there’s opportunities to grow.

Lynne Rainey  17:29 

When I look at the effective use of my checkoff dollars, it makes sense that US Dec and the international partnership team would work together. Can you speak to that a

Rebecca MacKay Allen  17:39 

little bit, we have a cross Enterprise team that’s working together to help identify ways that we can even collaborate more. But really, it’s important to note that US DEC has set that foundation for us they have opened the markets for us dairy suppliers, they have built that reputation, they built that brand for us dairy, they’ve made the connections between customers and consumers who want more US dairy. And we really come in and work with those brands that have both the carriers in the pizza or burgers, and also the strong consumer base and growth strategies of their own. So it really is building upon that foundation that we really couldn’t do what we do without and going deeper with those partners to directly to consumers to take advantage of the growing demand for Western cuisines and then opportunity to grow USGS through those channels.

Lynne Rainey  18:30 

What are still key moments of success we’ve achieved with some of these international partners.

Rebecca MacKay Allen  18:35 

Yeah, great question and really strong runway for more success. But as you mentioned, it’s working with of us QSR brands on a rolling frequency for pizza using us cheese. But it’s important to note that those pizzas don’t necessarily look like the pizzas that we have here in the US either. There’s lots of interesting toppings that appeal to those local cuisines, those local customers in those local markets and the local consumers. And that’s another way we lean in on us dairy Export Council as well is just tapping into those offices, those local offices, the boots on the ground, but the folks who really understand that local marketplace and leveraging that. And then also Domino’s and Pizza Hut of course and those operating in those markets would know what their consumers want. You know, you can get seafood on your pizza or barbecue on your pizza. Seaweed is often an interesting accompaniment but specifically some successes that we’ve had kind of combining both of those things the appeal of pizza with us cheese and then appealing to local consumers. One example of that is the one kilogram pizza, which it’s probably very easy for will to do the math in his head, but it’s hard to kind of understand what that means from a pound standpoint. So that’s two pounds of cheese on a pizza in that one kilogram pizza. That has been just a hugely successful launch. We launched it first with Domino’s in Japan. And then as we’ve expanded our partnerships to other markets, that product has kind of followed suit. So in Taiwan and the Middle East and as you can imagine, we’re not only growing the frequency by which people are consuming the pizza but also growing the amount of cheese that’s on those pizzas as well. So we look for that product to continue to appear on menus, where US cheese is utilized in those markets where we have partnerships and we’re excited for more. So

Lynne Rainey  20:13 

I actually got the opportunity to try that pizza at a DMI event. And I loved it, I would buy it here it was buttery and smooth and delicious. And I managed cheese fan tremendous product and was proud of it.

Rebecca MacKay Allen  20:26 

Absolutely, it sells itself. But you see like the the advertising and the commercials with that beautiful cheese pull and your mouth just waters thinking about it. And again, that can be served with the toppings for the local consumers. In fact, when it first launched, it was served with seaweed, kind of a packet of seaweed on the side and maple syrup, which is certainly not a combination we might think of here in the US.

Lynne Rainey  20:48 

I wouldn’t think that either. But I could see the opportunity to try it that feels like a social media trend. Being a cultural experience from another country and wheeling in in the United States, and it being something you see in your social media feeds and videos, and then your kid coming up and being like the next time we get pizza, can I try maple syrup? So another opportunity for a conversation, great examples and exciting to hear about when I think about what will said about growth opportunity on the export market. What does that mean in relation to international partnerships? Where do you see that going in 2023? And maybe beyond?

Rebecca MacKay Allen  21:26 

Yeah, that’s a great question as well. And I think we still have an opportunity to expand our kind of geographical footprint with the number one and number two pizza players. And we’ve had conversations with both Pizza Hut and Domino’s in that regard. But we do also think that there’s an opportunity to look to other foodservice channels. And again, working in lockstep with us dairy Export Council to identify, you know what that looks like. It may be a local player, a local restaurant chain that could benefit from a partnership to grow us dairy. And again, we’re in conversation with what that might look like. So more definitely a lot more runway on the pizza front. And we intend to expand that. But then also looking to other kinds of foodservice opportunities. cheeseburgers are another great carrier for cheese. And there might be an opportunity to unlock opportunities for us cheese in that channel and other markets as well.

Lynne Rainey  22:15 

So this may be a challenging question, but I will ask it just because I didn’t have interest in this is an opportunity for that fluid milk market on the international and the international market space.

Rebecca MacKay Allen  22:29 

Yeah, great question. One, which I’m sure we’ll get on a daily basis and is absolutely an opportunity area that we’re looking at together. Again, it has to be done collaboratively not only between DMI and US dairy Export Council, but with us dairy suppliers, and making sure that we have the supplier to fill that demand and will can probably speak to the demand much more eloquently than I do. But absolutely, I think an opportunity area that we can focus on

Will Loux  22:54 

from my perspective, and I said I was the Econ nerd. So give me this straight answer from how I see it. And it’s a challenge. I mean, as may make sense for folks on the West Coast, especially, I think also with improvements in innovation with extended shelf life. Certainly maybe that can be extended beyond the west coast, but shipping across the ocean where you’re shipping, what is 77% Water is a challenge compared to say milk powder. And so you’ve got to make it price competitive overseas. And that can be a challenge, too. You’ve got well entrenched fluid milk exporters already in Europe, where they sell a lot of UHT to China, particularly New Zealand does the same. But China is also trying to grow its own milk production for that fluid milk category. So I think there’s great opportunities where, you know, we’ve seen real success in Taiwan, I think we’ve seen some success also in Mexico. But it is a real challenge. And so you have to think of kind of where are the opportunities and be really strategic within that.

Lynne Rainey  23:53 

I appreciate your answer. Well, and Rebecca, and as a dairy farmer, I’d be remiss if I didn’t ask it, right, we want to market every product we make to that global marketplace. And understanding that it does come with challenges. But we still want to hear that answer. Right? And be reiterated to us that it’s not a no, but it’s here. Here’s the challenges with that. And what is what is the best use of that export market and the product that we can get over there. As a farmer? How can I be assured that this work is using us dairy products that the work you’re doing in the export market and in these other countries is really servicing us dairy?

Rebecca MacKay Allen  24:34 

These are you know, we have agreements in place that we that both sides have agreed to the gives and takes and the end the what we want to accomplish together and it is very, very clearly stated that it is USGS growth that we are looking for and growing that opportunity for USGS. We have volume goals that we measure our partners against and we meet with them regularly to talk about how we can grow more, what are the business dynamics that they’re facing, but It absolutely kind of the the partnership agreement is doesn’t exist without us dairy.

Will Loux  25:05 

And I’d say from my perspective, I think the proof is in the data. I mean, we see growing exports overseas and we see growing market share for the United States. That’s something that really happened this year, we’re at a record high as a percentage of the global market. We’re now at 25%, of total global dairy traded basically among the major exporters. And that’s a major success given how well established our competitors in Europe and New Zealand are. So the fact that we’re seeing increased volume and value overseas during this period really speaks to we’re growing demand, we’re making the pie bigger, but we’re also making the US its share of that pie bigger. And I think that’s, that’s where we see the work really being done by the Export Council and that gap.

Lynne Rainey  25:46 

What is the biggest thing you would like farmers to know about your work? What’s important

Rebecca MacKay Allen  25:50 

and you know, and we would reiterate, every chance we get is that we are not two separate teams. We are you know, we’ll and I represent parts of the export team across checkoff. So not even just us Dec and DMI but also other checkoff organizations and states and regions. So that’s important our strategies, our international partnership strategy feeds into the strategy of growing US exports, through all of the ways that we’ll have mentioned that US deck does, and really, it’s at one plus one is greater than two model, I don’t think you can put too fine a point on it that the growth runway is huge. And I absolutely think that there’s a ton more opportunity to take advantage of

Will Loux  26:31 

Yeah, and I’ll say from my two cents, what I think I want farmers to know about our work is ultimately exports are a phenomenal return on the investment that dairy farmers put into checkoff. And I think we’ve seen that this year, you know, when our marketing teams and when our partnerships are going out. And we’ve got our cheese marketers at US deck and ingredients trying to get premium effectively for us very because they see the reputation and reliability that matters to your milk check. I mean, if we increase even just think of the commodities like sweet whey powder, or skim milk powder, if we increase our nonfat dry milk price by 10 cents, because people value our nonfat dry milk, that’s gonna raise your class for price by 90 cents. And so that, of course factors into the class one price. And so even folks in the southeast, you know, who aren’t exporting all that much product that matters for their milk, check whether we’re succeeding overseas or now. So the fact that we’ve seen this growth in our ingredients in our cheese this past year, that speaks a whole lot to the investment that farmers are putting in us that we want to be good stewards of those dollars going forward, and I think we can really generate a strong return on those dollars.

Lynne Rainey  27:40 

Thank you, Rebecca, and well for the discussion today on the US dairy Export Council and how Dairy Checkoff is driving dairy sales through international partnerships. For more discussion affecting our dairy community. Subscribe to this podcast on your favorite podcast platforms, including Stitcher, Spotify and iTunes or check out our website Dairy Checkoff. podcast.com for future episodes. I’m Lena Wheeler, see you next time.

Transcribed by https://otter.ai

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