In recent years, much has been written and said about the need for transparency on the part of food and beverage companies. The more transparent the company, the greater the odds that consumers will trust it — and its brands.
In a June 5, 2018, post on its website, New York-based Nielsen went so far as to say that transparency is driving the growth of food in fast-moving consumer goods.
“Generally speaking, consumers are seeking transparency around three key product attributes: sustainability, processing claims (e.g., organic, natural) and ingredients,” the post states. “Interest in each of these three areas varies, but sales among products that focus on each of them are on the rise.”
The dairy processing industry certainly is not immune to the transparency push. Back in July 2018, Infiniti Research (with U.S. headquarters in Elmhurst, Ill.) published a blog detailing the top three dairy industry trends for 2018. The trend toward transparency made the firm’s list (the others were environmentally friendly nutrition and clean-label products).
“Customers want access to everything from the sourcing policies and product nutritional information to the human rights policies,” Infiniti Research noted in a press release.
Opportunities and challenges
A January 2019 report from Denver-based CoBank — “Consumers Calling the Shots: Desire for Transparency is Reshaping Dairy Supply Chains” — also addresses the growing importance of transparency across the dairy supply chain. According to the report, dairy processors, producers and cooperatives could benefit by meeting transparency-related consumer demands. But doing so will require rework of supply chains into greater segmentation and direct contracts with farms.
“Dairy supply chains are adapting in order to meet consumer demands for increased transparency about farm production practices,” said Ben Laine, senior economist for the CoBank’s dairy sector. “However, the entire industry will be forced to walk a fine line to meet these demands in an environment in which cost reduction and efficiency are a constant focus.”
CoBank pointed to opportunities and challenges in three specific areas:
Product labels and assurances. At the retail level, consumers want labels that spell out farm management practices. But with the expansion of product offerings, there’s increased risk that retailers will require differing and potentially conflicting farm management practices from their suppliers. To help mitigate this issue, CoBank noted, the National Milk Producers Federation developed the Farmers Assuring Responsible Management program. The program is a proactive step to define and audit responsible farm management as an industry.
Supply chain. Managing price and input volatility can be more challenging for processors that sell a niche product such as organic or non-GMO milk. With these types of products, Laine pointed out, one commoditized pool of milk no longer exists; a number of brands and manufacturers need to “work back to the farm level to contract directly for a segregated milk supply.” As a result, cooperatives might see members seeking out these direct contracts for a premium elsewhere, CoBank said. And some cooperatives might look for opportunities to segment portions of their members’ milk supply that meets the specified criteria and handle premiums internally, adding a logistical benefit to customers.
The connection gap. Many consumers are seeking opportunities to feel more connected to the farmers who produce their food. That reality, CoBank said, has contributed to growing demand for locally produced foods — which, though their definition varies by consumer, generate a sense of being part of a regional ecosystem instead of an anonymous global supply chain. The local angle also presents a transparency-related opportunity for dairy processors, but one that isn’t necessary easy to pull off. Artisan cheesemakers might want to tap into the popularity of farmers markets, bringing along the dairy farmer to interact directly with consumers. And cooperatives could communicate to consumers the farmer ownership of their brands.
Are transparency enhancements a goal for your company? Visit cobank.com to read the full report.
