Updated: Aug 1
The IDFA stated that the economic impact of the US dairy industry totalled $752.93 billion USD in 2021. However, the industry has been facing significant challenges over the past few years, such as higher operating costs, which has been putting additional pressure on supply and prices. It is now, more than ever, crucial for dairy buyers to be scrupulous when it comes to monitoring market changes and fluctuations.
Through this article, we want to help you navigate the current challenges facing the dairy industry in 2022 and secure a better supply and price for your milk. To achieve this, we connected with Scott Hoff, Business Development Manager at MRV Dairy Solutions, a Dairy Intelligence service based in the US. We asked Scott to share with us the top 2 most common mistakes that buyers make when sourcing milk and the best practices to avoid them.
Mistake 1: Consolidation of dairy processors
Consolidation in the dairy industry is one of the main challenges for dairy companies. Between 2002 and 2017, the number of dairy farms was decreasing about 4% per year, a rate which rose to approximately 8.8% between 2019 and 2020.
This decline has spilled over to the processing side of the dairy industry as well. With milk supply reducing, plant maintenance costs rising and higher staff shortages since the pandemic, the US market has witnessed closure after closure of dairy processing plants. This is especially true across the southeast where there has been a high number of dairy plants that have closed down, or will be closing down over the next few months.
Closures create instant scarcity in the market which most often translates into rising prices. Regularly, buyers across the industry find themselves between a rock and a hard place when it comes to securing reliable milk supply at a fair price. It is to no surprise that the number one mistake most buyers make is to accept the price they are presented.
“When buyers receive notification of a federally-regulated price increase, the normal reaction is to accept it as is, says Hoff. However, there are multiple times throughout the year when prices decrease and these are often missed due to companies lacking the time it takes to consistently monitor the market. There is a lot of savings potential in this area just by keeping an eye on the data throughout the year.” - Scott Hoff
Hoff broke down three solutions that he uses frequently with his customers at MRV to help them leverage these savings. Firstly, through MRV’s strong network across the US, they are able to help customers connect with suppliers that make their product in and outside of their usual sourcing regions. This means, for instance, that an ice cream brand in Ohio could find relevant suppliers in other states that may offer what they need at a lower price.
Secondly, MRV can also consolidate their purchasing power and bid out a customer’s needs to appropriate suppliers in order to extract the best price for the customer in question. Hoff says that “the majority of customers are able to save money this way.”
Finally, by constantly following the market as a “watchdog”, MRV are able to provide cost change management services. This involves providing monthly visibility on market prices and capturing price decrease savings for customers.
Mistake 2: Developing the right products at the right time
Consumer needs and market trends are constantly evolving in today’s dairy industry, and rapidly. Dairy ice cream manufacturers and brands therefore need to be able to adapt their offering to each relevant need or trend. The challenge for many businesses is often in deciding what trends are relevant to them and when they should jump in, if at all. For instance, the high protein trend allowed challenger brands at the time like Breyers and Halo Top to grab a large portion of the market quite quickly. However, making the decision to enter the high-protein ice cream market right now may lead to a different decision for brands. Is the market too saturated? Does the consumer demand still exist? Where are the gaps that could be taken advantage of?
Launching into a market segment or niche with a superficial understanding of the size of the potential market, the competitive landscape outside the local region, or the correct timing to launch is one of the biggest mistakes brands can make. Not investing time in deeply understanding each of these areas prior to moving forward with product development can result in high costs or worse, lost opportunities in other areas that may have been better suited to your brand.
Helping businesses focus on identifying gaps in their manufacturer’s portfolio in addition to analysing relevant market trends can help save a lot of money in the long run.
“By consistently monitoring market trends and being on the lookout for gaps and opportunities for our clients, we are able to help them better understand the market size potential through the analysis of IRI and Nielsen Data so that they can more confidently enter the right market, at the right time. This more often than not leads to a high level of savings achieved.” - Scott Hoff
They can identify if and when a particular segment is too crowded to enter and if so, they will work to discover other potential gaps or opportunities that play to a customer's strengths and capabilities. Hoff explains that “for a lot of companies, it is often more important to take a step back and focus on core flavours or production methods instead of doing too much too soon. We will make sure you are producing all of the key items that matter to your customers first, and that you have the right in-demand products on shelf so that you are able to cater to a constant product supply and generate higher sales.”
Thank you to Scott Hoff from MRV Dairy Solutions for the insightful information he shared that allowed us to put together this article with the intent of helping dairy businesses secure a better milk supply and savings. Keep reading to learn more about MRV Dairy solutions and how you can connect with them further.
Who are MRV Dairy Solutions?
MRV is a premium Dairy Intelligence solution comprising industry expertise in dairy sourcing and procurement. This means that they work with dairy customers, i.e. anyone who buys dairy products or ingredients, including those in wholesale, convenience chains, restaurants, manufacturing, and retail. They collaborate with dairy companies across the US on the buyers side helping them source dairy components.
Currently working with over 120 dairy processors across the United States, MRV pride themselves on being able to make fast decisions thanks to their flat organisational structure of 17 employees who report directly to the owner and Founder of the organisation who has personal implication on all subjects, and whose experience ranges all the way from working on the farm to being experienced with products in market and on shelf.
How to connect with MRV Dairy Solutions?
If you would like to connect with the team at MRV Dairy Solutions, reach out to Andrea at firstname.lastname@example.org to connect you directly.
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