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THE LAND OF MILK AND MONEY
GRASP THE NEW DAIRY MINDSET, AND THE INDUSTRY CAN BECOME A PROFIT CENTER
by Linda L. Leake, Contributing Editor

Mention pressures on dairy producers and the obvious issues come to mind: operating costs, fluctuating milk prices, cash flow, labor requirements, herd health and environmental stewardship - just to start the burgeoning litany.

These days, thereís another relentless headache on the producerís list, says Gary Vorpahl, director of marketing for Hoardís Dairyman. Billed as "the dairymenís bible" since its founding in 1885, the Fort Atkinson, Wis.-based magazine has a circulation of approximately 90,000 and some 220 regular commercial advertisers.

"With the downsizing of the industry, dairy producers are subject to increasing pressures from agri-marketers," Vorpahl observes. "Dairy producer names are available on more databases than ever before, so producers receive a tremendous amount of telemarketing phone calls and a mind-boggling volume of direct mail."

A few years ago, Hoardís Dairyman asked a progressive dairy producer to save all of the mail he received during one month and then weigh it. The result: a sea of bills, letters, postcards, fliers, brochures, catalogs and magazines totaling 138 pounds.

With this burdensome proliferation of sales messages, a producerís favorite magazine is appreciated more than ever as a welcome harbor in the storm, Vorpahl says. When a producer picks up a magazine, he or she has made a choice about what to read and the time to spend with that particular title. For advertisers, brand awareness in that special magazine becomes more important all the time.

A recent University of Arkansas study shows that magazines are dairy producersí preferred means of receiving information. (See "Keep the Presses Rolling!, January 2001 issue of Agri Marketing, page 34.) That preference can be attributed to two key factors, Vorpahl suggests.

The first is the very personal nature of magazines. "Producers sense a one-to-one relationship with their favorite magazine because they feel it caters to their specific needs and interests," Vorpahl explains.

Second, a preferred magazine is not intrusive on personal time, like telemarketing calls are. "A magazine is not trying to sell a producer chemicals when his or her favorite basketball team is playing in the championship game on TV," Vorpahl notes.

Most everyone has a cell phone, a beeper, e-mail and access to the Internet, Vorpahl observes. "People are looking for respite from those intrusions," he says. "They can read magazines at their own pace and at the time and place they choose. Marketers of goods and services need to realize that the more time dairy producers spend with their favorite magazines, the more time they will spend absorbing advertising messages."

The most significant aspect of the dairy industry never changes, Vorpahl adds. Compared to all other agricultural commodities, milk is extremely perishable. Grain can be stored and sold months after harvest, but milk is harvested at least twice a day, 365 days a year, and shipped just hours later. That makes dairy producers extremely dependent on their providers of goods and services.

"As the number of dairy suppliers dwindles, producers can order farm inputs on the Internet," Vorpahl says. "But there are some features of local dealerships that are still critically important to dairy producers - most notably reliable, outstanding service."

Vorpahl adds that a dairy marketerís challenge today is to influence brand choice and continue to provide reliable, accessible service to build a stronger supplier-customer relationship.

NEW WAY OF THINKING

Being a successful dairy producer these days requires a mindset of dairying as a business, rather than a way of life, says Joel Hastings, president of Dairy Business Communications (DBC), based in East Syracuse, N.Y. The firm publishes four magazines - Midwest DairyBusiness, Northeast DairyBusiness, Western DairyBusiness and Holstein World - plus two newsletters, Dairy Profit Weekly and the monthly Global Dairy Update. DBC also produces DairyLine, a syndicated daily radio show. With all of these endeavors, Hastings estimates that the company reaches 80 percent to 90 percent of U.S. dairy producers on a regular basis.

A career devoted to communicating with dairy producers has afforded Hastings the opportunity to develop several impressions relative to marketing.

"Buying goods and services is no longer based on tradition, but rather on potential return on investment," Hastings begins. "So in addition to pointing out the features and benefits of their products, companies that market to dairy producers need to emphasize the monetary benefits."

Even during tough financial times when maintaining positive cash flow is a challenge, dairy producers need to purchase inputs, Hastings continues. "They want high-quality supplies to maintain optimum well-being of their cattle, but they have got to be shown ahead of time exactly where that money they spend will come back to them," he says.

With the proliferation of e-commerce, buying patterns of the past no longer are the norm, Hastings points out. "Producers arenít automatically patronizing their local suppliers," he notes. "Today they are saying Ďjust because my dad purchased supplies from your dad doesnít mean Iím going to buy from you. Now you have to compete for my business.í

"Thatís the overlying theme weíre hearing from all dairy support businesses, including feed, A.I., pharmaceutical and milking equipment suppliers," Hastings continues. "They see that dairy producers are looking for ways they can make less costly purchases and get a better return on their investment. And companies vary in the approaches they are developing to respond to this trend."

ELECTRONIC APPROACH

Itís old news that many ag suppliers are establishing Internet venues or adding them to existing services such as retail outlets, mail-order catalogs and publications. "Many farmers are engaging in e-commerce," says Robert Hill, director of research market analysis for AgWeb.com, an Internet provider of information, products and services, based in King of Prussia, Pa.

"Our latest figures show about one in every 14 farmers are doing this for ag-specific purposes," Hill relates. "About twice that many are involved in e-commerce, if you count their non-ag e-commerce activity. But dairy producers currently rank as the least frequent user of the Internet."

According to Hill, cash grain producers use the Internet the most, followed by beef producers, hog producers and then dairy producers. "Thereís a big step down from hog producers to dairy producers when it comes to time spent on the Web," Hill says.

Why are dairy producers so low on the e-commerce totem pole?

"Time spent with animals and time spent on the Internet counter each other," Hill says. "Itís a concept thatís almost too simple. Of all the major commodity producers, dairy producers spend the most time with their animals, so they have less time to mess around on the Internet."

Until recently, many dairy producers saw no compelling reason to be on line from a commerce standpoint, Hill points out. But thatís changing. Now animal health care products have become readily available online at competitive prices. Moreover, some livestock handling equipment also is available on the Internet, and very do-able where credit is not a problem, Hill notes.

"Itís an exciting time in the dairy industry relative to e-commerce," Hill says. "Milk marketing co-ops are hooking up with processing companies and negotiating better prices in the processing chain," he explains, referring to the up-and-coming dairy.com - the first independent Internet venue serving just the dairy industry. "Thatís big news for dairy producers to be enthusiastic about."

The benefits of the Internet for dairy producers may be lagging behind perks available for the producers of other commodities, but these recent business developments may create a breakthrough year for the dairy industry, Hill predicts.

"A dairy producerís business mindset may not be focused on the Internet just yet, but if his or her needs can be met there, he or she will be more inclined to get on line and realize more rewards," Hill says.

SWEET FUTURE

Regardless of new technologies, itís difficult to find a time in history when margins werenít tight in dairying, Hastings asserts. "The dairy industry roller coaster is getting faster and steeper, but producers always needed a sharp pencil to stay competitive," he says. "Despite current trends, our company continues to be optimistic about the future of dairying."

There may be fewer dairy farms, but consumption and demand for milk and dairy products increase year after year. "That demand fosters a dairy farmís ability to generate a positive cash flow," Hastings notes, "making dairy producers an important segment of agriculture to suppliers."

That, Hastings says, reflects the opposite of a dying industry. "We see dairying as a solid component of the ag economy, and thereís no sign of that going away any time soon," he explains. "If companies that market goods and services to dairy producers can help their customers increase financial returns, those companies will prosper, too." AM



Freelance writer Linda L. Leake covers the dairy industry from her home base in Wilmington, N.C.


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