Dairy on the menu
Foodservice sales offer $12.8 billion in sustenance.
he foodservice menu du jour reflects more than the increasing sophistication of consumer tastes. Home meal replacement trends, ethnic food trends and even health trends are mirrored in venues ranging from fast food to theme restaurants to cafeterias.
Foodservice menus in both commercial and non-commercial arenas increasingly reflect input from industry suppliers, and dairy processors are getting into the game. The more closely dairy processors work with foodservice operators, the more dairy products will be part of menus and cafeteria lines.
Major foodservice suppliers including Land O’Lakes have successfully become value-added suppliers. The Arden Hills, Minn.-based cooperative’s foodservice division brings in about 30 percent of $1.5 billion in annual finished dairy product sales.
“We’ve really made our focus customization and solving problems for our operator customers. As a company, we’ve gone from selling product to selling solutions,” explains Kim Ewers, Land O’Lakes’ foodservice division vice president.
Product consistency and quality remain essential elements in serving the foodservice industry. But to maintain a competitive edge with foodservice operations, today’s dairy processors must also address key issues such as labor shortages, sophisticated consumers and promotions.
The modern processor-operator alliance runs the gamut from sharing consumer data to co-branding to developing proprietary products.
Offering applications and products that will save back-of-the-house labor or improve menus can give processors the edge in a competitive sales arena.
Tracking of foodservice sector purchases by foodservice consulting and marketing firm Technomic Inc., Chicago, shows dairy product sales keeping pace with overall growth of the foodservice industry over the last decade.
Dairy products contribute a steady 9.5 percent of total food purchases by the combined commercial and non-commercial segments of the foodservice industry, Technomic notes.
In 1997, Technomic tracked foodservice purchases of dairy products totaling $12.09 billion of total foodservice sector purchases of $129 billion. For 1998, Technomic projections put total food processor sales to the foodservice industry at $135 billion, with projected dairy sales at $12.8 billion.
Commercial and non-commercial sides of the foodservice industry traditionally served different markets, but the two sectors are increasingly vying for the same customer. “There is an awful lot of competition out there trying to capture the imagination of the patron,” Ewers notes.
Foodservice operators are scrambling to maintain their share of dining out dollars in the new era of home meal replacement. Helping them to do so is the task of suppliers.
An average of 4.1 meals per week were consumed away from home by Americans ages 8 or older in 1996, according to the National Restaurant Association, Washington, D.C. The association notes 46 percent of all adults were restaurant customers on a typical day in 1996. This year, industry experts estimate more than 50 percent of adults will purchase at least one prepared meal on any given day.
The increase in overall prepared meal purchases means increased opportunities for both foodservice providers and dairy processors. But it also means increased pressure to provide unique offerings.
“If you’re eating out more, the standard burgers and fries don’t fly anymore. You get real sick of that. Consumers are getting much more sophisticated in terms of their taste buds,” Ewers explains.
Developing partnerships with foodservice customers benefits both parties. Dairy processors see foodservice as one of the dairy industry’s biggest growth opportunities.
Although dairy processors often consider beverage companies arch rivals, much can be learned from partnerships and marketing concessions pioneered by the beverage industry, says Mary Pat Knight, president of Organization Performance Solutions, Glenview, Ill., a foodservice industry consulting firm.
Knight concedes that the partnertype approach can be more intensive than the supplier-customer model, often involving a systems shift. But foodservice operators are increasingly asking how their suppliers can help their businesses run more efficiently.
“Partnership does not mean just providing product. Partnership means providing solutions,” she says. “If you really step back and look at the way your customers run their businesses, then offer some streamlining solutions that will be appropriate to them efficiently running their business, upgrading their menus, working with their chefs – if you take the time to do that customer focus, you’ll really extend yourself in the marketplace.
“The beverage companies are wonderfully aggressive. They are such smart marketers,” she says.
One of most recent foodservice industry attempts to address supplier relationships is Efficient Foodservice Response, a program similar to category management at the supermarket level. The fledgling EFR program requires foodservice wholesalers to share need-based information with product manufacturers including food processors. The hope is that EFR will help foodservice suppliers produce on a just-in-time inventory basis. Meanwhile, the program fits in with foodservice operators’ assessments that the dairy industry could improve its approach.
For instance, major foodservice player ARAMARK Corp. is actively seeking suppliers who offer more than just food. “It’s not selling us the products, it’s developing relationships,” says Jim Miller, ARAMARK’s Midwest regional vice president.
“As foodservice companies, we have less interest today in suppliers calling on us and taking us out to lunch,” Miller says. “We’re much more interested in them offering us solutions. Spend the money for lunch on our partnership instead.”
Miller additionally notes that dairy processors should try to become fullservice suppliers rather than purveyors of one product.
Linda Funk, vice president of foodservice marketing, Wisconsin Milk Marketing Board, guides cheese processors entering foodservice markets.
“They have a good understanding of the way the foodservice market works. They have to look at positioning their product, defining it, then deciding what type of distribution is best for the company.”
Funk additionally advises processors who decide to market their products directly to operators to have the proper tools: sell sheets, company backgrounders, total product list and understanding of foodservice industry trends and challenges.
Processors who serve both retail and foodservice markets are in a position to supply operators with consumer information such as demographics and trends.
Sargento Foods, Plymouth, Wis., has discovered that a little information goes a long way with foodservice customers.
“Suppliers can certainly position themselves more favorably in the eyes of the customer by making an extra effort. Offering the customer applications for products goes a long way toward that. You can never have too many good ideas,” says David Engel, Sargento foodservice marketing manager.
Sargento began using an applications approach with foodservice operators in 1997, providing cheese information to operators including menu usage analysis of cheese and other value-added information.
“There’s a lot of empty seats out there. There’s a lot of competition and only so many consumers,” Engel says. “Asking the right questions will yield the information you need to serve their needs better.”
At West Lynn Creameries, Lynn, Mass., foodservice gets priority about 70 percent of the company’s $230 million in annual sales is derived from the foodservice industry.
The bulk of West Lynn’s foodservice business is non-commercial, serving such venues as business/industry, cafeteria businesses, nursing homes, hospitals, jails and schools. West Lynn supplies an entire line of dairy products to its customers – milk, juice, cultured products, butters, eggs, cheeses. On the frozen side, products include ice creams and cup novelties.
While West Lynn’s foodservice clients are asking for more information on the nutritional aspects of dairy products, they also demand and receive quality, service and reliability.
“Those continue to be the big three,” says Gerald Finn, vice president of sales at West Lynn.
The company has a unique customer service method, incorporating the efforts of its outside sales forces with the company’s tele-selling operation. Weekly orders are phoned in to Telephone Selling Representatives (TSRs) matched by skill level with clients.
The most advanced TSRs handle customers who require application information, Finn explains. He offers the following scenario: “A chef looking for a true heavy cream for making a dessert might request UHT cream. The TSR would say, ‘You really ought to try the fresh, extra-heavy cream that West Lynn Creamery has, it’s got 40 percent butterfat and an extra amount of solids and will whip up better for decoration on the cake and hold up better under display.’ ”
Land O’Lakes offers foodservice customers a variety of information, positioning itself as the dairy trends expert. The cooperative conducts frequent surveys of consumers, chefs, foodservice operators and even menus in order to keep up with trends, additionally offering recipes.
The information gathered is then passed on to customers in Land O’Lakes’ quarterly Dairy Times newsletter and faxed FoodWire updates. For instance, a recent survey of 1,000 consumers may ease foodservice operators’ concerns about using convenience products in the kitchen. The survey determined that 76 percent of consumers don’t care what ingredients are used in a dish – taste is what counts. In fact, 38 percent expect use of some pre-made products in original restaurant recipes.
Dealing with dairy distributors and broadline distributors such as SYSCO, Crowley Foods Inc., Binghampton, N.Y., has discovered that each foodservice segment has different economies, strategies and distribution channels.
“There’s a universal theme around the convenience and the value. Any way of taking the cost out of the business is good,” notes Joe Cervantes, Crowley’s vice president of sales and marketing.
Like much of the dairy industry, Crowley considers foodservice sales to be the new millennium’s big opportunity for increased sales. “Whenever the consumer, wherever the consumer, however the consumer wants to eat the product, that’s where we have to have the product,” Cervantes says.
Crowley is doing everything it can to reduce costs for customers while still delivering quality product to the consumer. The company currently provides bulk cultured products and ice cream mix as well as portion-control cream cheese and sour cream.
Foodservice operators are as crunched for time and meal ideas as the consumers they serve. Support in the form of easy-to-use products and unique applications can help processors and foodservice operators alike edge out the competition.
Land O’Lakes portion-control butter is perhaps the best-known of the cooperative’s foodservice products. By no means is it the only offering. Products designed specifically for foodservice applications range from Land O’Lakes table-toppers such as portion-controlled sour cream and cream cheese items to 2-ounce cheese products for airlines, schools and hospitals to backof-the-house items such as No. 10 cans of Alfredo sauce.
Land O’Lakes research of its foodservice customers shows labor as the No. 1 issue facing the industry, with product consistency a close second.
The two issues led to the development of Land O’Lakes Alfredo Sauce in 1997. The sauce can be served as-is or can be customized.
“Sometimes it’s called speedscratch cooking. Chefs start with a base ingredient and add their flair,” Ewers says.
Because Land O’Lakes research indicated 84 percent of operators use some type of seasoned butter-spread product mixed from scratch, the co-op developed its Signature Spread line to help operators save time and ensure batch-to-batch consistency difficult to achieve when mixing from scratch.
Originally developed as a consumer product, the line features 8pound tubs of high-flavor-profile, margarine-based butter-blend spreads in Garlic & Herb, Pesto & Parmesan and Southwestern Sizzle varieties. The product has a 150-day refrigerated shelf-life.
“Operators are looking for products that they can use to help liven up those menus yet not have to spend a lot of time with,” Ewers says.
Land O’Lakes has had similar success with Queso Sabroso, introduced two years ago. The pasteurized, processed seasoned natural cheese product contains red, green and jalapeno peppers. Those looking for a Hispanic flair cube it, melt it down and serve or blend in their own special ingredients.
“It’s perfect for sauces and queso dips,” Ewers says.
Clarifying butter for clear sauces and other gourmet uses is a time-consuming task. Among the newest Land O’Lakes foodservice products is preclarified butter targeted at upscale restaurants and currently being test-marketed in the Southeast.
Another recently-introduced Land O’Lakes product specifically designed to save foodservice customers steps is flavored American cheese slices. Available in roasted garlic, sun-dried tomato and basil, parmesan and Caribbean spice, the slices can “spice up” a menu and give character to basic items such as grilled chicken sandwiches.
“The foodservice industry is changing – 20 years ago there wasn’t a need for these types of products. There wasn’t the labor shortage that the operators are seeing. Consumer taste buds weren’t as sophisticated. The industry wasn’t as developed,” Ewers says. “The back-of-house items that solve problems for operators is where we see our real growth.”
At the same time, products like bulk sour cream and cottage cheese, 40-pound blocks of cheese and standard American slices will continue to be the backbone of the dairy supply business, Ewers notes.
“You need to make sure you provide those as efficiently and as effectively as you can, but also offer some of these other services, because operators can buy those bulk products from anyone. If you’re not offering them something value-added, it just becomes a pricing game – who can give it to me the cheapest,” Ewers says.
West Lynn has offered its customers plastic single-serve pints for about eight years and has continually expanded the line to include various flavors of milks, juices and drinks.
Finn urges all dairy processors to switch to some type of 10-ounce plastic bottle for single serve fluid products from what he calls the “8-ounce Leave-It-To Beaver gabletop.”
Today’s consumers have been conditioned to consume more beverages and the 8-ounce serving of milk is simply not enough, he says.
“That 8-ounces may have been great for the size that person was in 1950, but its no longer the size people are looking for today with the advent of the Big Gulp and 20-ounce Cokes. Yet we as an industry continue to pump it out,” Finn says.
Plastic packaging for fluid products has a definite advantage over the gabletop on the foodservice line. Not only does it offer a few more ounces of product, but the packaging holds up better in ice baths, Finn notes.
“The key elements really come down to offering healthy, nutritious product that is resealable, tamper-evident and portable. Hit those type of key, salient points, you have yourself an opportunity and what we call intercept marketing,” he says.
West Lynn helps its customers and itself with its cooler program. The West Lynn coolers are filled with various flavors of milk including chocolate, strawberry, coffee and creamsicle-flavored milk.
At smaller volume locations where ice baths are more appropriate for displaying products, the plastic container allows the product to remain chilled while keeping the packaging integrity.
“If you leave a gabletop in an ice bath for any length of time, you’re getting a product that’s pretty shopworn,” Finn notes.
There is evidence that milk is more likely to sell on the cafeteria line when offered in packaging that mirrors overall beverage packaging trends, agrees Tami Cline, director of nutrition services for Dairy Management Inc. (DMI). Cline offers outreach to school foodservice operators and promotes milk to children for the National Dairy Council, which is managed by Rosemont, III.-based DMI.
Cline relates the case of a foodservice director in Illinois who stocked the district’s high-school cafeterias with pint-sized, 1% Chocolate Milk Chugs from Dean Foods, Franklin Park, Ill., priced at $1. While 8-ounce traditional gabletop milk sales remained consistent with sales prior to the Chugs offering, total milk volume sold at various schools increased dramatically, from 18 percent to 90 percent.
“The perception of the kids was that this was a really cool product that the schools were offering,” Cline says. “The Chugs became a competitor with bottled water, canned juice and sports drinks.”
The dramatic increase in sales caused the school district’s regular milk supplier to offer a new 16-ounce milk product, Cline says.
Wells Dairy Inc., Le Mars, Iowa, positions its foodservice division as the food-away-from-home supplier, targeting segments of the foodservice sector ranging from restaurant chains to sports stadiums to business and industry to vending machines. The division is responsible for a significant percentage of Wells’ annual $490 million in total sales.
Wells’ hits the foodservice market with a value-added, broad appeal frozen dessert strategy. The program focuses on a complete product offering to include single-serve novelties, 3-gallon tubs and specialty products designed to meet operator needs. “We try to be a one-stop shop for everybody,” explains Ken Reuter, Wells’ foodservice group marketing manger.
This year, Wells’ partnered with NASCAR stock car racing for the association’s 50th anniversary. Singleserve novelties packaged in special boxes featuring race cars, drivers and NASCAR’s 50th anniversary logo in a checkered flag are being sold through retail outlets such as convenience stores as well as at race tracks during the association’s 33 races this year.
“We developed a specific novelty targeted at a specific venue to measure our ability to go into a dedicated segment,” Reuter explains.
Wells’ is finding a growing market for its nutraceutical-type products with its Health Smart cups and vitamin-fortified Nutrition Plus cups in health-care foodservice operations such as hospitals and nursing homes. There are opportunities for foodservice suppliers through the general shift to an aging consumer more interested in total nutrition management.
However, Reuter notes that since ice cream products are often considered an indulgence or a reward, “There’s a fine line that you can add vitamins to a dessert item and still get acceptance.”
If modern media advertising and promotions serve to improve the sales of dairy products on the retail side, it only stands to reason the same is true on the foodservice side of the industry. After all, DMI’s “got milk?” program and MilkPEP’s “Milk Mustache” celebrities have become a part of pop culture.
In fact, Denny’s national restaurant chain will begin promoting milk in each of its 1,600-plus operations with the help of materials from MilkPEP.
“People need a reminder about the benefits of milk, especially when they are away from home. We want to encourage them to order a glass with their meal,” notes Jon Jameson, Denny’s senior vice president of marketing. “Partnering with the popular Milk Mustache campaign is helping us get an important health message out to the millions of customers who dine at our restaurants each week.”
A MilkPEP survey of adult restaurant patrons showed the No. 1 reason consumers don’t order milk when dining out is that they don’t think of doing so. It is hoped that the presence of in-restaurant signage will increase the amount of milk consumed.
Though generic promotions such as the “Milk Mustache” campaign do not push specific brands, foodservice operators are becoming increasingly willing to promote branded items either on-menu or through signage. In addition, dairy processors’ retail promotions are aimed at consumers and, in their off time, foodservice operators are consumers.
“This is one of the real advantages of having the Land O’Lakes brand name. Our Land O’Lakes brand is recognized by 98 percent of all consumers.” Ewers says. “Many of these foodservice directors grew up on our brand. They know what Land O’Lakes stands for, so we don’t spend our time selling the brand and what it means. We spend our time talking about how to solve problems.”
Although the idea of placing brandnames on menu items is becoming more accepted, Ewers notes that “Restaurateurs are reluctant to take away the perception that everything is theirs.”
However, with issues of food safety at top of mind, Wells’ has found the power of their Blue Bunny brand helps foodservice operators sell more ice cream.
“We’re certainly seeing the emergence of a brand-driven consumer,” Reuter says. “With issues of food safety, people are turning to brands to identify a product they know is inherently safe because it is branded and they recognize that manufacturer.”
At the operator level Wells’ provides marketing support elements to include table-top tents, posters and other promotional materials to help convey the Blue Bunny brand, as well as to help operators drive dessert sales and increase check averages. Retail promotions also serve to remind operators about the brand, Reuter says.
“The foodservice channel sale is a business-to-business sale, yet the person that’s making that decision is also a consumer, gaining familiarity with our product through shopping, television advertising, radio advertising,” he says. “That equity transfers back and forth from the retail application to the buyer side because the buyer is a consumer first.”
Product promotions on a generic level carry awareness over to operators in the same manner as brand-specific promotions, foodservice industry consultant Knight notes.
“The challenge is to go in to the operator once the awareness is created and cement the relationship with oneon-one solutions. The generic solutions will only take you so far,” she says.
DMI’s Cline will spend 1998 increasing outreach to school foodservice operators and to children.
Growing participation in school meal programs is part of the DMI plan. Because 8-ounce cartons of milk must be offered with each breakfast and lunch offered in school, increasing student participation automatically increases milk sales, she says, estimating that every new student brought into the cafeteria for breakfast or lunch means 100 pounds of milk consumed yearly.
In March, DMI helped promote National School Breakfast Week with merchandising materials distributed to 16,000 elementary schools. Materials included colorful posters and danglers for cafeterias promoting the “Breakfast: It’s Totally Cool!” theme as well as milk and other dairy products.
This fall, back-to-school efforts will include a chocolate milk promotion and a program to help foodservice operators overcome barriers to serving flavored milk in their schools. An additional school marketing kit will tie “got milk?” TV ads with printed promotional materials to be used on menus sent home with students.
“The only piece of paper that always makes it home with the kids is the school menu,” she notes. “Why not get our dairy message on school menus across the country?
“If you ask any foodservice director what they want, it’s more kids in their cafeteria,” Cline says. “Instead of just throwing money at the school district, we’re really trying to help them build a stronger program.”
Though patrons of theme restaurants, fast food venues, cafeterias and other foodservice operations created the HMR market, most have never heard the industry term. Though no one knows where the prepared meal segment is headed, it’s a good guess that the market will continue to grow.
With supermarkets, convenience stores and even gas stations getting into the action, Ewers says it appears that “More and more of the food that is consumed in the U.S. is going to be foodservice products.”
Commercial restaurants are still determining how they fit into the HMR trend beyond takeout.
Sargento’s Engel notes that his customers are searching for practical applications at the unit level. For instance, Appleby’s theme restaurant chain is beginning to offer its sauces at the retail level.
Modem vending machines may be the wave of the future for grab-and-go dairy items such as milk and ice cream novelties.
“There’s a demand for convenience, and convenience means service, speed, food at the fingertips, food anywhere,” Wells’ Reuter says.
“We have a consumer today that’s much more mobile so our product has to be available to consumers wherever they may be.”
To date, Wells’ has placed several hundred Blue Bunny-branded, glassfront ice cream novelty vending machines containing up to 18 products in markets throughout the country. The machines are placed in hightraffic locations or where there is a captive audience – at highway rest stops, schools and business/industry locations.
“Ice cream novelty machine vending is the fastest growing segment of the vending industry, growing in excess of 15 percent annually over the last three years,” Reuter says.
Cline shares the vending success story of a Wisconsin middle school, where traditional gabletop cartons were placed in a vending machine to free up space and labor on the cafeteria line.
“The unexpected result is the foodservice operation is selling more milk. The kids think it’s fun to purchase the milk out of the vending machine.”
Whether prepared food is offered in commercial, non-commercial or asyet untried venues, it appears that the foodservice industry will continue to grow. The end result is increased opportunity for dairy processors.
Knight sums up the future of the foodservice market: “It is booming. The foodservice market is not likely to fade away like the Hula-Hoop did.”
Copyright Stagnito Publishing May 1998
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