40:1 Leverage

October 3, 2011 01:14 PM
 
40:1 Leverage

A DMI partnership with fast-food giants spurs promotion

Talk about leverage: A $21 million partnership with high-profile names like McDonald’s, Domino’s Pizza and Pizza Hut has resulted in more than $800 million in consumer advertising.

And that, in turn, has led to an estimated incremental sales increase of 7 billion pounds of milk over the past three years.

The marketing gurus at Dairy Management Inc. (DMI) decided several years ago that despite their millions in checkoff dollars and their best efforts, it still wasn’t enough to move the needle on dairy sales.

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The solution: Partner with national brands that have the size and scale to reach consumers where they live—at McDonald’s, Domino’s and Pizza Hut.

Following are Q and A sessions that Dairy Today conducted recently with Patrick Doyle, president and CEO of Domino’s Pizza, and Tom Gallagher, CEO of DMI.

Both Doyle and Gallagher will be featured speakers at the 2011 Elite Producer Business Conference in Las Vegas, Nov. 7–9. To learn more about the program and to register for the event, see the sidebar below.

Dairy Today: Domino’s has partnered with dairy farmers for the past three or four years, using dairy farmer dollars to both develop and promote Domino’s new pizza offerings. What have these additional dollars allowed Domino’s to do that it would not have been able to do without them?

doyleDoyle: With DMI’s help, we are reinventing our brand and the pizza category, which had been "tired" and declining in recent years. DMI’s support allows us to try things we probably wouldn’t otherwise—like adding specialty cheeses such as feta, Parmesan and Asiago to our pizzas and trying volume-driving carryout specials.

We likely would not have tried the carryout specials, which featured very enticing price points, without DMI support. They were initially funded by DMI, and were so successful that we’ve repeated them many, many times. Now we offer them every Monday through Wednesday instead of a couple times per year.

Dairy Today: Dairy farmers have committed some $12 million to adver-tising Domino’s American Legends pizzas in 2011 and 2012. How much has Domino’s committed?

Doyle: As far as dollars, it’s not a matching situation or even close, as we spend many times what DMI contributes on dairy-driving initiatives. While our partnership began with the development and promotion of the American Legends line of specialty pizzas with 40% more cheese than our regular pizza, our partnership has grown. It now includes other dairy-centric products in development, support for our research and development, assistance with consumer insights and culinary trends and promotional support for dairy-driving initiatives like school lunch and carryout specials.

Dairy Today: Can you share any sales results from these marketing efforts?

Doyle: I think the number dairy farmers would be most interested in is 20%. Our cheese usage increased 20% in 2010. We continue to execute our strategy and our partnership with DMI to the benefit of our franchisees, our consumers and dairy farmers.

Dairy Today: Have the dairy farmer support dollars allowed you to get into new markets that you weren’t present in before? Or have they simply allowed you to increase frequency of advertising?

Doyle: DMI support has allowed us to focus some advertising dollars on areas we wouldn’t otherwise consider. The Wisconsin 6 Cheese pizza has more than twice the cheese of a regular pizza, but we had never developed nor advertised such a product. DMI helped fund the research and media to launch this product. In that sense, we are talking to a new segment of the population: abundant cheese–loving consumers. That’s new for us.

Dairy Today: Are there new offerings on the horizon that have come about as a result of your partnership with DMI?

Doyle: There are several new dairy-centric products in various stages of development as a result of our partnership. We don’t generally discuss products in development—what they are or when they might launch—but I promise that when you see them you will want to try them!


DMI’S New Strategy

Dairy Management Inc. (DMI) has moved away from producing and funding direct consumer advertising. Tom Gallagher, CEO of DMI, explains why and how the new approach is working.

Dairy Today: Why has DMI opted to form strategic partnerships with companies like McDonald’s and Domino’s Pizza?

gallagherGallagher: Because it sells more dairy. With McDonald’s and Domino’s, we’ve compressed the timeline to launch new products and made sure only 100% dairy products are used. Because these companies are category leaders, other chains follow suit, and that sells even more dairy.

Dairy Today: Can you give a breakdown on the number of dairy checkoff dollars that have been devoted to new product development for specific companies?

Gallagher: Using other people’s money really stretches the dairy farmer’s checkoff dollar. With McDonald’s, it has been about $5 million a year for three years from us, and McDonald’s has spent hundreds of millions of dollars annually to roll out dozens of products, including dairy. With Domino’s and Pizza Hut, we’ve invested about $15 million; the two of them have spent more than $100 million annually, and the pizza category has turned around.

Dairy Today: Have you had to get approval from USDA to use checkoff dollars to promote proprietary products?

Gallagher: We keep USDA informed of all our activities. They understand that when we create change with category leaders, the entire category benefits.

Dairy Today: Do you have an estimate of the amount of increased sales, both in dollar and volume, these efforts have produced?

Gallagher: More than a billion pounds of incremental milk have come through McDonald’s in the last three years. Our investment in the pizza category drove an estimated 2 billion pounds of additional milk.

Dairy Today: Are there other areas where DMI is working in partnership with companies? Anything in the cheese, yogurt, ice cream categories?

Gallagher: We are working with yogurt companies; this is a growing category and dairy producers will benefit from it.


Dairy’s New Normal

In addition to Domino’s Patrick Doyle and DMI’s Tom Gallagher, the 2011 Elite Producer Business Conference (EPBC) will feature a host of other top-notch speakers who will home in on the
conference theme, "Dairy’s New Normal: Volatility, Opportunity, Risk and Reward."

The 2011 EPBC opens Monday, Nov. 7, and runs through noon on Wednesday, Nov. 9, at the Bellagio in Las Vegas.

The EPBC will once again open with Michael Swanson, vice president and chief economist for Wells Fargo. Swanson will zero in on global economic trends that will shape the dairy industry in the next decade.

A panel of dairy risk managers, traders and brokers will describe how to cope with increased price risk for both milk and inputs, and how to position your dairy to grab opportunities when they arise.

Dairy Today’s own Dollars and Sense producer panel will kick off the Wednesday morning program. These four producers, from Arizona, Minnesota, Pennsylvania and Washington, will detail how they manage risk and cope with volatile markets on their dairies, which range in size from 670 to 3,200 cows.

New this year are breakout sessions that will allow attendees to choose among presentations on generational transfer of farm ownership, handling inspections and raids, and mobile technology apps for the farm.

Learn more and register now for the Elite Producer Business Conference.

 

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