The team at McCarty Family Farms in Colby, Kan., could have kept selling milk into a traditional cooperative model as it had done for years. The farming family traces its roots to the 1740s in Pennsylvania, so tradition runs deep and change can be uncomfortable.
Yet Ken McCarty and his three brothers decided to do the exact opposite in 2010. They’d grown their successful operation to 3,500 milking cows across two farms, but coming out of a year of volatile milk prices and a changing consumer marketplace, they wanted more. They desired greater transparency so consumers could understand how they produced milk.
The producers began a series of conversations with the milk team at Dannon. The relationship blossomed into a program that allows the processor to source 50% of its milk supply directly from a handful of carefully selected operations, including McCarty Family Farms, under a cost-plus model. Dannon compensates producers for their inputs plus a fixed margin.
“We decided based on our hope to limit that volatility in milk pricing and to begin working with farmer-partners in a new type of relationship,” says Michael Neuwirth, senior director of public relations, Dannon.
For the McCarty family, it meant rapidly scaling their operation to today’s 8,200 milking cows and
163 full-time employees located at four farms. They added an evaporative condensing plant to draw out skim and cream for direct sales.
“Our reason for wanting to be a part of this model, and being excited about being in this model, was simply that it is truly very innovative and provides greater sustainability,” McCarty says. “It allows us to have a greater connection with the consumer. We’ve aligned with a company that shares our values in what we believe is really important.”
Adapt And Advance. Dannon is among the first in the dairy industry to directly purchase milk from farms. But experts say business relationships led by food companies and retailers, sometimes called chain captains, in partnership with food producers will only become more important in the future. Food companies require a safe and reliable supply chain that is closely documented and traceable. Large farm operations align nicely with those needs: They often are the best equipped to scale rapidly, deliver products in a timely way and integrate the necessary technology and transparency to promote food safety and consumer awareness.
There’s no question food preferences are changing among consumers, particularly millennials, explains Michael Boland, ag economist at the University of Minnesota.
“The world is changing,” Boland says. More than ever before, he explains, some consumers are:
- Wearing wristbands and other technology that collects health data and helps them monitor exercise and sleep patterns
- Substituting big meals with more frequent daily snacks
- Embracing products without GMOs and gluten and reading labels to understand them better
- Asking questions about the effects food production has on animals and the environment
- Expressing openness to new technology that creates products such as non-animal protein that is made from plants
The challenge food companies and, by extension, farmers face is to know where consumers are headed next and build the supply chain that will deliver the right ingredients in
a timely way.
“Very often, shoppers don’t know what they want until they’re exposed to it, so predicting the future is impossible, in my estimation,” Neuwirth says. “We can take cues from them via interviews, focus groups and things like that, and we do that on an ongoing basis—not just for things like flavor … but also increasingly for complicated topics like sustainable development.”
It’s easy for conventional farm operators to be upset by food companies purchasing famed organic brands, as when General Mills purchased Annie’s Homegrown, Boland says. Yet it’s important to see the whole picture and how it can benefit consumers and farmers if executed properly under the guidance of chain captains.
“They’re able to help producers feed these growing markets,” Boland points out. “McDonald’s is one of the largest buyers of U.S. pork. You don’t think that gives you some influence? These chain captains are increasingly having more and more influence. That’s not a bad thing. The hard part is organizing it so they get what they want.”
Depth Of Clarity. In the next few years, McCarty is hopeful his team can continue to strengthen ties with Dannon and consumers to tell the story not only of the dairy but also of the crop farmers who provide feed for its cows and the stories of its numerous other stakeholders.
“That’s where we see our next steps going, is deepening that relationship,” he says.
Why High-End Food Makers Are Fleeing Corn and Cattle
One reflection of changing consumer tastes: Major food companies are looking carefully at products such as high-fructose corn syrup sweeteners and examining alternatives such as cane sugar, says Michael Boland, ag economist at the University of Minnesota.
Consumers connect corn sweeteners with GMOs, and because non-GMO corn is difficult to purchase in bulk quantities needed for soft drinks, ice cream and other products, name-brand manufacturers such as Heinz Foods or Campbell’s might walk away and search for new alternatives, Boland predicts.
Less expensive generic brands will continue to use corn syrup, Boland says, but high-end brands might look at alternatives as they try to differentiate their products.
“There will be some switching out of GMO products in the near future,” he says. “Some well-known brands using sweeteners will move to cane sugar or non-caloric sweeteners. These are irreversible investments made to last many years.”
As for livestock producers, Boland says, more consumers are asking for lean meat such as tenderloin steaks that could potentially be produced in a laboratory setting. Already, McDonald’s blends U.S. beef with grass-fed beef, which has lower fat content.
“What will happen with all of the meat that used to go into hamburger patties?” Boland asks. “That will result in reduction of the cowherd [as] people start producing lean meat in the lab versus in the field.”