Innovation Impresses U.S. Dairy Customers

To become more valuable to their customers, U.S. dairy suppliers need to provide service and technical know-how.

"We've seen it in Asia, the Middle East and Latin America: dairy ingredient end-users—and cheese end-users as well—prefer to do business with companies who position themselves as innovation partners,” says Vikki Nicholson, USDEC senior vice president, global marketing. “It is part of the cost of becoming a key player in the global market.”

“Innovation partner” in this sense has broad application. It could mean ingredient support for anything from product development to education to nutrition to functionality to marketing and communication. Much depends on the end-user’s size, experience and manufacturing resources.

“Different customers have different production equipment and processes, ingredient requirements, country regulations, etc.,” says Gabriel Sevilla, vice president, sales and market­ing, Proliant Dairy Ingredients. “After we complete work at our pilot plants and test kitchens, we always provide support to adjust our research to the customers’ specific needs.”

Proliant built a $10-million state-of-the-art laboratory, test kitchen and pilot plant dubbed the Lauridsen Advancement Building or LAB in Ankeny, Iowa, in 2013 aimed at providing technical and analytical support, formulation assistance, pro­totype development, regulatory review and logistics services.

It is one of a group of U.S. dairy suppliers bolstering their innovation capabilities to better equip themselves to meet end-user needs. In 2013, Glanbia Foods opened a multi-million-dollar cheese innovation center in Twin Falls, Idaho. In 2011, Leprino Foods Co. opened an Innovation Studio as part of its Asian Business Center in Singapore to help customers develop products tailored to the tastes and trends of the region.

While such investments well position each company to lend an R&D hand and illustrate a desire to build deeper busi­ness relationships, every U.S. dairy supplier need not spend millions on new facilities to offer innovation support.

“Some U.S. dairy suppliers have hired technically inclined export sales staff or invited key customers to visit R&D centers in the United States to facilitate successful and col­laborative new product development,” says Kristi Saitama, USDEC vice president, export marketing ingredients.

Adds Nicholson, “Relatively speaking, sending a techni­cal expert overseas to provide consultative support is a pretty nominal investment, and the learnings gained on customer needs, how they operate, how they are thinking of using an ingredient, are invaluable.”

The U.S. industry also has the backing of Dairy Manage­ment Inc. (DMI)—and its extensive portfolio of nutrition and product research—and organizations like USDEC for market research and insights, understanding dairy ingredients and integrating them into local diets. A cor­nerstone of USDEC marketing programs for cheese and ingredients is stimulating product innovation alongside technical training and formulation support.

“For example, we brought R&D staff from Vietnam to the United States in August to learn about U.S. whey and milk permeate, understand functional aspects and characteristics—R&D folk to R&D folk,” says Nicholson. “We work to cut the learning ingredient curve. We take the first step and the supplier follows up.”

DMI is also instrumental in new ingredient research to counter criticism from global end users who see the United States as behind the ingredient-development curve.

“It can be a tremendous value proposition if you are the first supplier to work with end users on a new ingredient use,” says Angélique Hollister, USDEC vice president, cheese and consumer products. “When Oceania was first to market with pizza cheese in Asia, buyers and consumers grew accustomed to Oceania specs. Their first taste of cheese defined ‘cheese’ for them.”

That means U.S. suppliers now have to work doubly hard with end-users to acquaint them with U.S. mois­ture content, melt and stretch characteristics and how to make adjustments for oven temperatures and bake times to achieve a desirable product.

“If you expect to be a primary supplier to a significant customer, you need it to go beyond a transactional relationship to something that is more complex and enhanced,” says Nicholson. “Price is a factor, but service and knowledge become more valuable to the buyer and more difficult to replace. Buyers are looking at the overall value proposition and sellers should be doing the same.”

(This article first appeared in the September 2014 edition of Export Profile.)

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The U.S. Dairy Export Council is primarily supported by Dairy Management Inc. through the dairy farmer checkoff that builds on collaborative industry partnerships with processors, trading companies and others to build global demand for U.S. dairy products.