Foodservice Opportunities Overseas for U.S. Cheese Suppliers

Earlier this year, for the first time, Burger King’s 38 Taiwanese stores began using U.S. cheese on their menus. The debut (on two combo meals and six a la carte burgers) was accompanied by a major promotion for the chain’s made-to-order “Big” burgers.

Taiwanese Burger King (BK) sales jumped 20-30 percent during the promotion, and even though the campaign is nowover, we expect the follow-on effect to continue to drive the chain’s revenues and, by extension, exports of U.S. cheese slices, particularly as BK opens 12 new units this year in Taiwan.

It is a welcome and significant success story for the U.S. industry.

In this case, USDEC played an instrumental role in convincing BK to give U.S. cheese a chance with repeated visits to the company’s Taiwan headquarters to explain U.S. products and applications (USDEC also backed the promotion with print ads and in-store tray liners). After all, that’s a big part of what we do. Yet, both with and without this type of collaboration, the breakthrough hints at the significant current existence and future promise of overseas foodservice sales for any U.S. cheese supplier willing to commit to serving the market.

Burger King Taiwan is merely one chain in one country. From 2005-2009, Yum Brands, McDonald’s, Domino’s Pizza and BK opened a net total of more than 8,400 international units.

At the Jefferies 2010 Global Consumer Conference in June, Yum pointed to the vast growth potential of emerging markets: The company currently has about 27,000 units or 27 units per 1 million people in developed countries, but “only” about 10,000 restaurants or 2 stores per 1 million in emerging markets. If you project the developed-world ratio to emerging markets, that would mean an additional 50,000 Yum stores (Pizza Hut, KFC, Taco Bell and other fledgling brands) in China, India, Southeast Asia and elsewhere in the years ahead.

Yum’s expansion alone would create solid world growth opportunities for cheese. But dozens of other fast-food chains ranging from mega-operators like Subway to regional brands like Fatburger are all pouring development dollars into emerging markets, adding thousands of units of their own. You would be hard pressed to name a U.S. fast-food chain that hasn’t made overseas expansion a key leg of its future growth strategy—particularly big cheese users like pizza, burger and sandwich shops.

The pace and breadth of restaurant development speaks directly to the findings from the Innovation Center for U.S. Dairy’s globalization report (which were recently largely backed up by a discussion paper from the University of Wisconsin-Madison’s Babcock Institute): World dairy demand growth, driven disproportionately by emerging markets, is outpacing production.

The United States is best positioned to meet this demand. But it needs to change how it does business—from a policy, regulatory and customer service perspective. It needs to demonstrate a commitment to serve export markets and increase the amount of value-added products in its dairy output mix, like cheese for the foodservice sector.

Rapid expansion is already making foodservice buyers reassess their procurement needs to ensure supply chain security. Burger King Taiwan had been buying solely from Australia, but found it in its interests to diversify and bring U.S.-sourced products into the mix once it got to trust U.S. quality and the commitment of its U.S. supplier.

U.S. cheesemakers have a unique opportunity to step up and meet the needs of the Burger Kings, Pizza Huts and Subways of this world. But the industry cannot be passive.

Some U.S. suppliers are doing a good job actively targeting the global foodservice sector. They’ve made strides over the past year securing new business with major fast-food chains in China and Japan.

Such companies are one of the reasons why U.S. cheese exports grew 43 percent to 47,313 metric tons in the first four months of 2010, and posted a record month in April as volume hit 14,453 metric tons.

But too few are capitalizing on the opportunities, and it won’t be long before the capacity of the active U.S. players gets maxed out.

This is not a distant opportunity set to come to fruition at an indeterminate time in the future. The opportunity is right here, right now—and it will only get bigger.

If U.S. suppliers focus on building relationships with the overseas foodservice sector, servicing buyers, meeting end-user specs and then protecting volume and market share gains, they can go a long way toward making the United States a consistent global exporter and routinely exceeding that new monthly volume record.

(This article first appeared in Cheese Market News in July 2010.) 

The U.S. Dairy Export Council represents dairy farmers, proprietary processors, cooperatives, ingredient suppliers and export traders. Its mission is to enhance U.S. competitiveness and increase global sales of U.S. dairy ingredients and products.