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Dairy Sustainability Alliance meeting addresses marketplace opportunities

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Navigating social, environmental and economic issues facing dairy businesses in a world shifting from COVID-19 restrictions.

Navigating social, environmental and economic issues facing dairy businesses in a world shifting from COVID-19 restrictions took center stage at the 2022 Dairy Sustainability Alliance Spring Meeting.

The Dairy Sustainability Alliance is a multi-stakeholder initiative of the checkoff-founded Innovation Center for U.S. Dairy and includes more than 165 companies and organizations. Representatives exchange ideas, best practices and tackle shared challenges on issues and opportunities affecting the industry to accelerate progress toward common sustainability goals. More than 270 representatives of these dairy value chain organizations, including 25 dairy farmers, attended in person or virtually.

Many of these organizations have adopted the U.S. Dairy Stewardship Commitment signaling support for farmers, cooperatives and processors who voluntarily advance sustainability leadership and transparently report progress. To date, 35 dairy companies, representing more than 75% of U.S. milk production, have voluntarily adopted the Commitment.

Dairy Management Inc. (DMI) and Innovation Center CEO Barbara O’Brien opened the meeting by sharing key marketplace forces and trends that she says the checkoff identified as significant opportunities for the U.S. dairy industry to innovate, demonstrate sustainability progress and impact and, ultimately, lead.

“Never has the opportunity been greater for us to come together and demonstrate our collective impact,” O’Brien said. “And frankly, never has it been more urgent as we work to meet the growing demands and expectations of both customers and consumers around personal wellness, environmental sustainability and food security.”

The areas O’Brien identified are:

New Digital Frontiers, Marketplace – the rapid acceleration in digital technologies and marketplaces that all business and sectors are assessing for challenges and opportunities. O’Brien said one in five dollars spent in the grocery channel will be through a digital transaction by 2025.

New Definition of Health and Wellness – technology is playing a significant role in redefining how people manage their health and wellness. COVID-19 accelerated the do-it-yourself healthcare movement as physicians and the healthcare system came under strain. O’Brien said more than 60 percent of Americans report using food as medicine to manage or prevent health conditions.

Impact Imperative – consumers have expectations of dairy and other businesses to lead in developing solutions that address societal challenges. O’Brien called it a “notion of purpose over profit” and said the pandemic, growing concern over climate change and other social and market forces have caused people to demand transparent accountability. She pointed to the Innovation Center’s 2050 Environmental Stewardship Goals as a proactive step the industry has taken.

Inclusive Relevance – O’Brien said Gen Z – at 72 million strong – is the most diverse generation to date with a purchasing power of $100 billion. They expect companies and brands to reflect and meet their expectations around diversity and inclusivity.

A panel discussion titled “U.S. Dairy 2022 & Beyond: Navigating Sustainability in a World of Transition” followed O’Brien. Executives emphasized how U.S. dairy’s sustainability efforts continue to hold promise and opportunity, even amid the uncertainty of inflation, global conflicts, continued workforce and supply chain disruptions, and an increased focus on environmental, social, and governance (ESG) reporting.

“Sustainability has become mainstream. It’s part of a normal conversation,” said Brad Anderson, president and CEO of California Dairies Inc. “Maybe five, eight years ago, you had sustainability experts talking to sustainability experts, but I rarely talk with a customer where the conversation doesn’t start with ‘what are you doing around some form of sustainability?’

He continued, “There is a big opportunity for the dairy industry to lead, be in front of consumers and build the demand they’re expecting. Absent of that, someone else will fill that void. Whether you’re on a farm or in a processing facility or a co-op or any other capacity in the marketplace, your role is really important because the consumers are demanding it and that demand will be greater tomorrow than it is today.”

Pennsylvania dairy farmer Marilyn Hershey, who serves as chair of DMI, shared how sustainability has impacted farming and stressed economic returns must be part of the conversation.

“It’s very important for us to be stable economically, and how does sustainability fit into that?” she said. “You have that two-way street where there is concern about sustainability and the cost of it, but then you realize the customers are asking for it, so it’s a necessary step for us.”

A follow-up panel discussion addressed how Gen Z and Millennial consumers are making grocery store purchases based on their health and wellness views. These consumers are looking for foods that deliver energy, a sense of calm, immunity and gut support, fight inflammation and help their children on a pathway to lifelong wellness.

Increasingly, these consumers expect that the brands they’re turning to are treating the animals, planet and workers with respect. Retailers are leading the way with personalized in-store and digital experiences and are guiding shoppers as eating and sustainability advisors.

Beau Hayden, vice president of insights/sales and trust for DMI, explained the evolution of consumers’ shopping habits and how the pandemic impacted online sales.

“The path of purchase is not as linear as it once was,” Hayden said. “It used to be, ‘Hey, I saw something on TV or I saw it in a Sears catalogue.’ You fast forward to today where your journey might start on YouTube or Hulu. Then you’ll somehow get an ad on Instagram or Facebook for something that you may have been talking to your spouse or kids about.”

Hayden said the checkoff’s Reset Yourself with Dairy campaign launched last fall seeks to immerse dairy more deeply in the social media world. He said pre-pandemic online sales of grocery items totaled 2 percent, but they jumped to 20 percent during peak COVID-19 periods. Sales since have settled to about 13% but dairy has built a strong online retail presence.

“E-commerce retailers love the dairy category,” Hayden said. “There are plus-75% more dollars spent when dairy is in the basket. Dairy is second largest department behind dry goods.”

Methane reduction

Another key aspect of the meeting focused on the Global Methane Pledge and opportunities for the U.S. dairy industry. The pledge was launched at COP26 – a decision-making body of the United Nations Framework Convention on Climate Change – and aims to reduce global methane emissions by 30% by 2030. Currently, 112 countries have joined the pledge and proponents believe achieving this reduction target globally would eliminate 0.2˚C warming by 2050.

A panel of Alliance meeting experts provided an overview of the pledge and the opportunity it presents for research and leadership, including a featured collaboration to advance mitigation of enteric emissions.

Nick Gardner, senior vice president of sustainability and multilateral affairs for the checkoff-founded U.S. Dairy Export Council, reiterated that methane mitigation has long been a priority for the U.S. dairy industry. However, due to methane’s intrinsic characteristics as a potent greenhouse gas with a short lifespan, the political conversation has escalated because short-term methane reductions can meaningfully reduce warming.

“COP26 represented a culmination of many years of rising attention and activism within the global community on agriculture and food systems,” Gardner said. “We should keep in mind that COP26 occurred just months after the culmination the UN Food Systems Summit, which helped to galvanize growing attention, momentum and urgency at the highest levels of government that more action is needed to reduce the environmental impact of food production.”

Gardner pointed to the Agricultural Innovation Mission for Climate (AIM for Climate) effort, which was launched by the United States and United Arab Emirates at COP26 to address climate change and global hunger by uniting participants to significantly increase investment in climate-smart agriculture and food systems innovation.

The Greener Cattle Initiative (GCI), which was created by the Foundation for Food & Agriculture Research and the Innovation Center for U.S. Dairy, is another critical piece of the methane solution and an AIM for Climate tactic. GCI is a five-year public-private partnership that aims to reduce enteric methane emissions from dairy and beef cattle.

Dr. Juan Tricarico, vice president of environmental research for DMI and the Innovation Center, said GCI is in the process of accepting requests for proposals to award $5 million in research grants to identify, develop and/or validate scientifically sound, commercially feasible and socially responsible methane mitigation options.

“There are two important elements here,” Tricarico said. “Of course, the funding is important, but the network and the sharing of knowledge is also critically important, so the right work gets done.”

 

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