WCMA Notes: Lemonade in this Lemon of a Year
These are challenging times, but dairy processors are finding opportunities against a backdrop of shifting markets, diminished lead time on orders, workforce safety concerns and unprecedented milk and cheese prices.
Plenty of lemons. Let’s make some lemonade.
Americans have spent $5.5 billion more dollars on dairy products in grocery stores in 2020 than the same period last year. Retail butter sales are up 35 percent since March 15, 2020; natural and processed cheese sales are up 19 percent.
U.S. dairy exports remain strong, 16 percent higher in the first eight months of 2020. Cheese exports are up 2 percent in 2020 and international whey sales are 17 percent higher this year, with China now buying aggressively.
Foodservice sales, including schools, restaurants, institutions, and destinations, are the marketplace wild card. Some manufacturers have recovered lost foodservice sales, but most have diminished volume, with uncertainty about the months ahead.
In recent days, Wisconsin Cheese Makers Association began a random poll of manufacturer members, seeking opportunities that have arisen amidst the challenge of change. Happily, lemonade is flowing in this lemon of a year. Here’s some examples:
- Agropur continues to ramp up mozzarella production at its Lake Norden, South Dakota, facility and 18 months after a massive expansion, production growth is ahead of schedule on the way to full capacity of 9 million pounds of milk per day. “We’re getting positive growth signals from our farms in the region,” said Mike Sipple, Agropur’s VP Milk Production & Regional VP Operations. The cooperative’s next goal is a $140 million investment to build a completely new production facility in Little Chute, Wisconsin, replacing the specialty cheese capabilities of the former Simon’s Cheese operation. “We’re trending growth on all our cheese lines in 2020,” Sipple said.
- Growth opportunities at Baker Cheese, St. Cloud, Wisconsin, are a story intertwined with the economic and employee impacts of COVID-19. Baker, a forerunner in string cheese production, doubled its footprint with an additional plant (pasteurizer to packaging) that came online in the fall of 2019. That capacity – particularly the new packaging lines – came into play in 2020 as Baker has spread out packaging teams to reduce the potential for close contacts. President Brian Baker said the company accelerated several capital purchases from a 3-5 year conservative growth plan for the new plant to “as soon as possible” this year. He’s proud to point out that his employees made and packaged more string in the last six months than the same six months in 2019, and the company is positioned to handle growing demand for their string cheese.
- It’s been one year since Valley Queen Cheese in Milbank, South Dakota, completed its plant expansion and equipment upgrades, and strong demand throughout the volatility of 2020 pushed cheese production up 20 percent. New vats and open drain tables, complemented by a new packaging line for 640-lb blocks, lifted Valley Queen processing capacity to more than 5 million pounds of milk per day. CEO Doug Wilke is optimistic about growth for the factory and for dairy farms that serve his eastern South Dakota facility. “Price volatility has been tough to manage,” he said. “But product demand, our production flexibility, and our local milk supply have all responded well to a challenging year.”
- Concrete trucks are lined up at Specialty Cheese Company in Reeseville, Wisconsin, laying the groundwork for a more than $10 million project which will double capacity at the plant by mid-February 2021. Specialty Cheese, an award-winning manufacturer of cheeses for ethnic minorities and – as recently seen on “Shark Tank” – a popular baked cheese snack, has seen retail orders skyrocket amid the pandemic. Owner Paul Scharfman credits his team’s effort to meet demand, noting infrastructure investments are paired with workforce training and incentives, including programs to provide childcare assistance and transportation.
- A recently completed five-year plan that renovated AMPI’s four flagship natural cheese plants in Wisconsin, Iowa and Minnesota found the cooperative ready for the challenges of 2020. “Our natural cheese plants are sold out for the year ahead,” AMPI Co-President Sheryl Meshke said, adding, “We’ve seen double digit growth on our premium cheeses” including aged products and pepper styles. Co-President Donn DeVelder noted that pasteurized process American cheese sales are up and innovations into natural cheese styles like Habanero Jack and Carolina Reaper are growing beyond projections at retail. AMPI is bullish on the future for great cheese: “Americans consumed more than 400 million new pounds of natural cheese when you combine commercial disappearance growth figures for 2018 and 2019,” Meshke said, adding, “Now we’re laying out our next five-year plan for growth.”
- Klondike Cheese in Monroe, Wisconsin, has seen both sides of the economic fallout from the coronavirus pandemic. Sales of muenster and Havarti from their newly completed plant soared in the spring of 2020 and have continued strong, while feta cheese, used heavily in restaurants, lost ground. Klondike took the opportunity to upgrade their feta production and packaging lines this spring, said Klondike’s Dave Buholzer. “We’re also going to introduce an all-new line of gouda products this winter,” he added. Buholzer sees an industry that’s growing and managing production and inventory like never before: “Everybody’s five-year plan is now a one- or two-year plan, but we’re getting it done.”
WCMA will continue this exploration of success in challenging times next month.