The yogurt giant Dannon, looking to tap into the public’s growing concern about the source of its food, is establishing a direct pipeline to some farms that supply the company with milk, part of an ambitious plan to influence farm practices right down to the dirt.
Clay McCarty checked on calves at a dairy farm in Rexford, Kan. Mr. McCarty is one of four brothers behind McCarty Family Farms, a milk supplier to Dannon. Credit Nick Cote for The New York Times
Under a new supply system that the company will announce on Wednesday, farmers in the program must adhere to Dannon-dictated animal welfare standards and work to improve and conserve soil on their farms, among other things.
“Engaging in this direct way with our milk suppliers allows us to join them in a journey to improve agricultural practices and reduce their footprint on the environment, which in turn reduces Dannon’s footprint on the environment,” said Mariano Lozano, chief executive of the Dannon Company.
The company’s program plays into an array of consumer trends, from the desire for better treatment of farm animals to a preference for the wares of small, new food companies that promote the simplicity and purity of their products. Those upstarts represent stiff competition for Dannon, whose yogurts represent more than a third of those sold in America.
Many big food companies are responding to the pressure like Dannon, by chipping away at an industrial food system built for efficiency, speed and low cost. Over the last year, companies including Nestlé and General Mills have pledged to use eggs only from hens living in cage-free, or aviary, housing systems, and Unilever has promised to increase “sustainability” in its business by doing some of the same things Dannon is trying to do with its new program.
But few have made plans as far-reaching to an ingredient as central to its business as milk is to Dannon.
“For the last many decades, we’ve had a system that encourages short-term efficiencies at the expense of soil health, animal welfare and biodiversity,” Mr. Lozano said. “We want to play a part in changing that system.”
Dannon, the American arm of the giant French food company Danone, has faced stiff competition in its yogurt business in recent years from newcomers like Chobani and Noosa. Under the leadership of Emmanuel Faber, its chief executive, Danone has cut costs, reformulated products to reduce sugar and worked to improve sales of its baby formulas and nutritional supplements in overseas markets.
Its sales in the first quarter of this year grew 3.5 percent, adjusted for swings in currency, to $6 billion, in part thanks to a recovery in its North American unit’s sales.
The steps Dannon is now taking are aimed at fortifying it against further threats to its dominance.
Sourcing milk directly is a sharp departure from the way big dairy companies usually get their milk. Typically, dairy farms load their milk into refrigerated trucks, which take it to a plant where it is combined with milk from other farms and processed.
That process, used by Dannon’s former milk supplier, Dairy Farmers of America, a large cooperative, can make it difficult to figure out where the milk originated. Such information is increasingly important to improving food safety and addressing consumer demands for transparency.
Now, all the milk in Dannon’s yogurt will come directly from farms and two co-ops, whose members have agreed to the plan. The suppliers have said they will follow the animal welfare standards set by Validus a third-party certification company; these include providing cattle shades to reduce heat stress, and prohibiting tail-docking. The farms and co-op members have also agreed to take steps to change their farm management to deliver the environmental benefits Dannon seeks.
Some 40 percent of Dannon’s milk will come directly from seven family farms like McCarty Family Farms, which has three dairy operations in Kansas and one in Nebraska.
Ken McCarty, one of four brothers running those farms, said the family had become frustrated with the existing model of milk sales and distribution.
“Once it left our farm, I couldn’t tell you where our milk ended up,” said Mr. McCarty, whose great-grandfather began his farm in Pennsylvania in 1914. “We felt a great deal of frustration with the traditional co-op model because we had no connection with the customer or the consumer.”
The McCartys agreed to be guinea pigs of a sort, striking a deal with Dannon in 2011 that served as a test of what the company was trying to do. Because of that deal, their dairy herd has more than doubled to 8,500 cows spread across four farms and producing roughly 76,500 gallons of milk a day.
The partnership with Dannon allowed the McCartys to build a milk condensing plant that reclaims 20 million gallons of water a year, which they use to water fields where they grow some of the feed for their herd and for other purposes.
“Some of the changes Dannon was looking for weren’t necessarily changes for us — we already had animal welfare initiatives going because cows are what pay our bills,” Mr. McCarty said. “What was nice was the validation we got for what we were doing.”
The McCartys and the six other farms shipping directly to Dannon get a price guarantee to even out milk’s notoriously volatile prices. “We’re guaranteed a certain minimum level of profit, which allows us to focus on the things we’re truly passionate about rather than worrying about a milk market we can’t control,” Mr. McCarty said.
Those farms also have agreed to feed their cows feed without genetically modified ingredients, which presents a big challenge for Dannon. Other companies needing such feed have had to import it, as soaring demand for organic milk and meat products has reduced domestic supplies.
The McCartys produce about 20 percent of the feed they need on their farms and have begun growing conventional crops there. They have also helped Dannon persuade other farmers that supply them with feed to begin planting seeds that are not genetically modified organisms, or G.M.O.s.
Cows supplying milk for the three brands currently included in the new program — Dannon, Oikos and Danimals — are expected to make the transition to non-G.M.O. feed by 2018.
Beginning this summer, those brands, which account for roughly half the company’s sales in the United States, also will begin eliminating G.M.O. ingredients, for example, by replacing beet sugar with cane sugar.
“Sometimes I wake up sweating and thinking, what are we getting into?” Mr. Lozano of Dannon said. “We don’t know how we’re going to do all this, but I’m glad we’re aiming high. It shows we have the right level of ambition.”
Source: NY Times
