COVID-19 has created havoc but opportunities remain, especially in Asia, where USDEC is investing in people, programs, partnerships and a new, first-class facility promoting U.S. Dairy.
In an online panel discussion, U.S. Dairy Export Council President and CEO Tom Vilsack provided a market-by-market outlook of U.S. dairy exports as the world continues to grapple with the economic ripple effects of COVID-19.
Appearing as a guest on DairyLivestream, produced by Hoard’s Dairyman, Vilsack said U.S. dairy exports turned in a strong first quarter of 2020, “suggesting this was going to be a good year.”
The coronavirus changed that forecast as it has changed so many other things as it threatens health and disrupts economies around the world. COVID-19 has clouded the future for U.S. dairy exports
On the May 13 Hoard’s panel, moderated by managing editor Corey Geiger, Vilsack explained areas of concern, including the economy of Mexico, the No. 1 U.S. export market, worth $1.5 billion last year. But the former U.S. Agriculture Secretary also expressed optimism about USDEC marketing, partnership and training initiatives, particularly in Southeast Asia, Japan and China.
Working in the U.S. and in 10 international locations, USDEC has been resilientduring the pandemic, leveraging technology to reach the world from home offices. Strategies and 2020 plans made before the pandemic are being reimagined to maximize U.S. dairy exports in a fast-changing environment.
Vilsack’s forward-looking, around-the-world analysis provided so many insights we are offering three ways to access it:
- Recorded video by Hoard’s Dairyman.
- Audio captured by USDEC on SoundCloud.
- Text excerpts edited by USDEC for brevity and clarity, illustrated with images from social media posts.
Click middle arrow, below, to watch complete recording
Click orange button below to hear highlights from Vilsack
USDEC President and CEO Tom Vilsack on DairyLivestream
Strong start for 2020 U.S. dairy exports
We saw a lot of opportunity at the beginning of the year with a lot of optimism, including a U.S-Mexico-Canada Agreement (USMCA), the China Phase One agreement, the Japanese Phase One agreement.
We saw a corresponding activity in the export market that suggested that this was going to be a good year. Then the Coronavirus comes, total disruption of food service globally — impacts and effects everywhere. Deep concerns right now about Mexico.
Their economy was not strong to begin with. Their oil economy was particularly weak because of the Saudi and Russian oil dispute. So, we’re keeping an eye on Mexico (and) anticipate and expect that we may not see quite as robust activity in our No. 1 market as we have historically.
Agreement could increase exports to China
I’m anxious to see if our opportunities in China continue to expand. The reality is that we did see some movement in terms of whey and the whey complex in China as they rebuild their hog industry.
Hopefully the Phase One agreement continues to stand and that the back-and-forth and various transactions between the leaders of China and the U.S. on the virus don’t complicate the agreement. We are hopeful that we will continue to see additional purchases in China,
Competitive U.S. cheese prices in Southeast Asia
In Southeast Asia, they’re beginning to rebound from the virus. I talked today to folks in Vietnam and yesterday to some folks in Japan and Korea. They’re beginning to see food service open up, beginning to see a cautious approach towards going back to restaurants.
Our cheese price is still pretty competitive, and as long as it remains competitive, I think there are chances for us to continue to see some growth there, notwithstanding the virus.
Canceled Olympics in Japan dampen prospects
I’m anxious to see the impact of the virus on the economy in Japan. Obviously, the Olympics were canceled. So, the opportunities that we saw in 2020 in Japan may not be quite as robust.
Their schools are shut down and they began to transition fluid milk production into powder, so they have a surplus of powder. We may not be able to see quite as much of an activity on the powder side as we as we anticipated with the Phase One agreement.
Working with allies to send a message to the EU
I would also say that we’re keeping an eye on our friends in Europe, particularly as it relates to the Middle East and North Africa — still opportunities there as their economies begin to reopen.
Europe is obviously sitting on a lot of supply (and) started their private storage program. We’ll see how that works.
We are obviously concerned about an intervention. So we worked with a number of our allies to send a message to the EU that if in fact they trigger intervention that they need to do it differently than they’ve done it in the past because obviously their last effort caused a significant disruption to powder prices that certainly penalized our producers.
We don’t want to see a repeat of that.
U.S.-Mexico-Canada Agreement starts July 1
The implementation date for USMCA is July 1, which is good news. That begins to start the clock on the expiration of Class 7, which Canada has again used to provide an advantage for their producers at the expense of our producers on the powder side.
I hope that is replaced with a system that is fair and does in fact restrict the capacity of Canada to export its supply management challenges with reference to product. We hope that they live up to both the letter and the spirit of that agreement. If so, we should see, over time, some increased opportunities in Canada.
In Mexico, we are keeping an eye on their implementation of geographical indications because that could have an impact on our cheese sales. They’ve made an agreement with the EU. We want to make sure that we continue to protect the common names of cheeses in that very important market for us.
More in-market people, programs and promotions
USDEC has over the last couple of years, tried to deepen its presence in every single market.
We wanted more people so that we had a better understanding of the market, more people to develop the market by understanding precisely the customers that were available — training and educating folks both on the retail and the food service side and doing partnerships with the universities to create new products and new applications that would be timely, appropriate for that particular culture or that particular location.
We are also doing more promotions — working with outfits like Costco and other entities to basically get American products out and about if you will, to get people to experience the versatility, functionality and tastes, of our products.
In China, 9,000 U.S. cheese samples consumed at Costco
We’re focused on creating promotional opportunities. We have a partnership with Costco in Japan, in Korea, in Taiwan and in China.
We provide samples, provide recipes, information that would allow people that are in those facilities who want a sample to buy it, to utilize American cheeses.
We had a sampling program just before the virus hit in China. They got about 5,000 customers a day into that facility. We had 9,000 samples that were utilized in a single day during the course of that promotion.
It’s obvious that people were interested. We’re also now going to begin to start a similar program in Mexico.
USDEC brick-and-mortar commitment in Southeast Asia
For far too long, the rest of the world perceived that the U.S. was in the export market only to deal with surplus product, and that it wasn’t really sincerely engaged or involved in exports.
We wanted to send a clear message that we are committed to exports for the long haul. And one way you do that is by having a physical presence that operates 365-24-7, showcasing the U.S. dairy farm story, the sustainability story, the safety story and the functionality story.
With the Center for Dairy Excellence in Singapore, we are creating a platform in a place where our members can utilize a test kitchen and sensory panels to make their case to potential buyers in Southeast Asia.
Growth of Asian middle-class should deliver ROI
Why invest in Asia? Why Southeast Asia?
Very simple, a growing middle class, phenomenal numbers of new potential consumers that are and will be interested in American dairy products. We want to use (the Center for Dairy Excellence in Singapore) as a linchpin, if you will, for doing additional business as well in North Asia.
There will be 10 times the number of middle-class consumers in Asia over the course of the next 10 to 15 years as there are people in the United States.
We’re going to continue to sell a lot of products here in the U.S. and continue to be domestically focused. We are going to continue to pay a lot of attention to our No. 1 market in Mexico.
First-class center built to make a strong impression
But we need to complement that with expanded efforts in Asia, starting in Southeast Asia. Hopefully, that expands. Then it allows us to promote in China, Japan and South Korea.
The reality is many of our top 10 markets are located in that part of the world. We want to pay attention. We want to be present, we want to make an impression and we want to have a first-class facility fully staffed.
We’re anxious to open it up once the virus gets to a point where Singapore lifts its restrictions and we are able to do business.
Increase in percentage of U.S. cheese exported
Over the course of the last couple of years, we have seen an increase in the percentage of milk production here in this country that goes into cheese exports. A year or so ago, it was maybe somewhere around 4.5% to 5%.
Over the last 12 to 15 months, we’ve seen it at 5.5% to 6% of cheese production. And about 70% of our powder is exported. So obviously the more cheese we’re able to export, the better the prices are going to be.
Japanese love pizza with 2.2 pounds of U.S. cheese
We have partnerships with food service. We look for ways in which we can encourage the Pizza Huts of the world and the Dominoes.
An example of that is an effort that is currently underway in Japan to essentially put 2.2 pounds of cheese on a pizza. It is something that the Japanese are excited about. I don’t know how you hold a piece of pizza with 2.2 pounds of cheese on it, but it drips off the pizza. They love it.
This is a promotion that obviously is going to continue to encourage utilization. And finally, we want to build a cadre of leaders in the food industry and in chefs throughout the world that understand how to utilize U.S. cheese — and the benefits and the great value that we now see.
Culinary training teaches future chefs about U.S. cheeses
You know, one of our U.S. cheeses won the World Cheese contest as the best cheese in the world. Last year, we had 137 medals that were awarded to our various cheeses.
We have a partnership with culinary institutions in places like Japan, South Korea and Singapore where we’re working with folks to basically educate them as they go through their chef training, as they go through their food industry leadership training about U.S. cheeses, so that when they leave that training they understand and appreciate how versatile and functional our cheeses are, and that the cheeses being produced are top quality.
Telling the U.S. sustainability story
We have a great sustainability story to tell. U.S. dairy producers are the most sustainable producers in the world.
They have an internationally certified animal welfare standard. They are, with their Canadian counterparts, the only dairy producers in the world that actually reduced their emissions over the course of time. They produce more milk with less water, less land, less inputs… tremendously efficient.
New U.S. logo promotes cheese
Part of the opportunity to increase sales is to make sure that people understand and recognize American cheese when they go into a store. There are some states that have done a pretty good job of marketing their own cheese products — Wisconsin, California for example.
But what we need is a U.S. brand. When people go down the counter and see a leprechaun, they understand that’s from Ireland. When they see a windmill, they know that’s from Holland. The question is what do they see so that they know it’s from the United States. Until recently, they didn’t see much.
But what we’re now doing is we’re creating a U.S. brand logo, which we’re encouraging folks to use on exported cheese. As people go through the counter, they can actually see the location where U.S. cheeses are being sold.
That’s important because you know, to a certain extent in many of these markets, the purchase of U.S. cheese, the purchase of U.S. products is considered to be something that’s sort of upscale, something that you want to do to impress your friends and neighbors. We want to make sure that we buy into that.
Videos promote U.S. cheese recipes to global customers
And then part of it is retail training to make sure that people are directed towards that part of the counter so that they have the opportunity to not only choose American cheeses, but as importantly know how to use them.
We’re putting together a series of recipe cards that are now being put in grocery store bags so that people can see a recipe that uses American cheese. We’re developing little vignettes because we can’t do as many in-person promotions as we once did.
Now we’re creating a series of virtual trainings where you basically see various recipes and just see hands in a bowl, mixing the cheese with other ingredients and creating a delicious meal for your family.
We’ve got 12 of those videos that we’re now going to be focusing on. So, a variety of ways of sending the message and making sure that the U.S. brand of cheese gets branded in the mind of consumers all over the world.