Dairy: Food for Life by The National Dairy Council

da i ry: food for l i fe a st rat egy to promot e i ris h m i l k & da i ry

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+353 (0)1 616 9726 +353 (0)1 616 9760 www.ndc.ie

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p ro du c ts

The National Dairy Council 28 Westland Square Dublin 2, Ireland

Dairy: Food for Life A S T R AT E G Y T O P R O M O T E I R I S H M I L K & DAIRY PRODUCTS 2008 - 2012

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Dairy: Food for Life A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Table of Contents

Acknowledgement

Chairman’s Foreword

Chief Executive’s Foreword

Executive Summary

Section 1

The National Dairy Council: From Past to Present

Section 2

Overview of the Irish Dairy Industry

Section 3

The Changing Market Landscape for Irish Dairy Products

Section 4

NDC’s Vision, Mission, Values and Strategic Objectives

Section 5

NDC’s Work Programmes 2008 – 2012

5.1 Advocacy & Communications Programme

5.2 School Milk & Dairy Programme

5.3 Marketing & Promotion Programme

5.4 Issues Management Programme

5.5 Nutrition Programme

5.6 Accountability & Corporate Governance Programme

Section 6

NDC Investment Programme

Section 7

What the Strategy Aims to Deliver

Glossary

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

List of Tables and Figures

Executive Summary Table 1(a): Table 1(b): Figure 1: Figure 2: Table 2: Table 3: Table 4:

Performance of Irish Dairy Market (2001-2007) Projected Growth of Irish Dairy Market (2008-2012) National Dairy Council’s Core Values Summary of National Dairy Council Work Programmes NDC Planned Investment 2008-2012 Key Performance Indicators for National Dairy Council 2008-2012 Key Performance Indicators for School Milk & Dairy Programme 2008-2012

10 10 12 14 17 18 18

National Dairy Council Promotions – Highlights Evolution of Role/Remit of International Comparable Models Dairy Food Exports (1998-2007) The Irish Dairy Sector (1960-2006) The Utilisation of Milk in Ireland The Distribution of Dairy Farms by Size – 2006 World Dairy Prices (2006 & 2007) Projected Population Growth (2007-2050) Geographic Distribution of Dairy Farms Performance of Irish Dairy Market (2001-2007) Projected Growth of Irish Dairy Market (2008-2012) Per Capita Consumption of Liquid Milk – 2006 Total Liquid Milk Consumption in Ireland Per Capita Consumption of Cheese – 2006 Segmentation of Yellow Fat Market in Ireland by Value Per Capita Consumption of Butter – 2006 Irish Population and Projections to 2021 Origin and Proportion of Non-Irish Nationals within Population – 2006 Census Population Growth Forecasts for Each Age Cohort in Ireland Numbers Participating in the Labour Force in Ireland Mean Dairy Product Intake in Ireland (Grams Per Day) Direct Cost of Treating Type II Diabetes & Obesity in Ireland The Problem of Overweight and Obesity in Irish Children (5-12 Year Olds) National Dairy Council’s Core Values Summary of National Dairy Council Work Programmes Overview of School Milk Scheme Performance in Ireland Summary of Work Programmes and Strategic Objectives NDC Planned Investment 2008-2012 Key Performance Indicators for National Dairy Council 2008-2012 Key Performance Indicators for School Milk & Dairy Programme 2008-2012

21 23 26 26 27 27 30 31 32 35 35 36 37 38 39 39 40 41 41 42 42 43 44 50 52 56 70 72 75 75

Main Report Table 1.1: Figure 1.1: Figure 2.1: Table 2.1: Figure 2.2: Figure 2.3: Figure 2.4: Table 2.2: Figure 2.5: Table 3.1(a): Table 3.1(b): Figure 3.1: Figure 3.2: Figure 3.3: Table 3.2: Figure 3.4: Figure 3.5: Figure 3.6: Figure 3.7: Table 3.3: Table 3.4: Figure 3.8: Table 3.5: Figure 4.1: Figure 5.1: Table 5.1: Table 5.2: Table 6.1: Table 7.1: Table 7.2:

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Acknowledgement The Board and Chief Executive of the National Dairy Council gratefully acknowledge the support and contribution made by all those involved in the consultation process and in the development of this strategy.

NDC Board

Back Row:

Kevin Kiersey, Joe Collum, Conor Ryan, Sean Griffin, Richard Kennedy

Middle Row:

Jackie Cahill, Tom Corcoran, Patrick Kelly

Front Row:

Eamonn Bray, Mary Purcell, Henry Corbally (Vice-Chairman), Dominic Cronin (Chairman), Gerald Quain

Not Pictured:

Sean McAuliffe (appointed March 2008)

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Chairman’s Foreword Currently the Irish dairy industry is well positioned to take full advantage of opportunities to secure a share of growing markets both here and abroad. Today Ireland produces some 5.23 billion litres of milk a year, which is channelled into four product streams of butter, cheese, milk powders (including casein) and liquid milk. This product mix represents a combination of consumer products and dairy ingredients. The Irish dairy sector provides employment for approximately 22,000 farmers with a further 9,000 employees in the processing sector and an additional 4,500 employees in support and ancillary services. In the region of 85% of Irish dairy products, valued at €2.36 billion, are exported annually representing 27% of all food and drink exports. Investment by Irish dairy farmers reached €834 million in 2007 and is estimated at €609 million for 2008, demonstrating the commitment to securing a strong future for dairy farming in Ireland amidst the evolving WTO negotiations and CAP Health Check and their implications at farm level. Equally, 2007 saw €114 million in grant assistance awarded by the Department of Agriculture, Fisheries & Food towards capital projects aimed at supporting innovation, increased productivity and new product development to enhance the future competitiveness of the Irish dairy processing sector. The business of the NDC is primarily concentrated on the domestic market, valued at €1 billion, where it focuses on strengthening the market position and driving consumer consumption of Irish dairy products, traditionally centred around milk, cheese and butter. This Strategic Plan lays out a new direction for the organisation in promoting a vibrant future for the basket of Irish dairy products produced and sees the NDC evolving to change alongside consumer, market, industry and farming developments. Within the Irish context, the consumer market for milk, in terms of per capita consumption, is showing signs of decline with significant competition from major brands in the soft drinks, bottled water and juice categories. However, there is now a heightened awareness amongst consumers with regard to obesity and the need for a balanced diet. Concerns regarding artificial ingredients and added sugars are resulting in a switch back to basic, natural products with milk and dairy products well-placed to benefit from this trend and to regain their position as ‘natural, pure and

good-for-life’. In that context, the NDC echoes the support outlined in the Agri Vision 2015 action plan for the School Milk Scheme and it intends to lead this initiative, bringing new thinking and renewed energy to this important programme. Butter has come under significant pressure over the years from the wide variety of spreads available but has managed to retain a strong position and take advantage of consumers’ desire for natural products. Irish consumers also lag behind their European counterparts in terms of their consumption of cheese. While there has been significant innovation in this category in recent years, there is further opportunity to promote the versatility of cheese as part of a balanced diet. With growing pressure from competing categories and international brands, the industry requires a concerted drive to maintain the position of Irish milk and dairy products as a central part of the Irish diet. Furthermore, recognising the demographic changes within Ireland from continued growth in birth-rates to the ageing of the population, to the increase in importance of non-Irish nationals, the National Dairy Council faces considerable challenges and opportunities to keep dairy at the forefront of consumer minds. It is an exciting but challenging time for the Irish dairy sector, but we are confident that the NDC, in rolling-out its current Strategic Plan, will deliver many real and tangible benefits to its funders and stakeholders. I would like to acknowledge the support of those Irish dairy farmers who continue to fund the NDC through the levy scheme. While achieving the recent increase in support by industry, not all processors contribute to the NDC, which is a matter of some disquiet and concern. Now, more than ever before, there is a real need for the whole sector to support the NDC in delivering on this robust and far-reaching plan. I would like to conclude by thanking the very significant input made by the Board Members and staff of the NDC into the whole strategic planning process and the resultant plan.

Dominic Cronin Chairman

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Chief Executiveâ&#x20AC;&#x2122;s Foreword The key priority in taking up the position at the helm of the National Dairy Council in September 2007 was to embark on a strategic review process, which would see the development of a new five-year plan for the organisation. The first strategic review of its kind for the NDC, the process was led by a comprehensive consultation phase with all key stakeholders in order to obtain as much input into this review as possible.

Equally, the opportunities that exist within the dairy category as a whole in light of the current health and wellness trend, offer the potential to strengthen the performance of the dairy sector. With the looming obesity crisis, particularly amongst the younger population, the timing of this strategy is very apt to proactively promote locally produced, wholesome, nutritious milk and dairy products.

This has entailed meetings with most dairy co-ops throughout the country and the representative associations for the processing sector. Equally, the National Ploughing Championships and the National Dairy Show, provided the opportunity to survey farmers on their views while both the IFA and ICMSA have provided valuable input into the process.

My vision for the NDC is an organisation that has respect and credibility within the industry, is capable and dynamic in how it undertakes its business and continually strives to innovate and lead the way with a fresh approach. The NDC must be based on a valueadded model and must demonstrate the value created directly for its stakeholders and particularly, the Irish dairy farmer, without whom, the organisation would cease to exist.

Consultations also took place with relevant food agencies/bodies and authorities in addition to the media and, of critical importance, the study of international comparable models afforded the opportunity to compare the existing business model of the NDC with other similar organisations internationally. Finally, the review encompassed an analysis of the home market, the potential for developing new opportunities and the assessment of current perceptions of the NDC at consumer level. In parallel with the strategic review, the internal capability and resources of the NDC have been reviewed with a programme of restructuring now in place. This main purpose of the programme is to ensure that the organisation is equipped with the appropriate skills and expertise to implement the new strategy and will operate to a high level of efficiency and effectiveness. Equally, as an organisation dependent on industry funding, the need for accountability forms an integral element of the strategy and the restructuring will ensure that the correct controls and procedures are in place for this purpose. The outcome of the review process has demonstrated the clear rationale to continue to invest in the work of the National Dairy Council. While Ireland continues to lead in consumption per capita of milk within the EU, there is no doubt that we are operating in a mature market and one where complacency will inevitably lead to decline.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

I look forward to taking on the challenge of implementing this ambitious strategy and particularly working with both farmers and processors in achieving the objectives set out. I equally look forward to developing opportunities for co-operation with related food bodies and particularly with respective dairy councils overseas which, through working in partnership, can only be to the benefit of both the NDC and the Irish dairy sector. As a final comment, I am confident that the strategy developed is robust in terms of its thinking, objectives and targets and I would like to thank the members of the Board and staff for their commitment, time and effort in supporting the strategy review and development process over the last number of months.

Helen Brophy Chief Executive

Executive Summary

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Executive Summary

Background to the NDC The National Dairy Council (“NDC”), formerly known as the National Dairy Publicity Council, was established in 1964 with the key objective of maintaining and supporting growth in consumption of milk and dairy products in Ireland. Originally founded as a semi-state body, the organisation evolved to become an industry-funded organisation subsequent to Ireland joining the EEC in 1973. Initially financed through a combination of Exchequer and EU funding and now largely by the farmer levy, the NDC quickly found its place at the forefront of industry, gaining prominence as the spokesperson on dairy matters and undertaking many high profile advertising campaigns and promotional events. The Council’s role in the generic promotion of milk and dairy products presided through many changes that took place both at industry and at market level. In 1978, the organisation was one of the first food agencies in Ireland to employ a nutritionist in recognition of the need to promote the health and nutritional benefits of dairy products amidst increased consumer interest in healthy eating. This ongoing need to inform and educate the Irish public on the goodness and nutritional value of dairy products has continued to act as the key focal point for the organisation and has been manifested through several high profile TV advertising campaigns in recent years.

Strategic Review Process In September 2007, the Board of the NDC decided to embark on a strategic review of the organisation and its activities with the aim of developing a clear roadmap for the future, encompassed in a new five year strategic plan (2008-2012). Notwithstanding the successes of the past, this decision was taken by the Board to ensure that the organisation would continue to deliver services of real value and relevance to the Irish dairy sector into the future. Central to the development of this strategy was the review and consultation process undertaken, which involved significant engagement with key stakeholder groups involved in the dairy sector including: •

Farmers – over 120 farmers completed a questionnaire at the National Ploughing Championships and Millstreet National Dairy Show;

•

Co-operatives/Dairy Processors – the NDC CEO met with senior management/Boards of dairy processors in addition to senior management and Board of the Irish Dairy Board;

•

Dairy Representative Organisations – IFA Dairy Committee; ICMSA; National Milk Agency; National Dairies Association; Irish Dairy Industry Association; IFA Fresh Milk Producers Group;

•

Government Departments/Agencies – Department of Agriculture, Fisheries & Food, Food Safety Authority, Safefood;

•

Media – CEO meetings with a cross-section of media correspondents involved in the food/dairy sector;

•

Consumers – a series of consumer focus groups were undertaken in addition to a nationally representative survey on consumer attitudes towards milk and dairy products.

In addition, as part of the review process, the study of twelve international comparable models provided the opportunity to compare the existing business model of the NDC with other similar organisations. Equally, the roles of collective bodies including the International Dairy Federation (IDF), International Milk Promotion Group (IMP) and the

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

newly established Global Dairy Platform (GDP) served in understanding the benefits of international networking and collective thinking on dairy-related issues. On concluding this process, it was very clear that the NDC had reached a watershed in its life and needed to reposition its services to become a key agency in the dairy support infrastructure. However, while there were several critical messages emerging from the consultation process, there was also a very strong consensus view expressed in the need for the organisation more than ever in today’s changing environment. The strong core message was that the NDC had performed an important function in the past but that the challenging market and consumer trends mean that its future role must undergo fundamental change in order for the organisation to retain its relevance. The support of existing stakeholders therefore, who continue to fund the organisation, particularly through this transition period, is recognised in this respect and serves as a strong endorsement of the potential role the NDC can play in the future to support the sector.

The Dairy Sector in Context Ireland’s long tradition in dairying has led to the well-established dairy industry that exists today, internationally recognised for its innovation, technological, marketing and brand capability. Providing employment for just over 22,000 farmers, 9,000 employees in the processing industry and an additional 4,500 positions in support and ancillary services, the dairy sector forms the largest component of Ireland’s food and drink industry exporting €2.36 billion annually and representing 27% of all food and drink exports. Producing an estimated 5,235 million litres per annum, the sector has evolved from a narrow product portfolio position dominated by butter to a more diversified range reflecting the technology depth in the sector and the effective value-added business model adopted. In this context, 2007 saw €114 million awarded by the Department of Agriculture, Fisheries & Food towards supporting developments in innovation, increased productivity and new product development to further drive the competitiveness of the sector. Equally, at farming level, the sector has experienced major changes with rationalisation occurring in recent years and this is expected to continue. The number of dairy farmers has reduced from 68,000 in 1984 to the current figure of just over 22,000 and this has resulted in larger farm sizes and increases in the average quota to the current level of 231,000 litres. Amidst this change, there have been major developments at farm level with almost €1.5 billion invested between 2007 and 2008. The future potential of the sector is therefore recognised with the prospect for market expansion and growth envisaged despite the uncertainty of evolving WTO negotiations and the CAP Health Check reforms. The absence of public stocks within the EU is a particular feature of this positive outlook for dairy product prices with the International Dairy Federation (IDF) stating that “the current surge in demand is not just current and has been present over a number of years, but a significant amount of “new” demand has been met from Intervention stocks which have now disappeared.” Combined with a number of international factors including projected world population growth, energy prices, increased fuel demand and demand for renewable energy resources, climatic effects, growing demand for dairy

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

products in China and India and the prospect of quota abolition, this new price paradigm emanating from the changed supply and demand profile is in sharp contrast to both the intent and expectation of the reform of the EU dairy market support system which began in 2005. Given the positive international outlook together with strong potential within the home market, the relative competitive position of the Irish dairy sector augers well for future prosperity.

Ireland’s Changing Market Landscape for Milk and Dairy Products The Irish market for milk and dairy products remains significant, valued at €1 billion with high levels of market penetration achieved. However, this enviable market position continues to be challenged in light of competing categories, dairy-free alternatives and health-related concerns, particularly in relation to cholesterol and recommended daily fat intake levels. While the market is significant in size, on closer analysis, sales have reached a mature stage and for some products, are largely static or showing signs of decline.

Table 1(a): Performance of Irish Dairy Market (2001-2007)

Value of Irish Dairy Market

Source: Mintel/CSO

2001 (€ m)

2002 (€ m)

2003 (€ m)

2004 (€ m)

2005 (€ m)

2006 (€ m)

2007 (€ m)

820

851

868

901

925

957

981

Table 1(b): Projected Growth of Irish Dairy Market (2008-2012) Value of Irish Dairy Market

Source: Mintel/CSO

2008 (€ m)

2009 (€ m)

2010 (€ m)

2011 (€ m)

2012 (€ m)

1,008

1,035

1,062

1,088

1,115

As is illustrated, the market grew by 17% to €957 million over the 2001-2006 period and is projected to grow by 11% from 2008 up to 2012 to €1.115 billion. Milk forms a major component of sales, representing 44% of total sales at just over €440 million and remains largely static but showing signs of decline, while doorstep delivery continues to decline representing just over 7% of total sales today. Opportunities for growth in butter, cheese and yogurt still remain positive and are largely being driven by innovation in new flavours, product varieties, portion sizes and pack formats to meet changing consumer demands. Increased focus on health issues will be a critical factor for the future, particularly for butter and cheese as will the continued competition from international brands. A key feature of retail sales is the growing dominance of private label, particularly for milk, with retailers holding an estimated 50% of market share for fresh milk and continuing to win share from competing branded products. This poses a number of key concerns for industry in relation to the commoditisation of product and the consequent downward pressure on pricing. At consumer level, the prospects for the sector are positive with Ireland continuing to enjoy economic growth and despite a global slowdown, prospects remain good with Ireland’s economic growth level projected to grow at 2% per annum up to 2015. There are a number of key changes in the consumer landscape that pose both challenges and opportunities for milk and dairy products. Domestic demand should grow on the basis of population projections from the Central Statistics Office, which forecast an increase of 20% in population up to over 5 million by 2021. However, with Ireland becoming a country of net immigration, this will be challenging as some of the migrant population are entering from geographies where milk and dairy consumption is not established within the mainstay dietary habits.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

The continued strong birth rates demonstrate potential for milk and dairy products as does the growing ageing population and increased life expectancy. Also, the general increased focus on health and wellbeing and the link with diet is driving consumers to take a greater interest in healthy eating and a desire for natural foods despite the growing problems of obesity, particularly amongst the younger generation. Time pressures, long commuting distances, smaller household sizes and less time spent on food preparation are leading to over reliance on convenience foods and inadequate nutrient intake. Given the nutritional value of dairy foods, it will be critical to retain strong consumption levels for the future. Milk and dairy products are well positioned from a health and nutrition perspective but face strong competition from heavily marketed brands with subsequent intake of dairy foods below the three portions per day recommended by the Department of Health and Children. In addition, consumers are becoming more “issue” driven considering ethical issues and environmental issues when making food choices. Terms such as “food miles” and “carbon footprints” are now commonly used and can determine purchasing decisions, which also has important implications for the dairy sector. Given the anticipated demographic changes and the increased consumer desire for products that are both natural and healthy, the market outlook for milk and dairy is positive and provides the backdrop for the development of the future roadmap for the NDC. However, the evolving complexities and dynamics pose real challenges for the future in driving the positive position and consumption of dairy foods. This will require a detailed understanding of the market and effective communications and marketing strategies to be deployed.

Vision In this regard, the NDC’s vision is:

………to be the authoritative and trusted voice in advancing the consumer perception and consumption of Irish milk and dairy products. The realisation of this vision will help to position the NDC as an important contributor to the sustainability and growth of milk and dairy in Ireland. The Board and management of the NDC are ever mindful of the fact that as an organisation, it is funded by the dairy farmers of Ireland. As such, their interests and the long-term sustainability of the sector are at the heart of the organisation’s raison d’être.

Mission Thus, the mission of the NDC is:

………to support Irish dairy farmers by driving the positive position and consumption of milk and dairy products through integrated marketing and communications programmes, based on informed scientific evidence. Delivering on this mission will result in many benefits to the sector, not least the strengthening of the position of milk and dairy in the minds of consumers, more informed and streamlined lines of communication to various media and interest groups as well as back into the sector, resulting in an uplift in the consumption of milk and dairy within the home market.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Core Values The values that the NDC wish to convey and embed in the culture and ways-of-working of the organisation are encapsulated in the diagram below.

I nn

For wa rd

e tiv

oo -L

Figure 1: National Dairy Councilâ&#x20AC;&#x2122;s Core Values

king

sib

r ho Aut

ita

Trusted

tiv e

es c c A

Trusted: The NDC will seek to build trust with key stakeholder groups through the provision of well-informed and balanced views and information.

Innovative: The NDC will strive to be innovative, bringing new ideas and a fresh approach to the work undertaken.

Forward-looking: The NDC will endeavour to be forward-looking, pre-empting issues and matters of interest and importance to the funders and the milk and dairy sector.

Authoritative: The NDC will ensure that the views and opinions of the organisation are rooted in robust scientific research so that it can speak with authority.

Accessible: The NDC will at all times engage openly with the many stakeholder groups and be accessible and responsive.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Strategic Objectives Consistent with, and underpinning, the Vision and Mission for the organisation, the NDC aims to achieve the following between 2008 and 2012.

1. Enhance the position and image of milk and dairy products through a proactive and well-informed advocacy and communications strategy. 2. Increase the consumption of milk by young people by leading the re-vitalisation of the School Milk Scheme at primary and secondary levels. 3. Strengthen the position and image of milk and dairy in terms of usage and attitudes amongst all target consumer segments by means of more informed market research and delivery of effective marketing campaigns. 4. Inform, advise and publicly represent the milk and dairy industry through building a systematic approach to, and competency in, Issues Management. 5. Be recognised as the national centre of knowledge on dairy nutrition and related matters of importance to consumers. 6. Restructure and develop the NDC as a competent, efficient and effective organisation operating to a high standard of integrity and accountability, thereby delivering value to funders and key stakeholders.

Success or otherwise in the attainment of these objectives will be the main basis on which the success of the NDC will be evaluated. The achievement of these objectives requires the NDC to engage in a wide range of activities which are organised into discrete work programmes.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Outline of Work Programmes There are six key work programmes which correlate to a specific strategic objective: 1. 2. 3. 4. 5. 6.

Advocacy & Communications Programme School Milk & Dairy Programme Marketing & Promotion Programme Issues Management Programme Nutrition Programme Accountability & Corporate Governance Programme

The overall aims of these work programmes are summarised in Figure 2.

Figure 2: Summary of National Dairy Council Work Programmes National Dairy Council - Key Work Programmes

Advocacy & Communications

School Milk & Dairy Programme

Marketing & Promotion

Issues Management

Nutrition

Accountability & Governance

Act as the trusted advocate for the Irish dairy sector & implement a proactive communications strategy

Lead the development of a new consumer focused School Milk & Dairy Programme

Strengthen the position and image of Irish milk and dairy products through effective targeted marketing campaigns based on informed market insight

Develop and implement an Issues Management Plan for the dairy sector on consumer matters

Be recognised as the national centre of knowledge on dairy nutrition

Develop the NDC as an efficient, competent organisation delivering value to its members

1. Advocacy & Communications Programme Fundamental to the success of the Irish dairy sector is the necessity to ensure that milk and dairy products are positioned positively within the minds of consumers. This requires a concerted effort to combat the unsubstantiated, inaccurate facts and misinformation that are currently being provided to consumers. The purpose of the Advocacy & Communications Programme therefore, is to establish the NDC as the trusted and respected advocate for the Irish dairy sector and to take a proactive approach in communicating the health and nutritional benefits of milk and dairy products to the consumer. In order to achieve this, the programme will be based on informed scientific evidence, distilled into user-friendly arguments, which will form the basis of specific communications campaigns for key target groups. In this context, it is recognised that the key target may not always be the consumer but groups who are important influencers on consumer purchasing decisions (e.g.. medical profession, media). Information will also be prepared and relayed specifically for NDC members with the redevelopment of the NDCâ&#x20AC;&#x2122;s web site acting as a central communications platform in this respect, in facilitating regular updates, newsletters or alerts as required.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

The success of the NDCâ&#x20AC;&#x2122;s role as an advocate will be determined by the level of recognition of the NDC as the first point of contact on all matters related to the consumption of dairy products and the subsequent recognition of the messages communicated by the NDC to the various stakeholder groups.

2. School Milk & Dairy Programme The School Milk Scheme has operated in Ireland since 1982 with 3.2 million gallons of milk sold at its peak in 1983. The continued decline in participation in the scheme and the lack of drive to market milk and dairy products more appealingly to young people is a fundamental concern for the sector with the School Milk Scheme seen as the vehicle to drive the consumer base for the future. The main goal of the School Milk & Dairy Programme therefore, is to lead the revitalisation of the School Milk Scheme and to obtain increased participation by children and teenagers in addition to increasing the number of schools involved nationally. The new School Milk & Dairy Programme will seek to address key weaknesses within the existing scheme and will offer a more attractive and appealing product to children and teenagers, in addition to supporting that offering with significant marketing support. The key deliverable for this programme will be to increase consumption of milk and other dairy products through the new programme in co-operation with NDC member dairies and through delivering a co-ordinated marketing drive to strengthen the position of milk and dairy products in the 5-18 year age bracket.

3. Marketing & Promotion Programme In parallel with undertaking specific communications campaigns, the need to maintain the visibility of milk and dairy products at consumer level and reinforce their relevance to consumer lifestyles is critical to support and drive consumption. The purpose of the Marketing & Promotion Programme in this respect is to strengthen the image and position of dairy products in a way that is meaningful and impactful for consumers. Critical to this programme will be to gain deeper insight into consumer behaviour through establishing a more informed market insight tool to understand purchasing and usage behaviour in addition to attitudes, drivers and motivations within specific consumer segments. This will facilitate the development of targeted marketing and promotion campaigns that will allow the NDC to inform, educate and strengthen the image and perception of dairy products. Consideration of appropriate tools and media geared to specific audiences will be necessary in addition to considering the potential for developing a quality/eco mark for members to allow for product differentiation at the point of purchase. Through building knowledge and insight of the market, the NDC will deliver effective marketing campaigns to targeted consumer segments that complement and support NDC membersâ&#x20AC;&#x2122; marketing and brand activity.

4. Issues Management Programme While the Irish dairy sector has not suffered any significant crisis in consumer confidence to date, the importance of identifying potential issues and the management of these issues is believed critical to the success of the strategy and the continued safe passage of the industry. In this context, the aim of the Issues Management Programme, is to ensure that the interests and concerns of the consumer are understood and prioritised in order to maintain their trust in the health and nutritional benefits of milk and dairy products.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

The NDC’s programme will be based on partnering and co-operating across several fields of expertise and will centre on the establishment of a National Issues Management Committee, comprised of industry representatives in addition to technical, scientific and nutritional experts as required. By developing a comprehensive Issues Management Plan, the NDC will ensure that the objectives and targets of the strategy can be achieved while reducing the risk of exposure to unforeseen circumstances or threats that may arise.

5. Nutrition Programme Milk and dairy products contain a wide range of essential nutrients required for growth, development and overall health and wellbeing throughout one’s life cycle. Given such health properties which are scientifically robust and well-documented, the NDC is concerned at the confusing and sometimes inaccurate beliefs and perceptions held by consumers. The aim of the Nutrition Programme therefore, is to provide the basis and foundation for communicating, marketing and promoting milk and dairy products to key target groups. The NDC will therefore strengthen the existing nutrition advisory service by widening the existing network and proactively interacting in the areas of clinical nutrition, community nutrition, business, industry research and education. This will also require the NDC to adopt a more authoritative approach in working to assist in shaping future policy and the regulatory framework in which the dairy sector operates. Forming the foundation for other programmes within the strategy and providing a solid scientific basis for the development of key messages to combat inaccurate and misinformation is the required deliverable. The key outcome therefore, is to position the NDC as a key centre of nutrition science and knowledge supporting the role of dairy foods as an integral part of a balanced diet and life style.

6. Accountability & Corporate Governance Programme As an externally funded body, the NDC is accountable to its supporters with the need to ensure that the organisation operates to a high standard of integrity. Equally critical to the success of the strategy is to ensure that the organisation is equipped with the appropriate skills and competence in order to drive the implementation of the strategy effectively. The purpose of the Accountability & Corporate Governance Programme therefore, is to restructure and develop the NDC as a competent, efficient and effective organisation that has the respect of its stakeholders and funders. This requires a restructuring programme to be undertaken in order to right-size the organisation, deploy the required set of competencies to deliver upon the strategy and to review the internal efficiencies of key functions carried out. In addition, the programme will create the appropriate corporate governance structures, policies and procedures thereby encompassing the role and responsibilities of the Board, improving the overall integrity of the organisation. While being different from the development programmes, this programme is viewed as a priority within the strategy in order to rebuild and maintain confidence in the work of the organisation, the success of which will be determined by the continuation and expansion of the funding required to implement the strategy.

Investment Plan Over the period 2008–2012, the NDC aims to invest €14 million in strengthening the position and driving the consumption of milk and dairy products. This is an unprecedented level of investment, which is essentially being made available by the dairy farmers of Ireland through the levy contribution. It is also important to acknowledge the annual contribution made by the Irish Dairy Board to the NDC, which is much appreciated.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

However, the investment of €14 million is based on the current levy received from the industry and there is no doubt that the strategy will be further strengthened by the increased levy contribution of current non-members. An illustrative breakdown of this investment programme over the key strategic areas of the plan is outlined below.

Table 2: NDC Planned Investment 2008-2012 2008 €m

2009 €m

2010 €m

2011 €m

2012 €m

Total €m

% of total

Advocacy & Communications Programme

0.3

0.5

0.6

2.5

18%

School Milk & Dairy Programme

0.45

0.7

0.8

3.55

25%

Marketing & Promotion Programme

1.2

1.3

43%

Issues Management Programme

0.2

0.1

0.7

Nutrition Programme

0.25

1.25

Total Investment

2.2

2.85

3.05

100%

The School Milk & Dairy Programme together with the Marketing & Promotion Programme represent the two most significant areas for investment, at just under 68% of the total. At all times, it is intended to have a reserve of circa €1 million as a contingency fund in the event of an unforeseen event which requires immediate attention by the NDC. In making this level of investment, the NDC is mindful of the need to deliver real value to its funders and stakeholders, and in executing the proposed work programmes, delivering value-for-money will be a key priority.

What the Strategy Aims to Deliver As the NDC is not directly engaged in sales, it is believed particularly important to demonstrate the impact and value of the work programmes to both funders and stakeholders. CSO/Mintel projections for dairy are positive in forecasting an 11% increase over the 2008-2012 period to a total market value of €1.15 billion. In this capacity, the role of the NDC is to ensure that the programmes implemented within the context of the strategy, have a direct impact on helping to achieve this growth. Based on the overall need to strengthen the position and image of milk and dairy products, omnibus research was commissioned by the NDC for the purpose of establishing baseline indicators on current consumer attitudes amongst the adult population (15+ years) in Ireland. The fieldwork was undertaken in April 2008 by TNS/MRBI and involved a nationally representative sample of 1,017 adults. The results proved very interesting in establishing a number of key issues at consumer level: • • •

While encourageingly, 4 in 5 adults claim to consume milk every day, over 25% disagree that they will consume more in the future. This is despite the fact that 94% believe milk provides key nutritional benefits for their health and wellbeing. This likelihood of consumption also appears to decline with age (e.g. 86% of 15-24 year olds vs. 65% of 55+ claims they will consume more milk in the future) underlining the need to generate increased frequency of consumption. Furthermore, 4 in 5 adults are of the opinion that teenagers are not consuming enough milk demonstrating the awareness of this key issue highlighted in the recent Teen Survey (IUNA 2008).

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

• • • • • •

31% of the population disagree that milk is a natural, unprocessed food indicating the need to promote the natural image of milk with the linkage back to the farm/producer required for reassurance in this respect. In addition, with 17% of the population believing that milk is harmful to their health, the focus on the nutritional benefits and health properties of milk is critical for the future. Interestingly as well, about half of all adults believe soya milk is equally as good as cow’s milk, highlighting the growth and success of alternatives to dairy and presenting a clear challenge for the dairy sector. While 90% of adults believe cheese is an essential source of calcium, there are clear health concerns regarding cholesterol and fat being detrimental to health. Equally, the same concerns are expressed for butter particularly in the older age groups with 25% of those 55+ claiming to never use butter while 38% of all adults claim to be trying to cut down on using butter. Finally, at a more general level, over 25% of adults believe they do not consume the recommended three servings of dairy per day for their health and wellbeing, which demonstrates both a challenge and opportunity to increase consumption frequency.

The results of the research have been analysed to create a set of performance indicators based on achieving consumer attitudinal shifts in key areas over the 2008-2012 period. These are illustrated below in Table 3 and show a projected 5-10% change over the five-year period, which will be tracked and monitored on an annual basis.

Table 3: Key Performance Indicators for National Dairy Council 2008-2012 2008 Agree

2012 Agree

% Change

Milk plays a vital role as part of a healthy balanced diet

53%

58-63%

+5-10%

Milk is a natural unprocessed food

69%

74-79%

+5-10%

Milk is something I will consume more of in the future

71%

76-81%

+5-10%

Butter can be consumed as part of a healthy balanced diet

44%

49-54%

+5-10%

Cheese is beneficial to my health and is not fattening/detrimental if consumed in moderation

55%

60-65%

+5-10%

It is important for one’s health to consume three portions of dairy per day

71%

76-81%

+5-10%

Consumer Attitudes to Milk & Dairy Products

Source: TNS Phonebus Survey 2008

Aside from these indicators, specific targets have also been set for the School Milk & Dairy Programme, which are shown in Table 4 below.

Table 4: Key Performance Indicators for School Milk & Dairy Programme 2008-2012 School Milk & Dairy Programme Number of pupils/students participating Litres of milk consumed (million)

2008

2012

% Change

85,000*

114,750-127,500

+35-50%

3.7*

4.9-5.5

+35-50%

* Most recent figures by Department of Agriculture, Fisheries & Food (2004)

In the partnership with NDC member dairies, it is targeted to increase the current pupil/student numbers participating in the School Milk Scheme by 35-50% up to a projected level of 127,500. In achieving this increase in participation, it is projected that milk consumption can increase from the current 3.7 million litres up to a potential 5.5 million litres. Central to the implementation of the strategy will be the continued evaluation of investment against these targets in measuring the overall effectiveness of the work programmes in achieving the strategic objectives set out.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Section 1 The National Dairy Council: From Past to Present

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

SECTION 1

The National Dairy Council: From Past to Present 1.1 Overview of the NDC to Date Formerly known as the National Dairy Publicity Council, the National Dairy Council (“NDC”) was established by the Minister of Agriculture in 1964, as a semi-state body. The aims of the Council were defined as maintaining and supporting the growth in the consumption of milk and dairy products. The Council changed from a semi-state body to an industry-financed organisation in 1973 subsequent to Ireland joining the EEC. In 1978, the European Commission commenced a financial support programme to assist the undertaking of national promotional campaigns in an effort to increase dairy consumption and thereby reduce the problem of disposing of surplus milk production within the EEC. With the assistance of EU funding, the popularity of milk, butter and cheese has been maintained and developed in Ireland by a range of successful marketing and promotional programmes over the years. The NDC has been behind many well-known campaigns from “Butter is the Cream” to “Dem Bones, Dem Bones Need Calcium” and has played an important role in communicating the benefits of dairy produce to the Irish consumer. The accompanying music to this campaign “Pride of the Herd” was composed by Shaun Davy, the well-known piper and subsequently entered the Irish record charts with great effect. It remains today a haunting anthem to the origins and traditions of an industry emerging from the world’s greenest dairy land. The Council’s role in the generic promotion of milk and dairy products has over time presided through the many changes that have taken place in the industry in terms of its structure, amalgamation and rationalisation. Originally funded through both Exchequer and EU funding, the National Dairy Council quickly grew and found its place at the forefront of activities representing the industry in many different situations. It quickly gained prominence as the spokesperson on dairy matters, while undertaking various high profile promotions, event sponsorship and media campaigns In the early 1960s, it had a very popular 15-minute weekly radio slot on RTE 1 hosted by Gay Byrne which grew steadily in listenership. The organisation also opened the Cookery Kitchen Information Service at that time. In 1978, it was one of the first food organisations in Ireland to employ a nutritionist on its staff in support of the growing attitudes towards healthy eating, which was in its infancy at that stage. Some of the high profile events included: • • • •

The Milk “Fun” Run staged nationally in conjunction with the dairies and a charity to raise funds and awareness for the selected cause. The Milk Superstars, which featured high profile athletes and well-known personalities from TV/Radio competing on a weekly television programme for the ultimate sporting title. The Milk Rás was sponsored for 22 years in association with FBD Insurance and travelled the country while commanding high network profile in addition to press and radio coverage. The Milk Music Awards, an annual awards ceremony transmitted live on television following a polling system used in the weeks leading up to the event.

Other examples of successful promotions are detailed in Table 1.1 opposite.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Table 1.1: National Dairy Council Promotions – Highlights “What’s Cooking”. An eight-week TV programme transmitted on RTE 1. “Cheese SuperMum”. A road show event which had its final staged and judged on “The Late Late Show” with Gay Byrne. Radio 2 “Food File” with Gerry Ryan. A weekly slot to promote dairy-based food recipes with a high volume of postal requests. “Pennywise Kitchen” with Jimmy Greely on 2FM featured favourite food preferences of pop superstars in the music industry. The National Cheese Board Awards was endorsed by Bord Fáilte and promoted nationally the wide availability and versatility of farmhouse and industry cheeses. The Young Home Economist Competition, Panel of Chefs in Ireland, Schools Computer Programmes and Medical Seminars are examples of other areas that the Council targeted in its quest for publicity and sales.

1.2 Strategic Review Process and Stakeholder Feedback In September 2007, the Board decided to embark on a strategic review of the NDC with a view to developing a new five-year plan for the organisation. Notwithstanding the successes of the past, the review was deemed necessary in terms of ensuring the future continuation of the organisation in playing an effective and critical role within the dairy sector. As part of the research and consultation process undertaken to inform the NDC’s new strategy, significant consultation was undertaken with regard to the key stakeholder groups involved in the milk and dairy sector including: •

Farmers – over 120 farmers completed a questionnaire at the National Ploughing Championships and Millstreet National Dairy Show;

•

Co-operatives/Dairy Processors – the NDC CEO met with senior management/Boards of dairy processors in addition to senior management and Board of the Irish Dairy Board;

•

Dairy Representative Organisations – IFA Dairy Committee; ICMSA; National Milk Agency; National Dairies Association; Irish Dairy Industry Association; IFA Fresh Milk Producers Group;

•

Government Departments/Agencies – Department of Agriculture, Fisheries & Food, Food Safety Authority, Safefood;

•

Media – CEO meetings with a cross-section of media correspondents involved in the food/dairy sector;

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

•

Consumers – a series of consumer focus groups were undertaken in addition to a nationally representative survey on consumer attitudes towards milk and dairy products.

A number of critical messages emerged from the whole consultation process, not least the fact that there was confusion on the role of the NDC and a low level of awareness of its services including its nutrition and health programmes. However, there were some very clear and coherent views expressed about the role that the NDC could have and the issues that it should be in a position to address on behalf of the industry. Such views were typically expressed in comments like – “the industry has no clear, unified voice when it comes to addressing nutritional issues in the media”, “there is a need to defend the position of milk and dairy in light of national and international scares”, “the nutritional value and naturalness of milk needs to be promoted”, “the School Milk Scheme is important because these are the years when young people are weaned off milk by fizzy drinks”. On concluding the research and consultation process, it was clear that the NDC had reached a watershed in its life and that it needed to re-position itself to become a key agency in the dairy support infrastructure, delivering appreciated and value-adding services of real relevance to the sector. The strong core message was that the NDC had performed an important function in the past but the challenging market and consumer trends mean that its future role must undergo fundamental change in order for the organisation to retain its relevance. In this capacity, the support of the stakeholders who continue to fund the NDC, particularly through this transition period, is recognised and serves as a strong endorsement of the potential role the organisation can play in the future to support the sector.

1.3 International Models of Milk and Dairy Promotional Organisations As part of the research programme informing this Strategic Plan, the roles and activities of those other international dairy organisations involved in supporting the milk and dairy sectors in their respective countries were reviewed. Many were represented at the World Dairy Summit in Dublin in September 2007 where initial contact was made and followed up. It is interesting to see how these organisations have evolved over time in keeping with the needs of and challenges facing the sector. By and large, the more progressive of these organisations seek to influence and shape policy and consumer perceptions by being an informed advocate for the sector on nutritional-related issues. In addition, they are more strategic in how they market and promote milk and dairy, with a healthy reliance on insightful consumer market research. Figure 1.1 captures the essence of this evolution to being a more value-enhancing organisation. Typically these organisations, like the NDC, are small but have deep competencies around: communications and advocacy; policy influence; input to regulatory matters; promotion and marketing. Most are funded by way of a levy, collected from either processors or producers or a combination of both. The composition of their Boards has also evolved to include members with broader and complementary skill sets drawn from the worlds of academia, research, healthcare and business.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Figure 1.1: Evolution of the Role/Remit of International Comparable Models

ult

Value-Added Models

hi sti ca tio n

um ns Co

M er -

a i-s t

gement r enga e d l o keh

ity co m pl ex cy te n pe

Generic mass-market advertising Reactive media communications Development/Dissemination of information material School Milk Programmes Promotional events

Advocacy Influencing policy & regulatory environment Sophisticated communications programmes Recognised industry spokesperson Targeted marketing based on consumer/market insight Crisis/Issues management Nutritional expertise & knowledge

Co m

• • • • •

/s op

Basic Models

• • • • • • •

Another noticeable feature is the extent to which such organisations are networked nationally and internationally, with links into organisations such as the International Dairy Federation (IDF) and the International Milk Promotion Group (IMP). In terms of joined-up-thinking, the newly established, Global Dairy Platform (GDP), set up in 2007, aims to act as an umbrella body for the dairy industry worldwide. The rationale for the organisation is based on the recognition that acting collectively in a co-ordinated manner, the dairy industry can accomplish more. The main aim of GDP is to provide insight, guidance and networking to enable the global dairy industry promote and advocate milk and dairy products. Still in the infant stages of development, it is worth noting the premise on which GDP was established – the recognised need for co-operation for the collective benefit of the dairy industry worldwide – not too dissimilar from the NDC’s role at national level.

1.4 Conclusion A huge wealth of knowledge, insight and advice was gleaned from undertaking the research and consultation programme, which has helped to shape the strategic agenda for the NDC. The experiences and initiatives of other comparable dairy councils internationally have proven to be fertile ground for thought, while the development of such relationships will be even more important going forward. While this Strategic Plan has been designed to respond to a number of key issues and challenges facing the milk and dairy sector, the NDC is committed to ‘staying in-tune’ with the needs of its funders and stakeholders, and being agile, so that it continues to be truly relevant and value-enhancing long into the future.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Section 2 Overview of the Irish Dairy Industry

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

SECTION 2

Overview of the Irish Dairy Industry 2.1 Historical Overview Ireland has a long tradition in dairying and established a reputation for quality butter as far back as the 18th century. The Cork Butter Exchange played a pivotal role, from 1770 onwards until the First World War, in the trade of Irish butter throughout the British Empire. The economic war with Britain in the 1930s saw a decline in the butter trade to the UK, with the consequence that the industry went through a contraction in the two decades which followed, with the number of creameries falling from 274 in 1929 to 193 in 1951. The 1950s saw a revival in fortunes with trade to Britain resuming. The Irish dairy sector entered a renaissance period in the 1960s and 1970s. These years were significant firstly for, the establishment of Bord Bainne in 1961 and secondly, the entry into the EEC in 1973. The launch of the Kerrygold brand was a watershed for the industry, successfully diversifying Irish butter into international markets across the UK, Europe, the Middle East and America. EU entry enabled the dairy sector to expand rapidly and adopt new technologies such as spray drying. These new technologies provided processing solutions for skim milk, which previously had been returned to farms as a by-product fed to pigs, for close to zero economic value. The period saw a phase of rationalisation with the demise of the dairy disposal company-run creameries and the emergence of co-operatives. Other developments in the 1970s saw the diversification from butter into cheese manufacture with cheese output rising from 5,000 tons in 1960 to 45,000 tons in 1973. The sector also benefited from the expansion of milk powder production, with the major infant formula companies locating operations in Ireland. The expansion in milk output was quite remarkable, growing from 2,182 million litres in 1960 to 3,364 million litres in 1973 up to 5,800 million litres in 1984. This expansion was underpinned by significant technological advancement at both farm and processing level. The introduction of automatic milking machines and bulk tank cooling at farm level facilitated the transition from daily delivery to the creamery, to bulk collection off the farm. At the same time processors invested in plant capacity with a huge focus on improving milk quality. Major advances were also made in cheese technology during these years. Intense competition between the main co-operatives drove the technology advances with some notable developments such as achieving a shelf-stable cream liqueur and the emergence of dairy spreads, which for the first time offered the consumer a spreadable dairy product from the fridge. In addition to the strong technological competency, the sector quickly acquired an expertise in consumer marketing and brand building. The consumer marketing base was further enhanced with product introductions such as yogurt, fromage frais and cream cheeses, which were underpinned by fermentation technologies. 1984 saw the introduction of milk quotas, which halted the expansion of milk production in Europe. The introduction of quotas proved yet another milestone and prompted some Irish co-operatives to diversify internationally into multinational companies. This required an innovative approach, with the adoption of new business models. In addition, there followed a new wave of rationalisation with a number of mergers, driven by a strategy to achieve scale and efficiency in a business environment where increasingly buying power was concentrated amongst a few.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

2.2 The Economic Significance of the Irish Dairy Sector Today Ireland boasts a substantial dairy industry which provides employment for approximately 22,000 farmers with a further 9,000 employees in the processing industry and an additional 4,500 employees in support and ancillary services. Approximately 85% of Irish dairy products, valued at €2.36 billion, are exported annually representing 27% of all food and drink exports. It is notable that the value of dairy exports has risen despite the volume constraint imposed by the milk quota regime. This continual value growth reflects the innovative capacity within the dairy sector and the progression towards increasingly adopting value-added processing and products.

Figure 2.1: Dairy Food Exports (1998-2007)

Source: CSO

Fig 2.1 Dairy Food Exports 2,600

€ Million

2,400 2,200 2,000 1,800 1,600 1,400 1998

1999

2000

2001

2002

2003

2004

2005 2006

2007

Year

2.3 Dairy Sector Composition and Output Over the years, the Irish dairy sector has evolved from a narrow product portfolio position dominated by butter to a more diversified range which reflects the technology depth within the sector. The dairy sector’s business model has evolved from that of a cost plus food processing operator to encompass the value-added margin driven by effective brand management strategies as is demonstrated in Table 2.1.

Table 2.1: The Irish Dairy Sector (1960–2006) 1960

1973

1997

2000

2005

2006

Milk Production (Litres - million)

2,182

3,364

5,073

5,160

5,060

5,235

Cheese (Tons)

5,000

45,000

86,000

96,000

118,000

135,000

33,300

26,300

22,386

22,042

No. of Dairy Farms

Source: CSO

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Ireland produces approx. 5,235 million litres per annum and in summary allocates the milk fat and protein into four product streams of butter, cheese, milk powders (including casein) or liquid milk consumption. This product mix represents a combination of consumer products and dairy ingredients as shown in Figure 2.2.

Figure 2.2: The Utilisation of Milk in Ireland

Source: IDF/NMA

Milk Production 5,235 million litres

Liquid Milk 539 million litres

0% exported

Cheese 135,000 tons 1,472 million litres milk equivalents

Whole Milk Powder 43,650 tons 338 million litres milk equivalents

2,886 million litres milk equivalents

81.5% exported

100% exported

91.6% exported

Butter 143,000 tons Skim Milk 2,597 million litres

Casein 48,000 tons 1,571 million litres Skim milk equivalents 85% exported Skim Milk Powder 68,000 tons 716 million litres Skim milk equivalents 70% exported

2.4 Overview of Dairy Farming At farm level, there has been a structural shift with significant numbers choosing to exit the industry resulting in a degree of consolidation. The number of dairy farmers has declined from 68,000 in 1984 to the current figure of 22,042. This decline in numbers has been accompanied by a shift towards larger farm sizes with the average quota rising from 76,000 litres (16,717 gallons) in 1984 to the current average of 231,000 litres (50,800 gallons).

Figure 2.3: The Distribution of Dairy Farms by Size â&#x20AC;&#x201C; 2006

Source: Department of Agriculture, Fisheries & Food

Fig 2.3 The Distribution of Dairy Farms by Size â&#x20AC;&#x201C; 2006

30 25 20 % 15 10 5 0

-4

-3

-2

-1

Farm size in Litres of milk

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Case Study: The Story of Irish Dairy Farming – 1961-2008 Introduction From the establishment of the National Dairy Council in 1964, dairy farming has presided over many changes but still is recognised and valued as a way of life in modern Ireland. This case study provides an example of what it was like to be a dairy farmer in the 1960s and how that compares today through the eyes of a father and son on their particular farm.

The Murphys Profile of a four-generation dairy farm family.

The Farm 53-acre dairy, 40 cow herd, all year milk supply, two calving seasons

Time Line 1959 Dan’s parents offered farm by Land Commission 1961 Dan and Hannah move on to farm with Dan’s parents 1964 Dan and Hannah take over the farm 1993 Dan takes early retirement scheme, passes farm to son, John and family

Background The Murphy family commenced farming on this farm in the early 1960s. Beneficiaries of a Land Commission scheme that broke up a larger estate into family-farming units, they took 53 acres of what were, Dan Murphy remembers, unpromising land for dairying - largely scrubland. “My father had his name in with the Land Commission for a long time,” Dan recalls. “In 1959, they approached him to see if he was still interested and he told them he was. In 1961, we moved in.”

Early Days Dan was already married to Hannah so it was essentially two couples who were moving into the farm together. The poor condition of the land was matched by the low productivity of the times. The farm could only support nine cows where there are, today, 40 and Dan recalls the milk went to the now defunct dairy where the contract was to supply one gallon per day. For this, the Murphys were

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

paid eight old pence and got additional money for any surplus they supplied. The milk would be dropped down for collection at the local village where it was collected by lorry. Conditions throughout were primitive, Hannah remembers. For the first two years there was no running water (except, strangely, at night). It took two years for the situation to be rectified. However, the ‘60s were a time of change for the family, farming and for Ireland. In 1964, the Murphys took over the farm from Dan’s parents and, with a young family of their own, the new technology and advances in productivity were more than welcome. Tractors eased a lot of the drudgery of farm work while better housing for the cows meant the herd could grow. Hannah took an active part in farm life over the years, driving the tractor, setting potatoes and doing the farm chores. Dan believes the most obvious sign of improved conditions could be seen in the milk itself. It became a much cleaner and more controlled product. “The milk produced is of a much better quality now,” Dan says. “The cow is washed down and the milk goes straight into the bulk tank where it is cooled immediately. In the old days it was cooled by water. It wasn’t as reliable.”

Distribution Joining the EEC was the landmark event of the early 1970s and Dan believes it was a good move for dairy farmers, even if they didn’t benefit to the extent that other farming sectors did. Dan believes that consumers often take milk for granted and do not necessarily appreciate the value, paying higher prices for bottled water, for example. Of course, the distribution of milk also changed radically over this time. In the 1960s, it was delivered door-to-door and very little went to supermarkets. Dan remembers that the first major shift in the 1970s came, in fact, with the emergence of Bailey’s Irish Cream Liqueur as an important new client. Today, the supermarkets dominate milk distribution in Ireland and Dan believes that they don’t work particularly hard to market or sell the value of milk to consumers. Though not sentimental about the old days (Dan regrets, for example, that a lack of resources delayed the expansion of the herd size) he notes that modern dairy cows are not as hardy as the breeds that came before them. “Cows now take a lot more care,” he says.

New Generation Like the rest of the family, Dan’s son John was closely involved in the farm from his youngest days. From the age of 15, he would take over the running of the business while his parents took a week’s holidays in Kerry. “He helped us to get away and so now we’re happy to help them when they need a break,” Hanna says of her son. Availing of the early retirement scheme, Dan retired in 1993, passing ownership of the farm to his son, then aged 34. John had spent some years working as a carpenter so was sure that farming was what he wanted to do. “When I got married, I felt that I was travelling too much,” he says. “And I liked farming as a way of life. You feel you are your own boss. When you get up in the morning you’re at work, not stuck in traffic for an hour.” New generations bring new ideas and John now manages the dairy farm with a grassland management system far more sophisticated than his father would have operated. Electric fencing keeps the herd grazing in confined paddocks. Less moving around means less damage to the land while a rota system means the cows are always grazing on fresh grass, increasing productivity and the overall quality of the milk. (Like his father, John points to the improved quality of milk as one of the major gains of decades of advance.) The herd winters inside for about 100 days of the year, when there is no grass growth and are fed on a silagebased diet. To keep milk supply going all year round, calving takes place in two seasons – from September to October and from late February to April. The cows are dried off between 40 and 60 days before calving, moved to different sheds and fed on a suitable diet. John typically works a twelve-hour day – up at 7am in the morning and finishing late in the evening, when the second milking of the day is done. It’s a full time job but a lifestyle he likes, one closely governed by the seasons and one where local community matters a great deal.

Running a Business John believes joining the EEC was positive even if, in real terms, the farmer’s take home from the retail price of milk has declined from 50% in the 1970s to about 30% now. The price increases of 2007 were, he says, long overdue.

The quota system of the 1980s may have had its imperfections but it also helped to keep smaller farmers in business as it protected their output. “We would probably have been swamped by larger producers without it,” John reflects. Looking to the possible abolition of the quotas in 2015, he says: “we’ve all progressed but anyone that stays in dairying will have to be careful. Costs have escalated and have to be managed very carefully.” Both John and Dan agree that farming has become more and more like other businesses – there is a heavy bureaucracy that has to be managed and many cost factors outside the farmer’s control. Over all, however, John is positive about this regulatory regime. Farmers are a lot more confident about the food they produce and are far more environmentally aware too.

Community Looking to the future, it is hard to know if small farmers can survive, John says. His wife Caroline agrees. “Dairy farmers are an endangered species,” she jokes. Farming has given them a great quality of life and their children are independent and self-motivated with a great work ethic. Their two boys Sean (20) and Kenny (16) combine study, farm work and off-farm employment. “There’s never time to be idle on a farm,” she says. The community is one of “real people doing real work”. The traditions of time gone by are still very much alive in this farming community. Farmers help each other out when there is work to be done – hay or silage to be saved for example – and the only reward expected is the communal dinner in the host family’s kitchen. Caroline recalls what happened when John’s uncle died a few years ago. Spontaneously, all the neighbours came together and saved the hay for them. Of course, times are changing. People have off-farm jobs now and less time on their hands but John recalls an incident only a few weeks ago when he had to check on a cow having a difficult calving late one night. No sooner was he up and about, but two neighbours called down to the sheds to see if they could help. In spite of the pressures of change, old kinships and loyalties are important. As Caroline puts it “People have a special bond growing up here, and special memories. Everyone works together.”

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

2.5 Outlook for Dairy Sector A key driver in this structural shift and consolidation at farm level, is the threat of falling or unstable milk prices anticipated from EU CAP Reform and market support adjustments. The market dynamics, emerging from policy reform, provides a range of scenarios for decision-making with consideration around the trade-off on the impact of unit price/ value and volume movements. The buoyant world markets in 2007 took all commentators by surprise with dairy commodity prices doubling within twelve months on the back of a decline in global stocks and strong demand in developing markets.

Figure 2.4: World Dairy Prices (2006 & 2007)

Source: ZMP

Fig 2.4 World Dairy Prices - 2006 & 2007

5,800 5,300 4,800

US$ per ton

4,300 3,800 3,300 2,800 2,300 1,800 2006

2006

Butter

2006 Chedder

2007

2007 2007

2007

SMP

Key Factors Affecting World Dairy Prices The developments led to a reassessment of the global outlook for dairy product prices and supply based on the following factors: • global population growth in developing economies • the sustained surge in world energy prices • the increased demand for fuel in the ever-expanding Chinese and Indian economies • an overall concern that supplies of fossil fuels are dissipating at a faster rate than previously believed because of the surge in demand • sustained climatic effects worldwide of global warming linked to over use of carbon-based fuels • significant increase in Government funding supports for the development of renewable energy resources • the absence/run down of grain and dairy stocks • the increased demand for grain as bio fuel • the emergence of food miles as an issue for consumers • the impact of higher grain prices on animal production costs • the surge in demand in Chinese and Indian economies for dairy products • EU proposals to increase quotas in 2008 and beyond • the response at producer levels across the EU to the prospect of quota abolition • the danger of volatile pricing

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

In addition to the new production cost related issues affecting dairy product prices, the absence of public stocks particularly in the EU, is also a key feature. According to the International Dairy Federation (IDF), “the current surge in demand is not just current and has been present over a number of years, but a significant amount of “new” demand had been met from intervention stocks which have now disappeared.”

Table 2.2: Projected Population Growth (2007-2050)

Source: University of Illinois

Region

2007

2050

% Change

World

6,671

9,191

+38%

High Income

1,223

1,245

+2%

Low Income

5,448

7,946

+46%

965

1,998

+107%

4,030

5,266

+31%

Latin America

572

769

+34%

North America

339

445

+31%

Europe

731

664

-9%

Africa Asia

The “new price paradigm” deriving from the changed supply and demand profile set out above is in sharp contrast to both the intent and expectation of the reform of the EU dairy market support system which began in 2005.

While supply from Australia is reduced due to problems with drought, supplies from Europe continue to decline in response to EU policy reform. However, despite the supply contractions in specific geographic regions, overall there has been a global expansion in milk production. Global supply has risen from 470 billion litres in 1997 to 553 billion litres in 2007, a growth of 18%. In the short to medium term, it is expected that supply will lag demand as the global population grows and consumption of milk and dairy increases in developing countries. In most developing markets, current consumption levels are well below the WHO per capita consumption target of 185 litres per annum. The trend in the developing world is for a shift in diet from starch-based to protein-based products. This scenario provides a positive outlook in the long term for both milk production and consumption of dairy products globally. Ireland with its temperate climate and extended grass growing season has a natural advantage for milk production. In addition, Ireland’s reliance on grass as the primary animal feed source is expected to further accentuate the competitive position with respect to milk production over those regions, where grain is the principle feed. Grain based livestock production enterprises will have to deal with inflationary costs sparked by expansion in biofuel production. The impact of biofuels will enhance the competitiveness of Irish milk production and thus provides for an encourageing future. As already mentioned, in recent years there has been an exodus from dairy farming with the small units disappearing and being absorbed into larger farm units. The exit from milk has been facilitated by the permitted trading of milk quota through a quota exchange whereby sellers and buyers determine the market price within a co-op region. The quota exchange auctions have seen two trends: firstly high prices have been set at these exchanges in the southern half of Ireland where the number of buyers exceeds the sellers. However in the northern and western regions the reverse seems to be the case with sellers exceeding buyers resulting in a low price offered. In summary, there has been a greater demand for milk quota in the southern regions than in the northern and western areas.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

The concentration of dairy farming is in the southern half of the country with more than 15,000 dairy farms. In the border, western and midlands there are less than 5,700 dairy farms. This trend in concentration in the southern part of the country is emphasised even more when milk production levels are compared. There has also been a consolidation at processing level and currently the six largest processors control 70% of the national milk volume. In the liquid milk sector there are just fifteen processors.

Figure 2.5: Geographic Distribution of Dairy Farms

Source: CSO

BORDER 2,900 Farms

28% of all dairy farms WEST 1,800 Farms

MIDLANDS 1,500 Farms

72% of all dairy farms

MID-WEST 3,600 Farms

SOUTH-WEST 7,400 Farms

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

SOUTH-EAST 3,700 Farms

DUBLIN & MID-EAST 1,080 Farms

2.6 Conclusion As a commitment towards increasing the efficiency within the processing sector the Department of Agriculture awarded â&#x201A;Ź114 million in grant assistance towards capital projects in 2007. This grant assistance is aimed at supporting the innovation, increased productivity and new product development to enhance the competitiveness of the Irish dairy sector so as to enable the sector to compete into the future. This grant assistance is in line with the strategic objective of Agri Vision 2015 to ensure the sustainable competitiveness of the dairy sector. The grant package recognises the need for the State to engage with the processing sector in order to achieve the most favourable conditions such as increasing scale and efficiency for long term success. The State is also committed to building a knowledge base in the food sector and has committed â&#x201A;Ź8 billion in the National Development Plan 2007-2013, towards food research and a major input of this fund will generate nutritional knowledge centred in the dairy science/biotechnology interface. Given the positive international demand trends and outlook, a growing and more prosperous home market, the relative competitive position of the Irish dairy sector augers well for future prosperity. The key challenge for the sector is how to take advantage of these positive trends and particularly, in the case of the NDC, the potential opportunities that exist to grow and develop the domestic market.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Section 3 The Changing Market Landscape for Irish Dairy Products

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

SECTION 3

The Changing Market Landscape for Irish Dairy Products 3.1 Domestic Market Overview for Milk and Dairy Products The Irish dairy market remains one of the most significant markets in Ireland with the majority of homes having some form of dairy products in the fridge. However, this high level of market penetration has been challenged in recent years particularly from dairy alternatives and substitute products. In addition, population growth, while being a key driver of demand, has not impacted on the dairy sector to the extent that would have been imagined given the high proportion of non-nationals accounting for this growth and the lack of tradition in some cases of consuming milk and dairy products. Table 3.1(a) below highlights the performance of the Irish dairy market over the 2001-2006 period and Table 3.1(b) the projected growth up to 2012. As is illustrated, the market grew by 17% to €957 million over the 2001-2006 period and is projected to grow by 11% up to €1.115 billion from 2008 to 2012.

Table 3.1(a): Performance of Irish Dairy Market (2001-2007) Value of Irish Dairy Market

Source: Mintel/CSO

2001 (€ m)

2002 (€ m)

2003 (€ m)

2004 (€ m)

2005 (€ m)

2006 (€ m)

2007 (€ m)

820

851

868

901

925

957

981

Table 3.1(b): Projected Growth of Irish Dairy Market (2008-2012) Value of Irish Dairy Market

Source: Mintel/CSO

2008 (€ m)

2009 (€ m)

2010 (€ m)

2011 (€ m)

2012 (€ m)

1,008

1,035

1,062

1,088

1,115

In examining the published statistics on the Irish dairy market, a number of discrepancies are apparent in the breakdown of the market value within the category. The figures contained in this report are based on the following sources: CSO, Mintel, TNS and NMA. However, despite this, the overall growth forecasts and trends are not too dissimilar with Datamonitor for example, projecting an increase in value up to €1.03 billion or 10% according to their figures by 2011. The Irish market is changing in response to a number of demand drivers including changing demographic profile, lifestyle trends, regulatory changes, public health policy, technology changes and other external drivers such as climate change and food safety scares. There are important implications for milk and dairy products going forward as a result of these changes and it is therefore critical to understand these drivers and how they are likely to affect consumption for the future and subsequent market growth. Since the early 1990s, Ireland has enjoyed continued economic growth, buoyed by strong domestic consumption. Despite a global slowdown, economic prospects remain positive for Ireland with growth levels expected to continue, albeit at more modest rates of 2% per year till 2015.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

This strong domestic market has not gone un-noticed internationally with many global players entering the market; in 1997 Tesco re-entered the Irish retail market, in 1998 the German discounter Aldi opened its first store in Ireland, the Starbucks coffee experience was first sampled on the Irish high street in 2005, UK pharmacy chain, Boots, entered the Irish market in the late 1990s, the Swedish furniture group Ikea, identified Ireland and the greater Dublin region as a target destination for its expansion. Hence, the Irish market has been seen as an attractive location by international brands and retailers across a spectrum of business sectors. This recognises the growth levels in disposable income and high spending power exhibited by Irish consumers.

Market Profile: Milk As a nation, Ireland has a strong tradition in liquid milk consumption and ranks in the top percentile for per capita consumption of liquid milk, only outperformed by Finland and Sweden.

Fig 3.1 Consumption of Liquid Milk – 2006

Source: IDF

Finland

Sweden

Ireland

Holland

Norway

Switzerland

USA

Australia

Ukraine

France

Germany

New Zealand

Argentina

Brazil

200 180 160 140 120 100 80 60 40 20 0 China

Litres per person per year

Figure 3.1: Per Capita Consumption of Liquid Milkof–liquid 2006 milk Per capita consumption

The total consumption of liquid milk in Ireland has increased in the ten years since 1997, growing from 533 million litres in 1997 to 575 million litres in 2007. Milk therefore remains part of the daily shopping list in most Irish homes but sales are not showing any significant growth in what is now a mature market showing signs of decline Trends also show that while consumption of whole milk is still dominant, sales fell by 10% over the period 2000-2006 whereas consumption of semi-skimmed milk grew by 35% and skimmed milk grew by 10% over the same period (CSO). Going forward, the market for liquid milk should show a volume growth in correlation with population growth. However, market forecasts project a decline in sales of milk up to 2012 by an estimated €21 million or 4.7% up to just under €426 million (CSO/Mintel). This is forecasted on the basis of a drop in frequency of purchase by consumers in addition to a decrease in the weight of purchase (i.e. spend and volume per trip) (TNS).

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Fig 3.2 Total Liquid Milk Consumption in Ireland Figure 3.2: Total Liquid Milk Consumption in Ireland Consumption of liquid milk in Ireland

Source: National Milk Agency

580

Million litres

570 560 550 540 530 520 510 1996

1998

2000

2002

2004

2006

The challenge therefore for the industry is to retain high consumption frequency in light of ongoing competition from competing drinks. Source: With healthNational concerns around obesity and diet, this provides an Milk Agency opportunity to encourage milk consumption as against less healthy alternatives. The natural position and inherent nutrition messages of milk should resonate strongly with consumers, policy makers and health professionals. In addition, in terms of pricing, a key issue to be addressed is the fact that milk remains at the value end of the market and continues to be commoditised by the growing dominance of private label. This is a critical issue which needs to be addressed in terms of the perceived consumer value of the price of a litre of milk in comparison to other food items.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Market Profile: Cheese Cheese has experienced sustained growth in the Irish market despite the increased dietary concerns on fat intake and some claims that cheese is a “junk food”. As Irish tastes have become more adventurous, the market has widened to include many new flavours and convenient formats which are popular with consumers. Since 2001, the value of the market has increased from €133 million to just over €187 million and is projected to increase steadily up to 2012 to just over €231 million (Mintel). What is interesting in this respect is the success by the discount retailers, Aldi and Lidl in capturing a 27% share of the total market value based on predominantly non-Irish produced products. Despite the sustained growth, consumption of cheese in Ireland is well below that of other European countries and the fact that Ireland lags behind its European neighbours on the per capita consumption table, would indicate an opportunity to grow the consumption level for Irish cheeses. However, while overall forecasts for growth are positive, further analysis of current trends shows similar issues highlight reverse trends in consumer purchase frequency and weight of purchase. Addressing health-related concerns and driving innovation will be key success factors going forward in ensuring sustained market growth.

Fig 3.3 Per Capita Consumption of Cheese

Figure 3.3: Per Capita Consumption of Cheese - 2006 Per capita consumption of cheese - 2006

Source: IDF

25 20 15 10 5

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

New Zealand

Ireland

Australia

Canada

Norway

USA

Austria

Sweden

Finland

Netherlands

Germany

Switzerland

Italy

France

0 Greece

kgs per person per year

Market Profile: Butter/Dairy Spreads Given our well established tradition in butter making, Ireland’s per capita consumption is relatively low on a country comparison. Nevertheless, both butter and dairy spreads have a significant market lead over margarine. Since 2001, the margarine market share has declined dramatically following health concerns relating to vegetable fats and the risk from trans fats in margarines. The dynamics in the yellow fat market between 2001 and 2006 demonstrates the impact of health and the market reaction to the publication of scientific studies on nutrition and health. The increase in the market value of butter has been steady over the six year period and is largely based on new healthier butter products and new flavours, encourageing consumers to choose premium varieties at higher prices. Driven by the trend towards natural wholesome products, butter has sustained a strong market share and is projected to increase in value by a further €10 million over the next five years (Mintel). However, similar to cheese and milk, consumers showed a drop in frequency of purchase of butter by 6.8% and an equivalent drop in weight of purchase by 8.1% over 2006-2007 period (TNS). This would suggest that concerted effort is required in maintaining the market share for butter and continuing to achieve the potential market growth.

Table 3.2: Segmentation of Yellow Fat Market in Ireland by Value

Source: Mintel

2001 €m

2002 €m

2003 €m

2004 €m

2005 €m

2006 €m

2007 €m

Butter

65.8

67.8

71.5

71.7

73.5

76.0

77.9

Spreads

48.4

49.0

47.8

50.0

53.2

52.5

53.7

Margarine

20.9

20.8

19.6

15.5

13.1

10.6

Total

135.1

137.6

138.9

137.2

139.8

139.1

141.6

Fig 3.4 Perof Capita of Butter Figure 3.4: Per Capita Consumption ButterConsumption - 2006 Per capita consumption of butter - 2006

Source: IDF

7 6 5 4 3 2 1 Greece

Spain

Sweden

Italy

Ireland

Holland

Norway

Austria

Finland

Switzerland

New Zealand

Germany

0 France

kgs per person per year

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

3.2 Demographic Profile and Changes The Irish population age profile is much younger than the EU average, with just 11% of the population over 65 years. By comparison, 20% of the population in Germany is over 65 years of age. The combination of a young age profile and growing disposable income manifests into an economy exhibiting strong consumer spending behaviour. Domestic demand is set to grow on the basis of population projections from the Central Statistics Office. These projections estimate population growth from the 2006 level of 4,239,848 to a population of 5,070,000 in 2021. This translates into a growth of 20% from the 2006 figure and more importantly, represents an expanding base of consumers/customers. Such expansion in population should provide a strong basis for demand growth for milk and dairy products.

Figure 3.5: Irish Population and Projections to 2021

Source: CSO

Fig 3.6 Irish Population and Projections to 2021

Population Size - Millions

5.3 4.8. 4.3. 3.8. 3.3. 2.8. 2.3. 1,8. 1902 1911 1926 1936 1946 1951 1961 1971 1981 1991 1996 2002 2006 2011 2016 2021 Year

The Irish population was at its lowest level in 1961 and in the 2006 census reached its highest level since 1871. In 1996, Ireland reached its migration turning point, becoming a country of net immigration. It is estimated that between 2000 and 2006, some 430,000 migrants joined the population register and it is expected that this trend of net immigration will continue. Thus, the countryâ&#x20AC;&#x2122;s population will increase in cultural and ethnic diversity. In the 2006 census, there were 419,733 nonIrish nationals resident in the country, equivalent to 10% of the population. This presents certain demand preferences and requires a different approach in meeting the needs of such emerging segments and their taste preferences. This will be especially challenging for milk and dairy products as some of the migrants are entering from geographies where milk and dairy consumption is not established within the mainstay dietary habits.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Figure 3.6: Origin and Proportion of Non–Irish Nationals within Population – 2006 Census Source: CSO Fig 3.7 Origin and Proportion of Non–Nationals within Population – 2006 Census 180,000 160,000 Population Size

140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 UK

Europe (EU)

Africa

Europe (Non EU)

Asia

America

Others

The other key trend will be towards an ageing population with the percentage over 65 years rising from 11% in 2006 to 14.6% in 2021. Even at this level, the population profile will remain young but beyond 2021, the ageing population will become more significant. A significant factor also will be the increasing life expectancy, which has increased from 57 years in 1926 to 75 years in 2002 and will be estimated to reach 82 years in 2036 for males. An ageing population will have a greater desire for particular dietary products and will be more conscious of issues relating to health and wellbeing, which should provide opportunities for the dairy sector.

Figure 3.7: Population Growth Forecasts for Each Age Cohort in Ireland Fig 3.9 Population Growth Forecasts for Each Age Cohort in Ireland

Source: CSO

50 40 30

20 10 0 -10 -20 2010 0-14

2015 15-24

25-44

2021 45-65

>65

Total

Age Group

The other significant demographic change is the trend towards smaller household size. While the household size is shrinking, the total number of households is expanding. The average number of persons per household in 1971 was 4, which fell to an average of 3.34 persons in 1991 and has continued downward to the 2006 figure of 2.8 persons per household.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

This phenomenon of smaller household size has impacted heavily on consumer behaviour and will lead to a demand for smaller portion sizes and may lead to more personalised tastes and hence, create opportunities for increased product differentiation. This is especially relevant for cheeses and other fermented milk products.

3.3 Lifestyle Trends Consumer lifestyles have evolved over the last decade, with more women participating in the labour force and people commuting long distances to the workplace. This modern lifestyle has come to be termed the “time poor cash rich” society, which results in fewer traditional meals cooked in the home, an increase in demand for convenience foods and ready prepared meals, with more meals eaten outside of the home. Consequently, the food service market has increased in value from €4.2 billion in 2000 to €6.8 billion in 2006.

Table 3.3: Numbers Participating in the Labour Force in Ireland

Source: CSO

1996

2001

2006

Female

582,000

728,000

895,631

Male

925,000

1,054,000

1,213,867

While the market for “ready meals” has risen from €67 million in 2000 to €112.4 million in 2005, it is likely that this convenience pattern and on-the-go snacking will continue, driven by time pressures and busy schedules. Increased focus on diet and health and general wellbeing will drive consumers towards healthy eating. However, the desire for a healthy diet is compromised by time constraints as consumers find themselves grabbing convenience foods on-the-go. Such a dilemma has become known as the “credit-debit” approach and increasingly consumers will seek to balance the trade off between on-the-go snacking and indulgent comfort foods with those foods that offer proven health benefits. This growing trend has implications for the health and wellbeing of Irish people, especially those who are over-reliant on convenience foods and not getting sufficient intake of required nutrients. Milk, cheese and yogurt provide 48% of calcium in the diet of Irish adults for example, but the latest National Teens Food Survey 2008 (IUNA), found that 42% of teenage girls do not have adequate daily calcium intake within their diet. Equally, the Department of Health & Children’s recommendation for adults to consume three portions of dairy per day, teenagers and pregnant/breastfeeding woman, 5 portions per day, is not achieved in many cases and consequently, leads to deficiencies in key nutrients including protein, calcium, riboflavin and Vitamin B12. It is therefore vitally important to retain milk and dairy products as an integral part of the Irish diet but this will be nonetheless a challenging task.

Table 3.4: Mean Dairy Product Intake in Ireland (Grams Per Day)

Source: IUNA 2001/2005/2008

Milk

Cheese

Yogurt

Children (5-12 years)

266g

39g

Teenagers (13-17 years)

258g

11g

22g

Adults (18-64 years)

243g

12g

16g

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

3.4 Addressing the Obesity Challenge Another key issue is that the nature of work has changed with increasing numbers finding employment in the services sector. Between 1995 and 2004 employment in the service sector in Ireland increased by 58%, compared with an increase of 6% in the manufacturing sector. Such changes result in a more sedentary lifestyle which is considered one of the factors contributing to the obesity problem in Ireland. Obesity is a growing health problem worldwide. In Ireland alone, it is estimated that obesity results in 2,500 premature deaths annually. Obesity triggers the onset of various diseases including: type II diabetes, heart failure, stroke, angina, colon cancer. It is estimated that in Ireland 200,000 people are clinically diagnosed with type II diabetes, while an additional 100,000 people have high blood glucose levels and will only be diagnosed when they present with medical complications. Allied to this, healthcare professionals estimate that the numbers of type II diabetes patients will double over the next 10 years due to increasing prevalence of obesity. The WHO estimates that by 2015, 2.3 billion people worldwide will be overweight and a further 700 million will be obese. The key concern for governments everywhere is the cost of treating obesity and the pressure placed on healthcare budgets.

Figure 3.8: Direct Cost of Treating Type II Diabetes & Obesity in Ireland Source: Diabetes Report from Federation of Ireland Fig 3.11 Direct Cost of Treating Type II Diabetes & Obesity inDiabetes Ireland

350 300 250 200 150 100

Type II Diabetes Obesity

50 0 Due to the multi-factorial nature of obesity, treatment is extremely complex. Hence, prevention would be the ideal with the key focus on avoidance of childhood obesity as it is believed this would assist in reducing the risk of related problems manifesting in adulthood. In this context, there will be increased focus on the diet of children, with a growing focus on constraints relating to advertising to children and more transparency demanded on food labels. In response to health concerns, many food manufacturers have already invested significant effort in removing artificial flavours, colours and preservatives from foods. While the labelling on many products has been revised to highlight certain nutrient contents, quoting the level of sugar, saturated fat, trans fat and salt, concerns with obesity and ensuring increased consumer awareness of the need for balanced consumption may see increased regulation in the food sector. Such objectives have been stated within the Department of Agriculture, Fisheries and Foodâ&#x20AC;&#x2122;s Agri Vision 2015 action plan, where a key priority is placed on the consumer focus and specifically enforcing legislation that delivers food safety initiatives. The Agri Vision 2015 action plan also allocates funding of â&#x201A;Ź8.1 million towards research projects on the theme of food safety and security of the food chain.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

The Department is committed to supporting research in the area of human nutrition with funding of â&#x201A;Ź11 million allocated to research on food and health with additional support allocated to assist and develop a nutritional focus in product development and marketing. The Department of Agriculture, Fisheries and Food together with the other state agencies has been proactive in meeting the obesity challenge, commissioning detailed surveys determining the diet and physical activity habits of children aged 5â&#x20AC;&#x201C;12 years, and following with the launch of healthy eating initiatives.

Table 3.5: The Problem of Overweight and Obesity in Irish Children (5â&#x20AC;&#x201C;12 Year Olds) Source: UCD Centre for Food & Health

Boys

Girls

Overweight

15%

20%

Obese

Total

19%

20%

The promotion of milk and dairy products to children and adults has taken on an elevated importance in the context of combating the long term consequences of obesity and poor dietary habits, with 1 in 4 children overweight. Hence, the NDC has a critical role in assisting government and relevant state agencies in influencing and educating consumer behaviour and advancing nutritional and scientific information to the public and all relevant stakeholders.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

3.5 Changing Consumer Preferences Clearly the trend towards healthy foods will continue and the demand for natural traditional foods will gain further momentum with consumers. Consumers will increasingly seek out those products made with only natural ingredients and reject products with additives and preservatives. Increasingly food and environment will merge together raising concerns about sustainable food production. As a consequence, the organic food movement has gained a strong footprint with consumers in recent years. Consumers will become more “issue” driven, considering ethical issues, environmental issues, climate change when making food choices. Consumers, by paying higher prices have endorsed the fair trade movement, and feel rewarded in supporting such issues with a sense of making a difference. Such causes are very often championed by retailers as they aim to be viewed by consumers as being at the forefront of positive activity. For example, Marks & Spencer (“M&S”) stated in January 2007 that “every business and individual needs to do their bit to tackle the enormous challenges of climate change and waste”. Hence M&S were informing consumers that by shopping in their stores, consumers could be assured that M&S had taken all the necessary steps to minimise the environmental impact. Overall consumers are becoming better informed, conscious of issues and more discerning in their purchase decisions. Against this background of “issue” driven consumption, the outlook for milk and dairy products is positive as consumers search for natural products, while other issues such as sustainability, eco friendly, animal welfare may also offer positive benefits or opportunities for milk and dairy to differentiate in a congested retail space. Currently, there is intense competition within the beverage sector from soft drinks, fruit juices and mineral waters. However, the wind may be blowing favourably for milk and dairy given the natural, unadulterated, integrity of the category. In comparison, beverages such as soft drinks and fruit juices suffer from heavy criticism of high sugar levels, added sugars, added colours, added flavourings, high food miles etc. In the yellow fats sector, margarine has come under strong criticism for high levels of trans fats, with the pendulum on health swinging back in favour of butter. To date consumers have not embraced GM and biotechnology. However, should the science develop to an extent that additional performance is reached in the form of new functional foods, then consumers may swiftly move to adopt the use of GM. Given the association of dairy with functional foods, then key developments in this area may benefit dairy.

3.6 Retail Trade The distribution channel for milk and dairy products has undergone the most dramatic changes in recent years with a dramatic decline in door step milk delivery. It now accounts for just 7% of total liquid milk sales, while retail accounts for 78% of sales. Retailing has become heavily concentrated with the four largest retailer groups accounting for 75% of the grocery market in Ireland in 2005. The large retail multiple groups have expanded significantly with additional store openings, between 2001–2005, amounting to 321 new retail stores in Ireland. Tesco increased from 77 stores in 2001 to 93 stores in 2006, while in the same time period Dunnes Stores expanded from 63 stores to 87 stores. The growth in retail outlets mirrors the strong population growth. The two most significant changes within the trade sector occurred in 1998 and 2000. In 1998, the discounter Aldi opened its first store in Ireland and was quickly followed by Lidl and both combined now operate 102 stores. In 2000, Musgraves introduced the first central distribution network for chilled, fresh and frozen goods in Ireland and other retailers followed suit. The dominant position of the retail multiples, who effectively control the channel to the consumer, has a major impact on milk and dairy products. The own label product range, which is sold heavily discounted has somewhat devalued the milk category and moved the product into commodity status. Nevertheless, despite the strong grip of multiples, the retail landscape also faces a state of flux with consumers seeking local products and moving back to traditional habits. The “farmers markets” concept for example has taken advantage of this desire to support local produce and has developed in recent years.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

In many respects, consumers find themselves in a situation of paradoxes with attitudes, habits, desires and tastes all changing, amidst a great degree of chaos with a multitude of issues and trade off to consider in making their purchasing decisions.

3.7 Conclusion Given the anticipated population growth and increasing consumer willingness and desire for products that are both natural and healthy, the outlook for milk and dairy should be positive and provides the backdrop for the development of the future roadmap for the NDC. However, key to this roadmap is the depth of insight required in understanding the market and consumer trends, how these trends are evolving and how the role of the NDC in increasing and promoting milk and dairy consumption can be effectively achieved. The projected market growth up to 2012 will be dependent on driving consumption positively through strengthening the relevance of milk and dairy with modern day life and reversing the trend towards reduced consumption frequency, particularly for milk. While the Irish market is small in comparison to the UK, the evolving complexities and dynamics pose challenges for the NDC and there is real need to gain a deeper understanding of the different consumer segments from preschool children to young adults, parents and older age groups in order that the programmes of the NDC are relevant, meaningful and most importantly have the desired impact. The proposed roadmap for the NDC is outlined in the following section.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Section 4 NDCâ&#x20AC;&#x2122;s Vision, Mission, Values and Strategic Objectives

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

SECTION 4

NDC’s Vision, Mission, Values and Strategic Objectives 4.1 Introduction As discussed in the Section 3, the consumption of milk and dairy products represented an important part of the traditional Irish diet, but in a time of unprecedented consumer choice, steep competition from well-funded international brands, and general confusion about the nutritional value of various food products, the dairy sector, more than ever before, has to work hard to ensure that the “voice of dairy” is heard amongst the media noise and that dairy, as a food category, retains its important position in the food pyramid. The NDC therefore has a vital role to play in supporting the sector in driving the consumption and positioning of milk and dairy.

4.2 Vision In this regard, the NDC’s vision is:

………to be the authoritative and trusted voice in advancing the consumer perception and consumption of Irish milk and dairy products. The realisation of this vision will help to position the NDC as an important contributor to the sustainability and growth of milk and dairy in Ireland. The Board and management of the NDC are ever mindful of the fact that as an organisation it is funded by the dairy farmers of Ireland. As such, their interests and the long-term sustainability of the sector are at the heart of the organisation’s raison d’être.

4.3 Mission Thus, the mission of the NDC is:

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Delivering on this mission will result in many benefits to the sector, not least strengthening the position of milk in the minds of consumers, more informed and streamlined lines of communication to various media and interest groups as well as back into the sector, resulting in an uplift in the consumption of milk and dairy within the home market.

4.4 Core Values of the NDC The values that the NDC wish to convey and embed in the culture and ways-of-working of the organisation are:

Trusted: The NDC will seek to build trust with key stakeholder groups through the provision of well-informed and balanced views and information.

Innovative: The NDC will strive to be innovative, bringing new ideas and a fresh approach to the work undertaken.

Forward-Looking: The NDC will endeavour to be forward-looking, pre-empting issues and matters of interest and importance to the funders and the milk and dairy sector.

Authoritative: The NDC will ensure that the views and opinions of the organisation are rooted in robust scientific research so that it can speak with authority.

Accessible: The NDC will at all times engage openly with the many stakeholder groups and be accessible and responsive.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

I nn

For wa rd

e tiv

oo -L

Figure 4.1: National Dairy Councilâ&#x20AC;&#x2122;s Core Values

king sib

r ho Aut

ita

Trusted

tiv e

es Acc

4.5 Strategic Objectives from 2008-2012 Consistent with, and underpinning, the Vision and Mission for the organisation, the NDC aims to achieve the following between 2008 and 2012. 1. Enhance the position and image of milk and dairy products through a proactive and well-informed advocacy and communications strategy. 2. Increase the consumption of milk by young people by leading the re-vitalisation of the School Milk Scheme at primary and secondary levels. 3. Strengthen the position and image of milk and dairy in terms of usage and attitudes amongst all target consumer segments by means of more informed market research and delivery of effective marketing campaigns. 4. Inform, advise and publicly represent the milk and dairy industry through building a systematic approach to, and competency in, Issues Management. 5. Be recognised as the national centre of knowledge on dairy nutrition and related matters of importance to consumers. 6. Restructure and develop the NDC as a competent, efficient, effective organisation operating to a high standard of integrity and accountability, thereby delivering value to funders and key stakeholders. Success or otherwise in the attainment of these objectives will be the main basis on which the success of the NDC will be evaluated. The achievement of these objectives requires the NDC to engage in a wide range of activities which are organised into discrete work programmes. The next section of this report sets out the work programmes underpinning each of the objectives above.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Section 5 NDCâ&#x20AC;&#x2122;s Work Programmes 2008 - 2012

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

SECTION 5

NDCâ&#x20AC;&#x2122;s Work Programmes 2008 - 2012 5.0 Introduction The strategic objectives form the basis of the six work programmes laid out in this section. Each work programme correlates to a specific strategic objective and the following pages outline the background context for each of these programmes, the vision for the future of each programme and how the proposed work programme is to be developed and implemented. The six work programmes include the following: 1. 2. 3. 4. 5. 6.

Advocacy & Communications Programme School Milk & Dairy Programme Marketing & Promotion Programme Issues Management Programme Nutrition Programme Accountability & Corporate Governance Programme

The overall aims of these programmes are summarised below in Figure 5.1.

Figure 5.1: Summary of National Dairy Council Work Programmes National Dairy Council - Key Work Programmes

Advocacy & Communications

School Milk & Dairy Programme

Marketing & Promotion

Issues Management

Nutrition

Accountability & Governance

Act as the trusted advocate for the Irish dairy sector & implement a proactive communications strategy

Lead the development of a new consumer focused School Milk & Dairy Programme

Strengthen the position and image of Irish milk and dairy products through effective targeted marketing campaigns based on informed market insight

Develop and implement an Issues Management Plan for the dairy sector on consumer matters

Be recognised as the national centre of knowledge on dairy nutrition

Develop the NDC as an efficient, competent organisation delivering value to its members

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.1

5.1 Advocacy & Communications Programme

Ad vocac y & Commu n ic ation s

Strategic Objective 1 Enhance the position and image of milk and dairy products through a proactive and well-informed advocacy and communications strategy.

Background Context

P r o g r am m e

Fundamental to the success of the Irish dairy sector is the necessity to ensure that milk and dairy products are positioned positively within the minds of consumers. To that end, the NDC historically, has provided an independent and impartial point of view on any matter of importance to consumers. This role was largely reactive and was based on the understanding of nutritional research and information and the dissemination of such information to deal with particular issues that arose. However, the health and nutritional benefits of milk and dairy products continue to be constantly challenged in the market place with unsubstantiated, inaccurate facts and misinformation being provided to consumers. This is further compounded by the growing competition in the market and hence, the need to protect and defend the interests of the dairy sector is paramount to the future development of the Irish dairy industry. The image of milk and dairy products as high in fat and the consequent link to high cholesterol is particularly significant with many older people taking professional medical advice to reduce their dairy intake. Equally, there is a need to counteract the belief by regulatory authorities that cheese is essentially “junk food” for children with the subsequent ban on children’s advertising of cheese products coming into effect in the UK last year (2007) being very detrimental to the sector. Such negative perceptions have led to the growth in popularity of dairy alternatives with some brands in fact utilising the “dairy-free” aspect of the product as the basis of their marketing campaigns. Consequently, the route to market for dairy products is becoming more and more complex and competition for a share of the consumer spend is intensifying. The poor understanding of farming practices and the negative portrayal of animal welfare within the industry is also of concern, particularly given that consumers today are much more interested in where their food comes from and how it is produced. The positive story surrounding dairy farming and the excellent pasture conditions are virtually unknown to the consumer. These negative perceptions are difficult to deal with by any one particular co-op and it is both desirable and logical that the National Dairy Council should act as the appointed advocate for the dairy sector. In order to achieve this, the new approach of the NDC must work to be recognised as the trusted and authoritative voice on dairy matters of importance to the consumer.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.1 Ad vocac y

Future This will require a very different and much more proactive approach in continually communicating the health and nutritional benefits to the consumer and providing strong scientifically-based arguments to combat any negative issues arising.

In an age where we live with the growing problems of obesity, the reliance on convenience and processed foods and the lack of time available to prepare home meals, the National Dairy Council is optimally positioned to communicate the benefits of milk and dairy products as nutrient rich, wholesome foods, which when consumed in moderation, have proven health and nutritional benefits at all stages of life.

Commu n ic ation s

The advocacy role will be very much based upon the National Dairy Councilâ&#x20AC;&#x2122;s expertise and knowledge in the field of human nutrition. This will require an in-depth understanding of latest developments worldwide in nutrition and dairyrelated research and participating in both national and international networks to keep ahead of developments. Utilising this expertise as the basis of a proactive communications strategy will effectively see the research being distilled into user-friendly arguments, which will then form the basis of specific communications campaigns for key stakeholder groups. Understanding who these key stakeholders are, is critical in this process and the communications strategy must also categorise these stakeholders into groups based on their relative importance.

P r o g r am m e

In this context, it is important to recognise that the stakeholder is not just the consumer but also key groups who play an influencing role and impact on consumer behaviour. This may include a number or all of the following: - - - - -

health professionals and the medical community media policy makers and government scientific community, academics and research institutions consumers themselves.

Understanding the key issues and concerns within these stakeholder groups will be central to the formation of effective communications campaigns. Equally, the NDC will require a deeper understanding of the drivers of consumer behaviour and how to communicate at a positive level, while in addition dealing with negative perceptions and issues. The integrity of these campaigns and the extent to which the NDC can act as an effective advocate will derive largely from the expertise and professionalism of the organisation in dealing with these stakeholder groups and the reputation earned for the dissemination of balanced, impartial and objective viewpoints based on scientifically robust arguments.

Work Programme The first stage of the work programme will be to identify and prioritise the key stakeholder groups and establish their key issues and perceptions both negative and positive. It is envisaged from this first stage that a core set of messages will be defined and form the basis of the communications strategy going forward. In order to provide a real depth of understanding of the key issues, the second stage will focus on analysing current scientific material and research and distilling this information into formats that are readily usable as the basis of any communications activity. It is also envisaged that this work should be undertaken in close co-operation with industry members to ensure consistent messageing across the sector. The role of advocacy and communications is recognised as the cornerstone of the strategy and best practice suggests that it is critical that all industry members are involved and informed throughout the process. The planning stage will involve the development of the proposed programmes and campaigns to be rolled out. This will be carried out in a targeted manner for each group with a plan entailing a series of initiatives and activities to be undertaken. It is also important that the plan encompass the use of third parties, independent of the National Dairy Council, to strengthen the delivery of the campaign while acting as an objective endorsement of the message.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.1 Ad vocac y

This could translate very simply into the use of a recognised health professional for example to target the over 50 age group on the issue of dairy and cholesterol or indeed a sports personality to endorse the re-hydration benefits of milk as a sports drink.

A key feature of the programme will be the development of the National Dairy Councilâ&#x20AC;&#x2122;s web site to act as a central communications platform for all stakeholder groups. The web site will be designed as an online information resource aimed at meeting the needs of stakeholders for providing informed communication and providing practical and concise information in a way that is engageing and of interest to the user.

Commu n ic ation s

Developing the web site as a gateway will allow each specific group (e.g. consumer, student, health professional) to be directed to a tailored information resource focused on servicing their specific needs. The site will be developed in an interactive manner that facilitates communication with stakeholders, information developed specifically for NDC members and will be used as one channel of maintaining contact through regular updates, email alerts, newsletters, bulletins etc. The success of the NDCâ&#x20AC;&#x2122;s role as an advocate for the dairy sector will be determined by the level of recognition of the NDC as the first point of contact on all matters related to the consumption of dairy products and the subsequent recognition of the messages communicated by the NDC to the various stakeholder groups. The importance of measuring attitudinal changes in this context is recognised as is the need to install practical ways of benchmarking improvements and changes in the perceptions and behaviours of each stakeholder group.

P r o g r am m e

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.2 Sch ool

5.2 School Milk & Dairy Programme

M i l k &

Strategic Objective 2

Da i ry

Increase the consumption of milk by young people by leading the re-vitalisation of the School Milk Scheme at primary and secondary levels.

P r og r am m e

Background Context The School Milk Scheme was established by the EU in 1977 and was primarily developed to aid the disposal of surplus milk while also contributing to the nutritional profile of childrenâ&#x20AC;&#x2122;s diets. The EU subsidy ensured that milk was available to children at a discounted price and was therefore cost competitive to other substitute products. In Ireland, the School Milk Scheme has operated since 1982 with 3.2 million gallons of milk sold at its height in 1983. However, since that time, there has been a continued decline in participation in the scheme with decreases in the volumes of milk sold on an annual basis as highlighted in Table 5.1 below. The main feature of this decline has been the significant fall-off in participation by pupils in the scheme while interestingly, the number of schools in the scheme has more or less remained constant over the last twenty-five years. Whilst it is recognised that sales have diminished over time, it is believed that the scheme has merit. With the increasing prevalence of obesity, poor nutrition and diet amongst Irish children, the importance of the promotion of diet and lifestyle has increased. In this context, the School Milk Scheme has a new relevance in influencing positive dietary habits and helping to alleviate the obesity crisis, which continues to grow in Irish society. Equally, from an industry perspective, the School Milk Scheme is recognised as fundamental to building a sustainable customer base for milk and dairy products. Since the introduction of the scheme in the 1980â&#x20AC;&#x2122;s, the market place has become more competitive with a vast array of new product introductions including soft drinks, diet and light drinks, mineral waters, flavoured mineral waters, isotonic drinks and fruit juices. Many of these products are supported by promotional and advertising spends. It is crucial that the dairy sector leverage the current access to children in schools through the School Milk Scheme in light of this increased competition in the market place to ensure that milk continues to be an integral part of Irish childrenâ&#x20AC;&#x2122;s diets into the future.

Table 5.1: Overview of School Milk Scheme Performance in Ireland Source: Department of Agriculture, Fisheries & Food

Performance Indicators

1987

2004

No. of pupils in the Scheme

234,000

85,000

Litres of milk sold in the Scheme

11,830,000

3,753,750

Milk sold in School Milk Scheme as % of national milk consumption

1.2%

0.8%

Participation level among school pupils

20%

12%

No. of schools participating in the Scheme

2,448

2,360

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.2 Sch ool M i l k &

Future

Da i ry

There is a clear recognition of the potential opportunity to develop a new School Milk & Dairy Programme which will seek to overcome the following identified key barriers to pupil participation in the School Milk Scheme: the image of school milk is bland and dull and is a major obstacle for older pupils who are exposed continually to the extensive and impactful marketing campaigns for alternative drinks. the boredom factor associated with the obligatory daily routine of consuming milk and the perceived lack of choice or variety. the lack of awareness among school principals of the scheme within non-participating schools. the logistical barriers including the lack of refrigeration to maintain the integrity of the product.

P r og r am m e

- - - -

Despite these barriers, the National Dairy Council believes a â&#x20AC;&#x153;new lookâ&#x20AC;? School Milk & Dairy Programme, supported by a strong marketing focus, can achieve success. This is based on the belief that the timing is now right for a revival of the scheme given the external factors that are driving consumer behaviour. In particular, the growing awareness among consumers regarding diet and health concerns combined with the nutritional values of milk offer the opportunity to re-position milk to meet consumer needs. In addition, it is recognised that consumers have passed through the era of convenience and are becoming more discerning in looking for high performance, natural, wholesome products that impact favourably on their health and wellbeing. Combining the desire by consumers to live healthier lifestyles, with a more pupil-focused marketing approach, can provide the ideal platform from which to re-vitalise the School Milk Scheme. The new School Milk & Dairy Programme will seek to address key weaknesses within the existing scheme and offer a more attractive and appealing product to children and teenagers in addition to supporting that offering with significant marketing support. Increased product choice and variety combined with an innovative marketing approach will form the basis of the new programme. The National Dairy Council will take the lead in undertaking this revitalisation process in conjunction with the NDC member dairies involved in the current School Milk Scheme. The importance of industry co-operation is recognised in ensuring the success of the new programme. Equally, the support from the Department of Agriculture, Fisheries & Food for this programme is recognised and the NDC also believes it is critical to obtain similar commitment from both the Departments of Education and Health. The key deliverable for this programme will be to increase the consumption through the new School Programme, which will be based on two key factors: increasing pupil participation and increasing school participation.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.2 Sch ool

Work Programme

It will also include a review of the performance of similar School Milk Schemes in other countries, particularly where there has been considerable success, to identify the key lessons and critical success factors. Where there is opportunity to work in partnership with other Dairy Councils, this will also be pursued as a vital part of the learning process.

Da i ry

Upon completion of this review, the final output will be a plan for the new School Milk & Dairy Programme including a detailed marketing programme and approach. Undertaking consumer research to highlight the stimuli and drivers influencing pupils, parents and schools will be fundamental to the development of this plan and will form the basis of developing the new marketing approach to the programme.

P r og r am m e

M i l k

The work programme will be divided into three main areas. The first of these areas will encompass a comprehensive review and re-development of the current School Milk Scheme. This will be carried out by means of a root and branch review to fully understand the barriers both on the supply and the consumption side.

The second phase of the work programme will involve the preparation of a detailed operational plan, highlighting all key operational and logistical issues including: - - - - -

proactive engagement with the Departments of Health, Agriculture and Education on delivering a high impact School Milk & Dairy Programme; exploring ways to motivate the teachers and principals to help stimulate demand and participation; putting in place the requisite NDC School Programme Committee and NDC staffing support; bringing a level of innovation to the product offering and exploring NPD opportunities and packageing improvements; addressing logistical issues from the supply side and examine the use of technology to assist with the administration of the new programme.

The final phase of the work programme will be the implementation of the new programme. This should commence on a pilot basis to ensure the smooth transition to a gradual national roll-out thereafter. The implementation phase will require strong focus on supporting the programme at ground level and providing hands-on assistance to participating schools. The initial pilot phase will allow for any pitfalls to be identified and resolved before moving to the national roll-out. The participation of NDC member dairies in the process will be critical. Equally, the implementation of the marketing programme and assessing the impact and effectiveness of this programme, will be central to the success of the new School Programme. The National Dairy Council will play a pivotal role in leading the re-vitalisation of the School Milk Scheme in cooperation with industry and government stakeholders. This programme will form the first co-ordinated effort to achieve a more successful and more market-driven approach to encourageing and stimulating the consumption of milk and dairy products in Irish children and teenagers, which will be judged solely on its success in achieving higher consumption levels across participating schools over the period.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.3 Ma r ke ti n g

5.3 Marketing & Promotion Programme

& P r omotion

Strategic Objective 3 Strengthen the position and image of milk and dairy in terms of usage and attitudes amongst all target consumer segments by means of more informed market research and delivery of effective marketing campaigns.

P r o g r am m e

Background Context The traditional focus of the National Dairy Council has been to stimulate and promote consumption of milk, butter and cheese in the domestic market. Over the last ten to fifteen years, TV advertising has been largely relied on as the vehicle to communicate to the Irish consumer. The NDC produced a suite of TV advertising campaigns which focused on promoting the health benefits of milk and dairy products in addition to the versatility and taste qualities of such products. Significant resources within the overall budget were invested in ensuring the frequency of these campaigns across key television programmes. Generic marketing and promotion is still recognised as offering potential to promote milk and dairy products to the consumer. However, there are a number of factors going forward that need to be considered in this respect. Firstly, recognising the developments in the dairy sector over the last fifteen years and the inherent strengths and capability that exist today, it is critical that any generic promotion undertaken does not duplicate what is already being carried out effectively through extensive brand marketing campaigns by the dairy sector. Where generic promotion can be effective, it must complement and support the brand promotional activity and act as an endorsement of the products in a way that cannot be achieved by the brand. The NDC must also strive to develop campaigns that specifically promote the members of the NDC and their products. Understanding the health and nutritional issues that surround milk and dairy consumption, the role of independent and impartial endorsement is an important role for the National Dairy Council going forward. Future generic marketing and promotional activity must be undertaken in parallel with the Advocacy & Communications Programme requiring a new and different approach than what was previously undertaken. This approach also recognises the market changes that have taken place over the period and having regard to the ways in which consumers now make their purchase choices. Thirdly, it is believed a primary role of the National Dairy Council is to address the fundamental market weaknesses that exist within the dairy sector. In this context, the overall image of milk and dairy products in comparison to competing products is recognised as an inhibitor to future growth. While this is recognised as a key issue internationally, it is particularly important in the Irish context given that the market has reached a mature stage of development with certain products within the category already moving into decline. Addressing this key issue requires that resources are invested to market and position Irish milk and dairy products more favourably in order to sustain the current market volumes and develop new opportunities for growth. This will require a deeper understanding of the market and more targeted campaigns at consumer level to improve the overall perception of the category. Working internationally to understand how this is being achieved in other markets will be a key feature of the NDCâ&#x20AC;&#x2122;s marketing approach going forward.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.3 Ma r ke ti n g

Finally, in striving to strengthen the position and image of milk and dairy products, current thinking suggests that it is not optimal to rely on TV advertising as a single medium for any generic marketing and promotional activity. In gaining a deeper understanding of the market and specific consumer segments, it will be important to develop campaigns that are impactful and meaningful within the context of consumer lifestyles. This will require a refocusing of the mediums selected for any campaign depending on the age group of the target audience.

Future

P r omotion

The National Dairy Council recognises the importance of continuing to strengthen the position and image of dairy products and also the need to be more focused and more market-driven in how this objective is achieved. The first critical step in this respect will be to bring research and insights on milk and dairy to consumers in a clear and concise manner through creating a more informed market insight tool. This will be based on understanding consumer purchasing behaviour, usage behaviour and attitudes towards the dairy category and gaining a deeper insight into the motivations and drivers of consumer behaviour at each life stage.

P r o g r am m e

Understanding the demographic changes whether this be the ageing of the population, high birth rates or changes in household size will be critical to forming effective marketing campaigns. This will in turn provide real tangible opportunities in understanding the key emotive issues that stop individuals from consuming milk and dairy products. In addition, it will deliver greater returns in providing real opportunities to expand the market by targeting specific groups of the population who have the potential to increase their usage occasions or spend on milk and dairy products. As a benefit for NDC members, it will additionally identify new opportunities and avenues for NPD and facilitate the development of successful category management strategies based on real consumer understanding rather than based on short-term retail buyer tactics. Through building this knowledge and insight of the market, the National Dairy Council will be in a position to deliver effective marketing campaigns to targeted consumer segments that focus on three specific areas to complement NDC members’ marketing and brand activity: information, education and image promotion.

Work Programme The work programme will be undertaken in three phases. The first phase will see the development of a more sophisticated consumer segmentation tool, which will act as the foundation for informing future marketing campaigns and communications programmes to selected target audiences. Also crucial to this process will be the gathering of information on the performance of competing products and drinks (i.e. bottled water, soft drinks etc). Once developed, this research will be monitored, tracked and updated regularly, thereby facilitating the development, refining and evaluation of marketing campaigns. Information will be shared with NDC members through the online information portal and through industry strategy seminars. Alongside the work of the NDC on market research, the second phase of the work programme will encompass the development of marketing and promotional campaigns with clear goals, aimed at specific consumer segments and targeted audiences, built around the appropriate consumer insights and behaviours, aimed at informing, educating or strengthening the image of milk and dairy products within the target audience. Consideration will be given to integrating sponsorship and “celebrity”/”hero” endorsements into the marketing campaigns as has been successfully achieved by Scotland (Scotland Dairy Farmers) through a three-year EU funded marketing campaign, which has increased per capita consumption by 2.9%.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.3 Ma r ke ti n g

Also, the NDC will explore the potential of developing a quality/eco mark for members and the benefit of utilising the new NDC identity as a point of differentiation for membersâ&#x20AC;&#x2122; products at retail level. Consideration will be given to the feasibility of this approach and the necessity at consumer level for a more structured approach to communicating industry standards of production. In the roll-out of marketing campaigns, the NDC will work to maximise the penetration of target groups with specific messages through multi-channel communication tools. Campaigns will need to consider the best way to address the target audience with both above-the-line and below-the-line activity.

In all marketing and promotional activities, the programme will be closely aligned with the Advocacy & Communications Programme through an integrated and seamless approach, which will be more effective at consumer and stakeholder levels.

P r omotion

The introduction of the new Marketing & Promotion Programme will comprise a launch phase to re-introduce the National Dairy Council to the consumer explaining its purpose and rationale and will act as a lead in the subsequent marketing campaigns.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

P r o g r am m e

The NDC is committed to demonstrating the impact and effectiveness of campaigns and will continually track the performance of this marketing and promotional activity. In continuing to promote milk and dairy products, the organisation will seek to follow best international practice, working closely in co-operation with other dairy councils and particularly with direct counterparts in the UK to ensure the continued vibrancy and strength of the domestic market.

5. 4 I ssu e s

5.4 Issues Management Programme

M a n ag e me nt

Strategic Objective 4 Inform, advise and publicly represent the dairy industry through building a systematic approach to, and competency in, Issues Management.

P r og r am m e

Background Context In comparison to other sectors within the food and drink industry, the dairy industry has not suffered any significant crisis in consumer confidence to date. Milk and dairy products are enjoyed as an integral part of the Irish diet, while Ireland has earned an enviable reputation on world markets for the high standards of quality of Irish dairy exports. While the 1980s became the decade of food safety, the 1990s moved to focus on quality and traceability and this has now shifted to a new focus on environmental sustainability including food miles, carbon footprints and responsibility for animal welfare. Driven by consumer concerns, the retail sector has played a major role in driving these issues forward and demanding significant improvement in industry practices. Food scares such as BSE and animal health issues including foot and mouth disease and more recently avian flu and blue tongue, have all led to increased awareness at consumer level of the potential dangers and threats posed by food. Combined with increased EU legislation to ensure that consumers are provided with accurate information on the purchases they make, the demands on food manufacturers today are growing and it is imperative as the basis of any strategy to recognise the potential threats or issues that may impact on business in this respect. While the imminent threat of a crisis within the dairy sector is unlikely, the National Dairy Council recognises the importance of identifying potential issues and the management of such issues as key to the success of the strategy. The pursuit of best practice in this area forms a vital element of the strategy and indeed is a new departure for the NDC. The main focus of the Issues Management Programme will be to ensure that the interests and concerns of the consumer are fully understood and prioritised and to maintain their trust in the perceived health and nutritional benefits of the consumption of Irish milk and dairy products. In this context, it is believed that there is a gap at present in the dairy sector in undertaking a co-ordinated approach to Issues Management from a consumer perspective. While there is significant work being undertaken by a range of agencies and associations within the industry, the majority of this work is trade-oriented and historically, policy and regulatory-based, particularly focused at EU level. It is not the intention of the National Dairy Council to duplicate any existing activity and the focus of the Issues Management Programme will be strictly geared towards consumer-related issues. It is also believed that through effective co-operation with existing agencies (e.g.. Teagasc) and associations (e.g.. Irish Dairies Industry Association (IDIA), ICOS), this programme can operate in tandem and for the benefit of the wider industry. Underpinning the Advocacy & Communications Programme, this programme will serve to anticipate any likely issues of importance at consumer level and will take a systematic and planned approach in dealing with such issues.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5. 4 I ssu e s M a n ag e me nt

Future

P r og r am m e

The key to Issues Management is the understanding of the wider external environment that the industry operates in and the potential issues that may arise within this environment that could impose a potential threat to the consumption of milk and dairy products. The NDC recognises that the most effective approach to Issues Management will be based on partnering and cooperating across several fields of expertise. For this reason, the core of the Issues Management Programme will be centred upon the establishment of a National Issues Management Committee, comprised of members representing the various stages along the supply chain to the consumer in addition to technical, scientific and nutritional experts as required. Inherent in this approach is the recognition that the external environment in which the industry operates is subject to constant change and therefore, requires continual monitoring and assessment. The National Dairy Councilâ&#x20AC;&#x2122;s role will be to act as the co-ordinator of this approach and in parallel with the Advocacy & Communications Programme, will be the first point of contact on all consumer-related issues. The focal point of this programme therefore, is to have a structured, co-ordinated plan in place to ensure that consumer issues can be anticipated, pre-empted and dealt with in a professional, transparent and objective manner, thereby ensuring the safe future passage of the industry. It is important in this respect not to confine the programme to national issues but to be cognisant of international developments given that the consumer of today is far less confined by geographical boundaries than was the case in previous years. Increased foreign travel, developments in technology, access to such technology (e.g.. internet, iPods etc.) and global media coverage of consumer issues mean that consumers are much more informed than ever before in what is now a truly â&#x20AC;&#x153;global marketplaceâ&#x20AC;?.

Work Programme The first step in the work programme will be the establishment of the National Issues Management Committee. This will require the appropriate structure to be put in place and the representatives of the committee to be appointed. It is envisaged that the representatives will be selected on the basis of skills and expertise required for this committee and will comprise farming, processing, nutritional, medical, marketing and media experts. In order to operate effectively, the Committee will require a clear mandate encompassing detailed policies, procedures, protocols, report formats and communication response strategies. It will be important in this initial stage to identify and document the process steps and elements of the Issues Management approach and in doing so, prepare an Issues Management Manual. The second phase will require the identification of potential risks or issues that may impact on the consumer, which will be supported by engageing the advice and expertise of the Issues Management Committee, whose role in scanning and assessing their respective fields will be critical.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5. 4 I ssu e s

These issues will need to be fully understood and prioritised in order that a response or position can be agreed. Whether this issue relates to a dietary or nutritional concern, perceived health impact or is more fundamentally linked to the production cycle, the necessary research will need to be undertaken to ensure that the Committee is best placed to make an informed decision on how the issue is to be dealt with.

M a n ag e me nt

Upon doing so, the Committee will be required to put a management plan in place which will entail a comprehensive issues management system to ensure that issue position statements and updates or revisions are in line with good document control. In conjunction with the Advocacy & Communications Programme, the Issues Management Committee will need to prepare communications plans and the roll-out of such plans will need to be dove-tailed to ensure consistency with the other elements of the NDCâ&#x20AC;&#x2122;s work programmes.

P r og r am m e

While it is envisaged that the work of the Issues Management Committee will be low-profile in comparison to other work programmes, it is critical that should the necessity arise to act formally as a spokesperson on a particular issue, the Committee is closely aligned with the other programme elements of the NDCâ&#x20AC;&#x2122;s strategy. The National Dairy Council will become the first port of call for industry under the Issues Management Programme, which is a foundation programme within the new strategy, ensuring that the other programmes can be implemented effectively while reducing the risk of exposure to unforeseen circumstances or threats that may arise. While the programme forms a less costly element of the strategy, it is nevertheless viewed as a critical component of the strategic package and also one that is ultimately dependent on the degree of co-operation and input at industry level.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.5 N utr ition

5.5 Nutrition Programme

P r og r amme

Strategic Objective 5 Be recognised as the national centre of knowledge on dairy nutrition and related matters of importance to consumers.

Background Context Milk and dairy are extremely versatile and recognised as one of the most nutritionally complete foods, containing a wide range of essential nutrients required for growth, development and overall health and wellbeing throughout oneâ&#x20AC;&#x2122;s life cycle. The nutrients in milk and milk products, particularly calcium, phosphorous and protein, play an essential role in bone health, providing structural rigidity and promoting bone turnover and growth. For this reason, adequate milk intake is crucial throughout life but particularly during childhood and adolescence as 90% of bone is developed by 17 years of age. Another well-established benefit of milk is its contribution to dental and oral health, the primary role being in tooth development during childhood, but the minerals present in milk also assist in the prevention of tooth demineralisation. In particular, cheese is recognised for its anti-cariogenic properties. Hence, insufficient intake of milk and dairy products may increase the susceptibility to a range of dental disorders such as dental cavities and periodontal disease. More recent scientific evidence suggests that the nutrients present in milk and dairy products play an important role in blood pressure management, exerting a protective effect in people at risk of developing high blood pressure (hypertension) and also a blood pressure-lowering effect among hypertensive patients. This effect has been noted in both children and adults, indicating that adequate milk intake throughout the life cycle may have a beneficial effect on blood pressure. It is likely that the calcium and potassium content of milk is largely responsible for these positive effects. Also, contrary to popular belief, milk intake may also be protective against cardiovascular disease. Prospective studies demonstrate that milk intake is associated with a reduced risk of heart disease and stroke. The mechanisms responsible for this protective effect are not confirmed but it may be, at least, partially due to the blood pressurelowering effect associated with milk. Furthermore, milk consumption has been negatively associated with the metabolic syndrome, a collection of numerous risk factors predictive of chronic diseases including heart disease and diabetes. Research also suggests that the consumption of milk and dairy products may assist with body weight management, and the incorporation of such foods into a weight loss regime may even increase its effectiveness. The role of dairy in body weight management is acknowledged in the report of the National Taskforce on Obesity (2005). The Department of Health & Children recommend therefore three servings of dairy foods a day for children and adults, and five servings for teenagers and pregnant and breastfeeding women. However, it has been estimated from the IUNA National Food Survey (2002) that on an average day Irish men consume 2.5 servings of dairy and Irish women an equivalent of 1.5 servings.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.5 N utr ition

Considering the vast range of health benefits associated with the consumption of milk and dairy products, achieving the recommended intakes of dairy would assist in attaining the recommended dietary allowances of a range of nutrients, and subsequently exerting a positive effect on many public health concerns in Ireland. The NDC is concerned, given the health and nutrition properties of milk and dairy products, at the confusing and sometimes inaccurate information that is held by consumers. Recognised early on as a major issue for the dairy industry, the National Dairy Council has earned a reputation over the years for the provision of scientifically-based evidence to support the consumption of dairy products.

P r og r amme

A qualified nutritionist team has been the mainstay resource of the NDC and has focused on providing dietary information and advice to GPs, practice nurses, public health nurses, dietitians and nutritionists in addition to providing a valuable advisory resource in schools, directly to students and to parents. However, the level of misinformation surrounding dairy continues to be challenging and is recognised as a key priority within the Advocacy & Communications Programme. To support this programme, the NDCâ&#x20AC;&#x2122;s role in nutrition is viewed as the foundation of the strategic plan and will continue to act as a valuable resource underpinning all other programmes.

Future The National Dairy Council will continue to strengthen this nutrition advisory service but will elevate this service to be recognised as a national centre of knowledge on dairy nutrition and related consumer issues. The organisationâ&#x20AC;&#x2122;s focus will change therefore to become research and knowledge-based and will seek to encourage and positively influence the nutrition status and health of consumers in promoting adequate dairy consumption at all life stages. The traditional role of providing talks, seminars and dietary advice will be re-shaped to widen the NDCâ&#x20AC;&#x2122;s network and proactively interact in the areas of clinical nutrition, community nutrition, business, industry, research and education. This will also require the NDC to adopt a more authoritative role in working to assist in shaping future policy and the regulatory framework in which the dairy industry operates. As a non-profit making organisation, the National Dairy Council will be recognised within the dairy sector as a centre of nutrition science and knowledge supporting the role of dairy foods as part of a healthy balanced diet and lifestyle. Utilising this information to combat misperceptions and misinformation whether it be at consumer level, within the media or amongst other key stakeholder groups, forms the cornerstone of the rationale for the Nutrition Programme. Fundamental to the programme will be the requirement to interact proactively with other dairy councils and also within the international network that exists to foster co-operation and strengthen the exchange and sharing of information within the dairy industry internationally on nutrition research and development.

Work Programme The work programme will be undertaken in a number of stages and in parallel with other programmes to provide sufficient support and information resources for their roll-out. The first stage in developing the new programme will be the establishment of a database of nutrition information.

In effect, an electronic nutrition library of information, research, journal updates, reports and other relevant material will be created and stored within the NDC. The library will require continual updating by a proactive nutritionist team and will also include a media monitoring component, which can act as the basis for tracking and assessing impact of other programmes.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.5 N utr ition

In order to be effective, the team will also need to build a national and international network to access thought leadership material at R&D and NPD levels and will participate on appropriate committees and for relating to nutritional and legislative issues. The knowledge gathered through these networks, combined with the expertise of the nutrition team together with the database of information, will form the foundation for the communications, marketing and promotions programmes to be undertaken.

P r og r amme

In order to increase the level of interaction within the NDCâ&#x20AC;&#x2122;s network, the newly developed web site will act as a gateway of information tailored to the specific needs of stakeholder groups and will be used as an online portal to house the knowledge and expertise gathered. NDC members in particular, will have access to more comprehensive information and support services. Equally, the nutritionist team will provide an important input into the new School Milk & Dairy Programme, providing support for its development and encourageing dairy consumption and the related health and nutritional benefits from entry level into primary school up to the teenage years. The challenge within the School Programme will be how to package these benefits in a manner that is appealing and attractive to young people through a targeted marketing programme. Similarly, the communications, marketing and promotions programmes will rely on the NDCâ&#x20AC;&#x2122;s nutrition resource to ensure that information and messageing is evidence-based, strongly backed up and continually up to date in terms of access to new developments in research. This is critical in ensuring the success of these programmes and safeguarding the organisationâ&#x20AC;&#x2122;s reputation. The newly re-shaped Nutrition Programme will therefore take an integrated approach to the development of the other work programmes and will work to support their effective delivery. While this requires a re-structuring of the existing nutrition resource, the programme will be cost-effective and streamlined to create the necessary infrastructure to implement the strategy.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.6

5.6 Accountability & Corporate Governance Programme

Accou nta bi l ity

Strategic Objective 6

& Cor por at e

Restructure and develop the NDC as a competent, efficient and effective organisation operating to a high standard of integrity and accountability, thereby delivering value to funders and stakeholders.

Background Context

G ove r n a n c e

The National Dairy Council is funded directly by a farmer levy, which currently stands at .06 cent per litre of milk produced. This equates to an annual payment of approximately â&#x201A;Ź160 per annum for the average-sized dairy farm and is deducted from the monthly milk cheque and forwarded to the NDC by the co-op members. The structure of the Board of the NDC is comprised of a number of representative associations in addition to representatives from contributing co-ops. The Board traditionally meets on a quarterly basis and holds its AGM in June of each year. The representative associations include: IFA, ICMSA, ICOS and the National Milk Agency.

P r o g r am m e

The representation from the co-ops is determined by the amount of levy paid by the co-op as a proportion of the total levy received. Entitlement to a seat on the Board is dependent on contributing a minimum of 5% of the total levy. For the remaining seats, the country is divided into three regions with elections held every four years to determine the allocation of these seats on the Board. At Executive level, the organisation is headed up by the Chief Executive and employs a number of administrative and marketing staff in addition to a nutritionist team. The CEO reports directly to the Board and also acts as Company Secretary. In previous years, the staff numbers have fluctuated with fifteen employed at one point, six of whom were nutritionists. However, in more recent times, with funding decreases, the organisation saw the staff numbers reduce to seven in total. Critical to the success of the strategy is ensuring that the NDC operates to a high level of competence and efficiency in delivering the programmes set out. In this context, the appointment of a new CEO has provided the window of opportunity to restructure and revitalise the organisation not only in terms of setting out the new strategic plan but also in undertaking the necessary changes internally to develop a more dynamic and results-driven structure. The National Dairy Council fully understands the necessity of demonstrating the value created by the levy paid by dairy farmers and is committed to ensuring that the organisation is operating to the highest standards in this respect. Notwithstanding the successes of the past, the strategic planning process has identified the requirements for the NDC to make a number of structural changes to the organisation in order to ensure that the vision can be achieved. The new programmes outlined above, mark a new departure for the organisation and one that will hopefully prove beneficial to industry. To achieve this, it is critical to create the necessary competence and structure internally. Equally, the NDC must be accountable and operate within clear policies and guidelines on corporate governance that allows the organisation to deliver the highest standards of integrity and transparency. The importance of the role of the Board is recognised in this respect to ensure that best practice is adhered to at all times.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.6 Accou nta bi l ity

Future

& Cor por at e

The vision for the future of the NDC is an organisation that is respected, trusted and valued by its stakeholders and particularly its funders (i.e. dairy farmers). As with any business model, the need to constantly question, re-evaluate and update is essential to the success of the organisation and the NDC will be no different in that respect. The National Dairy Council will consider the adoption of a recognised and accredited appropriate management system such as ISO to strive towards best practice in this respect. The adoption of such an approach would work to maintain standards within the organisation and demonstrate commitment to delivering value.

G ove r n a n c e

In addition, the need to communicate and demonstrate to stakeholders and funders the work of the NDC is recognised as a priority and appropriate mechanisms will be put in place to improve the overall visibility and communications with the industry. A key learning from the past is that it is critical that industry and farmers feel that they are involved and kept informed of the NDCâ&#x20AC;&#x2122;s programmes. The NDC must also work to gain the confidence and respect of consumers and other key stakeholders in the delivery of its programmes and this will be regularly monitored and assessed. The success of the strategy will be influenced by the perceived value of the work programmes at this level.

P r o g r am m e

Work Programme Alongside the development of the strategy, the NDC has already commenced a programme of restructuring to support its successful implementation. This has been undertaken by way of assessment of the current internal staffing, resources and capability within the organisation and has led to some fundamental changes. Staff numbers have been reduced through the successful implementation of a voluntary redundancy programme. This has had two effects. Firstly, the reduction in numbers has ultimately led to a number of posts becoming redundant and will facilitate the appointment of new skills to the organisation. Secondly, the programme has allowed for a review of internal functions and the outsourcing of a number of these functions is currently being dealt with. Right-sizing the organisation together with achieving the required set of core competencies is the first step in rebuilding the NDC. Once this has been achieved, the organisation can move forward with confidence to deliver upon the strategy effectively. Secondly, the NDC must ensure that the correct HR policies and practices are in place and are appropriate to the nature and scale of the organisation. To ensure that this is the case, the NDC is now a member of IBEC as of January 2008. To support the delivery of the programmes, the organisation must also deploy an appropriate IT and communications system and infrastructure. Again, the current internal systems have been reviewed and are in the process of being updated.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

5.6 Accou nta bi l ity

The overall aim of this phase of the work programme is to ensure that the NDC is competent in terms of its staffing and capability, has the correct support systems in place to make it as efficient as possible and is looking at the most effective ways of undertaking its business. The second phase of the work programme will improve the integrity and accountability of the organisation. A key step in this respect is to install an effective system of budgeting, financial accounting and reporting and also to include annual reporting to stakeholders and funders. To support this process, the NDC will create the appropriate corporate governance structures, policies and procedures to improve the overall standards of accountability. This will entail covering the roles and responsibilities of the Board and providing a clear mandate for the organisation to follow in terms of the controls and reporting mechanisms required.

& Cor por at e

While being different from the development programmes, the NDCâ&#x20AC;&#x2122;s Accountability & Corporate Governance Programme is viewed as a priority within the strategy in rebuilding and maintaining confidence in the work of the organisation. In this respect, this programme is already well underway in order that the necessary groundwork is laid for the initial implementation of the work programmes.

5.8 Conclusion

G ove r n a n c e

Table 5.2 provides a summary of the six work programmes outlined and the corresponding strategic objective.

Table 5.2: Summary of Work Programmes & Strategic Objectives

P r o g r am m e

Strategic Objectives

Work Programme

Enhance the position and image of milk and dairy products through a proactive and well-informed advocacy and communications strategy.

Advocacy & Communications Programme

Increase the consumption of milk by young people by championing the re-vitalisation of the School Milk Scheme at primary and secondary levels.

School Milk & Dairy Programme

Strengthen the position and image of milk and dairy in terms of usage and attitudes amongst all target consumer segments by means of more informed market research and delivery of effective marketing campaigns.

Marketing & Promotion Programme

Inform, advise and publicly represent the milk and dairy industry through building a systematic approach to, and competency in, Issues Management.

Issues Management Programme

Be recognised as the national centre of knowledge on dairy nutrition and related matters of importance to consumers.

Nutrition Programme

Accountability & Corporate Governance Programme

The following section deals with the proposed investment required to execute these programmes effectively.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Section 6 NDC Investment Programme

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

SECTION 6

NDC Investment Programme Over the period 2008–2012, the NDC aims to invest €14 million in strengthening the position and driving the consumption of milk and dairy products. This is an unprecedented level of investment, which is essentially being made available by the dairy farmers of Ireland through the levy contribution. It is also important to acknowledge the annual contribution made by the Irish Dairy Board to the NDC, which is much appreciated. However, the investment of €14 million is based on the current levy. There is no doubt that the strategy could be further strengthened by the increased levy contribution of current non-members. An illustrative breakdown of this investment programme over the key strategic areas of the plan is outlined below.

Table 6.1: NDC Planned Investment 2008-2012 2008 €m

2009 €m

2010 €m

2011 €m

2012 €m

Total €m

% of total

Advocacy & Communications Programme

0.3

0.5

0.6

2.5

18%

School Milk & Dairy Programme

0.45

0.7

0.8

3.55

25%

Marketing & Promotion Programme

1.2

1.3

43%

Issues Management Programme

0.2

0.1

0.7

Nutrition Programme

0.25

1.25

Total Investment

2.2

2.85

3.05

100%

The School Milk & Dairy Programme together with the Marketing & Promotion Programme represent the two most significant areas for investment, at just under 68% of the total. At all times, it is intended to have a reserve of circa €1 million as a contingency fund in the event of an unforeseen sector event which requires immediate attention by the NDC. The costs of the Accountability & Corporate Governance programme are absorbed within the other five programmes. In making this level of investment, the NDC is mindful of the need to deliver real value to its funders and stakeholders, and in executing the proposed work programmes, delivering value-for-money will be a key priority. The final section deals with how this investment will be assessed in terms of key deliverables and indicators.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Section 7 What the Strategy Aims to Deliver

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

SECTION 7

What the Strategy Aims to Deliver As the NDC is not directly engaged in sales, it is believed particularly important to demonstrate the impact and value of the work programmes to both funders and stakeholders. CSO/Mintel projections for dairy are positive in forecasting an 11% increase over the 2008-2012 period to a total market value of €1.115 billion. In this capacity, the role of the NDC is to ensure that the programmes implemented within the context of the strategy, have a direct impact on helping to achieve this growth. Based on the overall need to strengthen the position and image of milk and dairy products, omnibus research was commissioned by the NDC for the purpose of establishing baseline indicators on current consumer attitudes amongst the adult population (15+ years) in Ireland. The fieldwork was undertaken in April 2008 by TNS/MRBI and involved a nationally representative sample of 1,017 adults. The results proved very interesting in establishing a number of key issues at consumer level:

•

This likelihood of consumption also appears to decline with age (e.g. 86% of 15-24 year olds vs. 65% of 55+ claims they will consume more milk in the future) underlining the need to generate increased frequency of consumption.

•

Furthermore, 4 in 5 adults are of the opinion that teenagers are not consuming enough milk demonstrating the awareness of this key issue highlighted in the recent Teen Survey (IUNA 2008).

•

In addition, with 17% of the population believing that milk is harmful to their health, the focus on the nutritional benefits and health properties of milk is critical for the future.

•

Interestingly as well, about half of all adults believe soya milk is equally as good as cow’s milk, highlighting the growth and success of alternatives to dairy and presenting a clear challenge for the dairy sector.

•

While 90% of adults believe cheese is an essential source of calcium, there are clear health concerns regarding cholesterol and fat being detrimental to health.

•

Equally, the same concerns are expressed for butter particularly in the older age groups with 25% of those 55+ claiming to never use butter while 38% of all adults claim to be trying to cut down on using butter.

•

Finally, at a more general level, over 25% of adults believe they do not consume the recommended three servings of dairy per day for their health and wellbeing, which demonstrates both a challenge and opportunity to increase consumption frequency.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

The results of the research have been analysed to create a set of performance indicators based on achieving consumer attitudinal shifts in key areas over the 2008-2012 period. These are illustrated below in Table 7.1 and show a projected 5-10% change over the five-year period, which will be tracked and monitored on an annual basis.

Table 7.1: Key Performance Indicators for National Dairy Council 2008-2012 Source: TNS Phonebus Survey (2008)

2008 Agree

2012 Agree

% Change

Milk plays a vital role as part of a healthy balanced diet

53%

58-63%

+5-10%

Milk is a natural unprocessed food

69%

74-79%

+5-10%

Milk is something I will consume more of in the future

71%

76-81%

+5-10%

Butter can be consumed as part of a healthy balanced diet

44%

49-54%

+5-10%

Cheese is beneficial to my health and is not fattening/detrimental if consumed in moderation

55%

60-65%

+5-10%

It is important for oneâ&#x20AC;&#x2122;s health to consume three portions of dairy per day

71%

76-81%

+5-10%

Consumer Attitudes to Milk & Dairy Products

Aside from these indicators, specific targets have also been set for the School Milk & Dairy Programme, which are shown in Table 7.2 below.

Table 7.2: Key Performance Indicators for School Milk & Dairy Programme 2008-2012 School Milk & Dairy Programme Number of pupils/students participating Litres of milk consumed (million)

2008

2012

% Change

85,000*

114,750-127,500

+35-50%

3.7*

4.9-5.5

+35-50%

* Most recent figures by Department of Agriculture, Fisheries & Food (2004)

In partnership with NDC member dairies, it is targeted to increase the current pupil/student numbers participating in the School Milk Scheme by 35-50% up to a projected level of 127,500. In achieving this increase in participation, it is projected that milk consumption can increase from the current 3.7 million litres up to a potential 5.5 million litres. Central to the implementation of the strategy will be the continued evaluation of investment against these targets in measuring the overall effectiveness of the work programmes in achieving the strategic objectives set out.

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Glossary

AGM

Annual General Meeting

BSE

Bovine Spongiform Encephalopathy (commonly called “mad cow” disease)

CAP

Common Agricultural Policy

CSO

Central Statistics Office

EEC

European Economic Community (former name of the EU)

European Union

GDP

Global Dairy Platform

Genetically Modified

General Practitioner

IBEC

Irish Business and Employers Confederation

ICMSA

Irish Creamery Milk Suppliers Association

ICOS

Irish Co-Operative Organisation Society

IDF

International Dairy Federation

IDIA

Irish Dairy Industries Association

IFA

Irish Farmers’ Association

IMP

International Milk Producers Group

ISO

International Standardization Organization

IUNA

Irish Universities Nutrition Alliance

NDC

National Dairy Council

NMA

National Milk Agency

NPD

New Product Development

MRBI

Market Research Bureau Ireland

R&D

Research and Development

SMP

Skim Milk Products

TNS

Taylor Nelson Sofres

UCD

University College Dublin

United Kingdom

United States

WHO

World Health Organisation

WTO

World Trade Organisation

A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012