COVID-19 hit at the worst possible time for the dairy industry—during what’s known in the sector as “spring flush,” when cows are at the height of their milk production.
Just as the cows reached their most productive time, schools and restaurants shut down. A major outlet for dairy products evaporated overnight, forcing farmers around the country to dump their milk.
But at Land O’Lakes, a $14 billion farmer-owned cooperative, its members were spared. “We’re grateful and thankful for that, because it’s emotionally and financially devastating to have to dump milk,” says Heather Anfang, senior vice president of U.S. dairy foods at Land O’Lakes, on this week’s episode of Reinvent, a podcast about fighting to thrive in a world turned upside down by COVID-19.
The episode digs into a supply chain that left consumers with seemingly contradictory images this spring: On the one hand, there were empty store shelves as shoppers stockpiled goods. And on the other, farmers were destroying products they were unable to sell.
Land O’Lakes, meanwhile, was able to find a home for its more than 1,700 members’ milk—despite the fact that pre-coronavirus, about 40% of Land O’Lakes business came from items that it sold to the food service industry like enormous bags of shredded cheese or cheese sauce. When the pandemic hit, that business disappeared.
“We had to really step back and look,” says Anfang. “It’s a bit of a puzzle—where’s the milk, where’s it going, and what are the products that are now most relevant.”
To solve that puzzle, Land O’Lakes went back to basics. It scaled back on the number of items it produced so the co-op could pump out more volume. By just focusing on its core goods, it could run bigger items for longer on its production lines because it wasn’t stopping and starting for smaller items. “That simple thing allows you to get more butter out, to get more milk through the plant,” Anfang says.
Land O’Lakes also took items that it normally supplies to food service and instead sold them to grocers. For example, retailers typically sell one-pound blocks of butter separated into four sticks. But supermarkets were so desperate to keep up with consumer demand that they were willing to sell the one-pound block of butter used by restaurants.
Anfang says that Land O’Lakes will sell “significant butter this year, much more than we would have anticipated.” But the “swings have been very dramatic,” she adds. “If you’re selling butter to retail, you know that team is on fire. If you’re selling 50-pound bags of mac and cheese to school, there’s not a lot of sales happening right now.”
To hear more from Anfang and from market research firm Nielsen’s Scott McKenzie on how COVID-19 is remaking the supply chain, listen to the episode in its entirety.
