Western milk merger

In the weeks and months ahead, Jerry Duncan, vice-president of marketing for Dairyworld Foods of Burnaby, b.c., will face some of the most challenging marketing decisions of his career.Dairyworld was formed early this month by the merger of three Western Canadian...

In the weeks and months ahead, Jerry Duncan, vice-president of marketing for Dairyworld Foods of Burnaby, b.c., will face some of the most challenging marketing decisions of his career.

Dairyworld was formed early this month by the merger of three Western Canadian dairy co-operatives: Fraser Valley Milk Producers Co-operative Association, of Burnaby, b.c.; Central Alberta Dairy Pool, of Red Deer, Alta.; and Northern Alberta Dairy Pool, of Edmonton.

With more than 4,800 stock-keeping units in its inventory, and combined sales approaching $1 billion, Dairyworld has instantly become the country’s largest dairy.

And it will be Duncan’s job to watch over that sales volume at the same time as he manages the consolidation of the three separate marketing departments into a single office space in Burnaby.

‘There are a lot of good people in all three operations,’ Duncan says. ‘It is a matter of assimilating them into one organization in a way that will maximize their skills. It is not a process that will happen overnight.’

When Duncan says he has no expectations the merger of people and philosophies will be smooth and uneventful, he speaks from experience.

Just over a decade ago, Duncan was director of marketing for Silverwood Dairies when Silverwood took over Borden Dairy Group in Eastern Canada.

He says the challenge then, as he expects it will be now, was to ‘maintain the business,’ explaining ‘any time you have a merger, you have the basic job of maintaining volumes and protecting brand equity.’

Before the formation of Dairyworld, Duncan was director of sales and marketing for Fraser Valley Milk Producers, a position he held since May 1991.

Previously, after leaving Silverwood in 1983 following its acquisition by Ault, he spent eight years as a private consultant to the dairy industry.

With sales of $400 million, Fraser Valley is the largest of the three regional co-operatives participating in the merger.

It markets about 600 products throughout b.c., many under the Dairyland, Armstrong and Pacific trademarks.

The company’s inventory includes a full range of traditional dairy products, as well as juices, cooking creams and sauces.

Similarly, Northern Alberta Dairy Pool has established a strong presence for its Nu-Maid brand name in the northern part of Alberta.

And Central Alberta Dairy Pool has done the same for its Alpha branded products in central and southern Alberta.

‘A lot of work’

Duncan says Dairyworld has a ‘lot of work to do as far as product and plant rationalizations over the next few years.’

He says there will be an inevitable fall-out of regional brands as some products are ‘branded and marketed on a national basis.’

At the same time, he says Dairyworld’s core strategy will be to build on the strength of its strong localized trademarks, many of which are the market leaders in their respective geographic regions.

Although Dairyworld is well-positioned for success in Alberta and b.c., it faces increasing competition from Toronto-based Beatrice Foods, which has been slowly rolling its huge brand family westward since the mid-1980s.

When Beatrice bought Alberta’s Palm Dairies in 1989, thereby signaling it was in Western Canada to stay, the Western dairy industry saw the writing on the wall.

It knew it would be only a matter of time before its traditional regional dairies would be forced to consolidate.

In the last few years, Toronto’s Ault Foods has also been casting covetous eyes westward.

Unlike Beatrice, however, Ault has not targetted the core dairy market of milk and milk by-products such as butter and cheese.

Rather, Mike Egan, Ault’s director of marketing, says the company is concentrating on marketing its stable of frozen novelty products including O’Henry, Chipwich and Double Dutch.

Because Ault has not shown a predatory interest in the West’s traditional dairy markets, the regional dairies have been willing to open their distribution networks to Ault’s frozen novelties, and Ault has concentrated its energies on consumer marketing programs.

It is precisely in the area of consumer marketing that Duncan faces his greatest challenge.

According to many dairy marketing professionals, the Western dairy industry lags well behind Ontario and Quebec in the area of consumer marketing.

‘Last five years’

Says Egan: ‘It has only been in the last five years that they have been doing any marketing. In the past, they have been very commodity-oriented in terms of their marketing approach.’

Duncan shares this view, noting his job will be ‘to turn what has traditionally been a commodity business, driven by production and distribution, into one that is driven by the customer.’

Duncan says the need for change is necessary not only because of increasing competition from Eastern Canadian dairies, but also because of eventual competition from foreign producers.

Signals

He says free trade with the u.s., eventual free trade with Mexico and the general dropping away of international trade barriers brought about by the General Agreement on Tariffs and Trade are all signals to the dairy industry, not only in the West but across Canada, that it must become more competitive.

Duncan says a key plank of his strategy will be to increase Dairyworld’s focus on brand advertising.

He says he wants the company to develop a long-term approach to advertising campaigns in order to build customer loyalty.

Dairyworld has two agencies, which it picked up at the time of the merger.

Vancouver’s Scali McCabe Sloves was Fraser Valley Milk Producers’ agency, while Ogilvy & Mather, through Berger Hetherington & Associates in Edmonton, handled the Central Alberta Dairy Pool business.

Thinking of his own pre-merger experience at Fraser Valley, Duncan recalls ‘we would sometimes spend a lot of money and sometimes not as much.

‘We need to demonstrate an improved commitment to the building of brands,’ he says.

In conjunction with a heightened focus on advertising, Duncan says he also believes a greater emphasis on research and development is a necessary ingredient for Dairyworld’s long-term success.

He says the research and development should focus on new product development and on the development of new processes and engineering tools.