July 22, 2013

Top tier dairies reveal what they want most from suppliers

By Nancy Appelquist, Entira Associate

To say times are tough for dairy farmers would be understating it. This sector has been smacked by forces rippling in from many different angles—steadily high input costs, labor challenges and regulatory pressures, just for starters.

Dairies have been in survival mode with devastating obstacles to overcome. The margin between cost of producing and selling milk is so miniscule it’s been hard for most dairies to make money. Larger dairies have fared better than the small ones, and dairies who grow their own feed build in some protection, but no one has been immune. Smaller dairies in particular have found it difficult to stay above water. The industry has seen too many dairy farms auctioning their cows and shutting down operations after being family-run for generations, losing their life’s work.

While the trend toward larger herds and tech-savvy managers continues on, top tier dairies know they will have to work smarter—and in some ways manage operations differently—to sustain a viable business through the storms of the foreseeable future. They have more skin in the game, and want help figuring out how to reap all they can from the investments they’ve made.

The management structure of large dairies is evolving, and as a new generation of dairy managers moves in, what changes should agribusinesses expect? How should agribusinesses adapt to serve larger dairies and help them through this turbulent time?

These are just a couple of areas Entira explored as part of our recent study, “Navigating a Changing Course: Decision Making at Today’s Top Tier Dairies.” The study encompassed more than 120 top tier dairies with average herd size of 1,865 cows, all part of the fastest growing segment of dairy farms—those that milk more than 1,000 cows, a segment that grew 38 percent between 2003 to 2011. And while they only represent 3 percent of the nation’s total dairies, they are responsible for half the milk production in the United States.

In our dairy study, one of the most eye-opening trends we uncovered was a shift in what dairies want most from their suppliers. The benefits they seek today are more about advice and knowledge, and less about price and service. Not only are they looking for a representative who is knowledgeable about their own products and services, they want someone who can advise them on broader issues pertaining to their operation.

“What do you know that can help me keep my business healthy?”

Dairies want to work with suppliers who can go beyond their own area of expertise and provide broad-reaching benefits. From their vantage point, they’re thinking, “I know you work with many other dairies. What have you seen that’s worked well for someone else? If you can connect me to other solutions, people and organizations that can help me improve my operation, then you are invaluable to me.”

We have one great piece of advice for anyone who supplies products and services to dairies—encourage your reps to think beyond the product or service they’re selling and draw on their own knowledge and experience to help facilitate improvements for their dairy farmer-customers’ operations.

The new generation of dairy manager is ready to push the envelope. They want suppliers to show them ways they can improve their business. And they’re not looking for the same old same old—their mindset clearly is, “show me how to do something new” or “tell me something I don’t already know.” Perhaps it’s giving suggestions about something they can improve upon in their parlor, or maybe connecting them with other dairies to share lessons learned and success stories.

We do find it fascinating that dairy managers ranked price and service so low on the importance scale. It could be they consider cost and service a price of entry—being competitive gets you in the door, but what else can you show me? It also could indicate willingness to fork over more dollars if the package comes with the added benefit of your broad-reaching knowledge and expertise.

How are you broadening your sales force’s knowledge and expertise? Are there other experts you can partner with to bring a bigger benefit to your customers? How does your solution work with other aspects of the operation, and can you help facilitate those connections to make them work better for your customer?

This is just one finding from our dairy study, and there are many more where that came from. We did the study to provide insights to companies who sell to or buy from the new generation of dairy managers. The complete report is available, containing insights about the evolving decision-making structure (and biggest influences), expectations of sales teams and expansion plans of modern, top-producing dairies. Contact me at 845.544.1985 or nappelquist@entira.net if you’re interested in purchasing a copy of the report, or if you’d like to have a conversation with us about how you can make yourself invaluable to your dairy customers. You can also read the study highlights for more information.