The Rise of the Greek Yogurt Industry in Central New York - NADO.org

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As for Chobani, it is winning somegold of its own in terms of its marketingcampaign among the Olympic advertisers.Social media company AddThis,which monitors websites and users,tracked social media activity amongOlympic sponsors and other leading advertisersthroughout the London games,including mentions, write-ups, and Twitterfollowers, and awarded gold, silver,and bronze “brand medals” on a dailybasis. Chobani led their overall medalcount for the London games and wascrowned “Brand Champ” by AddThis,beating out such veteran competitorsas McDonalds, Coca-Cola, and VISA—pretty good for a newcomer. 15Yogurt and the NewYork Dairy IndustryA drive through upstate New York revealsa landscape with a sizable dairy industry.New York State had just under5,400 dairy farms as of 2010, based onpreliminary figures provided by the NewYork State Department of Agricultureand Markets. 16 Based on U.S. Departmentof Agriculture data, New York rankedthird among states for milk productionfor several years, dropping to numberfour in 2010 due to steadily increasingproduction in Idaho. 176This may reflect to some extent the impactof the recession on farmers, as theNew York Farm Bureau estimates thatabout 400 farms were lost to the 2009 recession—manymore than normal. 18In addition to milk production,manufacturing of milk-based products isvery important to the state economy. Accordingto 2009 Census Bureau figures,New York trailed only California andWisconsin in terms of manufacturingjobs generated from the dairy sector. 19Yogurt making is an important componentof this value-added activity in NewYork State. A February 2012 press statementfrom Governor Andrew Cuomopoints out that New York has a total of29 yogurt plants (traditional and Greek)that employ more than 2,000 people andproduced 530 million pounds of yogurtin 2011—more than double 2008 levels. 20Much of this growth, of course, has beendriven by the meteoric rise of Greek yogurt,to date driven by FAGE and Chobaniin the state, but soon to have companyfrom western New York.From a macro standpoint, thegrowth of the yogurt industry has alreadyhad a major effect on the dairyindustry in New York and surroundingareas. According to the governor’s pressstatement, New York’s yogurt producersused 1.16 billion pounds of milk in 2011,noting that this is comparable to themilk production of 500 averagesizeddairy farms in New York,based on an average of 115cows per farm. 21Milk consumption for NewYork’s yogurt production should continueto grow, driven by the Greek segment.Greek yogurt requires approximatelythree times the amount of milkthat non-Greek yogurt does to achievethe thick and creamy texture that is itstrademark. In fact, Chobani estimatesthat New York area farmers will needto increase milk supply 15 percent in 2013to meet demand. 22FROM FARM TO MARKETUnderstanding the market, milk pricingand effect down at the micro level, however,becomes more complicated. Forover a century, a complex, hybrid systemhas evolved in the U.S. to deal withproduction and distribution of milk thatis part market-driven and part publiclyadministered through various pricingregulations. 23 Milk is a “flow” commodity,as it is produced each and every day(there is no off switch on a cow). TheFederal government seeks to maintainorderly distribution and to protect thefarmers through milk marketing orders,which among other things set a minimumprice for the fluid milk.For distribution and consumptionpurposes, milk is broken down intogrades and classifications according tofederal rules. The highest “Grade” ofmilk is Grade A, with Grade B milk usedfor non-rated manufacturing purposes.24 Grade A milk is broken down intofour classes for pricing purposes, withClass I used in all beverage milks, ClassII used in fluid cream products, yogurts,ice cream, and other perishable products,Class III used in cream cheese andhard manufactured cheese, and Class IVmilk used to produce butter and driedmilk. 25For many years, farmer-owned cooperativeshave played a central role inthe U.S. dairy industry and in the marketingand distribution of milk. The industrywent through a transformation inthe 1960s and 1970s when dairy cooperatives,through mergers, consolidationsand acquisitions, grew from local to regionalorganizations, with some stretchingacross the country. 26Dairy Marketing Services (DMS) isthe primary supplier of milk to the Chobaniplant in Columbus, New York. DMSis a milk-marketing organization thatwas formed in 1999 through an agreementbetween Dairy Farmers of Americaand Dairylea Cooperative, Inc. Today,
DMS serves the industry “by combiningthe milk supplies of independent farmsand cooperative farms for the purposesof creating efficiency and the reductionof cost of milk assembly, field services,and transportation.” 27 DMS is servicedout of Syracuse, New York, which dispatchesabout 900 trucks of milk a dayto customers throughout the northeast.Dan Guido is a field representativefor DMS, and a veteran of the industrywho has lived in the central New Yorkarea for some time. 28 Guido notes thatNew York sits right in a prime locationnext to the I-95 corridor from Boston toWashington, DC—the largest market formilk in the country. He further points tothe quality of milk that is produced inthe northeast, a further reason for processorsto look to this region for valueaddedopportunities.Guido has witnessed plant closingsand consolidations over the years, andthe surge in Greek yogurt production inhis mind has provided a much neededmarket outlet for Class II milk. This newmarket helps allow the industry to “keeplocal milk local,” rather than relying onmarkets “farther and farther away” andthe increased transportation costs thathave to be borne.Milk pricing is also a complicatedmatter, due to how milk is regulated (toprotect the farmers and set a minimumprice) as well as bought and sold. Theprice of milk is set in the larger marketplace,and not at the local level. Whilefew would question the overall benefitState and local leadersare stepping up to addressthe challenges andopportunities facing thisgrowing industry cluster.of the growing yogurt industry to NewYork State and its farming community, itwould appear that an individual farmerlocated near these production facilitiesmay not necessarily be incented to expandtheir farms in response to this demand.Andrew Novakovic, a Cornell Universityprofessor and agricultural economist,has written a paper on the subject of thismarketing phenomenon: “The ChobaniParadox: Although the dairy industry,generally and instinctively, desiresgrowth, market and regulatory conditionssometimes make the cost of growthappear larger than the benefit.” 29Novakovic notes that this is not areflection of Chobani itself (it’s out oftheir control), but it does provide a goodillustration of this conundrum due to thecompany’s dramatic and concentratedgrowth.The supply of milk was also the focusof a Wall Street Journal article, inwhich Chobani founder Hamdi Ulukayacommented, “We are coming to a pointwhere the availability of milk is becominga challenge,” in reference to a newplant that Chobani is building in equallymilk-rich Idaho and is expected to employabout 400 people in Twin Falls. 30The article, however, also reports that theowners of FAGE are not worried aboutmilk supply in New York and notes thatPepsiCo and Theo Müller are building anew facility near Buffalo, in Batavia, NewYork where they can better access milkfrom the Midwest.State and local leaders are steppingup to address the challenges andopportunities facing this growing industrycluster. 31 In economic development,leadership starts at the top, andGovernor Cuomo certainly has been amajor booster for New York yogurt. Herecently convened the first “New YorkState Yogurt Summit” in Albany to “hearideas from industry leaders, farmers, andother stakeholders to help ensure thatthe yogurt industry continues to growand create jobs in New York.”Among the issues discussed at theevent, the governor announced that thestate will take new actions to help thedairy farmers increase their herds andproduction. The state is proposing toincrease its Concentrated Animal FeedingOperation (CAFO) cap from 200 to300 milking cows, allowing small farmsto expand without having to meet thecostly requirements of complying withCAFO environmental permitting. Thestate also intends to work with farmersand yogurt producers to lower energycosts by incentivizing the use of anaerobicdigesters to convert waste to energy.7
Page 2 and 3: Greek Yogurt:An Economic Driver inC
Page 4 and 5: The Greek YogurtPhenomenonand New Y
Page 9 and 10: of making Greek yogurt generates mo
Page 11 and 12: state Appalachian Regional Commissi
Page 13 and 14: The expanding market for Greek-styl
Page 15 and 16: Connecting to Markets and Suppliers
Page 17 and 18: officials, planning and development
Page 19 and 20: About the NADO Research FoundationF

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