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Battle for breakfast is a big boost for dairies

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Fast-food restaurants continue expanding their breakfast fare, and American dairy farmers are milking the move for all it’s worth.

Part of a multifaceted business strategy resulting in greater usage of butter, cheese, and other dairy products, McDonald’s decisions in 2015 are sparking an industry trend and exciting producers. By spring of 2016, Burger King was among those buttering up customers with the new Egg-Normous breakfast burrito, stuffed with both cheddar and American cheese according to Bloomberg media reports. Rival Jack in the Box Inc. has also begun offering a triple-cheese-and-hash-brown breakfast burrito, and Dunkin Donuts reports a new 1,650-store test project involving mobile ordering of breakfast items in New York to get into the chase.

Alex Macedo, head of Burger King North America, described the battle for breakfast goods to be fierce. “We’ve invested more in breakfast,” he told investors in May. “The environment is very competitive.”

Paul Ziemnisky, senior vice president for global innovation partnerships at Dairy Management Inc., credited producers’ check-off dollars and ongoing lobbying efforts as one reason for the move.

“McDonald’s all-day breakfast has been great news for America’s dairy farmers. Cheese, butter and yogurt are prominent ingredients on McDonald’s breakfast menu. We also know consumers often drink coffee – with creamer – and the many milk-based McCafé beverages. With more breakfast items being consumed throughout the day, dairy plays a critical role at McDonald’s. This also creates an impact in the marketplace where competitors follow McDonald’s lead. This has been one of the checkoff’s primary goals from the beginning – growing sales by spurring change in the category leader,” he stated.

In addition to expanding its breakfast offerings, McDonald’s in September of 2015 announced its conversion from liquid margarine to 100-percent butter at its more than 14,000 stores. The move affects more than 20 national menu items, in addition to regional offerings, including long-time customer favorites such as the Egg McMuffin, biscuits and pancakes. Coupled with what appears to be a resurgence in sales at the stores, this increased usage seemed to be bolstering dairy sales even by the spring of 2016. For dairy producers, DMI estimates the move from margarine to butter alone will require an additional 500 to 600 million pounds of new milk equivalent each year.

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According to the USDA’s Economic Research Service, producers have a right to expect a creamier future. The March 2016 dairy output for butter topped 182 million pounds, up considerably from the March 2015 post of 167.5 million pounds. All cheeses-other-than-American also outperformed year prior, totaling 630 million pounds in March 2016 over 615.5 million in 2015. The National Dairy Product Sales Report released in June 2016 showed a continuing trend, with U.S. butter sales trending up between the week ending April 30 and the week of May 28, from 3,353,247 pounds to 4,171,706. Sales of U.S. 40-pound block cheddar cheese also climbed from 13,645,530 at the end of April to 15,685,771 the last week of May.

The move seems to be working for all involved. McDonald’s reported fourth-quarter revenues and earnings for 2015 significantly outpaced expectations and beat back what many had thought would be a gloomy future for fast-food in America. In a report given to CNN Money, CEO Steve Easterbrook credited the 5.7 percent jump in same-store U.S. sales to the breakfast menu move. Worldwide same-store sales also rose 5 percent. Given that move seems to be paying off, the restaurants are likely to keep churning in that direction. The move to an all-day breakfast menu addressed customer’s desire for those particular products, and the switch to butter is in keeping with national concerns about the healthiness of margarine.

“We took bold, urgent action in 2015 to reset the business and position McDonald’s to deliver sustained profitable growth,” Easterbrook stated in a company earnings release, in which other dairy-related moves such as the new Buttermilk Crispy Chicken sandwich were credited with the success.

For dairy producers who have been contributing check-off dollars all these years, this is all welcome news. The industry’s research and marketing efforts concerning the health benefits of dairy fats have been 25 years in the making and are likewise credited with helping restaurants make the pitch. Dairy Management Inc. began in 2009 a change in strategy, moving slightly away from traditional advertising and more toward corporate partnerships. McDonald’s was among the first of the restaurant chains to jump aboard, introducing more milk-based products such as yogurt, low-fat chocolate milk, mozzarella sticks and adding milk as the default beverage in children’s Happy Meals. The new mozzarella sticks alone are expected to require upwards of 150 million pounds of incremental milk a year, according to DMI information.

Ziemnisky observed that McDonald’s is the world’s largest quick-serve restaurant company and brings considerable marketing power to the table when selling products, a growing number of which are born at American dairies. Given that restaurant’s position in the industry, it’s believed that its competitors, as well as other restaurant chains, will follow the trend toward more dairy products, both in terms of menu items and preparation methods. With more than 60 million customers daily, the move toward an all-butter cooking process, all-day-breakfast and expanded breakfast offerings, McDonald’s is sure to continue playing a significant role in the business of U.S. dairy farmers.

Any views or opinions expressed in this article are those of the author and do not reflect those of AGDAILY. Comments on this article reflect the sole opinions of their writers.
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