CLIENT PRIVATE. Prepared for: The Wisconsin Milk Marketing Board Madison, Wisconsin

Transcription

1 CLIENT PRIVATE DISTRIBUTION AND MARKETS FOR WISCONSIN CHEESE Final Reprt May 1985 Prepared fr: The Wiscnsin Milk Marketing Bard Madisn, Wiscnsin ~ SRI Internatinal 333 Ravenswd Avenue Menl Park, Califrnia ( 415) TWX: Telex: SRI Internatinal CLIENT PRIVATE

2 @ ~ D_' CLI NT PRIVATE DISTRIBUTlbN AND MARKETS FOR WISCONSIN CHEESE Final Reprt May 1985 Prepared by: Nicl Bellanca Nancy Brgesn Prepared fr: The Wiscnsin Milk tv,1arketing Bard Madisn, Wiscnsin SRI Prject 7851 SRI Internatinal CLlENr PRIVATE

3 CONTENTS LIST OF ILLUSTRATIONS LIST OF TABLES vii ix I INTRODUCTION. 1-1 II SUMMARY OF FINDINGS AND CONLUSIONS Objectives and Scpe. Cnceptual Apprach, Survey/Interviews Results, and Other Findings. Ratinale and Limitatins Plant Survey and Interviews Other Findings Wiscnsin's Rle in the U.S. Cheese Market Wiscnsin Cheese Prductin Accunted fr in the Study Reprting Frmat The U.S. Cheese Market The Wiscnsin Cheese Market Wiscnsin Reginal Vlume and Share Estimates Industry Interviews: Dynamics f Cheese Distributin and Vlume Flw Pattern. Ecnmic Grwth. Ppulatin Distributin Cmpetitive Prductin/Prmtin by Other States Image/Quality Transprtatin Technlgy Gvernment Plicy Industry Viewpint: Prmtin and Advertising Prgrams fr Wiscnsin Cheese Cheese Manufacturers/Marketers Retailers Fdservice/Fd Manufacturing Trade III METHOD OF APPROACH General Overview Definitins/Reprting f Data Natural Cheese Prducers Questinnaire Survey Interviews with Majr Cheese Firms Interviews with Brkers, Distributrs, Chain Retailers, and Fdservice Firms II-l II-I II-3 II-3 II-3 II-4 II-S II-S II-6 II-6 II-8 II-9 II-17 II-19 II-I 9 II-19 II-I 9 II-20 II-20 II-20 II-20 II-21 II-22 II-22 III-I III-l 1II III-8 III-10 iii

4 CONTENTS (Cntinued) IV WISCONSIN'S ROLE IN THE U.S. CHEESE MARKET. Wiscnsin's Share f U.S. Cheese Prductin Wiscnsin Cheese Prductin Accunted fr in the Study Gegraphic and Market Detail. Pasteurized Prcess Cheese Prducts U.S. Prductin Wiscnsin Prductin The U.S. Pasteurized Prcess Prduct Market Wiscnsin Pasteurized Prcess Prduct Market Cld Pack Cheese and Cheese Fds U.S. Prductin Wiscnsin Prductin.. The U.S. Cld Pack Prduct Market Wiscnsin Cld Pack Prduct Market Cmments Cncerning Cld Pack Prduct Prmtability Cheddar U. S. Prduc tin Wiscnsin Prductin The U.S. Cheddar Market Wiscnsin Cheddar Market Clby. U.S. Prductin Wiscnsin Prductin The U.S. Clby Market The Wiscnsin Clby Market Jack.. e U.S. Prductin Wiscnsin Prductin The U.S. Jack Market. The Wiscnsin Jack Market Muenster. U.S. Prductin Wiscnsin Prductin The U.S. Muenster Market. The Wiscnsin Muenster Market Brick. U.S. Prductin Wiscnsin Prductin The U.S. Brick Market The Wiscnsin Brick Market Swiss U.S. Prductin Wiscnsin Prductin. The U.S. Swiss Market The Wiscnsin Swiss Market IV-i IV-i IV-i IV-4 IV-7 IV-7 IV-8 IV-9 IV-9 IV-14 IV-14 IV-14 IV-iS IV-iS IV-17 IV-19 IV-19 IV-19 IV-19 IV-2i IV-2S IV-2S IV-26 IV-26 IV-28 IV-3i IV-3i IV-3i IV-3i IV-33 IV-36 IV-36 IV-36 IV-36 IV-38 IV-4i IV-4i IV-4i IV-4i IV-43 IV-44 IV-44 IV-44 IV-44 IV-47 iv

5 CONTENTS (Cncluded) Mzzarella and Other Sft Italian Pizza-Type Cheeses u.s. Prductin Wiscnsin Prductin The U.S. Mzzarella Market.. Wiscnsin Mzzarella and Sft Italian Cheese Market Hard Italian Cheeses u.s. Prductin Wiscnsin Prductin... The u.s. Hard Italian Cheese Market The Wiscnsin Hard Italian Cheese Market All Other Cheeses u.s. Prductin Wiscnsin Prductin The U.S. Market The Wiscnsin Prduct Flw V THE DYNAMICS OF CHEESE DISTRIBUTION AND VOLUME FLOW PATTERNS Ecnmic Grwth Ppulatin Distributin Cnsumer Taste. Cmpetitive Prductin/Prmtin by Other States Image/Quality Transprtatin Technlgy.. Gvernment Plicy IV-50 IV-50 IV-50 IV-50 IV-52 IV-54 IV-54 IV-56 IV-56 IV-56 IV-59 IV-59 Iv-61 IV-61 Iv-61 V-1 V-1 V-I V-3 V-3 V-3 V-4 V-4 V-5 VI INDUSTRY PERSPECTIVE ON PROMOTION AND ADVERTISING PROGRAMS FOR WISCONSIN CHEESE Cheese Manufacturers/Marketers Retail Trade Fdservice/Fd Manufacturing Trade Industry-Wide Cnclusins VI-1 VI-1 VI-2 VI-3 VI-3 APPENDICES A B C WISCONSIN PLANT SURVEY QUESTIONNAIRE SAMPLE OF WISCONSIN PLANT SURVEY COMPUTER PRINTOUT SAMPLE OF CHEESE FLOW COMPUTERIZED PROJECTIONS A-1 B-1 C-1 v

6

7 ILLUSTRATIONS 1 2 METHOD OF APPROACH u.s. CHEESE MARKET REPORTING REGIONS. III-2 IV-S vii

8

9 TABLES 1 WISCONSIN CHEESE VOLUME AND SHARE OVERVIEW FOR MAJOR PRODUCT CATEGORIES WISCONSIN CHEESE REGIONAL VOLUME AND SHARE ESTIMATES. 3 U.S. METROPOLITAN AREAS THAT ARE MAJOR MARKETS FOR BRANDED RETAIL WISCONSIN CHEESE IN VOLUME TERMS 4 U.S. METROPOLITAN AREAS IN WHICH WISCONSIN CHEESE HAS A HIGHER THAN AVERAGE (38%) OR AVERAGE SHARE OF THE BRANDED RETAIL CHEESE MARKET U.S. METROPOLITAN AREAS WHERE WISCONSIN CHEESE HAS A SIGNIFICANTLY LOWER THAN AVERAGE (38%) SHARE OF THE BRANDED RETAIL CHEESE MARKET II-7 II-l0 II-15 II-16 II-18 6 NATURAL CHEESE PLANT SURVEY: REPORTED CHEESE PURCHASES BY SOURCE... 7 NATURAL CHEESE PLANT SURVEY: USE OF BRAND NAMES ON RETAIL PACKAGED CHEESE. 8 NATURAL CHEESE PLANT SURVEY: REPORTED CHEESE SHIPMENTS TO GOVERNMENT WAREHOUSES... 9 NATURAL CHEESE PLANT SURVEY: CHEESE SALES BY CUSTOMER CATEGORY CHEESE INDUSTRY INTERVIEWS III-5 III-6 III-7 III-9 III-l0 11 WISCONSIN'S ROLE IN THE U.S. CHEESE INDUSTRY. IV-2 12 WISCONSIN PRODUCTION ACCOUNTED FOR BY INDUSTRY SOURCES IV-3 13 POPULATION OF REPORTING REGIONS IV-6 14 U.S. PASTEURIZED PROCESS PRODUCT DISAPPEARANCE. IV-l0 15 WISCONSIN PASTEURIZED PROCESS PRODUCT VOLUME AND SHARE OVERVIEW IV-ll 16 WISCONSIN PASTEURIZED PROCESS PRODUCT REGIONAL VOLUME AND SHARE ESTIMATES..... IV U.S. COLD PACK PRODUCT DISAPPEARANCE. IV WISCONSIN COLD PACK PRODUCT VOLUME AND SHARE OVERVIEW IV-17 ix

10 TABLES (Cntinued) 19 WISCONSIN COLD PACK PRODUCT REGIONAL VOLUME AND SHARE ESTIMATES IV U.S. CHEDDAR DISAPPEARANCE. IV WISCONSIN CHEDDAR PRODUCT VOLUME AND SHARE OVERVIEW IV WISCONSIN CHEDDAR REGIONAL VOLUME AND SHARE ESTIMATES IV U.S. COLBY DISAPPEARANCE. IV WISCONSIN COLBY VOLUME AND SHARE OVERVIEW IV WISCONSIN COLBY REGIONAL VOLUME AND SHARE ESTIMATES IV U.S. J ACK DISAPPEARANCE IV WISCONSIN JACK VOLUME AND SHARE OVERVIEW. IV WISCONSIN JACK REGIONAL VOLUME AND SHARE ESTIMATES IV U.S. MUENSTER DISAPPEARANCE IV WISCONSIN MUENSTER VOLUME AND SHARE OVERVIEW IV WISCONSIN MEUNSTER REGIONAL VOLUME AND SHARE ESTIMATES IV U.S. BRICK DISAPPEARANCE. IV WISCONSIN BRICK VOLUME AND SHARE OVERVIEW IV WISCONSIN BRICK REGIONAL VOLUME AND SHARE ESTIMATES IV U.S. SWISS DISAPPEARANCE. IV WISCONSIN SWISS VOLUME AND SHARE OVERVIEW IV WISCONSIN SWISS REGIONAL VOLUME AND SHARE ESTIMATES IV U.S. MOZZARELLA AND SOFT ITALIAN CHEESE DISAPPEARANCE IV WISCONSIN MOZZARELLA AND SOFT ITALIAN CHEESE VOLUME AND SHARE OVERVIEW.. IV WISCONSIN MOZZARELLA AND SOFT ITALIAN CHEESE REGIONAL VOLUME AND SHARE ESTIMATES IV-55 x

11 TABLES (Cncluded) 41 U.S. HARD ITALIAN CHEESE DISAPPEARANCE. IV WISCONSIN HARD ITALIAN CHEESE VOLUME AND SHARE OVERVIEW WISCONSIN HARD ITALIAN CHEESE REGIONAL VOLUME AND SHARE ESTIMATES IV-58 IV WISCONSIN "ALL OTHER" NATURAL CHEESE PRODUCT FIRST STAGE DISTRIBUTION.. IV RELATIONSHIP BETWEEN KEY VARIABLES AND DISTRIBUTION PATTERNS OF WISCONSIN CHEESE.. V-2 xi

12

13 I INTRODUCTION The Wiscnsin Milk Marketing Bard (WMMB) cmmissined this SRI prject t determine the distributin pattern and markets fr Wiscnsin cheese. In 1983, Wiscnsin cheese makers prduced sme 1.7 billin punds f natural cheese, abut 39% f the ttal natural cheese utput in the United States, and 0.8 billin punds f prcess prduct (43% f U.S. utput). The majrity f Wiscnsin-prduced cheese, as a variety f natural and prcess cheese prducts, mves ut f state t widespread pints f cnsumptin thrugh a mul ti tiered dist ributin system. This cmplex dis t ri bu tin netw rk has numerus part i cipan ts, i ncl ud ing c hees e manufacturers/marketers, cheese prcessrs/marketers, cheese assemblers/ packers, grcery and fdservice distributrs, fd brkers, grcery whlesalers and retailers, manufacturers f prcessed fds, and fdservice cmpanies. Wiscnsin cheese is present in virtually every market thrughut the United States--althugh the state rigin f the cheese is nt always identifiable amng the cuntless packaged prducts available in the marketplace--as a grcery item sld under a Wiscnsin r natinal brand, as a randm-weight, private-label prduct in Califrnia, as a cmpnent ingredient in a branded package f prcess cheese slices in Texas, r as part f a fdservice prduct r manufactured fd prduct anywhere in the cuntry. In recgnitin f the imprtance f cheese prductin t the welfare f the Wiscnsin dairy industry, as well as f the excellent grwth prspects fr cheese cnsumptin in the United States, the WMMB wants t develp new and/r expanded prgrams fr prmting Wiscnsin cheese based n the prduct's identity and its quality reputatin. T achieve the gal f designing effective marketing prgrams and f targeting prgram expenditures in supprt f the entire cheese industry in Wiscnsin, the Bard seeks quantitative estimates fr Wiscnsin cheese in gegraphic markets natinwide. These estimates will indicate where the cheese is marketed, thrugh what channels, and in what quantities and prduct frm. The Bard als wishes t integrate int its verall marketing strategy the impact f ptential changes in vlume flw pattern and cheese distributin methds; ding s requires an assessment f whether, when, and in what directin such changes may ccur. This infrma tin is currently either nt available anywhere r is available in limited and highly prprietary frm nly t a handful f majr cheese marketers. In July 1984, the WMMB agreed that SRI Internatinal (SRI) shuld undertake a study t identify the natinwide dist ribu tin channels and markets fr Wiscnsin cheese. This reprt presents the findings f that study as utlined in SRI's June 13, 1984 Prpsal N. ICC , I-I

14 "Distributin and Markets fr Wiscnsin Cheese." In additin t the majr bjectives f the study, SRI als agreed t prvide best-effrt estimates f the market presence f Wiscnsin cheese in majr metrplitan markets, and t slicit, integrate, and reprt n the cheese industry's pinins and pints f view regarding the effectiveness f prmtin and advertising prgrams fr Wiscnsin cheese. The scpe f the wrk fcused n Wiscnsin-made cheese nly and included: Estimates f cheese vlume flw int reginal and majr metrplitan areas in the United States. Vlume estimates fr the majr types f natural cheese (Cheddar, Clby, Jack, Muenster, Brick, Swiss, Mzzarella, hard Italian, and "ther" cheeses) and fr pasteurized prcess and cld pack cheeses. Vlume estimates fr each cheese by majr distributin channel (branded retail, private-label retail and fdservice/manufacturing, and prcessing). This reprt summarizes the wrk cnducted by SRI and presents majr findings and bservatins. Sectin II summarizes the findings and cnclusins. Sectin III reviews the methd f apprach emplyed in the study, including a survey f Wiscnsin cheese prducers, the interview prcess, and the cmpu~er mdel develped fr the analysis and integratin f the available data base. Sectin IV reprts detailed estimates f the vlume flw fr majr Wiscnsin cheese types by distributin channel, by regin, and by selected majr metrplitan areas. Sectin V addresses factrs influencing the future distributin pattern and use f Wiscnsin cheese, including market trends, cnsumer tastes, effect f cmpeting cheese prductin and prmtin in ther states, transprtatin, and technlgy. Sectin VI reprts the cncerns and pinins f industry participants regarding prmtin and advertising prgrams fr Wiscnsin cheese tgether wi th the authrs' cncluding bservatins. Because much f the infrmatin fr analysis was provided t SRI n a cnfidential basis, the levels f aggregatin/disaggregatin in the data reprted reflect the authrs' best effrt t balance the Bard's need fr quantitative infrmatin against the need t preserve the cnfidentiality f the surces. The study was perfrmed at SRI under the supervisin f Gerge vn Haunalter, Directr, Health and Fd Industries Center. Nicl Bellanca, Senir Cnsultant, was the prject leader as well as the leader f individual prject tasks. Nancy Brgesn, Senir Ecnmist, was the ther majr cntributr t the entire prject as well as the leader f several tasks. Additinal cntributrs t selected tasks include Theresa Stetsn, Michelle Smith, Jeffrey Larsen, Teresa Maccarne, and Mark Bettger. SRI wishes t acknwledge the assistance prvided by the entire WMMB staff, particularly that f Leslie Lamb, wh served as prject liaisn fficer, J. Ricard Jhnsn, and Nancy Sprecher. In additin, the SRI 1-2

15 prject team wishes t thank all thse individuals whse cperatin and expert pinin were invaluable fr the successful cmpletin f this prject. In particular, the authrs wish t thank J. E. Tillisn, Executive Directr, Wiscnsin Cheese Makers Assciatin, and C. L. Farr, Directr f the Dairy Divisin, Wiscnsin Federatin f Cperatives, as well as the members f the Wiscnsin dairy and cheese industries, cheese dist ributrs and brkers, majr cheese whlesalers and retailers, and fdservice and fd manufacturing cheese buyers, bth in and ut f state. This prject wuld nt have been pssible withut their participatin and cntributins. 1-3

16 II SUMMARY OF FINDINGS AND CONCLUSIONS Objectives and Scpe The verall bjective f this prject was t assist the Wiscnsin Milk Marketing Bard in develping a cmplete framewrk f quantitative estimates f the flw f Wiscnsin cheese t gegraphic markets thrughut the United States. This first-time undertaking is a key element in the Bard's lng-term strategy fr designing and implementing prmtin and advertising prgrams specifically targeted tward supprting the cheese and dairy industries in Wiscnsin. The Bard asked SRI Internatinal t investigate several cmpnents pertaining t the verall bjective; accrdingly, ur effrts included: Tracing the vlume flw f Wiscnsin cheese quantitatively frm the pint f manufacture t the point f final sale r use. Develping best-effrt estimates f the market presence f Wiscnsin cheese by regin and by majr metrplitan market area in the United States. Preparing vlume flw estimates fr each majr type f natural cheese (Cheddar, Clby, Jack, Muenster, Brick, Swiss, Mzzarella, Hard Italian, and "ther" cheeses), and fr pasteurized prcess and cld pack cheeses. Allcating vlume estimates fr each cheese type by majr distributin channel (branded and private-label retail, fdservice/manufacturing, and prcessing). Identifying the majr frces fr change within, and their likely effects n, the existing distributin system and flw pattern fr Wiscnsin cheese natinwide. Sliciting and reprting n the cheese industry's pints f view regarding the perceived effectiveness f and interest in prmtin and advertising prgrams fr Wiscnsin cheese. In the wrk undertaken, the entire United States was deemed a majr market fr Wiscnsin-prduced cheese. This decisin was based n the knwledge that Wiscnsin cheese prductin (as recently as in 1983) accunted fr apprximately 39% and 43% f ttal U.S. utput f natural and prcess cheese, respectively, and that a large prtin f Wiscnsin cheese mves ut f state t widespread pints f cnsumptin thrugh a II-I

17 cmplex distributin netwrk. Cheese utput data fr Wiscnsin spanning June 30, 1983-July 1, 1984, were used as the baseline fr develping the estimates f vlume flw t markets, whereas a 2- t 5-year time frame was emplyed fr qualitative prjectins f issues pertaining t the identificatin f majr frces fr change in the existing distributin system fr Wiscnsin cheese. In interviews with in-state and ut-f-state cheese industry particifr future changes in distributin pants, SRI explred the prspects methds and attempted t gauge the industry's attitude tward prmtin prgrams fr Wiscnsin cheese. The relevant issues discussed with industry participants included: The impact f key variables--ecnmic grwth, shifts in ppulatin, adptin f highly efficient manufacturing technlgies, and the future directin f gvernment farm supprt plicy--n sales vlume and gegraphic distributin f Wiscnsin cheese. The cmpetitive psitin f Wiscnsin cheese in light f increasing cheese prductin and prmtin in ther states, and the transprtatin cst advantage accruing t cheese marketed clse t the pint f prductin. Wiscnsin cheese's excellent image and reputatin fr quality as differential attributes fr marketing it. Perceived bstacles t the effective implementatin f prmtin prgrams based n the use f labels and/r lgs t identify the state rigin f the cheese. Factrs within the industry/market structure and distributin dynamics fr Wiscnsin cheese that might cnstitute impediments t the frmulatin f prmtin strategies beneficial t the Wiscnsin cheese industry as a whle. Industry participants' pinins and suggestins regarding methds fr prmting Wiscnsin cheese; als, the perceived value f prmtin prgrams that the WMMB culd undertake in supprt f the Wiscnsin cheese industry. As much as pssible, SRI has attempted t preserve the industry viewpints n the issues in the riginal frm in which we received them frm particular segments f cheese industry participants, including manufacturers/ prcessrs, retailers, and fdservice/fd manufacturing firms. We emphasize that this prject is the first effrt by any rganizatin t build an integrated framewrk f quantitative data n the vlume flw and distributin pattern fr Wiscnsin cheese. Individual estimates thrughut this reprt reflect the level f precisin made pssible by II-2

18 reviewing data available frm any surce. Fr the mst part, the estimates make extensive use f prprietary infrmatin that was crucial t the successful utcme f the study, and was prvided t SRI n a cnfidential basis. T preserve the cnfidentiality and annymity f the surce, industry data have been reprted nly in aggregate frm. Cnceptual Apprach, Survey/Interview Results, and Other Findings Ratinale and Limitatins Because f the cmplexity f cnstructing an entire framewrk f data frm infrmatin knwn t be extremely diffuse, f varying levels f detail and accuracy, ften highly prprietary and/r cnfidential, and at times nnexistent, a multiprnged research apprach was devised and used fr this study. One "tp dwn" apprach cnsisted f a questinnaire survey f Wiscnsin cheese prducers t establish current utput data and t determine the first pint f sale and/r delivery fr the cheese frm plants in Wiscnsin. Cmputer mdeling was used t prject, by regin and by metrplitan area, the retail universe fr each type f Wiscnsin cheese frm available retail trade and ther industry data; this mdeling prvided the "bttm up" apprach fr estimating the vlume flw f cheese frm Wiscnsin. The survey and cmputer mdel were supplemented by in-persn and telephne interviews with knwledgeable industry bservers and with majr firms (e.g., cheese manufacturers/prcessrs, distributrs, fdservice firms, chain retailers, etc.) representing different tiers f participatin in the verall channels f distributin fr cheese natinally and in multistate peratins. The industry data were expected t fill infrmatin gaps, and als t serve t define a first apprximatin f the secnd stage f Wiscnsin cheese flw in-state and ut-f-state, r f final links t markets and end uses. When they were integrated int cmputer-simulated prjectins, the prductin, shipment, and cheese mvement data frm bth the interviews and the plant survey were used t estimate the vlume flw f Wiscnsin cheese t markets natinwide and, by a prcess f iteratin, t test the reasnableness f these first-time estimates by cmparing them with relevant facts and figures cllected frm all surces. The final estimates incrprate bth actual industry data and SRI's expert judgment; they may vary in precisin fr each cheese type, depending n the cmpleteness f the infrmatin available when they were prepared. Plant Survey and Interviews Questinnaires, with cver letters and instruc tins, were mailed t 314 natural cheese plants in Wiscnsin. Apprximately 1.1 millin punds f utput equal t 65% f the ttal prductin f natural cheese reprted by the State f Wiscnsin fr 1983, were accunted fr by the 134 plants II-3

19 that participated in the survey. The survey data were internally cnsistent, with a vlume variance between reprted prductin and shipments f less than 1%. A ttal f 28 cheese manufacturers/prcessrs, including virtually all f the natinal cheesemarketers, were als interviewed in persn. Seventy-six telephne and in-persn interviews were cnducted with instate and ut-f-state brkers, distributrs, chain retailers, and fdservice firms wh extended at least sme cperatin; an additinal 20 firms refused t participate. Other Findings In additin t plant utput data, the questinnaire mailed t natural cheese prducers in Wiscnsin asked n a cnf idential basis, fr vlume infrmatin n: (1) prduc tin mix; (2) in-plant stre sales and mail rder sales; (3) cheese purchased frm ther prducers; (4) data n instate and ut-f-state shipments by pint f delivery (e.g., prcess cheese plant, ther natural cheese plant, etc.) and by recipient custmer categry (e.g., distributr, grcery whlesaler, fdservice, etc.); and (5) the names f majr custmers. The analysis f these survey data prvides additinal insight int the dynamics f in-state and ut-f-state flw patterns fr Wiscnsin cheese, and f intercmpany shipments: 71 plants purchased a ttal f 19 millin punds f cheese, mstly frm ther cheese firms in-state; utf-state purchases accunted fr nly 3%. 36 plants ship retail packaged cheese under their wn brand, distributr brand/label, r stre label. 122 millin punds f cheese were shipped t gvernment warehuses, with 90% f the vlume remaining in Wiscnsin. Ttal mail rder vlume was less than 1 millin punds, althugh the ttal dllar value f gift packages is likely t be a hefty multiple f the value f the cheese alne. 696 millin punds f cheese reprted in the questinnaires culd be traced t ne f the fllwing categries f custmers: distributrs, grcery chains, fd manufacturers, fdservice peratins, cheese prcessrs, ther natural cheese firms, and firms with cmbined peratins fr natural and prcess cheese. The largest prtin f this cheese (412 millin punds r 59% by vlume) is initially delivered t in-state lcatins, and a large prtin f it (15%) ges t distributrs. This II-4

20 categry, hwever, als includes cheese assemblers and packers that supply cheese t ther firms and t cheese prcessrs in-state and ut-f-state. Wiscnsin's Rle in the U.S. Cheese Market Wiscnsin is the leading U.S. cheese manufacturing state, prducing 39% f the natin's utput f natural cheese and 43% f all prcess prducts. Within the natural and prcess categries, the Wiscnsin cheese industry's share f utput ranges frm 86% and 76% f cld pack prducts and Muenster, respectively, t 17% f Swiss and 26% f prcess cheese fds and spreads. Accrding t the U.S. Department f Agriculture (USDA), Wiscnsin cheese utput in 1983 ttaled 1,728 millin punds f natural cheese (1,720 excluding Rictta), 5% mre than 1982 levels, and 837 millin punds f prcess prducts, a 20% increase ver 1982 utput. Sme 306 plants were invlved in natural cheese manufacture. The number f Wiscnsin plants prducing prcess prducts was nt fficially reprted. Wiscnsin Cheese Prductin Accunted fr in the Study By means f the natural cheese prducer survey and ur interviews wi th maj r Wiscnsin cheese industry participants, SRI gathered and/ r estimated prductin and shipment infrmatin fr Wiscnsin plants ttaling sme 1,428 millin punds f natural cheese and 738 millin punds f prcess prducts. Respnse varied by cheese type. Mre than 80% f the prductin f Cheddar, Jack, Swiss, hard Italian, Brick, Mzzarella, and pasteurized prducts was identified by prducer, but less than tw-thirds f the prductin f Clby, Muenster, cld pack, and specialty (r "all ther" types) was reprted. In terms f tracking Wiscnsin cheese t final market, the prject team was able t assign abut 2,300 millin punds t specific market channels r uses, and 2,200 millin f thse punds t final destinatin. Fr sme cheeses, bth reprted prductin and final market vlume estimates exceed bth 1983 reprted prductin levels and prductin/shipment data derived frm the cmbined prducer survey/interview prcess. There are fur reasns fr these discrepancies: (1) changes in prductin level and prduct mix between the 1983 calendar year and the time frame cvered by the prducer survey (July 1983-June 1984) and the interviews (1984 calendar year); (2) the pssibility f sme errr in cmpleting the prducer survey frm by respnding cheese firms; (3) additinal cheese accunted fr in interviews with assemblers, packers, distributrs, retailers, and fdservice firms; and (4) the pssibility f sme duble cunting f cheese as it mves thrugh the multistage distributin system. The difficulties encuntered in tracing cheese flw and aviding duble cunting can best be illustrated by data derived frm the prducer survey. The survey results indicated shipments frm respnding firms f 981 millin punds fr the July 1983-June 1984 perid. Of this vlume, II-5

21 495 millin punds, r 50%, were shipped initially t ther cheese firms--fr prcessing, cutting and packing, and/r distributin--and 333 millin f thse punds were destined fr in-state cheese manufacturers. In additin, 134 millin punds were reprted as being shipped t distributrs, 63 millin punds t in-state lcatins. Much f the cheese that is shipped t in-state distributrs is cut and packed and then reshipped t r fr ther cheese manufacturers/marketers. Because f this intricate pat tern f cmpany relatinships and cheese flw wi thin the state, it is very difficult t avid sme duble cunting f the prduct as it mves t pints f ultimate cnsumptin r use. Reprting Frmat Thrughut this reprt, the estimates f bth the U.S. cheese market and Wiscnsin cheese flws are reprted fr the United States as a whle and fr 10 regins. These regins were selected t represent current cheese prductin, distributin, and marketing patterns as well as pssible, and t fit the manner in which majr firms chse t prvide sales and market infrmatin (e.g., "20% f sales west f the Mississippi" r "60% n the East Cast frm Washingtn, D.C., nrth"). In terms f the verall cheese market, reprting is by majr distributin channel r market utlet. These channels include retail branded and retail private-label prducts, fdservice/fd manufacturing cheese use, prcessing (fr pasteurized and cld pack prduct manufacture), gvernment (Cmmdity Credi t Crpratin purchases and cnversins, and sales t gvernment prgrams r services, such as the military and the schl lunch prgram), and "ther," which generally refers t cheese sld at cheese plant retail utlets and by mail rder. The U.S. Cheese Market Table 1 presents an verview f the disappearance f cheese f the majr types n a cnslidated basis fr the United States as a whle. Excluded frm this verview and frm the subsequent tables in this summary sectin are the "all ther" r specialty types f cheeses, which include Blue, sft ripened cheeses, Guda, etc. These small-vlume specialty types are mitted here fr tw reasns: (1) little gd market data n a natinal r reginal level is available fr such prducts, and (2) the data we derived n Wiscnsin prductin and distributin f prducts in this categry were insufficient fr an analysis cmparable in level f detail and reliability t that cnducted fr the larger vlume "mainstream" types f prducts. II-6

22 Table I WISCONSIN CHEESE VOLUME AND SHARE O ERVIEW FOR MAJOR PRODUCT CATEGORIES Cheese Disappearance Distributin Channel U.S. (millin lb) Wiscnsin (millin lb) Wiscnsin Share (%) Retail 1, % Branded Private-label 1, Fdservice/fd manufacturing 2, Prcessing 1, Gvernment & Other Unallcated 226 Ttal 6,502 2,525 39% * Includes nly pasteurized prcess, cld pack, Cheddar, Clby, Brick, Muenster, Jack, Swiss, Mzzarella and sft Italian, and hard Italian. + Includes sales f Cheddar t the Cmmdity Credit Crpratin, and pas teurized prcess and Mzzarella fr varius uses--military, schl lunch prgrams, etc. & Cheese factry stre sales and mail rder. Surce: SRI Internatinal II-7

23 Fr the prduct universe cvered in Table 1, abut 1.9 billin punds f cheese are ultimately sld in the United States as a retail prduct, and 2.1 *billin punds are used in the fdservice/ fd manufacturing segment. A full range f cheese types is represented in bth f these channels, but the relative imprtance f each type varies depending n the channel. Fr example, Mzzarella, remains predminantly a fdservice prduct, althugh its retail vlume is grwing. On the ther hand, cld pack prducts are almst exclusively sld retail. Mre pasteurized prcess, Cheddar, and Clby are fund in the retail channel than in the fdservice/fd manufacturing segment, but the ppsite is true fr hard Italian and Swiss. The remaining majr cheeses--jack, Muenster, and Brick--are split almst equally between retail sales and fdservice/fd manufacturing use. Within the retail segment, branded prducts--either manufacturer/ marketer brands r distributr brands--surpass private-label prducts in vlume. Again, cheeses differ significantly by type; branded prducts are f greater significance in prcess cheeses, and private-label prducts are strnger in certain natural cmmdity-type prducts, especially American cheeses such as Cheddar, Clby, and Jack. Prcessing--the manufacture f pasteurized prcess and cld pack cheese prducts--accunts fr abut 1.4 billin punds f U.S. cheese use, predminantly Cheddar. The gvernment channel takes almst 1.0 billin punds, mstly Cheddar fr the Cmmdity Credit Crpratin, and pasteurized cheese prcessed under gvernment cntract, althugh sme Mzzarella and pasteurized prcess prducts are als purchased fr use in federal prgrams. The "ther" channel, as indicated, reflec ts SRI's estimate f cheese sales thrugh cheese plant stre utlets and mail rder. The Wiscnsin Cheese Market Table I als presents an verview f Wiscnsin cheese disappearance fr the majr cheese types n a cnslidated basis, tgether with estimates f Wiscnsin's share f the U.S. cheese market by distributin channel. Of the 2.5 billin punds f Wiscnsin prduct SRI accunted fr, abut 37% ges t retail, 23% t fdservice/fd manufacturing, 22% (predminantly Cheddar) t prcessing, 8% t the gvernment, and a little * If it were included in this table, mst f the vlume fr the "all ther" categry wuld be assigned t the retail channel, and particularly t the branded prtin f the retail business. This adjustment wuld increase the ttal retail vlume t abut 200 millin punds mre than that reprted fr fdservice and fd manufacturing. II-8

24 mre than 1% t cheese factry culd nt be definitely assigned fic infrmatin. Altgether, accunted fr in this study. stre sales and mail rders. Abut 9% t any channel because f lack f speciabut 91% f all Wiscnsin cheese is In the retail channel, Wiscnsin cheese is estimated t accunt fr 38% f branded retail prduct and 68% f private-label retail sales. Wiscnsin's share f the fdservice/fd manufacturing market is shwn in Table 1 t be abut 27%. Hwever, its actual share is prbably clser t 35% because it is likely that a majrity f the unallcated prtin f Wiscnsin cheese enters this market segment. Given the predminance f pasteurized prcess prducts and Mzzarella in this unallcated vlume and ur knwledge f the general market rientatin f the prducing firms invlved, ur judgment is that as much as 175 t 200 millin f the 226 millin punds f unallcated prduct is ultimately used in fd service and/r manufactured fd prducts. In terms f prcess cheese prduct manufacture, we estimate that Wiscnsin cheese accunts fr abut 38% f the natural cheese used as ingredients in pasteurized prducts manufactured bth in and ut f state and in cld pack prducts made in state. At the same time, Wiscnsin cheese accunted fr abut 21% f gvernment cheese purchases and fr almst tw-thirds f the relatively small vlume f cheese sld frm factry stre utlets and by mail rder. One factr shuld be taken int accunt in interpreting this table, as well as the thers in this reprt. T cmplete this effrt, the SRI prject team had t develp nt nly the parameters f the U. S. cheese market, in tt and by type and by regin, but als cmparable infrmatin fr Wiscnsin-prduced cheese. Because f the difficulties and uncertainties inherent in such a task, the data and percentages shwn in this table and elsewhere in this reprt shuld be cnsidered mainly as guideline estimates f size and share, and their precisin may vary with the iufrmatin that is available. Thus, in Table 1, Wiscnsin's share f branded prduct culd be as high as 40%, whereas the state's private-label share culd be as lw as 60%. The range reflects the degree f difficulty assciated wi th estimating branded and private-label cheese vlumes fr the United States, as well as with specifically tracing the flw f Wiscnsin prduct by channel and label. Overall, hwever, the estimates are cnsidered reasnable indicatrs that Wiscnsin cheese has a significant share f the retail market--higher than the State's share f u.s. cheese prductin--and that the retail market is likely t be the channel f distributin mst respnsive t well-targeted prmtin and advertising effrts. Wiscnsin Cheese Reginal Vlume and Share Estimates Wiscnsin cheese sales by channel and regin are reprted in Table 2. This table cvers nly the retail and fd service/ fd manufacturing channels. Of the Wiscnsin cheese used fr prcessing, apprximately 60% II-9

25 Ta ble 2 WISCONSIN CHEESE REGIONAL VOLUME AND SHARE ESTIMATES * H Retail Prduct Fdservice/Fd Branded P ri va te Label Manufacturin~ Use Wis. Wis. Wis. U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share Regin (mil lb) (mi 1. lb) --.i!l (mil. lb) (mil lb) -.i!l (mil. lb) (mil. lb) --.i!l New England New Yrk/New Jersey L Eastern Strip Sutheast Upper Central Midwest Lwer Central H Midwest I... 0 Plains/Muntains Nrthwest Califrnia/ Nevada Suthwest Unallcated Ttal U.S * Includes nly pasteurized prcess, cld pack, Cheddar, Clby, Brick, Muenster, Jack, Swiss, Mzzarella and sft Italian, and hard Italian. +Includes Alaska and Hawaii. Surce: SRI Internatinal

26 is prcessed in state; the balance is shipped primarily t nearby states- Minnesta, Illinis, Indiana, and Missuri--althugh small tnnages fr prcessing d mve as far as Idah, Utah, Pennsylvania, and Ohi. Cheddar sld t the gvernment nrmally remains in state, with the exceptin f that prtin prcessed and distributed under the USDA dnatin prgram. Cheese purchased frm Wiscnsin surces fr ther gvernment uses is distributed allver the cuntry. As Table 2 indicates, branded Wiscnsin cheese prducts are marketed and cnsumed thrughut the United States. Wiscnsin cheese has a higher than average market share in three regins--new England, New Yrk/New Jersey, and the Upper Central Midwest--and an average share in the Eastern Strip and the Suthwest. Althugh significant vlumes mve t Califrnia and the Suthwest, Wiscnsin's share in these areas and in the Nrthwest, the Plains/Muntains regin, and the Lwer Central Midwest is substantially lwer than average. The key factrs respnsible fr this verall distributin pattern fr the 10 majr cheese types are the fllwing: Lgistics--A number f the larger and mre diversified manufacturers/marketers f branded cheese prduc ts have mul tiple plants and/r prcurement surces. Such firms therefre manufacture and/r prcure and distribute prducts in a manner best geared t meeting market needs while minimizing assembly, inventry, perating, and transprtatin csts. Thus, Western and Suthwestern markets fr sme prduc t categries are likely t be served frm cheese facilities in the Plains/Muntains regin, and thse in the Suth Central frm mid-states facilities. The distributin pattern that results fr such firms is nt always fixed r predictable. Plant capabilities, differential reginal milk and/r cheese csts, and changes in ther variables can alter prduct mvement patterns fr these firms, even t the extent that, at times, cheese may mve frm the West Cast t the Midwest fr prcessing. Market pwer and representatin--sme f the larger cheese firms that market branded prducts have develped ver the years a strng cnsumer franchise in certain parts f the cuntry thrugh their wn prmtin and marketing effrts and/r with the aid f particularly aggressive brkers and distributrs. Thus, ne firm's market strength may be in East Cast cities, anther's in Califrnia and the West, and a third's in the central United States. Cmpetitrs--In sme regins, strng lcal manufacturers/ marketers f branded prducts hld a significant market psitin in certain types f cheeses (e.g., Tillamk fr Cheddar in the Pacific Nrthwest). The presence and II-ll

27 cntinuing marketing/prmtinal thrust f such firms, therefre, makes it difficult fr Wiscnsin firms t achieve market penetratin in similar prduct segments. The verall market mix fr branded cheese prducts- Althugh the data in Table 2 cver 10 majr cheese types, 5 cheese types are predminant amng Wiscnsin branded prducts at retail--pasteurized prcess cheese, Cheddar, Clby, Cld Pack, and Hard Italian. Therefre, the verall distributin pattern and share distributin fr Wiscnsin cheese is strngly influenced by these five cheese types, and sme f the differences in pattern and market share fr the smaller vlume cheese prducts tend t be bscured. Firm size--generally, smaller Wiscnsin cheese firms marketing a limited line f prducts frm a single Wiscnsin lcatin are likely t fall int ne f tw marketing patterns, depending n their prduct mix and business strategies. If their prduct line cnsists f the larger vlume, cmmdity-type, less differentiated cheese items, mst f their sales typically are within an 800-mile radius. Firms with greater marketing expertise and a higher value, mre differentiated prduct line may market natinwide, and they ften target large urban markets--ls Angeles, Miami, Atlanta, Dallas-Ft. Wrth, Bstn fr example--where they have gd brker/ distributr cnnectins. Reginal cnsumptin preferences and acceptance f private labels--in certain market areas, private-label prduc ts have a strnger psitin cmpared wi th branded prducts than they have in ther areas. Als, the mix f cheeses preferentially purchased by cnsumers differs by regin. Fr example, mst cld pack prducts are cnsumed nrth f the Masn-Dixn line, and Brick tends t be a cheese cnsumed by Midwesterners. Thus, the reginal differences in cnsumptin patterns in terms f bth ttal per capita cnsumptin and cheese type are ultimately reflected in the verall distributin pattern and market share f Wiscnsin prducts. As Table 2 indicates, generally utlined abve is that the largest prducts in terms f ttal vlume is alng the East Cast, in Califrnia, terms f market share, strng markets Central Midwest and the Eastern United the net result f all the variables cncentratin f Wiscnsin branded likely t be fund clse t hme, and in parts f the Suthwest. In fr Wiscnsin cheese are the Upper States. II-12

28 Fr private-label prduct, the verall pattern f Wiscnsin cheese distributin is a little different, but nt radically s. If we adjust fr the cheese vlume that culd nt be allcated with precisin, Wiscnsin's verall share f private-label prduct wuld be 62%, nt the 68% shwn in Tabel 2. Wiscnsin-made cheese has a much higher than average share in the Upper Central Midwest regin and a smewhat higher than average share in the Eastern Strip; this pattern is cnsistent with the branded cheese pattern. The state's strng shwing in the Sutheast, Suthwest, and Lwer Central Midwest and smewhat weaker shwing in Califrnia and the Plains/Muntains areas are the result f several factrs: Key grcery chains--sme leading grcery chains whse key market territries are the Midwest and the suthern tier f states prcure significant vlumes f Wiscnsin cheese bth fr sale as natural cheese and fr use in manufacturing prcessed prducts t be sld primarily in their wn stres. Majr private-label cheese firms--the marketing strengths f a number f large Wiscnsin cheese firms are currently in the private-label segment. The sales and shipment pat terns f these large-vlume firms strngly influence the verall distributin pattern in this market channel. The private-label prduct mix--in determining tributin pattern f all Wiscnsin private-label pasteurized prcess prducts and Cheddar are predminant. the discheeses, clearly Wiscnsin private-label pasteurized prcess cheese flw- Fr thse firms that prcess nly in Wiscnsin, Wiscnsin prcess prduct manufactured fr private-label brands tends t flw in a mre r less triangular fashin, with the apex in the Upper Central Midwest and the tw base pints in Flrida and Texas. Fr majr private-label cheese firms that als have prcessing facilities in mre central lcatins in this triangle (e.g., in Missuri), sales f their Wiscnsin-based cheese prducts tend t be mre frequently cnfined t the Upper Central Midwest. Cmpetitrs--The strngest cmpetitrs utside the Upper Central Midwest in the private-label segment are in Califrnia and in a few f the Plains/ Muntains states fr Cheddar, and in the Plains/Muntains and the Eastern Strip regins fr pasteurized prcess prducts. Cmpany relatinships--in the private-label area, majr grcery whlesalers and chains have develped ver the years strng relatinships with suppliers, which tend t persist as lng as the buyer's needs are met. II-13

29 Overall, in the private-label market, a number f key participants- manufacturers/marketers and buyers--are s large, and the requirements fr assured quality and cnsistency in this prduc t segment are s stringent, that sme types f prmtinal and advertising prgrams targeted t this channel may yield gd results. As nted earlier, Wiscnsin mst likely has a larger share f the U.S. fdservice/fd manufacturing market than the data in Table 2 indicate. With this in mind, we can still examine ur estimates t determine the pattern f distributin in this market. The pattern that is apparent in the data--a much higher than average share in the Upper Cent ral Midwest wi th bth market shares and vlumes sld declining as distance frm Wiscnsin increases--is a reasnable and expected ne. Fdservice and fd manufacturing prcurement f cheese reflects cnsideratins f price, prduct cnsistency, and service. Transprtatin csts are mre imprtant in this channel than in any ther. Wiscnsin cheese tends t stay clse t hme nt nly fr reasns f shipping csts, but als because f the cncentratin f the fd manufacturing industry in the Upper Central Midwest and the large number f majr fdservice chains and fdservice distributrs that have headquarters in this regin. It is mre difficult t t race cheese entering this market channel than it is t trace mvements in ther channels because (i) in fd manufacturing, the pints f cheese use and final prduct cnsumptin may be widely separated, and (2) in fdservice, firms may buy centrally fr a prtin f r all f their requirements; they may authrize reginal subsidiaries t buy and receive prduct independently, r may d bth. In either case, the flw f cheese may mve beynd the regin f the receiving entity. We have tried t cmpensate fr this by integrating the results f numerus fdservice interviews with the pattern f cheese use implicit in cnsumer fdservice expenditures and varying reginal taste preferences fr cheese. It is quite pssible, hwever, that the actual use pattern fr Wiscnsin cheese in this segment might be mre gegraphically diffuse than ur data indicate. Hwever, althugh ur data shuld be regarded with sme reservatins, the fdservice/fd manufacturing channel des nt appear t be ne in which prmtin and advertising prgrams based n prduct rigin might prvide substantial benefits. The participants in this segment see little value in such effrts. Because f the tendency f cheese used in private-label brands and fdservice/ fd manufacturing t mve beynd the pint f delivery- which might be a reginal grcery chain warehuse r a fdservice cmmissary, fr example--the prject team has elected t limit the estimates f Wiscnsin cheese sales vlumes and shares by majr metrplitan area t branded retail cheese prducts nly. Fr these branded retail prducts, majr metrplitan markets that are significant fr Wiscnsin cheese in vlume terms are listed in Table 3 and significant areas in terms f market share are listed in Table 4; metrplitan areas in which Wiscnsin cheese has a relatively small market share are listed 1I-14

30 Table 3 u. S. METROPOLITAN AREAS THAT ARE MAJOR MARKETS F~R BRANDED RETAIL WISCONSIN CHEESE IN VOLUME TERMS Over 30 millin punds per year: New Yrk millin punds per year: Ls Angeles-San Dieg Chicag millin punds per year: Cincinnati-Day tn-clumbus Baltimre-Washingtn Bstn-Prvidence Detrit San Francisc Philadelphia St. Luis 5-10 millin punds per year: Cleveland Grand Rapids-Kalamaz Jacksnville-Orland-Tampa Pittsburgh Buffal-Rchester Indianaplis Milwaukee Minneaplis-St. Paul Albany-Schenectady-Try Dallas-Ft. Wrth Miami Omaha-Des Mines Hartfrd-New Haven-Springfield Hustn Kansas City Atlanta Syracuse 'Ie Ranked within categries frm highest t lwest Wiscnsin cheese vlumes. Surce: SRI Internatinal II-IS

31 Table 4 U.S. METROPOLITAN AREAS IN WHICH WISCONSIN CHEESE HAS A HIGHER THAN AVERAGE (38%) OR AVERAGi SHARE OF THE BRANDED RETAIL CHEESE MARKET Share f 50% r mre: Milwaukee New Yrk Grand Rapids-Kalamaz Syracuse Share f 45-49%: Detrit Omaha-Des Mines Peria-Springfield Albany-Schenectady-Try Chicag Davenprt-Rck Island-Mline Kansas City Cleveland Minneaplis-St. Paul Buffal-Rchester Share f 40-44%: Bstn-Prvidence Cincinnati-Day tn-clumbus Philadelphia Hartfrd-New Haven-Springfield St. Luis Baltimre-Washingtn Scrantn-Wilkes Barre Share f 35-39%: Indianaplis Atlanta Charlestn-Savannah Charltte Ls Angeles-San Dieg Charlestn-Huntingtn Greenville-Spartanburg-Asheville Jacksnville-Orland-Tampa Miami Nrflk-Richmnd Pittsburgh Raleigh-Greensbr-Winstn Salem >II Ranked within categries frm highest t lwest Wiscnsin cheese shares. Surce: SRI Internatinal 11-16

32 in Table 5. Within each table and fr each categry, the cities are ranked in terms f declining Wiscnsin cheese vlume, market share, r verall market size. As might be expected, a number f metrplitan areas appear regularly n Table 3 and Table 4. Only three metrplitan areas--san Francisc, Dallas-Ft. Wrth, and Hustn--appear in Table 3 and Table 4. Ai thugh significant vlumes f Wiscnsin branded retail cheeses are sld in these areas, the Wiscnsin share in these markets remains belw average. These estimates have been prepared t be respnsive t the Bard's need t establish criteria fr the develpment f prmtinal and advertising prgrams; e.g., t prmte where current market share r vlume f Wiscnsin cheese is high r, alternatively, t prmte where the market share is lw, but the markets are underging significant expansin. Industry Interviews: Dynamics f Cheese Distributin and Vlume Flw Pattern In interviews wi th in-state and ut-f-state industry participants, SRI identified eight key variables likely t influence the sales vlume and gegraphic distributin f Wiscnsin cheese: Ecnmic grwth Ppulatin distributin Cnsumer taste Cmpetitive cheese prductin/prmtin by ther states Image/ quality Transprtatin Technlgy Gvernment plicy. Ai thugh each variable was evaluated independently fr this study, verall impacts n sales vlume and gegraphic distributin f Wiscnsin cheese typically result frm multiple interactins amng variables at any given time. Mrever, a few variables (e.g., cmpetitive cheese prductin/prmtin by ther states; technlgy) culd influence Wiscnsin cheese either favrably r unfavrably, depending n ther circumstances. Overall, nly tw variables--ecnmic grwth and changing cnsumer tastes--were identified as having a clearly favrable impact n Wiscnsin cheese. The cmpetitive prductin/prmtin activities and the imprved quality and image f cheese frm ther states seemed t be the mst serius threats t bth the sales vlumes and the gegraphic dispersin f Wiscnsin cheese. The ratinale fr these cnclusins and the qualitative assessments f net impact fr each key variable are summarized in the fllwing subsectins. II-17

33 Table 5 u.s. METROPOLITAN AREAS IN WHICH WISCONSIN CHEESE HAS A SIGNIFICANTLY LOWER THAN AVERAGE (38~) SHARE OF THE BRANDED RETAIL CHEESE MARKET Less than 20% share: Seattle-Tacma Prtland Spkane-Yakima 20-25% share: San Francisc Dallas-Ft. Wrth Hustn San Antni-Crpus Christi Phenix-Tucsn El Pas-Albuquerque-Lubbck Oklahma City-Tulsa 25-30% share: New Orleans Denver Nashville-Knxville Memphis-Little Rck Birmingham-Mntgmery-Huntsville Salt Lake-Bise Luisville-Lexingtn Wichita * Ranked within categries frm largest t smallest cheese markets. Surce: SRI Internatinal II-18

34 Ecnmic Grwth The industry cnsensus is generally ptimistic abut the shrt- t medium-term (2 t 5 years) prspects fr cntinued grwth in the U. S. ecnmy, althugh pckets f ecnmic dislcatin may persist in gegraphic areas such as the Midwest because f industry restructuring and reduced emplyment by smkestack industries and in farming. The prgnsis is fr minimal net change in the current sales vlume f Wiscnsin cheese, althugh the ptential shift away frm Midwest markets may alter the gegraphic pattern f cheese sales and distributin. Prmtinal prgrams fr cheese in grwing markets wuld help t maintain Wiscnsin cheese's verall sales vlume. Ppulatin Distributin The prjected net gains in ppulatin fr the Suth and the Suthwest will be accmpanied by decreases in ppulatin in ther areas (e.g., the Midwest). Cheese sales vlumes will be negatively affected in areas with ppulatin lsses; in additin, Wiscnsin cheese may face transprtatin cst disadvantages in the grwing, but mre distant, markets. Prmtin prgrams might help t ffset the ptential fr declining sales vlumes. Cmpetitive Prductin/Prmtin by Other States Planned expansin in cheese prductin by ther states (e.g., Arizna, Califrnia) will reduce the gegraphic dispersin f Wiscnsin cheese, particularly in the West and the Suthwest. Lcally prduced cheese will gradually gain market share because f gd quality, transprtatin cst advantages, and cmpetitive pricing. Prmtin prgrams fr nn-wiscnsin cheese will benefit the prduct categry as a whle, and thus will be initially favrable fr Wiscnsin cheese in particular because f its large share representatin in virtually all markets natinwide. If such prgrams are nt balanced by a prmtinal strategy targeted t Wiscnsin cheese per se, hwever, prmtin f ut-f-state cheeses will eventually cut deeply int the Wiscnsin cheese's market share. Image/QuaE ty Althugh Wiscnsin cheese retains its excellent image and quality reputatin, recent imprvements in the quality f ut-f-state cheese prductin in general make these attributes less valuable fr differentiating Wiscnsin cheese prducts in the marketplace. The increasingly cmpetitive envirnment resulting frm the gradual ersin f the quality/image differential will have a negative impact n sales vlumes and gegraphic dispersin f Wiscnsin cheese. Prmtin prgrams may retard this anticipated trend, but they are nt likely t reverse it. II-19

35 Transprtatin The lng-term trend is fr cheese marketers t increase distributin efficiency and minimize transprtatin csts in rder t imprve margins. Cheese prcurement plicies and deliveries t particular gegraphic markets will tend t favr surces clsest t the pint f prductin, prvided that lcal suppliers can meet the buyers' requirements fr quality, price, cnsistency, and service standards. Because f increasing availability, quality imprvement, and the transprtatin cst advantage f ut-f-state cheese, Wiscnsin cheese is expected t lse vlume and share in distant markets. Cnversely, hwever, the cmpetitive psitin f Wiscnsin cheese will be enhanced in nearby markets. Therefre, the verall net change in current sales vlume shuld be minimal. Technlgy Advanced technlgy such as ultrafiltratin ffers the ptential fr significantly reducing cheese prductin csts by imprving cheese yields (by 10% r mre), and the cst differential is large enugh t ffset transprtatin cst disadvantages. Adptin f the technlgy wuld prvide a cmpetitive advantage t early adpters, and the timing fr adptin f the technlgy by Wiscnsin cheese makers will determine the ultimate directin f its impact n the sales vlumes and gegraphic dispersin f Wiscnsin cheese. Hwever, it is still questinable whether the use f the technlgy will require changes in the identity standards fr cheese, and whether the quality/taste f the cheese will be acceptable t cnsumers. Gvernment Plicy Industry participants agree that current gvernment supprt plicies are likely t underg revisins that will have differential reginal effects n milk supply and, cnsequently, n the existing milk/cheese price relatinship. Hwever, this key variable defies meaningful assessment because f the uncertainty assciated with the timing and the directin f pssible changes in gvernment plicy. Peridic reassessment f this key variable is necessary s that any future plicy changes can be accmmdated in the Bard's prmtin strategy. Industry Viewpint: fr Wiscnsin Cheese Prmtin and Advertising Prgrams Cheese industry participants expressed a wide range f pinins regarding the perceived value f prmtin and advertising prgrams that the WMMB culd undertake in supprt f the Wiscnsin cheese industry. Because f the structural diversity within this industry, a clear cmmnality f interests is nt apparent, and n single prmtin prgram satisfactry t the majrity f industry participants culd be identified. Als, the Bard's ability t implement such prgrams effectively withut widespread industry supprt is cnsidered dubtful. Nnetheless, industry participants are verwhelmingly favrable tward the selective prmtin II-20

36 f Wiscnsin cheese by means f a variety f prgrams targeted t the specific requirements and business interests f the individual cheese industry sectrs. Althugh industry suggestins fr structuring a prmtin package were either narrw in scpe r nnspecific, they are summarized belw fr each respndent categry t prvide guidance fr the Bard in the frmidable task f establishing brad-based prmtin strategies fr Wiscnsin cheese. Cheese Manufacturers/Marketers Frequently, large-size cheese prducers/marketers expressed the pinin that the use f labels and/r lgs t identify Wiscnsin cheese is impractical Because these participants typically market branded prducts and prcure cheese in large vlumes, a Wiscnsin label wuld impse severe restrictins n their prcurement practices and increase the cst f inventry. Its excellent quality image ntwi thstanding, cheese with a Wiscnsin label des nt cmmand a premium price, and few custmers request cheese prducts f identifiable Wiscnsin rigin. Matching funds fr individual manufacturers' prmtin prgrams fr Wiscnsin brands in key markets may be an alternative t the difficult task f frmulating an verall prmtin strategy fr Wiscnsin cheese. In a similar vein, sme respndents suggested prmting brand-name cheeses in markets where the presence f Wiscnsin cheese is lw. In general, cheese manufacturers/marketers favr generic prmtin and advertising prgrams. Hwever, the traditinal "eat mre cheese/it is gd fr yu" message, withut material prmting innvative uses f cheese, is cnsidered an ineffective apprach t expanding cnsumptin. Certain industry sectrs, such as cld pack cheese and cheese spreads manufacturers, wuld like t see their prducts better represented in any future prmtin prgrams fr Wiscnsin cheese. Medium-sized and small prducers are typically in favr f using the Real Seal, and they wuld like the Bard t establish prmtin prgrams fr a Wiscnsin lg r sme ther indicatr f State rigin. II-21

37 Sme prducers feel that the Bard shuld include supprt fr academic research in dairy fd technlgy in Wiscnsin as part f an verall prmtin strategy fr the Wiscnsin cheese industry. They believe that Wiscnsin has lst a gd deal f its leadership psitin in dairy science t ther states because f its failure t attract and retain new scientific talent. Retailers Retailers favr prmtin prgrams fr Wiscnsin cheese in general, particularly use f price reductin cupns in cnjunctin with lcal media advertising. A Wiscnsin label ffers prduct differentiatin, but it des nt cmmand premium prices because f the availability f cnsistently high-quality cheese frm many surces, the prevalence f brand-name advertising, and the intensity f price cmpetitin frm private-label items. The disseminatin f literature and recipes suggesting innvative uses f cheese is recmmended in prmtin prgrams. Generic advertising typically des nt have a lasting effect and fails t expand cnsumptin. Fdservice/Fd Manufacturing Trade This industry sectr generally perceives little value in prmtin prgrams based n the state rigin f cheese prducts. Prduct rigi n/ identity is nt an issue fr use, and the prmtin f cheese as an ingredient wuld have a minimal impact n the business. Cheese suppliers/assemblers fr this market wuld benefit frm a reliable, year-rund supply f cheese under cntracts r ther lng-term agreements whse firmness wuld nt fluctuate with the milk prducing seasn. 1I-22

38 III METHOD OF APPROACH General Overview The methd f apprach emplyed by the SRI prject team t develp the data base fr analysis is shwn in the flw diagram in Figure 1. Als, the utline displays schematically the relative time sequence f each majr task as well as the critical dependence f the prject's successful utcme n several key tasks requiring a high level f cperatin frm many cheese industry surces in-state and ut-f-state. Fr this reasn, the prspects f achieving the bjectives were assessed peridically in terms f infrmatin gaps, and the prject's prgress was mnitred by means f internal reviews. Mrever, the prject team sught the WMMB's participatin at critical pints in the wrk flw. The key tasks, which are discussed in detail in this sectin f the reprt, included: A cheese manufacturer/prcessr questinnaire survey designed t elicit the necessary data fr determining the first pint f sale and/r delivery f the utput frm Wiscnsin cheese plants. A series f in-persn and telephne interviews with majr cheese firms and knwledgeable industry bservers t fill infrmatin gaps in the plant survey, and t develp a first apprximatin f the secnd (and smetimes final) stage f cheese flw in-state and ut-f-state. Additinal telephne and in-persn interviews with brkers, distributrs, chain retailers, and fdservice firms selected n the basis f their participatin in the verall mvement and distributin f cheese natinally r in multistate peratins. The infrmatin frm this task was expected t prvide the final link t markets and end uses f Wiscnsin cheese we culd nt accunt fr therwise. On cmpletin f these tasks, published retail trade and ther cheese industry data were fed int a cmputer mdel develped by the SRI team fr manipulating incmplete sets f data int prjectins f the ttal retail universe fr each majr type f Wiscnsin cheese by regin and by majr metrplitan area. Prductin, shipments, and cheese mvement data cllected thrugh the survey and the interview prcess were then integrated int the cmputer-simulated prjectins, and the final estimates III-1

39 CHEESE MANUFACTURER / PROCESSOR SURVEY ASSEMBLY OF RETAIL AND OTHER INDUSTRY DATA MAJOR CHEESE FIRMS/ INDUSTRY INTERVIEWS BROKERS, DISTRIBUTORS, CHAI N RET AI LE RS, FOOD-SERVICE FIRMS INTERVIEWS DATA INTEGRATION AND ANALYSIS OF FINDINGS ORAL PRESENTATION FINAL WRITTEN REPORT FIGURE 1 METHOD OF APPROACH 1II-2

40 were tested fr reasnableness n the basis f their crrespndence with ther relevant facts and figures available t SRI frm industry and ther trade surces. These first-time estimates f the flw f Wiscnsin cheese t markets natinwide, therefre, incrprate bth actual industry data and SRI's expert judgment. Because f the cmplexity f cnstructing an entire framewrk f data based n infrmatin that is extremely diffuse, f varying levels f detail and accuracy, smetimes nnexistent, and highly prprietary when it is available, the SRI prject team recgnizes that future refinements and/r revisins in sme f the estimates reprted are nt nly pssible, but als desirable. Industry feedback and cperative interactin with the Bard may help t cnfirm the validity f the data. Definitins/Reprting f Data The natural and prcess cheese prduced in Wiscnsin and traced t market by the SRI study includes: Natural cheese prduced and packaged in state Cheese prcessed in state regardless f the surce f the cheese used fr prcessing Natural cheese prduced in state and cut/packaged elsewhere. The prtin f Wiscnsin cheese utput incrprated in prcess prducts manufactured ut f state (mstly Cheddar) and cheese prducts f imprted/nn-wiscnsin rigin marketed by Wiscnsin firms are nt included in the SRI estimates. The vlume flw f Wiscnsin cheese was traced t market by majr cheese type and by distributin channel (e.g., retail, fdservice/ fd manufacturing, gvermnent). With few exceptins, estimates f vlume flw fr cheese at retail are reprted by regin and fr majr metrplitan areas. The retail private label and fdservice/ fd manufacturing data are typically reprted at the reginal level nly because cheese prducts in these distributin channels tend t diffuse away frm the first pint f delivery and cannt be traced t specific markets with any degree f accuracy. Fr example, cheese delivered t a fdservice distributr warehuse in Denver may find its way t users as far away as Idah and the Nrthwest. Fr this study, a vast bdy f prprietary data was assembled by SRI frm a number f cperating cheese firms in-state and ut-f-state; this infrmatin is included in the estimates. Hwever, many f the data reprted have been aggregated t the extent deemed necessary by SRI t preserve the cnfidentiality f individual surces and in a manner respnsive t the client's need fr quantitative infrmatin. III-)

41 Natural Cheese Prducers Questinnaire Survey In cperatin with the WMMB, SRI develped a questinnaire t survey the ttal utput f natural cheese in Wiscnsin by majr cheese type fr the perid frm July 1, 1983-June 30, In additin t plant utput data, recipients were asked fr vlume infrmatin regarding prductin mix, in-plant stre sales, mail rder sales, cheese purchased frm ther prducers, in-s tate and u t-f-state shipment data by pint f delivery (e.g., prcess cheese plant, ther natural cheese plant, etc.) and by custmer categry (e.g., distributr, grcery whlesaler. fdservice, etc.), and the names f majr custmers. In return, SRI prmised t treat the prprietary infrmatin with abslute cnfidentiality and t prtect the annymity f individual respndents. A cpy f the questinnaire, which was mailed t 314 natural cheese plants in Wiscnsin, is shwn in Appendix A, tgether with the cvering letters and accmpanying instructins. Respnses were received frm 134 plants that accunt fr apprximately 65% f the ttal cheese prductin figure fr 1983 reprted by the State f Wiscnsin. Each questinnaire was reviewed by the SRI prject team fr internal cnsistency f reprting, and any ambiguity was reslved by means f telephne fllwup with the preparer. The questinnaire data were then cded and fed int the cmputer fr analysis. Samples f the aggregate cmputer printuts fr all cheese types and fr Cheddar are included in Appendix B f the reprt. Vlume variance, defined as the difference between prductin/purchases and shipments/factry and mail rder sales, was less than 1% f the ttal cheese vlume reprted and served t gauge the verall cnsistency f the survey data. Althugh the level f participatin fell smewhat shrt f the bjective fr a cmplete survey f Wiscnsin cheese plants, nevertheless the "tp dwn" apprach prved invaluable as a critical first step in gathering the data base needed fr this prject. Als, the analysis f survey data prvided insights int the dynamics f in-state and ut-fstate flw patterns fr cheese, and f intercmpany shipments as fllws: Amng the respndents, 71 plants indicated that they purchase a ttal f 19 millin punds f cheese frm ther surces (99% frm ther cheese firms); 97% f the vlume is purchased frm in-state surces, and nly 3% frm ut-f-state surces (see Table 6). Thirty-six plants ship retail packaged cheese under several labels/brand names--wn brand, distributr brand/ label, stre label (see Table 7). Apprximately 122 millin punds f natural cheese were shipped by the reprting plants t gvernment warehuses, 90% f the vlume t lcatins in Wiscnsin and 10% t ther states (see Table 8)

42 Table 6 NATURAL CHEESE PLANT SURVEY: REPORTED CHEESE PURCHASES BY SOURCE Number f respndents reprting purchases: 71 Vlume Purchased by Type f Prduct Other cheese firm Whlesaler/jbber Gvernment warehuse Ttal Vlume purchased by lcatin: In-state Out-f-state Ttal Thusand Punds 19, ,312 18, ,312 Percent 99 1 <1 100% % Average vlume purchased per respndent 272 Median vlume purchased per respndent 14 Surce: SRI Questinnaire Wrksheets III-5

43 Table 7 NATURAL CHEESE PLANT SURVEY: USE OF BRAND NAMES ON RETAIL PACKAGED CHEESE Number f respndents reprting shipment f retail packaged cheese: 36 Use f Label/Brand Name by Type Own Distributr Stre Other Ttal N. f Labels Number f respndents using mre than 1 label type: 13 Number f respndents using mre than 1 label: 16 Surce: SRI Questinnaire Wrksheets III-6

44 Table 8 NATURAL CHEESE PLANT SURVEY: REPORTED CHEESE SHIPMENTS TO GOVERNMENT WAREHOUSES State Shipments (lb. ) Percent Wiscnsin 111,336, % Pennsylvania 4,261, Indiana 2,866, Illinis 1,363, Nebraska 1,157, Ohi 716, Minnesta 496, New Jersey 347, Iwa 115, Missuri 100,000 <0.1 Ttal 122,761, % Surce: SRI Questinnaire Wrksheets III-7

45 A ttal f 696 millin punds f natural cheese culd be traced t custmers identified in the questinnaires. This aggregate f cheese deliveries is brken dwn by state and by custmer categry (distributrs, grcery chains, fd manufacturers, fdservice peratins, cheese prcessrs, ther natural cheese firms, and firms with cmbined peratins fr natural and prcess cheese) in Table 9. The large vlume f the sales traceable t distributrs in Wiscnsin results frm the inclusin in this categry f cheese assemblers and packers that in turn supply ther cheese firms and cheese prcessrs in-state and ut-f-state. Interviews with Majr Cheese Firms SRI interviewed in-state and ut-f-state majr cheese firms knwn t participate in distributing and marketing Wiscnsin cheese at the reginal r natinal level. The respnsible individual in each firm was identified and cntacted in a letter asking fr the firm's cperatin in arranging fr an in-persn visit by SRI representatives. The letter explained the bjectives f SRI's prject fr the WMMB, and indicated the tpics we wished t discuss with knwledgeable peple in the rganizatin. The list f tpics included: An utline f the cmpany's cheese manufacturing, prcessing, and prcurement activities in Wiscnsin, tgether with its methds and patterns f distributin. A quantitative, r at least qualitative, the flw f the cheese handled by the Wiscnsin t U.S. cnsuming areas. assessment f cmpany frm Opinins/pints f view cncerning hw, where, and in what frm prmtinal activities by the Bard wuld be mst beneficial t the cmpany, and perceptins f the Bard's rle in supprt f the Wiscnsin cheese industry. Majr cheese prcessrs in Wiscnsin were als cntacted and interviewed in this phase f the prject, fr a ttal f 28 in-persn interviews with majr cheese industry participants and several medium-size firms that had nt participated in the questinnaire survey. Virtually all the natinal cheese marketers eventually agreed t extend sme frm f cperatin t the prject, and are represented in the sample f cheese firms interviewed by SRI. The data n prcurement and marketing activities f these firms were prvided n a cnfidential basis, and are included in the estimates f Wiscnsin cheese flw t market in Sectin IV f this reprt. The participants' viewpints regarding the exis ting and 111-8

46 Table 9 NATURAL CHEESE PLANT SURVEY: CHEESE SALf.S BY CUSTOMER r. ATEGORY Deliveries b~ State (Thusand Puds) Custmer Cate~ W1 CA IL IN MA HI MO HN OH PA TX NY GA A2 Others Catesrl Ttal Distributrs 63,449 5,939 1, ,464 2, ,090 23,323 3,825 2,445 10, , ,614 Grcery chains 11,877 14, , ,596 12, ,974 2, ,628 Fd manufacturers , ,000 2,802 Fdservice finms 3, ,806 Cheese prcessrs 138, ,260 12, ,087 6, ,168 Natural cheese manufacturers 31,345 3,025 3, ,835 H H H I \0 Cmbined natural/ prcessed cheese 163, , ,301 28,075 15, ,168 1, , , ,084 State ttal 411,903 23,221 68,497 8,636 2,464 12,243 48,325 41,099 25,410 20,353 4,173 10,650 8,981 3,024 6, ,937 SurC!e: SRI Internatinal

47 future pattern f cheese distributin and vlume flw and their perceptins f prmtin/advertising prgrams fr Wiscnsin cheese are discussed elsewhere in the reprt. Interviews with Brkers, Distributrs, Chain Retailers, and Fdservice Firms Cncurrently with the interviews with majr cheese firms, SRI undertk a series f telephne and in-persn interviews with brkers, distributrs, grcery chain cheese buyers, and fdservice firms t augment and expand the infrmatin n the vlume mvement and distributin channels fr Wiscnsin cheese available frm prducers/marketers. Table 10 summarizes the type and number f interviews cnducted in this task, and indicates the level f cperatin received by SRI. Within each categry, the firms cntacted were selected n the basis f identifiable, significant participatin in cheese mvement and distributin in majr metrplitan areas, natinally r reginally. The sample universe was drawn t prvide apprximately equal cverage in all U.S. regins. Table 10 CHEESE INDUSTRY INTERVIEWS Number f Interviews Telephne In-Persn Categry Participated Declined Brker/distributr 13 9 Grcery chain/whlesaler Fdservice firm 8 2 Fdservice distributr 40 1 Ttal Surce: SRI Internatinal Interviewees were asked abut the vlumes f cheese handled/used, the share/vlume f prduct identifiable as Wiscnsin-made, the gegraphic markets served by the firm, and the firm's practices/ratinale fr surcing cheese. They were asked t cmment n whether distributin patterns fr cheese may change in the freseeable future and their ratinale fr anticipating thse changes, if any. The discussin fcused n the III-10

48 ptential fr changes in key variables--quality, price, lcal cheese prductin, transprtatin csts, lcal market needs, and cnsumer tastes--t influence the existing pattern f distributin channels fr cheese. The quality f the infrmatin cllected in these interviews ranged frm marginal t excellent. The results have been integrated in the apprpriate sectins f this reprt. Ill-ll

49 IV WISCONSIN'S ROLE IN THE U.S. CHEESE MARKET Wiscnsin's Share f U.S. Cheese Prductin As Wiscnsin cheese and dairy industry participants are aware, Wiscnsin accunts fr abut 39% f ttal U.S. natural cheese utput. Within the varius majr natural cheese types, fr which 1983 prductin data are shwn in Table 11, the state's share ranges frm 76% f Muenster t 17% f Swiss. Amng the ther natural cheeses, Wiscnsin prduces an abve-state-average share f Cheddar, hard Italian types and Brick as well. In the prcess prduct categry, Wiscnsin accunts fr 86+% f cld pack cheese and cheese fds, and 48% f pasteurized prcess cheese, but nly 26% f pasteurized prcess cheese fds and spreads. (The prbable reasns fr this deviatin frm the natinal pattern in pasteurized prduct utput mix are discussed in the sectin dealing specifically with pasteurized prcess prducts.) Wiscnsin Cheese Prductin Accunted fr in the Study By means f the natural cheese prducer survey supplemented by SRI's field and telephne interviews with selected majr Wiscnsin cheese firms, the prject team gathered and/r estimated infrmatin n prductin and shipments by Wiscnsin plants ttalling abut 1.4 billin punds f natural cheese and 0.7 billin punds f pasteurized and cld pack prcess prduct. The prductin vlume accunted fr by each majr cheese type is shwn in Table 12. Tw imprtant cautins must be mentined in regard t the Table 12 data and the distributin and market analyses by majr cheese type that fllw in this chapter. Fr sme cheese types--jack, Swiss, Hard Italian, and Brick--Table 12 shws that the cmbined prducer survey- and interview-derived prductin figures exceed the prductin vlumes published by the state fr Tw reasns fr this difference are pssible. The mst likely ne is the difference between the time perids cvered by the tw sets f data. Wiscnsin prductin data cver the 1983 calendar year. The SRI prducer survey cvers plant utput during the perid frm July 1983 thrugh June The SRI field and telephne interview data, gathered principally in the early mnths f 1985, reflect primarily 1984 calendar year prductin levels. Thus, it is very likely that sme f the discrepancy between the tw sets f data results frm cheese plant prduct mix changes that ccurred ver the reference perids. The secnd and less likely explanatin is that respnding cheese firms may have made sme errrs in cmpleting the prducer survey frm. Althugh we made many fllw-up telephne calls t clarify and cmplete plant survey data IV-1

50 Table 11 WISCONSIN'S ROLE IN THE U.S. CHEESE INDUSTRY Cheese Type Natural Cheddar 1983 Prductin (millin lb) Uni ted States Wiscnsin 2, Wiscnsin Share (%) 40.5% Clby Mnterey Jack Ttal American Mzzarella & Sft Italian Hard Italian Swiss Brick * All Italian Muenster All ther Prcess Ttal Natural Prcess cheese Prcess cheese fds & spreads Cld pack cheese & cheese fds Ttal Prcess 2, , , , , , lll , * Excludes Rictta. Surces: Wiscnsin Department f Agriculture, Wiscnsin Dairy Facts 1984; U.S. Department f Agriculture, Dairy Prducts, 1983 Summary; SRI Internatinal IV-2

51 Table 12 WISCONSIN PRODUCTION ACCOUNTED FOR BY INDUSTRY SOURCES (Millin Punds) Vlume Accunted fr 1983 Wiscnsin by Survey Percent Cheese Type Prductin and Interviews Accunted fr Natural Cheddar * 83% Clby Mnterey Jack Ttal American 1, Mzzarella & Sft Italian Hard Italian All Italian Swiss Brick Muenster All ther Prcess Ttal Natural 1, , Pasteurized prducts Cld pack prducts Ttal Prcess *Includes washed and stirred curd. Surces: Wiscnsin Department f Agriculture, Wiscnsin Dairy Facts 1984; SRI Internatinal IV-3

52 received, we did nt cntact all respnding firms, and prductin data were nt always verified as a matter f curse. Therefre, sme utput differences may reflect survey errrs. The secnd imprtant cautin is that, althugh 83% f natural cheese utput and 88% f prcess prduct utput were accunted fr, we were nt always able t gather adequate infrmatin fr certain cheese types t permit develpment f final market destinatin data fr equivalent vlumes. Fr a few types, hwever, infrmatin gathered in interviews with assemblers, whlesalers, majr cheese marketing firms, and buyers allwed the SRI prject team t accunt fr the market distributin f larger vlumes than thse shwn in ur prductin data. The market cverage fr each cheese type is discussed in mre detail in the sectins tha t fllw. Gegraphic and Market Detail As shwn in Figure 2, fr reprting purpses the United States was divided int 10 majr regins, the bundaries fr which, except in 3 cases, fllw state lines. Ppulatin fr each f the 10 regins is given in Table 13. A number f factrs were cnsidered in the prcess f defining these regins: Hw industry participants rganize fr r view the cuntry fr distributin and marketing purpses. The lcatin f majr prcessing facilities and the nrmal gegraphic pattern f pasteurized prcess prduct flw. Typical reginal brker/distributr service areas. The manner in which the field and telephne interview respndents were able r willing t release sales and market infrmatin. The ne majr shrtcming f the reginal breakdwn fr cheese market analysis and data presentatin lies in the inability t further subdivide the Upper/Central Midwest regin. This regin has the largest ppulatin cncentratin (24% f the U.S. ttal) and therefre cnsistently appears as the majr reginal cheese market fr cheese frm all rigins as well as fr Wiscnsin-made prduct. Unfrtunately, the level f detail regarding distributin and market infrmatin that the SRI prject team received frm many majr cheese firms did nt permit us t subdivide this regin's cheese market with a sufficient degree f reliability. IV-4

53 Plains/Muntains Suthwest FIGURE 2 U.S. CHEESE MARKET REPORTING REGIONS IV-5

54 Table 13 POPULATION OF REPORTING REGIONS ( Millins) 1984 Ppulatin New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest Lwer Central Midwest Plains/Muntains Nrthwest Califrnia/Nevada Suthwest Ttal United States* *Includes Alaska and Hawaii--l.5 millin. Surce: SRI Internatinal The 10 majr regins shwn frm the reprting base fr all cheese types and channels f distributin and are the nly gegraphic breakdwn available fr bth private-label prduc ts and fdservice/ fd manufacturing cheese use. Fr branded retail cheeses, whenever pssible, we have identified the metrplitan areas within regins that receive the largest vlumes f Wiscnsin cheese, and in which Wiscnsin cheese hlds the highest market share. In terms f distributin channels, the U.s. cheese market has been brken int a minimum f fur and smetimes up t six segments, depending n the particular cheese type. These segments are: Retail branded--cheese sld thrugh supermarkets, cheese shps, delicatessens, and ther types f retail utlets that bears the prprietary brand r trade name f a cheese prducer, prducer/marketer, r distributr. The segment includes bth cnsumer packaged prducts and fdservice sizes that are cut fr sale t cnsumers in service delicatessens r cheese shp peratins. Examples f branded prducts are Cunty Line (Beatrice), Lake-t-Lake, Wispride (The Nestle Cmpany), Velveeta (Kraft), and Green Bay Cheese. IV-6

55 Retail private-label--cheese sld thrugh supermarkets, cheese shps, delicatessens, and ther types f retail utlets that bears a stre brand. A stre brand may be the same as the stre name r may be anther name prprietary t that stre r stre chain. Examples are Krger, Springdale Farms (Krger), and Lucerne (Safeway). Fdservice/ fd manufac turing--cheese used in fdservice peratins, such as fast fd restaurants, r incrprated in manufactured fd prducts, such as cheese sauces r frzen pizzas, intended fr ultimate retail sale r fdservice use. This cheese mayr may nt bear a prducer/packer brand r a distributr label when purchased. Prcessing--cheese used as an ingredient in the manufacture f pasteurized prcess r cld pack prducts. Gvernment--cheese sld t the Cmmdity Credit Crpratin (CCC) r fr gvernment-funded prgrams r services, e.g., military r schl lunch use. Other--usually refers t cheese sld at cheese plant cheese shps and thrugh mail rder prgrams. Distributin channels are differentiated in this fashin primarily because (1) the advertising and prmtin needs attached t the different channels vary; (2) cheese purchase cnsideratins in each segment are qui te different; and (3) the ability t identify and track prducts f Wiscnsin rigin varies by segment. In the sectins that fllw, each majr cheese type is addressed in terms f U.S. and Wiscnsin prductin, the U.S. market and Wiscnsin cheese flw, market presence, and market share. Pasteurized Prcess Cheese Prducts U.S. Prductin U.s. utput f pasteurized prcess cheese and pasteurized prcess cheese fds and spreads reached 1.8 billin punds in 1983, as reprted by the U.S. Department f Agriculture (USDA), an increase f 11% ver 1982 levels. Actually, prductin f prcess cheese fds and spreads, which accunt fr abut 35% f the categry, declined by 9% in 1983, while prductin f prcess cheese increased by 27%. This substantial percentage increase in the prcess cheese categry resulted, at least in part, frm the transfrmatin by cheese prcessrs f surplus gvernment Cheddar int prcess cheese fr the USDA dnatin prgram. IV-7

56 In 1983, 39 u.s. plants manufactured prcess cheese, and 37 prduced prcess cheese fds and spreads. Because mst prcessing plants make bth types f prduct, 39 r 40 plants altgether cnstitute this segment f the U.S. cheese industry. Wiscnsin Prductin Wiscnsin utput f pasteurized prcess prducts in 1983 ttalled 741 millin punds, 78% f it in the frm f prcess cheese and 22% in the frm f cheese fd and spreads. The number f plants manufacturing prcess prducts is nt reprted by the Wiscnsin Department f Agriculture. In SRI's interviews, 17 cmpanies and 18 plants were identified as being invlved in pasteurized prcess prduct manufacture, 10 f them at substantial levels f utput (i.e., 15 millin punds per year r mre). Thrugh a cmbinatin f in-persn and telephne interviews, the SRI prject team accunted fr the prductin and likely channels and general gegraphic pattern f distributin f abut 676 millin punds f prcess cheese prduct, equal t a little mre than ver 90% f reprted 1983 utput. In reality, the percentage f prduct accunted fr might well be smewhat higher than that because sme tnnage f natural cheese grated in the state appears t be reprted as prcess prduct, and this causes an verestimatin f state prductin. Fr the 676 millin punds f utput fr which relatively gd prductin data were available, it is estimated that abut 70 millin punds cnsists f prduct prcessed under gvernment cntrac ts. Therefre, abut 606 millin punds are prduced frm natural cheese btained primarily frm cmmercial surces. (AI thugh sme Cheddar is purchased frm the CCC by Wiscnsin cheese firms, it is ur understanding that these vlumes are relatively small, and that they cnsist f bth Cheddar destined fr prcessing and aged cheese used fr cutting.) The natural cheese surced fr cmmercial prduct manufacture is predminately Cheddar. In 1984, an estimated millin punds f Wiscnsin Cheddar were used in the manufacture f Wiscnsin pasteurized prcess prducts. Abut 10 millin punds f Clby and a smaller vlume f Swiss were used fr this purpse as well. Wiscnsin's pasteurized prduct mix is higher in prcess cheese--at 78% f ttal prcess prduct utput--than that f the u.s. industry as a whle, in which prcess cheese is 65% f the categry ttal. The prbable reasns fr this difference in mix are that, because prcess cheese has a higher natural cheese cntent, (1) it is a higher value prduct and can therefre bear higher freight csts and travel farther t market, and (2) it must be prduced in areas where Cheddar supplies are ample. Prcess cheese fds and spreads, having substantially lwer natural cheese cntents, are (1) lwer value prducts that will be prduced clser t the ul timate cnsumer, s prduc tin will be mre gegraphically dispersed, and (2) require less ample lcal Cheddar supplies. A third factr influencing Wiscnsin's mix is the amunt f prductin fr the U.S. gvernment IV-8

57 because the ultimate utput under gvernment cntracts is prcess cheese, nt cheese fds r spreads. The U.S. Pasteurized Prcess Prduct Market Estimates f the U.S. pasteurized prcess prduct market were develped by the SRI prject team frm interview infrmatin cncerning the verall distributin f use by market channel and differential reginal patterns f cnsumptin and use. USDA data n civilian per capita disappearance f prcess prduct adjusted t eliminate cld pack cheeses were used t estimate ttal cnsumptin. In additin, sme limited retail sales estimates were available as a guide. SRI's estimates f the U.S. pasteurized prcess prduct market appear in Table 14. As the data shw, the retail market predminates, with 45% f the ttal, the balance being split between fdservice/ fd manufacturing use (33%) and USDA dnatins, which accunted fr ms t f the remaining 21% during this perid. Tw special factrs are relevant t this market. First, nly in the last few years have USDA dnatin prgrams accunted fr such a significant prtin f verall cnsumptin. These prgrams have the greatest impact n the retail channel, reprtedly decreasing retail sales by rughly 1 pund sld fr every 2 punds dnated. In additin, sme cheese firms indicate that the prgrams have had sme effect n fdservice markets; i.e., in certain gegraphic areas, prcess laf purchases have declined cncurrently with USDA laf dnatins. The secnd factr t cnsider is imitatin cheese, which has been excluded frm ur data. Imitatin cheese at retail is still a relatively small-vlume prduct. In fdservice and fd manufacturing, hwever, the vlume is significantly greater; if it were included, ttal cmbined natural and imitatin prcess cheese use in fdservice/fd manufacturing wuld equal retail sales vlumes. Wiscnsin Pasteurized Prcess Prducts Market Estimates f Wiscnsin pasteurized prcess prduct distributin by market channel and by regin are shwn in Tables 15 and 16 fr the 676 millin punds that culd be tracked. In Table 15, retail vlume is further brken dwn int branded and private-label prducts. The data fr Wiscnsin-made prducts are based primarily n infrmatin gathered in interviews. IV-9

58 Table 14 U.S. PASTEURIZED PROCESS PRODUCT DISAPPEARANCE Distributin Channel Fdservice/ Average Fd Per Capit Retail Manufacturing Other* Ttal Disappear Regin (millin lb) (millin lb) (millin lb) (millin Ib) ance (lb) New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest Lwer Central Midwest Plains/Muntains Nrthwest Califrnia/Nevada Suthwest (1,421.2) + (6.2) ** Ttal U.S , Percent f Ttal 45% 33% 21% 100% * USDA dnatin prgram (370 millin lb), plus mail rder. + Excludes USDA dnatin prgram tnnage. ** Includes Alaska and Hawaii. Surce: SRI Internatinal IV-IO

59 Table 15 WISCONSIN PASTEURIZED PROCESS PRODUCT VOLUME AND SHARE OVERVIEW Pasteurized Prduct Disappearance Distributin Channel U.S. (millin I b) Wiscnsin (millin lb) Wiscnsin Share (%) Retail % Branded Private-label Fdservice/fd manufacturing * Other Unaccunted fr Ttal 1, % * USDA dnatin prgram sales t the gvernment and mail rders. + May include grated natural cheese. Surce: SRI Internatinal IV-ll

60 Table 16 WISCONS IN PASTEUR IZED PR OC ESS PRODUCT REGIONAL VO LUME AND SHARE ESTIMATES * Regin U.S. Ttal (mil. 1b) Branded Wiscnsin (mil. lb) Retail Prduct Wis. Share ~ U. s. Ttal (mil. lb) Private Label Wiscnsin ( mil. 1b) Wi s. Share'" ~ U.S. Ttal (mil. lb) Fdservice/Fd Manufacturing Use Wiscnsin (mil. lb) Wis. Share ~ New England L New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest H <: I I--' N Lwer Central Midwest Plains/Muntains Nrthwest Califrnia/ Nevada Suthwest Ttal U.S Wiscnsin prduct ttals 676 millin pund cmpared with the 1983 ttal reprted prductin f 74 1 millin pund. +Includes Alaska and Hawaii. Surce: SRI Internatinal

61 Data fr several firms, generally the smaller nes, hwever, were relatively imprecise in terms f distributin channel. Fr almst all firms, infrmatin n market gegraphy was nt very detailed, s that reginal allcatin f prduct are based substantially n the judgment f the SRI prject team. As Table 15 shws, the Wiscnsin prduct accunts fr abut 40% f ttal U.S. pasteurized prduct cnsumptin. Wiscnsin-made prduct is estimated t accunt fr abut 25% f branded retail prduct sales. As reprted t us and shwn in the table, Wiscnsin prcess prduct accunts fr abut 78% f the private-label retail market and 41% f fdservice/ fd manufacturing use. Given SRI's infrmatin n nn-wiscnsin prductin f private-label prduct, hwever, it wuld appear that Wiscnsin's estimated 78% private-label share is actually clser t 65%, and that the additinal Wiscnsin prduct is used in fdservice/fd manufacturing, r represents gvernment cnversin and perhaps sme sales t the gvernment. In terms f sales gegraphy, Wiscnsin-branded prduct has higher than average shares n the East Cast, frm New England thrugh Flrida, and in Califrnia. This pattern fllws the reginal marketing strengths f the majr branded prcess prduct prducer/marketers. T the extent that ur data permit, we have identified the majr metrplitan area r state in each regin where Wiscnsin-made branded retail prduct has the highest vlume and market share. These are: New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest Lwer Central Midwest Plains/Muntains Nrthwest Califrnia/Nevada Suthwest Highest Vlume Bstn-Philadelphia New Yrk Baltimre-Washingtn Flrida Chicag New Orleans Denver Seattle-Tacma Ls Angeles-San Dieg Texas Highest Share Hartfrd-New Haven Spri ngfield Albany-Schenectady Try Pittsburgh Chicag Ls Angeles-San Dieg IV-13

62 In terms f bth vlume and share, bth private-label and fdservice/fd manufacturing prduct tend t remain clser t their pint f rigin than branded retail prduct. Wiscnsin's market shares are high in the Upper Central Midwest, New Yrk/New Jersey, the Eastern Strip, and, fr fdservice/fd manufacturing, the Plains/Muntains area. The verall pat tern f Wiscnsin-made, private-label and fdservice/ fd manufacturing prcess prduct use is a functin f three factrs: (1) the utput and prduct mix f prcess cheese manufacturing plants in Idah, Utah, Missuri, and Pennsylvania, which are better psitined than Wiscnsin in terms f transprtatin cst t serve utlying markets; (2) the number, capacity, and lcatin f the prcess facilities and distributin centers perated by each f the majr marketers, which establishes t a large degree each firm's natinal marketing pattern; (3) the existence in Wiscnsin f ne prcessing plant wned by a grcery chain, that serves its grcery stres lcated thrughut the suthern and western prtins f the United States. Cld Pack Cheese and Cheese Fds U.S. Prductin U.S. utput f cld pack cheese and cheese fds is reprted by the USDA t have ttaled millin punds in 1983, an increase f 69% ver 1982 levels. This prduct categry accunted fr 6% f the cmbined prcess and cld pack cheese categry vlume in 1983 and abut 2% f the mre than 5.1 billin punds f cheese cnsumed by civilians in the United States. In 198 3, 29 U.S. plants were reprted t be invlved in cld pack prduct manufacture. Wiscnsin Prductin Wiscnsin prduc tin f cld pack cheese and cheese fds in 1983 reprtedly ttaled 95.9 millin punds, a 55% increase in utput ver the previus year. Cld pack prducts accunted fr smewhat mre than 11% f Wiscnsin's cmbined prcess and cld pack pr duct utput as reprted by the Wiscnsin Department f Agriculture. The number f plants invlved in cld pack prduct manufacture is nt reprted. SRI's interviews indicate that at least eight cmpanies are invlved in Wiscnsin cld pack prductin at substantial levels f utput (i.e., 3 millin punds per year r mre). A number f ther Wiscnsin cmpanies prduce small quantities, sme fr the cmmercial market and sme fr "internal" use (i.e., fr emplyees' and/r member patrns' use, purchase r gifts). Thrugh a cmbinatin f in-persn and telephne interviews, the SRI prject team was able t accunt fr the prductin and general channels and gegraphic pattern f distributin f 51 millin punds f cld pack prducts. Mre limited infrmatin was gathered n the utput and likely distributin f anther 11.5 millin punds. The remaining utput--abut 33 millin punds--was accunted fr thrugh ther infrmatin surces extensively supplemented by the prject team's judgment. IV-14

63 Fr the 62.5 millin punds f utput fr which gd prductin data were gathered, it is estimated that at least 30 millin punds f the ingredient cheeses are f Wiscnsin rigin, with Cheddar predminating. Other cheese types mentined as ingredients were Swiss, Blue, Clby, and Prvlne. Estimates f ingredient use, ttal r by type, are nt available fr the ther 33.4 millin punds f Wiscnsin cld pack prduct utput. The larger manufacturers tend t buy cheese specifically fr ingredient purpses. Sme smaller manufacturers use a cmbinatin f purchased ingredients and trim frm ther peratins. The U.S. Cld Pack Prduct Market Estimates f the U.S. cld pack cheese market were develped by the SRI prject team frm infrmatin gathered in interviews cncerning the general reginal pat terns f cnsumptin and use and the share f each distributin channel. N cmprehensive publicly available infrmatin n distributin and markets exists fr this categry f prduct, which cnstitutes a small market in relatin t ther prcess and many natural cheeses. Therefre, guided by the infrmatin and insights shared by interviewees and with sme crrbratin frm the very limited retail data that are available, the SRI prject team develped the U.S. market data prvided in Table 17. Reginal per capita cnsumptin estimates were develped fr the retail channel, and fdservice use was apprtined reginally under the assumptin that it wuld tend t parallel retail sales vlumes. As Table 17 shws, the U.S. cld pack prduct market is predminantly a retail market, and the majrity f sales are made nrth f the Masn Dixn line. Bth per capita and ttal reginal sales tend t decline as ne mves suthward. The tw largest single city markets fr cld pack prducts are reprtedly Chicag and New Yrk City. Wiscnsin Cld Pack Prducts Market Estimates f the distributin f Wiscnsin cld pack prduct utput by channel f distributin and by regin are presented in Tables 18 and 19. In Table 18, cld pack prducts marketed thrugh the retail channel are further brken dwn int branded and private-label prduct. The data fr Wiscnsin-made prduc ts are based n infrmatin gathered in interviews. This infrmatin fr a number f firms was quite general in terms f market mix and gegraphy, and the final allcatin f prduct is based substantially n the judgment f the SRI prject team. As Table 18 shws, the cld pack market, regardless f channel r segment, is dminated by Wiscnsin-made prduct. Wiscnsin prducts accunt fr almst all f the private-label and fdservice sales, and 80% f the branded retail prduct. Wiscnsin-made prducts have a smewhat lwer share in the branded retail segment than in ther segments because at least ne majr branded retail cld pack manufacturer/marketer prduces significant vlumes utside Wiscnsin. IV-IS

64 Table 17 U.S. COLD PACK PRODUCT DISAPPEARANCE Distributin Channel Fdservice/ Average Fd Per Capita Retail Manufacturing Other * Ttal+ Disappear- Re~in (millin lb) (millin lb) (millin Ib) (millin Ib) ance (lb) New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest Lwer Central Midwest Plains/Muntains Nrthwest Califrnia/Nevada Suthwest Ttal U.S Percent f Ttal 78% 17% 5% 100% * Cheesemakers' stre sales and mail rder. + Reginal ttals exclude ther. Surce: SRI Internatinal IV-16

65 Table 18 WISCONSIN COLD PACK PRODUCT VOLUME AND SHARE OVERVIEW Cld Pack Prduct Disappearance U.s. Wiscnsin Wiscnsin Distributin Channel (millin lb) (millin lb) Share (%) Retail Branded Private label Fdservice/fd manufacturing * Other Ttal % % * Cheesemakers' stre sales and mail rder. Surce: SRI Internatinal In terms f reginal market presence (reprted in Table 19), in the branded retail market, Wiscnsin has higher than average shares in New England, the Eastern Strip, the Suthwest, and the Sutheast. Lwer than average shares are held in New Yrk/New Jersey, the Lwer Central Midwest, the Plains/Muntains regin, and all f the West Cast regin. Wiscnsin shares f the reginal private-label and fdservice/ fd manufacturing markets have nt been cmputed because fr substantial vlumes f Wiscnsin prduct in bth these channels, available infrmatin is inadequate t make a reliable reginal allcatin. Cmments Cncerning Cld Pack Prduct Prmtability Althugh it is nt generally cnsidered a majr prduct categry by the Wiscnsin cheese industry, the sales vlumes f Wiscnsin cld pack prducts are greater than thse f such cheese categries as Swiss, Jack, Brick, r Muenster. Cld pack prducts appear t be a grwth categry, given recent utput trends, and they fit well with cnsumers' increasing interest in differentiated specialty-type cheese prducts. The categry is pen t and is underging expansin thrugh line extensins int varius types f spreads. A number f participants are already cnnected with Wiscnsin thrugh brand name r ther label infrmatin, and Wiscnsin prduct is dminant in the marketplace. As a mainly retail IV-17

66 Tab1" 19 IHSCONS IN COLO PACK PRODUCT K ClONAL VOI.U~E AND SIIAKt: t STH11\HS Retail Prduct Fdscrvi ce / Fd Brallded Private Label Hanufac turine Use Wis. Wi s. Wis. U.S. Ttal Wiscnsin Sha re U.S. Ttal Wiscnsin Sha re* U.S. Ttal Wiscnsin Share* Regin (mil. Ib) (mil. Ib) ~ (mil. Ib) (mil. I b) ~ (mil. Ib) (mil. I b) ~ Nell England Nell Yrk/ New Jersey Eastern Strip Sutheast Upper Central Hidwest Lwer Centra l H < Hidllest I <0.1 ~ 00 Pia i ns / Hun ta ins Nrthwest O. I 0.4 <0.1 Califrnia/ Nevada Suthwes t Unallcated Ttal U.S * Percentages hav e nt been c mputed because sig ni f icant vlumes c annt be allc a ted by regin. Surce : SRI Internatinal

67 prduct, the cld pack categry is a highly visible segment f the industry. Thus, grwth prspects, market psitining, and Wiscnsin's preeminence prgrams. in this area make it a likely candidate fr prmtin Cheddar u.s. Prductin U. s. utput f Cheddar in 1983 reached 2,352 millin punds, an increase f 9% ver 1982 levels. Cheddar is the largest vlume cheese prduced, accunting fr abut ne-half f all U.S. natural cheese utput. The USDA reprts that 383 cheese plants manufactured Cheddar in 1983, 49% f them lcated in Wiscnsin. Wiscnsin Prductin Wiscnsin's 1983 utput f Cheddar--951 millin punds--was 40% f U.S. prductin. Abut 189 plants were engaged in Cheddar manufacture in that year, accrding t the USDA. Thrugh the natural cheese manufacturers' survey and additinal interviews, the SRI prject team was able t accunt fr the prductin f 681 millin punds f Cheddar and 112 millin punds f stirred and washed curd that have been cmbined with Cheddar fr the purpses f this analysis; tgether, these vlumes equal 83% f Wiscnsin's reprted 1983 Cheddar prductin. Thrugh the plant survey ef frt and in interviews, SRI cvered 97 plants, a little mre than ne-half f thse reprtedly invlved in Cheddar manufacture. The tnnage unaccunted fr (158 millin punds) cmpared with the number f nnrespnding plants (97) wuld indicate that mst nnrespndents have minimal vlumes f Cheddar utput and/ r that a number f them may have discntinued Cheddar prductin altgether. The U.S. Cheddar Market Estimates f the U.S. Cheddar market are shwn in Table 20. Cheddar disappearance as natural Cheddar thrugh majr cmmercial channels is much mre difficult t determine than that f ther natural cheeses because f the cmplexities invlved in Cheddar flw assciated with CCC purchases and sales, military purchases, USDA dnatins, and the use f Cheddar as the majr cheese input in the manufacture f pasteurized prcess and cld pack cheese prducts. T cmplicate estimatin even mre, the USDA publishes data n per capita civilian Cheddar disappearance in natural equivalent nly, and des nt attempt t distinguish between Cheddar cnsumed as Cheddar and Cheddar cnsumed in the frm f prcess prducts. IV-19

68 Table 20 U.S. CHEDDAR DISAPPEARANCE* Distributin Channel Fdservice/ Average Fd Per Capita + Retail Manuf ac turl ng Other Ttal Disappear& ReBin (millin lb) (millin lb) (millin lb) (millin lb) ance (lb) New england Yrk/New Jersey ~cw Eastern Strip Sutheast Upper Central Midwest Lwer Central ~Iidwest Plains/Muntains Nrthwest Califrnia/Nevada Suthwes t ** Ttal U.S ,943.0 & 2,668.0 Pe rcent f Ttal 16% 12% 73% 100% (725.0)++ (3.1)+-~ * Cmmercial disappearance; excludes USDA dnatins. but includes washed and stirred curd. + &T prcessing, CCC, sales t military. mail rder and factry stre sales. Prductin f Cheddar. washed and stirred curd. imprts. and gvernment **cmmercial sales. ++Includes Alaska and Hawaii. Per capita estimates reflect cmbined retail and fdservice/fd manufacturing use nly. Surce: SRI Internatinal IV-20

69 Thrugh a balancing prcedure, the SRI prject team allcated U.S. Cheddar, washed and stirred curd, imprted Cheddar, and gvernment Cheddar sales t the end uses shwn in Table 20. Of the 2.7 billin punds f estimated dmestic Cheddar supply, 1.9 billin, r 73%, can be accunted fr primarily by the cmbinatin f CCC purchases and the manufacture f pasteurized prcess and cld pack cheese prducts, and secndarily by minr amunts absrbed in sales t the military, factry stre sales, and mail rder sales. The average per capi ta cnsumptin f Cheddar in natural frm thrugh majr cmmercial retail and fdservice/ fd manufacturing use channels is abut 3.1 punds per year. Retail sales accunt fr 58% f this amunt, and fdservice/fd manufacturing fr the balance. The bservable differences in reginal per capita Cheddar cnsumptin patterns reflect bth varying retail sales and fdservice/fd manufacturing use intensities. Three areas stand ut n a per capita basis: (1) the Nrthwest, where cnsumer tastes run much mre tward natural than t pasteurized prcess prducts at retail and where fdservice expenditures are high n a per capita basis; (2) the eastern seabard frm New Yrk t Flrida, where the mix f retail cheese purchases incrprates greater prprtins f Italian, Swiss, and ther natural varieties, and thus less Cheddar; (3) the Upper Central Midwest, where Clby appears t substitute t sme extent fr Cheddar cnsumptin. Wiscnsin Cheddar Market Estimates f Wiscnsin Cheddar distributin by majr market channel and by regin are shwn in Tables 21 and 22. As indicated earlier, the difficulties encuntered in detailing the flw f Cheddar were greater than thse fr any ther cheese categry fr several reasns. First, the infrmatin bases frm which the SRI prject team wrked cvered different time frames. The plant survey spanned July 1983 thrugh June The persnal and telephne interviews generally cvered the 1984 calendar year. This difference alne wuld lead t sme difficulties. Secnd, prcurement patterns fr Cheddar fr prcessing fluctuate because majr prcessrs adjust vlume requirements, inventries, and surces as business cnditins and supplier perfrmance change. Third, a number f majr firms were willing t share with SRI nly general infrmatin r "rules f thumb" related t prcurement and marketing patterns. Finally, and perhaps mst imprtant, the structure f the Wiscnsin industry itself leads t data cllectin prblems. Prducers/ marketers supply bulk and/r packaged prduct t each ther, and a number f assemblers/ packagers f varying sizes perfrm intermediary rles that further bscure the pattern f Cheddar flw. The SRI prject team has taken int accunt prcurement fluctuatins and these interfirm and assembler/packer relatinships t the extent pssible. Hwever, sme duble cunting prbably still affects ur estimates. It may explain the imbalance fr Wiscnsin Cheddar shwn at IV-21

70 Table 21 WISCONSIN CHEDDAR PRODUCT VOLUME AND SHARE OVERVIEW Cheddar Disappearance Distributin Channel U.S. (millin lb) Wiscnsin (millin lb) Wiscnsin Share (%) Retail % Branded Private-label Fdservice/fd manufacturing Prcessing Gvernment Other + Ttal Imbalance & * * 1, , (+22) % * Excludes gvernment cheese prcessed fr dnatin. + Cheese plant stre sales and mail rder sales. &1983 Wiscnsin prductin--951 millin pund. Surce: SRI Internatinal IV-22

71 Table 22 WISCONSIN CHEDDAR REGIONAL VOLUME AND SHARE ESTIMATES Retail Prduct Fdservice/Fd Branded Private Label Manufacturins Use Wis. Wis. Wis. U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share Regin (mil. lb) (mil. lb) ~ (mil. lb) (mil. lb) ~ (mil. 1b) (mil. 1b) ~ New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest Lwer Central H < Midwest I N W Plain./Munta1ns Nrthwest Califrnia/ Nevada Suthwest Unallcated Ttal U.S. * * Includes Alaska and Hawaii. Surce: SRI Internatinal

72 the bttm f Table 21. Other pssible factrs cntributing t this imbalance are purchases frm the gvernment, the p ssi bil i ty that sme Cheddar frm ther states has been included with Wiscnsin prduct in terms f accunting, and cntinual changes in the level f Wiscnsin Cheddar prductin and/r shipments. Table 21 shws, that, f a ttal "supply" f Wiscnsin Cheddar f 973 millin punds (including the 22 millin pund imbalance discussed abve), abut 54% is used in the manufacture f pasteurized prcess and cld pack prducts in Wiscnsin and elsewhere. It is estimated that millin punds are used within the state, and that the balance f millin punds is shipped elsewhere fr prcessing, mainly t nearby states- Minnesta, Illinis, Indiana, and Missuri. Sme small amunts als mve t Idah, Utah, Pennsylvania, and Ohi. Frm July 1983 t June 1984, SRI's survey indicated that 123 millin punds, r 12% were sld t the gvernment. An estimated 4 millin punds were sld at cheese plant factry stre utlets r by mail rder. The balance--321 millin punds, r 33%--was sld as natural Cheddar thrugh grcery stres, independent delicatessens, and ther majr retail utlets, and t fdservice/ fd manufacturing accunts. In the retai l sectr, Wiscnsin Cheddar is estimated t accunt fr abut 47% f U.S. branded Cheddar sales and 70% f private-label prducts. Wiscnsin's fdservice/fd manufacturing share is estimated at 27%. When Wiscnsints cmmercial Cheddar market is analyzed n a reginal basis, as shwn in Table 22, Wiscnsin branded prduct has a higher than average share in its hme territry f the Upper Central Midwest, in the Plains/Muntains regin, and in the Lwer Central Midwest. Lwer than average shares are fund in New England, the Suthwest, the Nrthwest, New Yrk/New Jersey, and Califrnia. This cncentratin f Wiscnsin Cheddar primarily in the central prtin f the United States reflects the surcing patterns and distributin lgistics f the majr branded cheese firms that market substantial vlumes f Wiscnsin Cheddar. T the extent that ur data permit, we have identified the majr metrplitan areas r states in each regin where Wiscnsin-made, branded retail Cheddar has the highest vlume and market share. These are: Highest Vlume Highest Share New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest Bstn-Prvidence New Yrk Baltimre-Washingtn Miami Chicag IV-24 Buffal-Rchester Baltimre-Washingtn Flrida Milwaukee, Cleveland, Grand Rapids

73 Lwer Central Midwest New Orleans Plains/Muntains Denver Denver Nrthwest Seattle-Tacma Califrnia/Nevada Ls Angeles-San Dieg Ls Angeles-San Dieg Suthwest Dallas-Ft. Wrth Texas In terms f private-label prduct, as might be expected, Wiscnsin prduct has a higher than average share in the Upper Central Midwest. It als has a high share in the Sutheast, and nearly an average share in the Suthwest, the Plains/Muntains regin, and the Eastern Strip. This pattern indicates that Wiscnsin private-label prduct des travel substantial distances. The verall pattern reflects the Wiscnsin prductin and/r prcurement practices f majr private-label suppliers, as well as the significant vlumes purchased directly frm Wiscnsin cheese plants by majr grcery chains whse prime market areas cver all but the New England and New Yrk regins. Nte als that abut 13.3 millin punds culd nt be allcated n a reginal basis. This unallcable vlume is s large that, if its distributin were cncentrated in relatively few regins, it culd substantially change the reginal share pattern. Like ther types f cheese in fdservice use, Wiscnsin Cheddar is cncentrated heavily in the Upper Central Midwest fr several reasns: (1) this area is the mst significant in terms f fd manufacturing plants in the United States; (2) price and therefre transprtatin csts are a mre imprtant factr in this market; (3) the Upper Central Midwest is als the headquarters f majr fdservice and fdservice distributing firms. Fr this last reasn, sme f this prduct may well mve utside the Upper Central Midwest fr final use. Clby U.S. Prductin U.S. utput f Clby is nt reprted separately by the USDA, but is included in the data set fr "Other American Varieties," a term that encmpasses Clby, washed curd, stirred curd, Mnterey, and Jack. The prductin vlume fr these five cheese types cmbined was 576 millin punds in 1983, a slight decrease (3%) frm the previus year. A ttal f 223 plants were reprted t manufacture ne r mre f these prducts, 48% f them in Wiscnsin. Fr the purpses f ur market share analysis, the SRI prject team had t estimate U.S. Clby prductin. This task was apprached in tw ways. First, we judged, n the basis f interview infrmatin, that Wiscnsin accunts fr 50% r mre f U. S. Clby utput. The manuf acturing plant survey and field interview results indicated that Wiscnsin Clby prductin between July 1983 and June 1984 ttaled 107 millin IV-25

74 punds, and that virtually all large prducers respnded t ur surveyr granted us interviews. Allwing fr nnrespnding smaller plants, and assuming that Wiscnsin has mre than a 50% share f the market, we estimate U.S. Clby utput at 250 millin t 300 millin punds. Our secnd apprach was t analyze 1983 USDA per capita disappearance data. By inference, these data imply abut a 5.1 pund per capita disappearance fr Cheddar, Clby, and Jack cmbined in natural frm. If we subtract frm that figure SRI's estimated 3.3+ punds per capita cnsumptin f Cheddar as natural cheese, it appears that abut 1.8 punds per capita f Jack and Clby cmbined are cnsumed as natural cheese, r a ttal f abut 420 millin punds. Given the relatinship between Clby and Jack vlumes at retail and in fdservice use develped fr this reprt, we can derive a rugh estimate that 240 millin punds f Clby and 180 millin punds f Jack are sld at retail and used in fdservice/ fd manufacturing. Allwing 40 millin punds fr use f Clby in prcess prducts yields a U.S. prductin figure fr Clby f abut 280 millin punds. This figure is in the same range as the ne derived frm the ther apprach utlined abve. Wiscnsin Prductin Wiscnsin's 1983 reprted Clby prduc tin was 175 millin punds. As nted previusly, SRI's prductin estimate fr the prducer survey/ interview perid is lwer millin punds. This discrepancy may reflect (1) sme plant prduct mix change as a result f market cnditins, (2) a decline in prductin capacity, and/r (3) the incrpratin f sme stirred and washed curd in the Wiscnsin Department f Agriculture's Clby reprting categry. In this reprt, we have used 140 millin punds as the shipment basis fr the state. On this basis, SRI accunted fr 76% (r 107 millin punds) f estimated utput in the survey and interview phases f the prject. The U.S. Clby Market Estimates f the U.S. Clby market are shwn in Table 23. The retail channel predminates, accunting fr an estimated 54% f Clby disappearance. The fdservice/fd manufacturing segment uses a little less than ne-third f ttal utput. Abut 40 millin punds, r 14%, are presumably used in prcess prduct manufacture r are sld frm cheese plant stres and by mail rder. The average U.S. per capita disappearance f Clby thrugh retail and fdservice/fd manufacturing channels is 1.0 pund. On a reginal basis, the areas that cnsume the largest amunts f Clby per capita are the Upper Central Midwest, the Plains/Muntains regin, and the Suthwest. The regins that frm the U.S. perimeter, with the exceptin f the Suthwest, are belw the natinal average in per capita cnsumptin. Basically, Clby appears t be mre f an "America's heartland" cheese than ther types are, particularly Jack. IV-26

75 Table 23 u.s. COLBY DISAPPEARANCE Distributin Channel Fdservice/ Average Fd Per Capita Retail Manufacturing Other * Ttal Disappear- Regin (millin lb) (millin lb) (millin lb) (millin lb) ance (lb) New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest Lwer Central Midwest Plains/Muntains Nrthwest Califrnia/Nevada Suthwest Ttal U.S Percent f Ttal 54% 31% 14% (240.0) ( 1.0) * +Fr prcess prduct manufacture, plant stre sales, and mail rder. Includes Alaska and Hawaii. Surce: SRI Internatinal IV-27

76 The Wiscnsin Clby Market Table 24 shws SRI's estimates f Wiscnsin Clby distributin by market channel fr the 132 millin punds f prduct that culd be tracked t final market. As with certain ther cheeses, fllwing the Clby prduct flw is cmplicated because initial shipments f substantial vlumes are directed t ther cheese firms bth in and ut f state and t assemblers/distributrs, which may pack it fr ther cheese firms as well as fr their wn needs. This pattern f mvement t interim pints shws in the data derived frm the prducer survey. The ttal vlume f Clby shipments reprted by survey respndents was abut 90 millin punds. Of this 90 millin, 60 millin punds, r tw-thirds, were shipped initially t ther cheese cmpanies in state (38 millin punds) and ut f state (22 millin punds), whereas 7 millin punds (8%) were shipped t distributrs in state (4+ millin punds) and elsewhere (3 millin punds). Only abut 22 millin punds, r 24% f the reprted ttal, were shipped directly t grcery whlesalers, grcery chains, r fdservice distributrs/firms. Table 24 WISCONSIN COLBY VOLUME AND SHARE OVERVIEW Clby Disappearance U.S. Wiscnsin Wiscnsin Distributin Channel (millin lb) (millin lb) Share (%) Retail % Branded Private-label Fdservice/fd manufacturing Other* Unaccunted fr Ttal % * Prcessing and cheese cmpany factry stre and mail rder sales. Surce: SRI Internatinal As Table 24 indicates, Wiscnsin Clby, as reprted t SRI, has a higher than average share f bth the branded and private-label retail channels, but substantially lwer shares are estimated fr prcessing use IV-28

77 and the fdservice/fd manufacturing segment. It is pssible that, because f the difficulty in determining ttal U.S. Clby utput and the almst ttal absence f infrmatin n fdservice Clby use (r even cheese use ~ tt), SRI's estimate f U.S. fdservice/fd manufacturing use f this cheese type may be t high, and that Wiscnsin's share may be underestimated. The reginal pattern f flw f Wiscnsin Clby is reprted in Table 25. In terms f branded retail prduct, the largest vlume f Wiscnsin Clby is fund in the largest market--the Upper Central Midwest. In terms f market share, Wiscnsin cheese is well represented and relatively evenly represented in every market area. (The market share estimate fr New Yrk/New Jersey may well in fact be the highest fr any regin; nte, hwever, that the market size fr this regin is s small that a dwnward adjustment f 0.1 millin pund in the estimate f shipments frm Wiscnsin wuld reduce the state's share estimate by 6-8 pints.) Within these regins, the majr metrplitan area r state where Wiscnsin-made branded retail prduc t has the highest vlume and market share are: Highest Vlume Highest Share New England Bstn-Prvidence New Yrk/New Jersey New Yrk Buffal-Rchester Eastern Strip Baltimre-Washingtn Philadelphia Sutheast Miami Upper Central Midwest Cincinnati-Daytn Minneaplis-St. Paul Lwer Central Midwest Plains/Muntains Nrthwest New Orleans Denver Seattle-Tacma Califrnia/Nevada Ls Angeles-San Dieg San Francisc Suthwest Dallas-Ft. Wrth Texas Fr private-label retail prduct, Wiscnsin Clby is als widely distributed thrughut the United States. Hwever, a significant vlume f prduct culd nt be allcated gegraphically--abut ne-third f the ttal pundage in the private-label segment. If we adjusted fr this unallcated tnnage, Wiscnsin's average market share wuld decline frm 72% t 48%, and in tw regins--the Plains/Muntains area and the Suthwest--Wiscnsin Clby wuld still have a substantially lwer than average IV-29

78 Table 25 WISCONSIN COLBY REGIONAL VOLUME AND SHARE ESTIMATES Retail Prduct Fdservice/Fd Branded Private Label Manufacturin~ Use Wis. Wis. Wis. U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share Regin (mil. lb) (mil. lb) ~ (mil. lb) (mil. lb) ~ (mil. lb) (mil. lb) ~ New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest H Lwer Central <: Midwest I w 0 Plains/Muntains Nrthwest Califrnia/ Nevada Suthwest Unallca ted <0.1 Ttal U.S. * * Includes Alaska and Hawaii. Surce: SRI Internatinal

79 share. Given the magnitude f the unallcable vlume, hwever, it is nt realistic t draw even this limited cnclusin. Fdservice/fd manufacturing purchases f Wiscnsin Clby are heavily cncentrated in the Upper Central Midwest. This pattern is nt unexpected given the dynamics f this market segment. Hwever, it is very likely that a prtin f this vlume is ultimately cnsumed utside the regin, after majr natinal fdservice chains and distributrs have shipped it t perating units r custmers in ther areas f the cuntry. Jack U.S. Prductin As is the case with Clby, U.S. prductin f Jack cheese is nt reprted separately by the USDA, but is cmbined with Clby and washed and stirred curd, and is reprted as "Other American." The SRI prject team's estimate f 1984 U.S. Jack utput is 180 millin punds. Wiscnsin Prductin The Wiscnsin Department f Agriculture reprts a 1983 state Jack prductin level f 32.2 millin punds. In the initial natural cheese plant prducer survey and the interviews, we gathered data indicating a Jack utput f abut 49 millin punds. If we allw fr the utput f smaller prducers that did nt respnd t the survey, ttal Wiscnsin Jack utput culd be in the 55 t 60 millin pund range, an amunt equal t 30-33% f all U.S. utput. The U.S. Jack Market Estimates f the U.S. Jack market by majr distributin channel and regin are presented in Table 26. After we allw fr a small vlume used fr prcessing and cheese plant stre and mail rder sales, the remaining market--retail and fdservice/fd manufacturing--splits almst equally, wi th a slight advantage in the fdservice/ fd manufacturing channel. Cntrary t the apprach used fr mst ther cheeses, we have nt estimated reginal distributin f fdservice/ fd manufacturing Jack use slely n the basis f the pattern f fd service expenditures. Adjustments based n judgment have been made t reflect the mre intensive fdservice use f Jack in the western and suthwestern states. Thus, bth retail sales and fdservice/fd manufacturing use fllw a similar reginal pattern. The resulting average per capita disappearance pattern is dminated by the fur western regins--califrnia, the Nrthwest, the Suthwest, and the Plains/Muntains area. Per capita cnsump tin levels in the remaining regins are similar t each ther--between 0.4 and 0.6 punds. IV-31

80 Table 26 U.S. JACK DISAPPEARANCE Distributin Channel Fdservice/ Average Fd Per Capita Retail Manufacturing Other * Ttal Disappear- Regin (millin lb) (millin lb) (millin lb) (millin lb) ance ( lb) Ne w England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest Lwer Central Midwest Plains/Muntains Nrthwest Califrnia/Nevada Suthwest Ttal U.S Percent f Ttal 46% 49% 6% (170.0) (0.7) * +Fr prcessing, cheese cmpany stre and mail rder sales. Includes Alaska and Hawaii. Surce: SRI Internatinal IV-32

81 The Wiscnsin Jack Market SRI I S estimates f Wiscnsin Jack distributin and share by market channel are shwn in Table 27. Table 27 WISCONSIN JACK VOLUME AND SHARE OVERVIEW Jack Disappearance U.S. Wiscnsin Distributin Channel (millin lb) (millin lb) Retail Branded Private-label Fdservice/fd manufacturing Other* Wiscnsin Share (%) 40% Unaccunted fr Ttal % * Prcessing and cheese cmpany factry stre and mail rder sales. Surce: SRI Internatinal Of the estimated 55 millin punds f Wiscnsin Jack prduced, we were able t accunt fr the distributin and marketing f a little less than 80%. Of the 43 millin punds tracked t market, abut ne-third is branded retail prduct, abut 44% ges t private-label sales, and the balance is sld fr fdservice use. A minr amunt is used in prcess prduct manufacture. Of the 12 millin punds nt accunted fr, the prject team judges that a significant prtin is destined fr fdservice use. Again, as with ther cheeses, a significant prtin f Wiscnsin Jack prductin is nt sent directly t market, but instead is shipped t ther cheese cmpanies and assemblers/ distributrs. Of the 36 millin punds reprted in the prducer survey, mre than 50% was initially shipped t ther cheese firms, predminantly in Wiscnsin, Illinis, and Pennsylvania. Anther 25% ges initially t assemblers/distributrs, a little IV-33

82 less than ne-half in state, Minnesta, Missuri, and Texas. accmpanied by cutting, packing, mvement very difficult. the balance primarily t Califrnia, This transshipment, which may als be and relabeling, makes tracing prduct In terms f final market, we estimate that Wiscnsin-rigin Jack accunts fr 30% f all branded retail Jack sales, 53% f private-label prduct, and a relatively small prprtin f fdservice use. The distributin f Wiscnsin Jack by regin is shwn in Table 28. In branded prduct, the Upper Central Midwest is Wiscnsin's largest vlume market and is the area in which Wiscnsin cheese has the highest share. It als has higher than average shares in New England and Califrnia. Its shares are lwer than average in the Suthwest, Nrthwest, Lwer Central Midwest, and Sutheast. The state's market share in the remaining fur regins is clse t the U.S. average. Whenever pssible, we have identified the majr metrplitan areas r states in each regin where Wiscnsin-made. branded retail Jack has the highest vlume and market share. These are: Highest Vlume Highest Share New England Bstn-Prvidence New Yrk/New Jersey New Yrk New Yrk Eastern Strip Baltimre-Washingtn Philadelphia Sutheast Miami Upper Central Midwest Chicag Milwaukee, Grand Rapids Lwer Central Midwest Plains/Muntains Nrthwest New Orleans Denver Seattle-Tacma Califrnia/Nevada Ls Angeles-San Dieg Ls Angeles-San Dieg Suthwest Dallas-Ft. Wrth Texas In terms f private-label prduct, Wiscnsin's share is lwer than average in the Nrthwest, Califrnia, and the Suthwest. The verall market share pattern indicates that Wiscnsin Jack in private-label use stays clse t hme r mves suth and east. A smewhat similar pattern, except fr the Califrnia regin, characterizes the fdservice/fd manufacturing channel. Hwever, the ttal vlume f Wiscnsin prduct allcated in this segment is quite small; as a result, minr changes in IV-34

83 Table 28 WISCO~SIN JACK REG[ONAL VOLu~E A~ SI~RE ESTIMATES Regin U.S. Ttal (mil. lb) Branded Wiscnsin (mil. Ib) Re ta il P rduc t Wis. Share ---ill- U.S. Ttal (mil. Ib) Private Label Wiscnsin (mil. Ib) Wis. Share --1!.L U.S. Ttal (mil. lb) Fdservice/Fd Manufacturing Use Wiscnsin (mil. lb) Wis. Share --1!.L New England <0.1 New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest <0.1 H < I Ul VI Lwer Cent ral Midwest PIa i ns/liuntai ns Nrthwest 3.2 < <0.1 <l Califrnial Nevada Suthwest * Unallcated Ttal U.S * Nte that 12.2 millin punds f Wiscnsin prduct are unaccunted fr and therefre cannt be allcated by +channel r regin. Includes Alaska and Hawaii. Surce: SRI Internatinal

84 the prject team's judgment f where cheese ges can make a significant difference in relative reginal market shares. Muenster u.s. Prductin As reprted by the USDA, 56 cheese plants were engaged in the prductin f Muenster in 1983, and 41% f them were in Wiscnsin. Ttal utput fr all plants in 1983 was 69.6 millin punds, a decline f abut 3% frm the previus year. Wiscnsin Prductin In 1983, Wiscnsin prductin f Muenster was 52.8 millin punds. That amunt was 76% f U. S. prductin, and a decrease f 8% frm 1982 vlume. Sme 41 plants reprted Muenster utput t the USDA. Thrugh the natural cheese manufacturer's survey, supplemented by interviews, we were able t accunt fr the prductin f 26.3 millin punds and the marketing and distributin f a slightly larger amunt millin punds. Thus, we were unable t t rack rughly ne-half f the state's prductin and shipments t their final markets. This relatively sparse cverage f this categry shuld be kept in mind in cnsidering the market data presented in this subsectin. The U.S. Muenster Market The prject team's estimates f the U.S. Muenster market by majr channel and regin are shwn in Table 29. The verall market is split rughly equally between retail and fdservice; nly a small vlume is sld thrugh factry stre utlets and mail rder r used as prcessing input. In terms f the gegraphic pattern f cnsumptin, what evidence exists indicates higher than average per capita cnsumptin levels in the New Yrk/New Jersey and New England regins; the lwest levels f per capita use are west f the Mississippi. Because f these apparent reginal sales differences at the retail level, we assumed that fdservice use wuld fllw nt nly reginal fd service expenditure patterns, but als tastes as reflected in grcery purchases. Therefre, fdservice/ fd manufacturing use f Muenster was adjus ted judgmentally t cnfrm mre clsely with the perceived reginal taste preferences. IV-36

85 Table 29 U.S. MUENSTER DISAPPEARANCE Distributin Channel Fdservice/ Average Fd Per Capita Retail Manufacturing Other * Ttal Disappear- Re~in (millin lb) (millin lb) (millin lb) (millin lb) ance (lb) New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest Lwer Central Midwest Plains/Muntains Nrthwest Califrnia/Nevada Suthwest Ttal U.S Percent f Ttal 50% 49% 1% 100% (69.1) (0.3) * Cheese factry stre sales and mail rder; prcessing vlume negligible. +Inc1udes Alaska and Hawaii. Surce: SRI Internatinal IV-37

86 The Wiscnsin Muenster Market Table 30 presents ur estimates f Wiscnsin-made Muenster vlume and market share by channel f distributin. Of the cheese we were able t track t market, the greatest prtin entered the retail channel, mre frequently as a private-label than as branded prduct. In terms f share, the almst 28 millin punds f Muenster assigned t particular markets accunted fr 46% f all branded retail sales and 72% f private-label vlume. Only abut 7 millin punds was determined t enter fdservice/fd manufacturing use, r 21% f all Muenster used in that market segment. Table 30 WISCONSIN MUENSTER VOLUME AND SHARE OVERVIEW Muenster Disappearance Distributin Channel U. S. (millin lb) Wiscnsin (millin lb) Wiscnsin Share (%) Retail % Branded Private-label l Fdservice/fd manufacturing * Other Unaccunted fr 25.2 Ttal % * Cheese factry stre and mail rder sales; prcessing vlume is negligible. Surce: SRI Internatinal As with many ther cheese types, much f the utput f smaller Wiscnsin Muenster prducers is shipped initially t ther Wiscnsin cheese manufacturers r t assemblers/ packers that supply larger cheese firms. Data frm the prducer survey cnfirm this. Of the 18 millin punds f shipments reprted by survey respndents, abut ne-half was shipped initially t in-state cheese firms r assembler/packers. Because f this pattern, and because Muenster is ne f the smaller vlume "majr" IV-38

87 Wiscnsin cheeses, it is difficult t track Muenster distributin accurately. The data we btained frm the larger cheese marketers tended t fllw average patterns fr each firm's entire prduct mix. Such data, f curse, wuld be heavily skewed by prcess cheese, Cheddar, Clby, and Mzzarella sales, and wuld therefre be less representative f sales f Muenster and ther small-vlume cheeses such as Brick. The estimated reginal market pattern fr Wiscnsin Muenster by distributin channel is reprted in Table 31. As culd be expected frm Wiscnsin's large share f U.S. Muenster prductin, Wiscnsin prduct flws int every regin and channel. In terms f share, Wiscnsin has a significantly higher than average branded retail share in the New Yrk/New Jersey regin and a relatively high share in the Eastern Strip and the Suthwest. The lwer than average share shwn fr the Upper Central Midwest prbably results mre frm the limited cverage f Wiscnsin prduc t flw than frm any significant inflw f Muenster frm ther states. Fr private-label prduct, Wiscnsin cheese has a high share everywhere except in New England and n the West Cast. Much the same share pattern exists fr fdservice use, even thugh the Wiscnsin share f ttal reprted use in this segment is much lwer than its share f private-label prducts. In terms f the branded retail prduct, the fllwing tabulatin identifies the majr metrplitan area r state in each regin in which Wiscnsin-made Muenster has the highest vlume and market share: Highest Vlume Highest Share New England Bstn-Prvidence New Yrk/New Jersey New Yrk New Yrk Eastern Strip Baltimre-Washingtn Philadelphia Sutheast Miami Upper Central Midwest Chicag Grand Rapids Lwer Central Midwest Plains/Muntains Nrthwest New Orleans Denver Seattle-Tacma Califrnia/Nevada San Francisc Ls Angeles-San Dieg Suthwest Dallas-Ft. Wrth Texas IV-39

88 Table 3l WISCONSIN MUENSTER REGIONAL VOLUME AND SHARE ESTIMATES Regin U.S. Ttal (mil. lb) Branded Wiscnsin (mil. lb) Retail Prduct Wis. Share ~ U.S. Ttal (mil. lb) Private Label Wiscnsin (mil. lb) Wis. Share ~ U.S. Ttal (mil. lb) Fdservice/Fd Manufacturing Use Wiscnsin (mil. lb) Wis. Share ~ New England New Yrk/New Jersey 3.0 Z Eastern Strip Sutheast Upper Central Midwest H <: I.c O Lwer Central Midwest PlainS/Muntains Nrthwest ( Califrnia/ Nevada Suthwest Unallcated * Ttal U.S l * Only abut SO%: f Wiscnsin Muenster prductin has been allcated t market. remainder has nt been determined and therefre is nt shwn here. The market segmentatin f the +Includes Alaska and Hawaii. Surce; SRI Internatinal

89 Brick u.s. Prductin Brick is ne f the smaller vlume "mainstream" cheeses, with utput in 1983 reprted t be 14.2 millin punds, a slight decrease frm 1982 levels. The USDA reprted that 41 cheese plants, 68% f them in Wiscnsin, were engaged in Brick manufacture in Wiscnsin Prductin Wiscnsin has the lin's share f Brick utput (62% f the U.S. ttal); prductin in 1983 ttaled 8.8 millin punds, abut the same as 1982 utput. The USDA reprts that 28 Wiscnsin cheese plants prduced sme Brick in Thrugh the prducer survey and interview prcess, the SRI team was able t accunt fr an estimated 10.9 millin punds f Brick prductin, 23% mre than the amunt reprted as utput fr This vlume difference mst likely reflects (1) changes in prduct mix utput in cheese plants ver the time perid cvered by the survey and interviews, r (2) prductin estimatin errr fr sme plants made by the prject team. It is als pssible that sme survey respndents reprted shipments in excess f prductin fr the July 1983 t June 1984 perid; such excess shipments are nt uncmmn fr a number f cheeses because f aging requirements and inventry changes. The U.S. Brick Market SRI's estimates f the pattkrn and channel f U.S. Brick disappearance are shwn in Table 32.. Of all Brick cnsumed, abut 44% mves thrugh regular retail channels, and the balance, except fr a small vlume sld frm cheese factry stres and by mail rder, is used in fdservice and fd manufacturing. In terms f the reginal pattern f cnsumptin, Brick is mre ppular n the East Cast and in the Upper Central Midwest than in ther regins f the cuntry. As with Muenster, the existence f such reginal taste differences at retail was taken int accunt in allcating fdservice/fd manufacturing use. Reginal disappearance in this channel was adjusted n the basis f the prject team's judgment. * Nte that units in this table are in thusands f punds, nt millins as with ther cheeses, because f the smaller tnnage invlved. IV-41

90 Table 32 u.s. BRICK DISAPPEARANCE Distributin Channel Fdservice/ Average Fd Per Capl ta Ret311 M~lnu f iic t ur i ng Other * Ttal Dlsappeii r- Regin (thusand lb) (thusand lb) (thusand lb) (thusand lb) ance (lb) New Englilnd New Yrk/New Jersey 1,005 1,225 2, Eastern Strip 1,119 1,250 2, Sutheast , Upper Central Mid wes t 1,652 1,900 3, Lwer Central Midwes t Plains/Muntains t>; rthwes t Ca1ifrnla/Ne v~da , Suthwest , Ttal U.S.+ 6,277 7, ,157 Percent f Ttal 44% 55 % 1% 100% (14,007) (0.06) * Cheese factry stre sales and mail rder. + Includes Alaska and Hawaii. Surce: SRI Internatinal IV-42

91 The Wiscnsin Brick Market The SRI prject team was able t develp reasnable distributin and market data fr abut 4.6 millin punds f Brick, equal t 52% f reprted 1983 prductin and 41% f the utput estimated in this prject. The distributin f this cheese by majr market channel is shwn in Table 33. Of the vlume tracked t market, a little less than 60% went t retail utlets, and the balance, except fr a small amunt sld thrugh factry stre utlets and mail rder, went t fdservice and fd manufacturing. Given this shipment base f 4.6 millin punds, Wiscnsin cheese accunted fr 36% f branded retail prduct, 53% f estimated private-label use, and 23% f fdservice/fd manufacturing use. Table 33 WISCONSIN BRICK VOLUME AND SHARE OVERVIEW Brick Disappearance Distributin Channel U.S. (millin lb) Wiscnsin (millin lb) Wiscnsin Share (%) Retail % Branded Private-label Fdservice/fd manufacturing Other* Unaccunted fr Ttal % * Cheese factry stre and mail rder sales. + Equivalent t 1983 prductin, nt the higher level f utput estimated by the prject team. Surce: SRI Internatinal IV-43

92 * Table 34 shws the same ttal vlume by majr channel n a reginal basis. As expected, Wiscnsin-made prduct accunts fr a high percentage f Upper Central Midwest use in all channels. Fr bth branded and private-label prduct, much f the vlume that we culd accunt fr tended t mve eastward t final markets, and nly small vlumes mved much west f the Mississippi r suth f St. Luis. The fdservice/ fd manufacturing pattern differs by having a mre even distributin f tnnage utside the Upper Central Midwest. This difference primarily reflects the significant vlume f Brick that is destined fr fd manufacturing west f the Mississippi which tends t even ut the verall flw. All these data n Brick shuld be cnsidered less reliable than the data fr ther cheeses. In all ther cases, prductin vlumes are greater, and the prject team's infrmatin ba-se was mre cmplete. Swiss U.S. Prductin The USDA reprts 1983 U.S. Swiss prductin at millin punds, a 5% decrease frm Sme 62 cheese plants were engaged in Swiss manufacture in Wiscnsin Prductin The utput f the 21 cheese plants in Wiscnsin ttalled 36.1 millin punds in This amunt is a 1. 5% dec rease frm 1982 levels, and is equal t abut 17% f all U.S. prductin. Thrugh the prducer survey and prject interviews, the SRI prject team accunted fr 44.5 millin punds f Swiss utput, a substantial increase ver reprted 1983 levels. This difference in prductin estimates mst likely results frm a change in prductin levels r prduct mix f ne r mre f the larger plants equipped fr Swiss cheese prductin during the prject perid. Given that the distributin and market infrmatin we received during the prject perid was geared t this higher utput level, the SRI prject team has made 44.5 millin punds the base fr the Wiscnsin cheese accunting that fllws. The U.S. Swiss Market Table 35 summarizes SRI's estimates f the U.S. Swiss cheese market by distributin channel and regin. Of the ttal Swiss cheese supply, which includes abut 68 millin punds f imprts f Emmenthaler, abut 5% * Nte that the units in this table are in thusands f punds, nt millins as with ther cheeses, because f the smaller tnnage invlved. IV-44

93 Table 34 WISCONSIN BRICK REGIONAL VOL~E AND SHARE ESTIMATES Retail Prduct Fdservice/Fd Branded Private Label Manufacturin~ Use Wis. Wis. Wis. U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share Regin (thus. lb) (thus. lb) ~ (thus. lb) (thus. lb) ~ (thus. Ib) (thus. Ib) ~ New England New Yrk/New Jersey , Eastern Strip , Sutheast Upper Central Midwest , H Lwer Central < Midwest I ~ \J1 Plains/Muntains Nrthwest Cali frnia/ Nevada Suthwest Unallcated Ttal U.S. * 3,464 1, ,814 1, ,730 1, * Includes Alaska and Hawaii. Nte: Surce: Wiscnsin estimates d nt accunt fr at least 4.3 millin punds f Brick. SRI Internatinal

94 Table 35 u.s. SWISS DISAPPEARANCE Distributin Channel Fdservice/ Average Fd Per Capita Retail Manufacturing Other * Ttal Disappear- Re gin (millin lb) (millin lb) (millin lb) (millin lb) ance (lb) New England New Yrk/New Jersey Eastern Strip Sutheast Uppe r Central Midwe s t Lwe r Central Midwe s t Plains/Muntains N rthwes t Califrnia/Nevada Suthwest Ttal U.S Pe r cent f Ttal 32% 63% 5% 100% (263.7) (1.13) * +Fr prcessing, cheese plant factry sales and mail rder sales. Includes Alaska a nd Hawaii. Surce: SRI Internatinal IV-46

95 is estimated t have been used in the manufacture f prcess cheese prducts and in sales at plant factry utlets and thrugh mail rder. Anther 32% finds its way int retail markets, where it is the mst ppular delicatessen cheese prduct. The balance--63%--is used in fdservice and fd manufacturing. There are sme reginal differences in per capita disappearance. The New Yrk/New Jersey area is the leader in cnsumptin, and the Lwer Central Midwest and Sutheast cnsume the smallest amunts. Mst ther regins fall clse t the natinal average--between 0.9 and 1.4 punds per capita. The Wiscnsin Swiss Market SRI's estimated distributin f Wiscnsin Swiss by market channel is shwn in Table 36. Because the mst cmplete data were assembled fr smaller prducers and the least specific infrmatin was n larger plants, these estimates are less reliable than the prject team wuld have preferred. A substantial amunt f judgment was used in develping these data, s they must be regarded as an initial effrt, nt as a final analysis. Table 36 WISCONSIN SWISS VOLUME AND SHARE OVERVIEW Swiss Disappearance Distributin Channel u.s. (millin lb) Wiscnsin (millin lb) Wiscnsin Share (%) Retail % Branded Private-label Fdservice/fd manufacturing Prcessing * Other Unaccunted fr Ttal % * Sales frm factry stres and mail rder. Surce: SRI Internatinal IV-47

96 As the table indicates, f the 44.5 millin punds f Wiscnsin Swiss reprted, a little mre than ne-half enters the retail channel, and 44% is used in fdservice and fd manufacturing. The balance ges primarily t prcess prduct manufacture, althugh a small amunt is sld at cheese factry stre utlets and thrugh mail rder. In terms f the reginal distributin f Wiscnsin prduct, which is presented in Table 37, branded retail Swiss has abve average shares in the Upper Central Midwest, New Yrk/New Jersey, and the Eastern Strip. Little, if any, use f Wiscnsin Swiss is reprted west f the Mississippi. A similar east-west break appears in private-label prducts; the same three regins receive the largest vlumes and have abve average Wiscnsin shares. There is little apparent pattern in the fdservice/ fd manufacturing segment because tw-thirds f the Wiscnsin prduct culd nt be tracked t its final markets. Within the branded retail segment, the fllwing tabulatin shws, fr each regin fr which sufficient data are available, the metrplitan areas that receives the largest vlume f Wiscnsin Swiss and the cities in which Wiscnsin Swiss hlds the highest share: Largest Vlume Largest Share New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest Lwer Central Midwest Plains/Muntains Nrthwest Califrnia/Nevada Suthwest Bstn-Prvidence New Yrk Pittsburgh Miami Chicag New Orleans Ls Angeles-San Dieg Dallas-Ft. Wrth New Yrk Pittsburgh and Ph Hadel phia Indianaplis Ls Angeles-San Dieg IV-48

97 Table 37 WISCONSIN SWISS REGIONAL VOLUME AND SHARE ESTIMATES Retail P rduc t Fdservice/Fd Branded Private Label Manufacturin~ Use Wis. Wis. Wis. U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share Regin (mil. lb) (mil. lb)...ql (mil. lb) (mil. lb)...ql (mil. Ib) (mil. lb) ~ New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest Lwer Central H <: Midwest I ~ \0 Plains/Muntains Nrthwest <0.1 <1 Califrnia/ Nevada 4.3 <0.1 <l <1 Suthwest 4.3 < Unallcated 9.9 * Ttal U.S * Includes Alaska and Hawaii. Surce: SRI Internatinal

98 Mzzarella and Other Sft Italian Pizza-Type Cheeses U.S. Prductin As reprted by the USDA, U.S. utput f Mzzarella and similar types f cheese reached 866 millin punds in 1983, a 13% increase ver prductin in earlier years. Mzzarella accunted fr 19% f all U.S. natural cheese utput in Overall, its grwth has been impressive; prductin has increased an average f abut 8% per year since the mid-1970s. In 1983, sme 141 U. S. plants were reprtedly engaged in Mzzarella prductin. Wiscnsin Prductin In 1983, Wiscnsin prduc tin f Mzzarella and similar pizza-type cheeses reprtedly ttaled 277 millin punds, 32% f ttal U.S. utput, and an increase f 13% ver 1982 prduc tin. The USDA reprts that 45 Wiscnsin cheese plants were engaged in Mzzarella prductin in Thrugh the natural cheese manufacturers' survey and ur interviews, the SRI prject team was able t accunt fr the prductin f 233 millin punds in the July 1983 t June 1984 perid, and fr the marketing and distributin f abut 191 millin punds. If state utput is basically unchanged frm 1983 levels, then the tables and analyses that fllw accunt fr the equivalent f 69% f Wiscnsin's Mzzarella prductin. Only 15 plants engaged in Mzzarella prduc tin respnded t the initial prducer survey. Tgether, they accunted fr abut 74 millin punds f utput in Prductin vlumes fr these plants ranged frm 38,000 punds up t 18 millin punds. Thrugh interviews, the SRI prject team accunted fr an additinal 159 millin punds f utput assciated with anther 13 plants; prductin at the largest f these plants was mre than 30 millin punds. These figures suggest that the estimated 44 millin punds f prductin we have nt accunted fr is spread ver 17 mre plants, many f which must prduce quite small quantities f Mzzarella. The U.S. Mzzarella Market Estimates f the U.S. Mzzarella and pizza-type cheese market are shwn in Table 38. They were develped in a manner similar t that used fr the ther majr natural and prcess cheeses, frm USDA prductin and disappearance data, interview infrmatin, and earlier market estimates frm SRI's data files. Imitatin prduct is excluded. Because the Mzzarella market is dminated by fdservice/fd manufacturing use, the pattern f reginal cnsumptin shuld be clsely aligned with fdservice sales. In the estimates in Table 38, U.S. reginal fdservice expenditures have been used t allcate the fdservice/fd manufacturing prtin f the Mzzarella market. Because n data n the reginal fdservice/ fd manufacturing use f real Mzzarella and imitatin prduc ts IV-50

99 Table 38 U.S. MOZZARELLA AND SOFT ITALIAN CHEESE DISAPPEARANCE. Regin Retail (millin Ib) Distributin Channel Fdservice/ Fd Manufacturing (millin Ib) Other (millin Ib) Ttal (millin Ib) Average Per Capita Disappearance** (lb) New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest Lwer Central Midwest Plains/Muntains Nrthwest Califrnia/Nevada Suthwest (822.6 ) (3.5) + Ttal U.S Percent f Ttal 17% 78% 5% 100i. * Excludes imitatin prducts. + Includes Alaska and Hawaii. & Estimated U.S. gvernment purchases and plant stre sales. ** Based n retail and fdservice/fd manufacturing use nly. Surce: SRI Internatinal IV-51

100 are publicly available, we have assumed that the patterns f use fr bth types f prducts are the same. As Table 38 shws, and as indicated earlier, the U. S. Mzzarella market is predminantly a fdservice/fd manufacturing ne; 78% f use in this categry. Retail sales accunt fr abut 17%, and gvernment purchases (primarily fr the schl lunch prgram) fr abut 5%. In terms f per capita disappearance, reginal differences in pundage result frm the cmbined effects f reginal differentials in fdservice expenditures and estimated retail cheese sales. Per capita disappearance estimates fr New England and the Nrthwest are significantly higher than the average, primarily because f the higher than average per capita fdservice expenditure in these regins. The high per capita cnsumptin estimate fr the Plains/Muntains area results primarily frm higher than average estimates f per capita retail sales vlumes based n the limited retail data at hand. The Califrnia market area ranks high in terms f bth per capita retail sales and fdservice use, whereas the Lwer Central Midwest ranks relatively lw n per capita retail and fdservice cnsumptin fr this cheese type. Wiscnsin Mzzarella and Sft Italian Cheese Market Table 39 shws SRI's estimates f Wiscnsin Mzzarella and sft Italian cheese distributin by market channel fr the 190 millin punds f prduct that culd be tracked t market. As with sme ther natural cheeses, tracking this prduc t categry is difficul t because fr substantial prductin vlumes, initial sales are t ther cheese firms bth in and ut f state r t in-state distributrs that may cut/shred and/r pack the prduct fr ther cheese firms. An analysis f ur survey data, which cver abut 74 millin punds f prductin, shws sales f 23% f the vlume t ther cheese cmpanies and 11% t in-state firms categrized as distributrs. Because mst f ur survey and interview data are nt specific in terms f intercmpany transfers r distributr-cheese cmpany transfers, prblems f duble cunting ccur. It is als pssible that sme reprted cheese cmpany r distributr purchases riginate with cmpanies utside ur prducer survey and interview universe; if s, we may have underestimated the amunt f cheese that we actually accunted fr. In the handling and manipulatin f the data, the SRI team pted fr the mre cnservative apprach f first balancing shipments t ther in-state cheese cmpanies and t distributrs with purchases by such firms unless infrmatin was available that indicated therwise. Thus, we chse t risk underestimating the cheese accunted fr rather than t risk significant duble cunting. As Table 39 indicates, f the Wiscnsin prduct we culd accunt fr, abut 62 millin punds mves int the retail channel and 127 millin punds is used in fdservice and fd manufacturing. Within the retail channel, 44% f Wiscnsin Mzzarella is sld as branded prducts, and 56% as private-label prduc ts. The prducer survey and interview data give IV-52

101 Table 39 WISCONSIN MOZZARELLA AND SOFT ITALIAN CHEESE VOLUME AND SHARE OVERVIEW* Mzzarella and Sft Italian Cheese Disappearance U.S. Wiscnsin Wiscnsin Distributin Channel (millin lb) (millin lb) Share (%) Retail % Branded Pr ivate-label Fdservice/fd manufacturing Other Unaccunted fr 86.3 Ttal % * +Excludes imitatin prducts. Estimated U.S. gvernment purchases and factry stre sales. Surce: SRI Internatinal sme indicatin f the split between ultimate fdservice and fd manufacturing use. Of the 127 millin punds accunted fr in this channel, abut 26 millin punds, r 20%, is emplyed in fd manufacturing, primarily in the prductin f pizza and Italian-type dishes fr eventual retail sale. As the data indicate, Wiscnsin prduc t has a higher than average share f retail prduct, bth branded and private-label, and a relatively lw share f the fdservice/fd manufacturing segment. An interesting bservatin is that, even if SRI had been able t accunt fr the equivalent f all 1983 Wiscnsin Mzzarella prductin, which cnstitutes 32% f U.S. prductin, rather than the 22% shwn, the state's share f bth branded and private-label prduct wuld still be higher than its share f ttal prduct utput. In terms f prmtinal prgram design, Wiscnsin prducts' higher than average share f retail sales, and particularly f sales f branded prducts, is f interest because in the last year r tw, Mzzarella has been ne f the "mainstream" cheeses with grwing retail sales. IV-53

102 The reginal distributin pattern fr this cheese type is reprted in Table 40. As can be seen, Wiscnsin prduct appears in all regins. The largest vlumes and shares are in the Upper Central Midwest, and bth vlumes and shares decline as distance frm this regin increases. In private-label prducts, Wiscnsin Mzzarella als has higher than average shares in the Sutheast, the Lwer Central Midwest, and the Nrthwest. In fdservice/fd manufacturing use, althugh the data indicate that 60% f the reprted vlume is delivered within the Upper Central Midwest, it is very likely that much f this prduct ultimately mves beynd this regin because it is shipped by majr fdservice chains and distributrs t utlets and custmers elsewhere, r it is incrprated in manufactured fd prducts that may then be marketed natinwide. Fr branded retail prduct, the fllwing tabulatin identifies the majr metrplitan area r state within each regin in which Wiscnsinmade Mzzarella has the highest vlume and market share. T the extent ur data permit, these are: Highes t Vlume Highest Share New England Bstn-Prvidence New Yrk/New Jersey New Yrk Syracuse Eastern Strip Philadelphia Philadelphia Sutheast Jacksnville-Orland Flrida Upper Central Midwest Chicag Milwaukee Lwer Central Midwest Plains/Muntains Nrthwest New Orleans Denver Seattle-Tacma Califrnia/Nevada Ls Angeles-San Dieg Ls Angeles-San Dieg Suthwest Dallas-Ft. Wrth Texas Hard Italian Cheeses U.S. Prductin u.s. prductin f hard types f Italian cheese reached millin punds in 1983, an increase f 2% ver 1982 utput. The USDA des nt publish data n the number f cheese plants invlved in this prductin, but it indicates that 37 plants were engaged in the prductin f "ther Italian types," which include hard Italian varieties as well as Rictta and sme ther types f sft Italian cheese. Of the 37 plants reprted, 34 are in Wiscnsin. IV-54

103 Table 40 WISCONSIN MOZZARELLA AND SOFT ITALIAN CHEESE REGIONAL VOLUME AND SHARE ESTIMATES Retail Prduct Fdservice/Fd Branded Private Label Manufacturing Use Wis. Wis. Wis. U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share Regin (mil. lb) (mil. lb) --1!L (mil. lb) (mil. lb) ~ (mil. lb) (mil. lb)...ql New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central H < Midwest I V1 V1 Lwer Central Midwest Plains/Muntais Nrthwest Califrnia/ Nevada Suthwest 7.) Ttal U.S SRI's data n ttal Wiscnsin shipments accunted fr millin pund cmpared with reprted 1983 prductin f 277 millin punds. Surce: SRI Internatinal

104 Wiscnsin Prductin Wiscnsin prductin f Italian cheese ther than Mzzarella was millin punds in 1983, a 3% increase ver 1982 prductin. In the SRI prducer survey and interview phases f the prject wrk, we cllected infrmatin n the prductin and sales f abut millin punds f what SRI categrized as hard Italian cheese, equal t 58% f 1983 U. S. prductin. This number exceeds the 1983 prductin level fr tw likely reasns: (1) prducts and/r vlumes prduced by state cheese plants may have changed ver the prject time perid; (2) we have incrprated string cheese in the hard Italian categry, but the state may reprt it in the Mzzarella categry instead. Althugh string cheese is nt nrmally as hard in texture as Rman, Parmesan, and Prvlne, we have included it in this categry because it is nt predminantly a pizza cheese, as Mzzarella is, and it is mre likely t be distributed as Prvlne and similar cheeses are. The U.S. Hard Italian Cheese Market SRI's estimates f the distributin by channel and regin f hard Italian cheeses, which include natural cheese imprts as well, are shwn in Table 41. The majrity f sales are fr fdservice/fd manufacturing use; that channel accunts fr 59% f ttal disappearance. The retail channel accunts fr 39%, and the balance is sld thrugh cheese plant factry stres and mail rder r used in prcess prducts. In per capita terms, the majr cnsuming regins are New England, New Yrk/New Jersey, the Pacific Nrthwest, and Califrnia. The Upper Central Midwest and the Plains/Muntains regin parallel the natinal average, and the Suth--including the Suthwest, the Lwer Central Midwest, the Sutheast. and the Eastern Strip, which extends int Nrth Carlina--are belw the natinal average. The Wiscnsin Hard Italian Cheese Market This segment f the Wiscnsin cheese manufacturing industry was less respnsive than any ther t the manufacturer's survey and interview prcess. Therefre, significant vlumes f shipments and sales culd nt be accunted fr by channel (12% f prductin), and an additinal 14% f the vlume culd nt be assigned t end markets within certain segments. As Table 42 shws, f the Wiscnsin cheese that we culd allcate t market channels, abut ne-half is sld retail and ne-half is used in fdservice/fd manufacturing, with a small vlume f plant stre sales, mail rder sales, and use in prcessing. The SRI prject team believes that f the almst 16 millin punds that we culd nt allcate by channel, abut tw-thirds is prbably destined fr fdservice/fd manufacturing use. In the retail segment, branded Wiscnsin prduct is estimated t accunt fr 68% f branded retail prduct, bth whle cheese and grated, and 56% f private-label prduct. We were able t track t fdservice/fd manufacturing use f quantities equal t 42% f U.S. disappearance in that channel. IV-56

105 Table 41 U. S. HARD ITALIAN CHEESE DISAPPEARANCE Distributin Channel Fdservice/ Average Fd Per Capita Retail Manufacturing Other * Ttal Disappear- ReSin (millin lb) (millin lb) (millin lb) (millin lb) ance (lb) New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest Lwer Central Midwest l Plains/Muntains Nrthwest Califrnia/Nevada Suthwest Ttal U.S l Percent f Ttal 39% 59% 2% 100% (218.2 ) (0.9) * Fr prcessing, cheese factry sales and mail rder. +Includes Alaska and Hawaii. Surce: SRI Internatinal IV-57

106 Table 42 WISCONSIN HARD ITALIAN CHEESE VOLUME AND SHARE OVERVIEW Hard Italian Disappearance Distributin Channel U. S. (millin lb) Wiscnsin (millin lb) Wiscnsin Share (%) Retail % Branded Private-label Fdservice/fd manufacturing Other * Unallcated 15.7 Ttal % * Prcessing, cheese factry stre, and mail rder sales. Surce: SRI Internatinal Table 43 reprts Wiscnsin-made hard Italian cheese distributin bth by market and by regin. Fr branded prduct, Wiscnsin hlds significantly greater than average shares in the Upper Central Midwest and the Sutheast. It has belw average shares west f the Mississippi and in the Lwer Central Midwest. Within the branded segment, the cities r states within each regin in which Wiscnsin cheese accunts fr the largest vlumes and largest market shares are as fllws. Highest Vlume Highest Share New England Bstn-Prvidence New Yrk/New Jersey New Yrk New Yrk Eastern Strip Baltimre-Washingtn Baltimre-Washingtn Sutheast Miami Upper Central Midwest Chicag Chicag and Grand Rapids IV-58

107 Lwer Central Midwest Plains/Muntains Nrthwest New Orleans Denver Seattle-Tacma Califrnia/Nevada Ls Angeles-San Dieg Ls Angeles-San Dieg Suthwest Hustn Texas Fr private-label prduct, Wiscnsin hlds higher than average shares in all areas except New England, Califrnia, the Suthwest, and the Plains/Muntains regin. Fr fdservice/fd manufacturing, it is difficult t discern a pattern because (1) such a substantial prtin is unallcated, and (2) sme f the vlume here assigned t the Upper Midwest regin is mst likely shipped later t ther areas by majr fdservice firms and fdservice distributrs. All Other Cheeses U.S. Prductin U.S. prductin f what we here term "all ther" cheeses--all cheeses except thse majr types reviewed individually earlier in this sectin- was abut 131 millin punds in 1983, 4% less than 1982 prductin. This ca tegry includes a wide range f cheese types--limburger, Blue, Brie, Camembert, Edam, Guda, Bnd Ost, Farmers, the sft spreadable hrs d' uvres type cheeses such as Rndele, gat cheeses, and many specially flavred cheese mixes. The USDA reprts prductin individually nly fr Blue and Limburger, and grups the thers in the "all ther" categry. The USDA data shw a small increase in prduc tin f Blue (+1.6%), a sizable percentage decline in prductin f Limburger (-21%), and a mderate percentage decline in prductin f all thers (-6%). These figures seem t cntradict' the reprted grwth in the market fr specialty cheeses, the categry in which mst f these prducts fall. This apparent incnsis tency partly reflects grwth in imprts, particularly in the nnquta types f prducts, and aggressive pricing and prmtin f them. Specialty cheese imprts rse frm 171 millin punds in 1982 t 182 millin punds in 1983, an increase f 6%. The greatest increases (7.5 millin punds, r 19%), as wuld be expected, were in the nnquta types, primarily the sft spread cheeses and Pecrin. A secnd reasn fr the incnsistency is that 1984 U.S. prductin data, when they are available, shuld shw an increase in U.S. specialty cheese utput, given the expansin in the number f small specialty prduct plants ver the last year r tw. Accrding t the USDA, 9 U.S. cheese plants were engaged in the prductin f Blue cheese in 1983, 3 in Wiscnsin, and 86 plants were invlved in ther specialty types, 22 f them in Wiscnsin. IV-59

108 Table 43 WISCONSIN HARD ITALiAN CHEESE REGIONAL VOLUME AND SHARE ESTIMATES Retail Prduct Fdservice/Fd Branded Private Label ManufacturinE Use Wis. Wis. Wis. U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share U.S. Ttal Wiscnsin Share Regin (mil. lb) (mil. lb) ~ (mil. Ib) (mil. Ib) ~ (mil. lb) (mil. Ib)..J.!L New England New Yrk/New Jersey Eastern Strip Sutheast Upper Central Midwest H Lwer Central <: Midwest I 0\ 0 Plains/Muntains Nrthwest Califrnia/ Nevada Suthwest Unallcated * Ttal U.S * Abut 15.7 millin punds f additinal Wiscnsin prduct are nt included here because they cannt be allcated by channel. Surce: SRI Internatinal

109 Wiscnsin Prductin Wiscnsin utput f these "all ther" types ttaled 83 millin punds in 1983, 63% f U.S. prductin. Wiscnsin plants accunted fr 100% f U.S. Limburger utput, 54% f Blue, and 66% f the remaining cheeses cmbined. Fr each f these cheese categries, prductin declined in 1983, by amunts ranging frm 0.3% t 4%. The U.S. Market Because f the wide variety f cheese prducts in this categry and their small vlumes, we have nt attempted t develp a U.S. market prfile by channel f distributin and regin. The available data d nt prvide a sufficient basis fr a prfile. Many f these prducts are delivered direct t retail stres, and therefre d nt appear in any f the general warehuse withdrawal market measures. Infrmatin n fdservice use f these types is basically nnexistent. Thus, this subsectin simply reprts the Wiscnsin prducer survey and interview data n an aggregate basis. The Wiscnsin Prduct Flw In the prducer survey and interview phases f the wrk, we gathered infrmatin n 21 millin punds f these "all ther" cheese types, an amunt equal t 25% f 1983 Wiscnsin utput. The flw f these prducts n a re~nal basis t varius types f recipient firms is summarized in Table 44 As suggested by the estimates f shipments t distributrs, the grcery channel, and the fdservice/fd manufacturing segment, sme Wiscnsin utput is destined fr virtually every regin f the United States. The large vlumes in the fdservice/fd manufacturing channel cnsist primarily f cheeses used in fd prduct manufacturing, such as Blue. The "unallcated" vlume in the distributr channel is branded prduct distributed natinwide, primarily t grcery stres. In fact, mst f the distributr vlume is likely t be branded prduct destined fr the grcery channel. Als, mst f the 4 millin punds assigned t ther cheese manufacturers is likely t be sld ultimately as branded retail prduct. * Nte that the units in this table are in thusands f punds, nt millins as with mst ther tables. IV-61

110 Table 44 WISCONSIN "ALL OTHER" NATURAL CHEESE PRODUCT FIRST STAGE DISTRIBUTION Grcery Other Cheese Reginal Whlesalers/ Fdservice/Fd Manufacturers* Di st ri butrs Chains Manufacturing Ttal Regin (thusands Ib) (thussnds lb) (thusands lb) (thusands Ib) (thusands Ib) New England New Yrk/New Jersey 0 ISS Eastern Strip Sutheast Upper Central Midwest 3, ,412 7, III Lwer Central Midwest H < I Plains/Muntains N Nrthwest 0 6 S 15 '" Califrnia/ Nevada Suthwest IS Unallcated 0 2, ,500 12,693 Ttal U.S. 3,956 4, ,913 21,026 Includes assemblers/packers that sell t majr cheese firms, if they were identif iable. + Includes sme prductin f these firms themselves. Surce: SRI Internatinal

111 V THE DYNAMICS OF CHEESE DISTRIBUTION AND VOLUME FLOW PATTERNS As part f the extensive interview prcess with in-state and ut-f-state cheese prducers/marketers, distributrs, brkers, assemblers, and fdservice and grcery chain cheese buyers, SRI raised the issue f whether the existing pattern f vlume flw and cheese distributin methds might change in the freseeable future. A preliminary list f variables likely t influence the sales vlumes and gegraphic distributin f Wiscnsin cheese was develped by the SRI prject team and served as the initial fcus fr discussin with industry participants. The list was mdified r expanded during the interview prcess t include variables mentined in the cmments f members f the cheese industry. Eight key variables were ultimately identified in this manner: ecnmic grwth, ppulatin distributin, cnsumer taste, cmpetitive prductin/prmtin by ther states, image/quality, transprtatin, technlgy, and gvernment plicy. These variables tgether wi th the applicable ratinale fr and a qualitative assessment f their likely net impact n the sales vlume and gegraphic distributin f Wiscnsin cheese, are summarized in Table 45. A mre detailed discussin f each variable is prvided in the fllwing subsectin. The impact evaluatin fr tw f the key variables, cmpetitive prductin/ prmtin by ther states and technlgy, was frmulated fr several sets f alternative assumptins. Ecnmic Grwth Industry cnsensus abut ecnmic factrs is ptimistic thrugh Similar trends are prjected fr the next 2- t 5-year perid althugh sme ecnmists predict pckets f ecnmic dislcatin t persist in certain gegraphic areas, such as the Midwest, because f industrial restructuring and the resulting decline in emplyment in smkestack industries (e.g., aut, steel) and farming. Therefre, ecnmic grwth in the Midwest will lag behind natinal prjectins. This predictin des nt prtend an verall net change in the current sales vlume f Wiscnsin cheese, althugh the gegraphic distributin f cheese sales may shift smewhat frm markets in the Midwest tward thse in ther areas with strnger ecnmies. Prmtinal prgrams targeted t grwing markets wuld assist the Wiscnsin cheese industry in maintaining its verall sales vlume. Ppulatin Distributin The largest net gains in ppulatin are expected t be in the Suth and the Suthwest as a result f the abve average ecnmic grwth, greater emplyment pprtunities, larger supplies f husing, and warmer climates in thse regins. This grwth is likely t be accmpanied by V-l

112 Table 45 RELATIONSHIP BETWEEN KEY VARIABLES AND DISTRIBUTION PATTERNS OF WISCONSIN CHEESE Key Variable Ecnmic Grwth Likely Trends Favrable utlk; Midwest lags behind natinal prjectins Sales Vlume Net Effect On Gegraphic Distributin + Cnsumer tastes Specialty cheeses; demand fr differentiated, quality prducts + + Ppulatin distributin Shift tward Suth and Suthwest Cmpetitive prductin/ prmtin by ther states Prmtinal prgrams fr lcal prductin increasing + Image/ quality Excellent Wiscnsin image; differentiatin declining because verall high quality f all cheese Transprtatin Majr impact n margins; trend tward mre efficienct distributin systems Technlgy Increased prductin efficiency (ultrafiltratin); ptential fr better margins + + Gvernment plicy Differential reginal impact n milk supply; affects milk/cheese price relatinship.?? V-2

113 decreases in ppulatin in ther areas f the cuntry, including the Midwest. The net resul t wuld be a decrease in sales vlumes in the Upper/Central Midwest regin, the largest and strngest market fr Wiscnsin cheese, that may nt be fully ffset by sales expansins elsewhere because f the transprtatin cst disadvantage that Wiscnsin cheese faces in markets further remved frm the pint f prductin. Prmtinal prgrams targeted t suthern and suthwestern markets culd prve beneficial in ffsetting the ptential decrease in sales vlume fr the Midwes t Cnsumer Taste A trend in cnsumer preferences tward specialty cheeses is well-dcumented, althugh the bundaries f this prduct categry remain smewhat ill-defined. Overall cnsumer demand fr differentiated, gd tasting, and high-quality specialty cheeses seems t be increasing natinwide because f cnsumer affluence and a desire fr unique taste experiences. This trend shuld increase the sales vlumes and braden the gegraphic distributin f high-quality Wiscnsin cheese. These effects culd be reinfrced by a strategy f selective advertising and prmtin prgrams. Cmpetitive Prductin/Prmtin by Other States Planned expansins in cheese prductin in ther states (e.g., prcessed cheese in Arizna and natural cheese in Suthern Califrnia) are expected t restrict the gegraphic distributin f Wiscnsin cheese, particularly in the West and the Suthwest. In these markets, gdquality lcal cheese, cmpetitively priced because f transprtatin cst advantages, will graduallly gain market share at the expense f cheese imprted frm ther states, f which a large prtin is nw Wiscnsin cheese. Prmtin prgrams by ther states, such as Califrnia's Real Califrnia Cheese Prgram are expected t have mixed effects n the sales vlume f Wiscnsin cheese. On ne hand, the advertising and prmtin f cheese is likely t increase sales fr the entire prduct categry, including Wiscnsin cheese. Hwever, in the absence f a prmtinal strategy fr Wiscnsin cheese per se, the lng-term effect f prmtin f dmestic cheese in ther states wuld be a lss f market share fr Wiscnsin cheese. Image/Quality Varius industry participants readily agree that Wiscnsin cheese has an excellent image and a reputatin fr quality in the marketplace. Nnetheless, they als pint ut that these attributes alne n lnger suffice t differentiate Wiscnsin's prduct because f the general imprvement in the quality f cheese prduced in ther states. With the help f academic researchers wh have turned the art f cheese making int a science, ther V-3

114 states have been able t create r expand dmestic cheese prductin and have upgraded their prduct quality standards t match thse f Wiscnsin cheese. This gradual reductin in quality/image differentiatin in an increasingly cmpetitive envirnment eventually translates int decreased sales vlumes and less extensive gegraphic distributin fr Wiscnsin cheese. Specific advertising and prmtinal prgrams may slw the trend, but they are nt likely t reverse it. Transprtatin Transprtatin csts directly affect margins fr cheese marketers and undermine the cmpetitive psitin f Wiscnsin cheese prducers in distant markets with grwing access t dmestic cheese prductin (e.g., Califrnia, the Suthwest). T imprve margins, marketers cncentrate n imprving the efficiency f the distributin system. Examples f this trend are the increasing use f cmmn carriers, full trucklad shipments, and backhauling f ff-grade, lwer cst cheese and cheese scraps fr prcessing. Ntwithstanding the emphasis n a mre efficient distributin system, it is likely that transprtatin csts will cntinue t smewhat restrict the gegraphic distributin f Wiscnsin cheese. Cnversely, expected increases in the market share f Wiscnsin cheese, particularly in areas where its cmpetitive psitin is enhanced by prximity t the pint f prductin, are expected t have nly minimal impacts n sales vlume. The lng-term trend is fr marketers t minimize the cst f cheese prcurement by delivering prducts t each gegraphic market frm the clsest available surce f prductin. A similar ratinalizatin in the prcurement/distributin patterns f majr grcery and fdservice buyers is likely. These buyers are increasingly turning t surces clse t majr crprate distributin centers, prviding, f curse, that lcal suppliers can meet their quality, price, cnsistency, and service standards. Technlgy Future cheese markets are mre likely t be affected by imprved efficiency in cheese prductin (e.g., higher yields) achieved thrugh adptin f advanced technlgy (e.g., ultrafiltratin) than by any technlgical breakthrughs in cheese making. The use f ultrafiltered milk reprtedly can bst cheese yields by 10% r mre, and thus can significantly reduce the unit cst f prductin. The cst differential between cheese prduced by this methd and cnventinal cheese is large enugh t ffset any cmpetitive disadvantage resulting frm transprtatin csts. Therefre, the early adptin f advanced technlgy by Wiscnsin cheese prducers is likely t have a psitive impact n bth the sales vlume and the gegraphic distributin f Wiscnsin cheese. The ppsite effect is als pssible, if ut-f-state prducers becme early adpters f advanced technlgy and Wiscnsin prducers lag t far behind. V-4

115 It is still nt clear whether cheeses made by ultrafiltratin meet current standards f identity, r will require changes in them. It is als unclear whether these cheeses will be acceptable in quality/taste fr markets in which such factrs are imprtant. Gvernment Plicy All industry participants agree that the current farm supprt plicies will be significantly revised at sme pint, and that such changes will mst likely have differential reginal effects n milk supply, and therefre n existing milk and cheese prices. Hwever, because f the uncertain timing f gvernment actin and the unpredictable magnitude and directin f its effects, this key variable defies any meaningful assessment at this time. Hwever, because f the ptential impact f regulatry changes n the dairy and cheese industry as a whle, it is imperative t cnsider this pssibility in strategic planning and t reevaluate the prspects peridically t determine effects f intervening changes in farm supprt plicy. V-5

116 VI INDUSTRY PERSPECTIVE ON PROMOTION AND ADVERTISING PROGRAMS FOR WISCONSIN CHEESE During interviews with cheese industry participants in Wiscnsin and elsewhere, the SRI prject team slicited pinins abut the ptential value f prmtin and advertising prgrams fr Wiscnsin cheese. The purpse f this task was t prepare a cmpsite prfile f the industry's need fr and level f interest in prmtin prgrams that the WMMB culd undertake in supprt f Wiscnsin cheese, and t identify issues perceived as bstacles t effective implementatin f the prgrams natinwide. In its integrated frm, the infrmatin is intended t prvide practical guidelines fr the Bard t use in designing prmtinal effrts and in targeting expenditures in a manner that is supprtive f and cnsistent with the interests f the Wiscnsin cheese industry as a whle. The pinins expressed and the reasns fr them are summarized in this sectin by categry f respndent (cheese manufacturers/marketers, retail utlets, and fdservice/ fd manufacturing users). Nte that we have made n attempt t rank pinins n the basis f their surce, the rder in which they surfaced in the interviews, r the frequency wi th which they were mentined. Cheese Manufacturers/Marketers The use f a Wiscnsin label r lg fr prmtinal purpses is frequently cnsidered impractical by large cheese manufacturers/marketers because f the restrictins that it wuld impse n the manufacturer's cheese prcurement practices and the additinal cst f carrying separate inventries fr cheese frm particular surces. Typically, these participants market branded prducts and must prcure large vlumes f cheese that meet the quality standards fr the brand. They have nly minimal cncern abut its rigin. Prcurement limited t Wiscnsin cheese and the maintenance f a separate inventry t preserve the prduct identity fr labeling wuld further cmplicate an already cmplex systems f lgistics fr marketing large vlumes f cheese. Only a few custmers demand a prduct label that identifies the rigin f the cheese as Wiscnsin. Althugh Wiscnsin cheese has an excellent quality image, cnsumers appear t resist paying premium prices fr cheese slely because it cmes frm Wiscnsin. Therefre, neither the manufacturers nr the retailers are able t pass alng the additinal handling and carrying csts assciated with Wiscnsin cheese labels. Given the current market structure and dynamics, it is difficult t frmulate acceptable prgram strategies fr prmting Wiscnsin cheese selectively. One apprach suggested by a few respndents is fr the Bard VI-1

117 t prvide matching paigns fr branded cheese. funds fr individual manufacturers' prmtin camprducts in majr markets fr Wiscnsin-prduced An alternative strategy, similar t the ne just described, suggested the prmtin f branded cheese prducts in metrplitan markets where the presence f Wiscnsin-prduced cheese is belw average r lw. This prmtin strategy nt nly wuld avid direct cmpetitin fr share amng Wiscnsin brands in specific markets, but als culd prduce a larger return per dllar spent n prmting Wiscnsin cheese in thse areas. Fr the mst part, the cheese manufacturing sectr favrs generic prmtin and advertising f cheese, althugh manufacturers cannt gauge with precisin the direct effects f such prgrams n their branded business. Hwever, they wuld like t see a shift away frm the traditinal message f "eat mre cheese/it is gd fr yu" tward prmtinal material fr innvative and specific new uses f cheese t expand verall cnsumptin. Manufacturers/marketers in sme prduct segments (e.g., cld pack cheese and cheese spreads) d strngly favr a Wiscnsin identity prgram and wuld like t see prgrams/ advertising materials incrprating their particular types f prducts, because they feel that these prducts have received little r n attentin t date. Medium-sized and small cheese prducers typically market under their wn brand names nly limited quantitites f cheese frm in-state surces ther than their wn prductin; therefre, they d nt have the inventry prblems f the large marketers. These Wiscnsin cheese prducers are very much in favr f using the Real Seal and f having the Bard establish prmtinal prgrams fr a Wiscnsin lg r sme ther frm f state identity. They feel that the benefit f expanded prduct sales frm this frm f advertising wuld accrue t their brands. Because ut-f-state cheese prductin is increasing and the quality f cheese frm many surces is nw equal t that f Wiscnsin cheese, there is a feeling that the dairy industry in Wiscnsin has been laggard in supprting dairy and cheese research at academic institutins thrughut the state. By failing t attract and retain new scientific talent in the state, Wiscnsin has lst a gd deal f the leadership psitin in dairy science and technlgy t ther states where academic prgrams receive strng supprt frm the lcal dairy industry. Sme prducers feel that the Bard shuld include supprt prgrams fr academic research n dairy fd technlgy in Wiscnsin as part f an verall prmtin strategy fr the Wiscnsin cheese industry. Retail Trade Retailers appear t be favrably dispsed tward prmtin prgrams fr Wiscnsin cheese, and they are prepared t cperate. Distributin f price reductin cupns in cnjunctin wi th lcal media advertising was suggested as the mst prmising means f prmtin. VI-2