Expensive dairy products prompted processors, diners to cut back

By CAROL RYAN DUMAS
Capital Press

Record-high milk prices of 2008 are long gone, but the records left behind lingering problems for an industry now losing money, according to an executive with a dairy consulting firm.

"Domestically, we've done a fair amount of damage due to high prices," said Bill Curley, vice president of research and consulting with Blimling and Associates.

Costly milk led to manufacturers and restaurants making less costly substitutions, he said.

For example, fast food restaurants started using one slice of cheese instead of two on their double burger offerings; pizza makers started skimping on cheese; "half-gallon" ice cream downsized to 48 ounces; processed cheese use grew to the detriment of natural cheeses; frozen meals switched away from cheese; and and macaroni and cheese makers substituted fillers.

Curley warns that those substitutions are going to stay in the market a long time.

Brian Kennedy, Grocery Manufacturers Association director of communications, said food manufacturers absorb rising costs when price spikes are short-lived.

"But, if these costs remain high for a protracted period of time, inevitably consumers will see the impact at retail in a variety of ways," Kennedy said. "Some companies raise the price of their products, some companies choose to reduce the size of their product and keep prices stable."

Yogurt manufacturer Dannon chose to raise prices while absorbing what it could of the high milk prices, said Michael Neuwirth, senior director of public relations.

"We didn't change any packaging or the size of our products due to any milk-pricing issues," Neuwirth said, "but rather we adjusted our price accordingly. That did not, however, account for the complete rise in the price of milk."

Nicholas Sampogna, Zagat Survey communications assistant, said his company has been tracking how dining habits have been changing throughout this economic downturn.

"The statistics vary in each of our nationwide markets, but looking at a working national average, it seems that about 20 percent of our surveyors report skipping appetizers and/or desserts when they dine out," he said.

Staff writer Carol Ryan Dumas is based in Twin Falls, Idaho. E-mail: crdumas@capitalpress.com.

Online

Grocery Manufacturers Association: www.gmabrands.com

Dannon: www.dannon.com

Zagat: www.zagat.com

Kraft Foods: www.kraftfoods.com

Blimling and Associates: www.blimling.com