Many other agricultural sectors employ checkoff programs.
If approved such a program could elevate industry spending from $2.7 million a year, the current annual budget of the Grain Foods Foundation (GFF), to $18 million or even significantly more (judging by other existing checkoff programs). The feasibility study is being conducted by the GFF and is expected to last for several months.
Funded by industry, checkoff programs are designed to expand market share and increase revenue. The programs are overseen by the U.S. Department of Agriculture (USDA), as authorized by U.S. Congress, and once approved, require industry-wide contributions for activities aimed at promoting the industry.
The GFF noted that a checkoff program is not a tax, a government-run program or used to influence government policy. Additionally, checkoffs do not promote individual brands, disparage other agricultural commodities or benefit only large companies.
Checkoff programs are premised on the idea that an industry has the potential to accomplish more together than is the case for an individual company alone, the GFF said.
“A checkoff program allows an industry to unify as well as identify and address issues that impact its sales, while having a more substantial investment to support the category through consumer marketing,” the GFF said.
Many other agricultural sectors employ checkoff programs. To qualify, an industry must produce and market an agricultural commodity defined as a food, feed, fiber or livestock and any product thereof. Other well-known checkoff programs include the Pork Checkoff, Cotton Incorporated and MilkPEP.
Effectiveness of checkoff programs is measured in return on investment, and the USDA cites current programs having ROI’s in a range from $3 and up to $18 for each dollar invested by the industry.
Campaigns are kept free of specific brand names, highlighting for consumers category benefits. A checkoff program leaves brands and companies, as always, to compete on their own unique attributes and benefits, the GFF said.
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| Christine Cochran, executive director of the GFF. |
In a more recent assessment process, launched beginning in 2016, Tom Nagle, a managing partner of Statler Nagle, conducted 55 interviews across about 35 companies.
“Checkoff was one of a number of ideas on the table in 2013 and in interviews in 2016,” Cochran said. “The volume of the conversation went up in last year’s interviews.”
During the exploratory stage, millers, bakers and other GFF supporters were asked what success would look like, and increased sales were the principal goal for the group.
“What we heard back is that our current programming is worthwhile and valuable,” Cochran said. “The challenge that was recognized in just about every interview is that GFF is not big enough to move the needle when it came to sales growth. We as a foundation are at a point of evolution, and there is a need for a bigger industry commitment to help turn the ship.”
Work will progress on multiple fronts during the feasibility phase currently under way, Cochran said. In addition to reaching out to GFF investors to tell them that the exploration process has begun, a steering committee is being structured. The committee will serve as a “guiding group,” Cochran said. Under current plans the steering committee will hold its first meeting in January.
According to the GFF, the steering committee will have representation from milling and baking. The group will “establish parameters and guardrails and ensure that all voices and perspectives are heard and considered.”
Guided by the steering committee, task forces will be created to more deeply understand issues confronting the grain-based foods industry with the objective to identify opportunities to better “protect and promote” the industry’s products. One task force will be focused on consumer and customer market research, assessing behaviors and industry perceptions, as well as values research. A second task force on innovation will look for potential areas of growth and development. Ongoing grains nutrition research will continue to be conducted to determine credible claims about the nutritional benefits of the industry’s products.
These task forces will be responsible for helping define the overall scope and strategy of a potential checkoff program, Cochran said. In addition to millers and bakers, task forces will include experts from retail, academia, associations and allied partners.
The Foundation has engaged outside counsel, heavily experienced in various industry checkoffs, to explore the drafting of a baking industry petition should the steering committee decide to move forward. The draft would then be disseminated for industry feedback in a USDA comment period.
After the comment period, the USDA will publish a final proposal and oversee a referendum to approve or reject the launch of a checkoff program either immediately or on a delayed basis. Any company that would be assessed is eligible to vote, Cochran said.
If established, the checkoff program would be overseen by an industry-governed board and by a staff hired by the board. The USDA appoints the board with representation from all segments of the industry subject to assessments.
The board will be responsible for strategic plan development, allocation of funds and approval of business plans and programs.
The USDA’s oversight role includes ensuring a checkoff’s fiscal responsibility, program effectiveness, fair treatment of stakeholders, and auditing nutritional claims in promotional materials and messages.
Cochran currently is visiting members of the industry to discuss issues related to the establishment of a checkoff program. She recently addressed the board of directors of the North American Millers’ Association (NAMA) about the subject.
Looking ahead, the steering committee will be focused on answering questions in three categories: money, market size and governance.
“The industry wants to know what annual assessments will be,” she said. “How many promotion dollars we need, the products to be assessed, and what level of products. We are working to develop a return-on-investment model based on category research and are exploring what products may be exempt, how imports and exports will be treated for assessment purposes.”
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| Tom Nagle, a manging partner of Statler Nagle. |
Built based on complex econometric models, the measurements are very different from analysis of impressions, attitudes and favorability measures associated with public relations programs (which, he said, is important analysis as well), he said.
Instead, using baseline analysis of trends in play before the checkoff was adopted, the return-on-investment measurements look at changes in the consumption rates for people exposed to a campaign/program versus those who were not. Also measured is the extent intermediaries, such as retailers or food service customers, adopt or amplify program strategies or messages or tools with their own dollars, Nagle said. The intent is to measure the impact of actions across the entire value chain.
Results are validated in numerous ways, including against the experience of the industry as a whole as well as the results of individual companies, he added.
Governance issues cited by Cochran include board representation, the nomination process and referendum voting and timing requirements.
What would a checkoff program look like if developed and approved?
Given the early stage of exploration at present, that question isn’t easy to answer clearly, Cochran said. The current focus is exploring whether a program that would impact sales is feasible. Still, the range of activities under a checkoff program likely would be considerable.
“I would expect we would see a program that is comprehensive, including some components of innovation, market intelligence and research, industry business development initiatives, and product, process and marketing R&D,” she said. “You’d probably see some b-to-b marketing and customer campaigns, as well as grains nutrition research.”
“You would see consumer communications, like advertising, as a component. But one of the caveats I tell people is when you look across checkoff programs, the success of most depend on things you don’t see — not the consumer campaign.”
Several checkoff organizations currently devote resources to innovation.
“We’re trying to understand the landscape and see whether there is a role for checkoff in innovation,” Cochran said. “Dairy Management Inc. runs what’s probably the gold standard. An example would be a partnership between Ardent Mills and Domino’s Pizza to come up with pizza recipes to keep them in the school meals program. Our industry is unique. We need to figure out what works for us, if anything.”
An appeal of checkoff programs is that it requires everyone who benefits from the program to share proportionately in the cost, Cochran said.
“A checkoff eliminates the free rider problem in the current GFF program,” she said. “That is a challenge that has been identified by our stakeholders. It’s been a hindrance to our growth.”
The GFF said contribution rates for checkoff programs are typically based on an equitable and proportional formula established by industry.
Among 10 other industry groups with checkoffs cited in GFF materials about the program, the median annual budget was $76 million, with a range of $18 million to $280 million (see table on Page 20). At the low end were potatoes ($18 million) and eggs ($20 million), and at the high end were soybeans ($118 million) and Dairy Management Inc. ($280 million).
Cochran emphasized that industry input will be diligently sought during the feasibility stage and that the process will be transparent and inclusive.
“I really want everyone to know this is the beginning of the process,” she said. “We’ve organized to start a conversation that is driven by baker, miller and supplier stakeholders to better understand what the industry would like to do. No one will be excluded.”
|||SIDEBAR: Leading industry executives enthused about checkoff prospects|||
Leading industry executives enthused about checkoff prospects
KANSAS CITY, MISSOURI, U.S. — What are the thoughts of leading grain-based foods executives about plans to explore a checkoff program? Given current consumption trends and the high expense of effective product promotion, a checkoff program may be the best option, perhaps even the only option. Even as they expressed concern about the possible cost of such a program and commitment to a process that thoroughly explores its feasibility, the executives all voiced excitement about the potential impact of a grain-based foods checkoff program.
The gap between the quality of flour-based foods and the public perception of the products makes Dye believe a greater investment in product promotion would pay off.
“Our core products are affordable, a great source of health and nutrition, and an important part of a balanced diet,” he said. “They are a staple, and people like our products. So, how do we do a better job telling that story?”
While the success of other checkoff programs doesn’t guarantee the same results for milling and baking, Dye said it is difficult not to be impressed by the current public perception of eggs given how poorly they were viewed through much of the late 20th century.
“Today, there is an egg on almost every dish you can order at a restaurant, at least as an option,” Dye said. “Pork, especially bacon, also have had impressive turnarounds.”
A thoughtful approach will be crucial if a checkoff program is to succeed over time, Dye said.
“Money doesn’t solve every problem,” he said. “You’ll have to figure out how you’ll use the resources.
“Checkoff is a way for flour millers and bakers to collectively participate as an industry — demonstrating that we’re all working together. I think there’s real value in that approach. It requires everyone to step back from their own company lens and look with one vision toward the future and for the industry to look as a whole. We collectively will be part of building this for the next generation.
“I think about whether there is a way we can leave a legacy to the next generation. To be able to say, ‘We made a difference. We had an impact. We pulled together resources in a way to change the story, change the thinking, change the momentum to help our industry prosper.’ And it’s not just for our businesses, but to provide great food, health and nutrition for consumers.”
While committed to moving thoughtfully through the feasibility study, Dye finds the status quo unappealing.
“If you don’t do anything, you aren’t going to change anything,” he said. “And with a checkoff program if in the end we’re not effective, if it isn’t enough dollars, we can always step back.”
Worsening trends in consumption of flour-based foods in recent years require the industry to take a hard look at possible solutions, Frederick said.
“The Grain Foods Foundation’s purpose is to promote the grain-based foods industry,” Frederick said. “That’s why it was created. There is empirical data that consumption of grain-based foods has been flat for a while and now is beginning to drift lower, especially in certain categories. What are we going to do about it as an industry?
“The working group is committed to having an open mind to study the feasibility of doing this. It won’t happen at the wheat level. It needs to happen at the product level.”
While crediting the GFF with an effective job of building the scientific case for inclusion of grains in the diet, too many consumers remain misinformed on the subject, Frederick said.
“Messaging is important — how you deliver a message in what is a cluttered, muddled and jumbled mess of what people hear and how people feel about grain-based foods,” he said. “You need to make it clear. There must be an emotional appeal. There has been negative press on what we manufacture. It’s time to push back on that.”
Confident the GFF has engaged the right outside groups to put the best possible plan together for grain-based foods, Frederick still cautioned that the program, if approved, will be expensive.
“It’ll be a big commitment on a lot of people’s parts,” he said. “It requires considerable due diligence.”
Vince Melchiorre, senior vice-president, Bimbo Bakeries USA, Horsham, Pennsylvania, U.S.
Calling the current feasibility stage an important first step in the process to determine the viability of a USDA checkoff program, Melchiorre said the initiative has the potential to be a “game changer” for the grain-based foods industry.
“This is exciting work,” he said. “As an industry, we are at an important crossroad in terms of our ability to keep the baked goods category relevant and growing with today’s consumers. Working in a unified manner, with strong leadership from the Grain Foods Foundation, to find the most compelling way to tell our story to consumers is critical to the long-term success of our industry.”
Our category has such a great story to tell, from a health and nutrition standpoint or as an economic way to feed the family,” Shiver said. “The exciting thing about checkoff is that we would have a system to generate significant marketing dollars to tell the consumer all the reasons to buy bakery products.”
Acknowledging that the “devil is in the details,” Shiver said the key to success will be achieving an industry-wide commitment. He suggested the possibility of funding the program with an assessment through primary industry ingredient suppliers.
“The reason we need checkoff is to generate large enough marketing investment dollars to move the needle when it comes to growing consumer demand,” he said.
The grain-based foods industry spans a broad range of companies, Shiver said.
“The definition of grain-based foods is pretty encompassing,” he said. “It will take some solid thinking to determine the way the funds are generated and collected, doing that in a manner that incorporates the entire industry, both retail and food service. The program needs to be very inclusive of all grain-based foods companies.”
