DENVER, COLO. – A crisis is a crisis and it hurts to think about the challenges that COVID-19 has created all across the supply chain, according to Peter Sheahan, CEO of Karrikins Group. Sheahan was a keynote speaker at the combined annual meeting of the National Dairy Board/National Milk Producers Federation/United Dairy Industry Association.

“And it is not like dairy producers weren’t already facing margin challenges in the fluid milk space,” he added.  “I am not going to pretend it is an easy time to do what we are doing.”

Still, Sheahan challenged producers to step back from the operational demands they are facing and look at the long-term opportunities that are being presented to them and is there a way to reposition the business to do better.

“During periods like this, the consumer has an appetite and willingness to do new things that they don’t have in other periods,” he said. “That appetite, that willingness for new perceptions, new behaviors, new actions is not repeated in a non-disrupted environment. So how do we leverage that appetite and willingness?”

Second, boards and organizations are more willing to invest in aggressive innovations right now because they know that they need it.

Sheahan said research has shown that companies and even sectors that invested in their brand, invested in telling their story, and were seen as moving toward change had a premium in growth.

“The question is how does dairy, as an industry, leverage this new appetite, this new permission and focus, and most important to double down on the stories we tell,” he said.

He said the industry can’t operate as if their backs are to the wall and everything is a crisis. Producers have the opportunity to influence where the consumer is going to go, by operating from an offensive rather than a defensive strategy. “Transformation is a psychological journey first, and a strategic journey second,” he said.

He said the dairy industry needs to look at the trends that are happening. First, governance, health, well-being and sustainability are growing concerns, consumers are eating their dairy, rather than drinking it. Another issue is the emergence of non-dairy completion and how it impacts the industry. Fourth, user-generated mediascapes and transparency.

Sheahan said this is not a one-way conversation, it is a two-way conversation in a fully transparent world. And viewers are going to have their opinions. Rounding out Sheahan’s list are environmental issues, including soil and water challenges and margin pressures.

“Is there anything on this list that is new to you,” he asked. “These trends were in play before COVID-19. COVID has just accelerated and amplified these trends.

What does the industry transformation look like?

“We know that we need massive innovation in practices and products,” he said. “We know that we need to be a demand-driven value chain, meeting the consumer needs, meeting them where they are at. We need to be a data-driven business and digitize processes and systems. We know the consumer is not going to get it on their own, we take the story to them. We need to be offensive as an industry, going on the front foot and asserting ourselves, rather than trying to protect the past and what it was like. And we sure as heck know we can’t do it alone, we have to do it together as an industry.”

Sheahan said that everyone in the industry knows what is going on, so don’t say you never saw these changes coming.

Sheahan reminded producers that it is their responsibility to begin to take ownership for leading the response because they can’t tell a collective story if it is not collectively adopted and embraced by the whole value chain. He stressed three key points.

Be aware of circular conversations where the same issue keeps surfacing, such as the desire for regulators to prevent the use of the word milk for any non-dairy alternative. It would have been nice to have gotten ahead of it, but it is unlikely the consumer is going to change their conversation, so we may need to accept it and move on. We have to watch out for the assumptions that we are making that we can market our way to a better outcome, we also have to practice and innovate our way to a better outcome.

“I don’t care how far back you are in the value chain, all of us are brand builders,” he said. “Brands are built on stories and these stories start back behind the farm gate.”

Change happens, according to Sheahan, but transformation is a psychological journey first, and a practical one second. “We should be leading the transformation,” he said.

Second, get above the chaos and above the crisis, create a preferred future. If the external rate of change for a business is faster than the internal rate of change, then the business will become less relevant and the external market will put pressure on the business and force it to change and adapt what they do. At that point, the business is being forced to change rather than doing it on its own.

“There are two problems with that,” he said. “Usually by the time you get there, your margins are squeezed so hard, there is not a lot of free cash flow. But more importantly, you lose the reputational gain that comes from being a cutting edge thinker, of being an innovative business, being seen as going to what is next.”

Sheahan said that perhaps producers need to think about creating a preferred future for their industry. He encouraged them to take the lead and bring new ideas to the processers.

“But first you need to determine your personal ambition and your preferred future,” he said. “Start by asking yourself what you would like to have happen and then look to generate the support of people in the value chain to get there.”

Finally, make sure that you go first. You have to see yourself as a demand generator, building the brand, creating the story, meeting consumers where they are at, and leading them to the future.

“That is the only way any company creates any kind of growth rate,” he said. “They do it by being brutally honest about what is happening, telling themselves the truth and putting their hand up and telling themselves, ‘I want a different kind of future and that future is built on ambition and not on crisis and a burning platform.’”

Finally, alignment, rather than agreement is critical.

“Make sure that you go first with your actions, your decisions, your investments,” he said. “It is not enough to simply agree that we need to adapt, you have to align. In fact, agreement is optional, alignment is not. Nothing changes until someone changes.”

So how do you make these changes? Start small, and push your comfort zone with the goal of learning. Embrace the idea of progress over perfection.

Finally, Sheahan said that progress over perfection was the key to innovation. 

“When you innovate, it will be messy, but you are learning,” he said. “Continue to feed the stories through the channels you work with. Consumers are not going to suddenly wake up and tell themselves a different story about dairy farming. We are going to have to do it.”

He urged producers to work together.

“Don’t feel like you have to do this on your own,” he said. “The dairy industry is a collaborative industry, but you need to partner with others.”