Organic Valley searches for new niche
By Mateusz Perkowski
The Organic Valley cooperative of dairy producers is looking for new niches within the greater niche of organic milk.
In 2013, the company has rolled out its "Grassmilk" -- a line of non-homogenized, minimally pasteurized milk from grass-fed cows -- on a national scale, and introduced lactose-free whole milk and half-and-half. It also sells milk fortified with Omega-3 fatty acids, which have been linked to health benefits like lower blood pressure.
The goal is to create a "strong portfolio" of market channels for the cooperative's raw materials and ultimately to grow its sales, said Tripp Hughes, Organic Valley's director of category management.
For example, the company's "Omega-3 Milk" sprang from the realization that many young mothers relied on baby formula fortified with these fatty acids and would be seeking fortified milk for their toddlers, he said.
Its lactose-free products, in which a natural enzyme has broken lactose into simpler sugars, allow people to enjoy milk that wouldn't have otherwise been able to comfortably digest it, he said.
As for Grassmilk, the cooperative recognized a demand from consumers for a product from cows fed nothing but grass, Hughes said. Farmers in the cooperative are already very pasture-based and the "grass-fed" category has made strides in the beef market.
"This is the only product of its type out there, and we're able to get a significant premium for it," he said.
Grassmilk typically sells for up to $1.50 more per gallon than regular organic milk at the retail level, Hughes said. While the product represents only a small fraction of Organic Valley's total revenues, it is starting to account for up to 15 percent of its milk sales at higher-end and specialty grocers.
"The consumers seem to be very excited by it," Hughes said.
The product is meant to appeal to the "artisan" food crowd, as the lack of homogenization allows cream to clump and rise to the top, which many milk consumers aren't accustomed to, he said. The lower intensity of pasteurization also reduces shelf life and adds complexity to distribution.
"We have to pay much closer attention to it," said Hughes.
The cooperative began developing an experimental pool of separately-managed Grassmilk in northern California last year and in 2013 shifted production to the Midwest, with the product being sold nationally, he said. During non-grazing seasons, the cows are fed grass hay but no corn or soybeans.
Larry Lev, an agricultural economist at Oregon State University, said organic dairy companies are trying to differentiate themselves as the market has grown more competitive.
"All of these companies are trying to stay one step ahead," he said.
Competition in the organic dairy market is fierce, as the sector has some producers that operate at a large scale, Lev said. Dairy products are also a highly visible component of the organic industry.
"It's an entry point," Lev said. "Moms buying for their kids and that kind of stuff."
Apart from the major organic players, Organic Valley is also competing against smaller producers who tout their locality and traceability, he said.
"How are you going to stand out? How are you going to keep your customers happy?" Lev said. "It's a lot of new product innovation in a short amount of time."