SRI International

®

CLIENT PRIVATE

DISTRIBUTION AND MARKETS FOR WISCONSIN CHEESE

Final Report

May 1985

Prepared for:

The Wisconsin Milk Marketing Board Madison, Wisconsin

~ SRI International 333 Ravenswood Avenue Menlo Park, California 94025-3493 ( 415) 326-6200 TWX: 910-373-2046 Telex: 334486

CLIENT PRIVATE

@ ~ © D_' __

SRI International

®

CLI NT PRIVATE

DISTRIBUTlbN AND MARKETS FOR WISCONSIN CHEESE

Final Report

May 1985

Prepared by:

Nicolo Bellanca Nancy Borgeson

Prepared for :

The Wisconsin Milk tv,1arketing Board Madison , Wisconsin

SRI Proj ect 7851

CLlENr PRIVATE

CONTENTS

LIST OF ILLUSTRATIONS

LIST OF TABLES

I INTRODUCTION.

II SUMMARY OF FINDINGS AND CONLUSIONS • •

Objectives and Scope • • • • • • . Conceptual Approach, Survey/Interviews Results, and Other Findings • • • • . • • Rationale and Limitations ••••••••••• Plant Survey and Interviews Other Findings • • • • • • • • ••••

Wisconsin's Role in the U.S. Cheese Market Wisconsin Cheese Production Accounted for in the Study • Reporting Format • • • • • • • • • •

The U.S. Cheese Market •••••••••••• The Wisconsin Cheese Market Wisconsin Regional Volume and Share Estimates •••••• Industry Interviews: Dynamics of Cheese Distribution and Volume Flow Pattern. • • •••••••••

Economic Growth • • • • • • • . • • • • • • Population Distribution • • • • • •• • • • • Competitive Production/Promotion by Other States Image/Quality • • • • • • • • • • • • • • • • • Transportation • • • • • • • • • • • • • • Technology • • •• •• • • Government Policy • • • • •• •• • • • • • •

Industry Viewpoint: Promotion and Advertising Programs for Wisconsin Cheese • • • • • • • • • •

Cheese Manufacturers/Marketers ••••• Retailers • • • • • • • • • • • Foodservice/Food Manufacturing Trade

III METHOD OF APPROACH • •

General Overview • • • • • • • • • • Definitions/Reporting of Data ••••• Natural Cheese Producers Questionnaire Survey • • • • • • Interviews with Major Cheese Firms •• Interviews with Brokers, Distributors, Chain Retailers,

and Foodservice Firms • • • • • • • •

iii

vii

ix

1-1

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-3 111-4 III-8

III-10

CONTENTS (Continued)

IV WISCONSIN'S ROLE IN THE U.S. CHEESE MARKET ••.

Wisconsin's Share of U.S. Cheese Production Wisconsin Cheese Production Accounted for in Geographic and Market Detail • • . • • Pasteurized Process Cheese Products ••••

U.S. Production •••• Wisconsin Production •••••••

the Study • •

The U.S. Pasteurized Process Product Market Wisconsin Pasteurized Process Product Market

Cold Pack Cheese and Cheese Foods • • • • U.S. Production Wisconsin Production • • . • • . • • The U.S. Cold Pack Product Market Wisconsin Cold Pack Product Market Comments Concerning Cold Pack Product Promotability

Cheddar •• • • • • • • • • • • U. S. Produc tion Wisconsin Production • • • The U.S. Cheddar Market Wisconsin Cheddar Market •

Colby .••••••• U.S. Production Wisconsin Production •• The U.S. Colby Market The Wisconsin Colby Market

Jack . . e • • • • • • •

U.S. Production Wisconsin Production • The U.S. Jack Market. The Wisconsin Jack Market

Muenster • • . • • • • U.S. Production •••• Wisconsin Production ••• The U.S. Muenster Market. The Wisconsin Muenster Market

Brick •• • • • • . • • U.S. Production Wisconsin Production • The U.S. Brick Market The Wisconsin Brick Market

Swiss •••• • • • • U.S. Production Wisconsin Production. The U.S. Swiss Market The Wisconsin Swiss Market •

iv

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

CONTENTS (Concluded)

Mozzarella and Other Soft Italian Pizza-Type Cheeses u.s. Production • • • • • • ••• Wisconsin Production . . • • . . . . . • . • The U.S. Mozzarella Market ..••••••• Wisconsin Mozzarella and Soft Italian Cheese Market

Hard Italian Cheeses • • • • • • u.s. Production Wisconsin Production ...•• The u.S. Hard Italian Cheese Market The Wisconsin Hard Italian Cheese Market •

All Other Cheeses • • • • u.S. Production Wisconsin Production The U.S. Market The Wisconsin Product Flow •

V THE DYNAMICS OF CHEESE DISTRIBUTION AND VOLUME FLOW PATTERNS

Economic Growth Population Distribution ••••• Consumer Taste . • • • • • • • • • Competitive Production/Promotion by Other States Image/Quality • • • • Transportation • •• •••••••• Technology . • . • • Government Policy •••• • • • • • •

VI INDUSTRY PERSPECTIVE ON PROMOTION AND ADVERTISING PROGRAMS FOR WISCONSIN CHEESE

Cheese Manufacturers/Marketers • Retail Trade . . • . . • • . . • • Foodservice/Food Manufacturing Trade Industry-Wide Conclusions

APPENDICES

A WISCONSIN PLANT SURVEY QUESTIONNAIRE • • • • • • • •

B SAMPLE OF WISCONSIN PLANT SURVEY COMPUTER PRINTOUT •

C SAMPLE OF CHEESE FLOW COMPUTERIZED PROJECTIONS • •

v

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-1

VI-1 VI-2 VI-3 VI-3

A-1

B-1

C-1

1

2

ILLUSTRATIONS

METHOD OF APPROACH

u.S. CHEESE MARKET REPORTING REGIONS.

vii

III-2

IV-S

TABLES

1 WISCONSIN CHEESE VOLUME AND SHARE OVERVIEW FOR MAJOR PRODUCT CATEGORIES . . . . . . .

2 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 . . • . . • . • .

5 U.S. METROPOLITAN AREAS WHERE WISCONSIN CHEESE HAS A SIGNIFICANTLY LOWER THAN AVERAGE (38%) SHARE OF THE BRANDED RETAIL CHEESE MARKET . . . • . . .

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 . . . . . · · · ·

10 CHEESE INDUSTRY INTERVIEWS

II-7

II-l0

II-15

II-16

II-18

· · 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-12

17 U.S. COLD PACK PRODUCT DISAPPEARANCE. IV-16

18 WISCONSIN COLD PACK PRODUCT VOLUME AND SHARE OVERVIEW IV-17

ix

TABLES (Continued)

19 WISCONSIN COLD PACK PRODUCT REGIONAL VOLUME AND SHARE ESTIMATES IV-18

20 U.S. CHEDDAR DISAPPEARANCE. IV-20

21 WISCONSIN CHEDDAR PRODUCT VOLUME AND SHARE OVERVIEW IV-22

22 WISCONSIN CHEDDAR REGIONAL VOLUME AND SHARE ESTIMATES IV-23

23 U.S. COLBY DISAPPEARANCE. IV-27

24 WISCONSIN COLBY VOLUME AND SHARE OVERVIEW IV-28

25 WISCONSIN COLBY REGIONAL VOLUME AND SHARE ESTIMATES IV-30

26 U.S. J ACK DISAPPEARANCE IV-32

27 WISCONSIN JACK VOLUME AND SHARE OVERVIEW •. IV-33

28 WISCONSIN JACK REGIONAL VOLUME AND SHARE ESTIMATES IV-35

29 U.S. MUENSTER DISAPPEARANCE IV-37

30 WISCONSIN MUENSTER VOLUME AND SHARE OVERVIEW IV-38

31 WISCONSIN MEUNSTER REGIONAL VOLUME AND SHARE ESTIMATES • • IV-40

32 U.S. BRICK DISAPPEARANCE. IV-42

33 WISCONSIN BRICK VOLUME AND SHARE OVERVIEW IV-43

34 WISCONSIN BRICK REGIONAL VOLUME AND SHARE ESTIMATES IV-45

35 U.S. SWISS DISAPPEARANCE. IV-46

36 WISCONSIN SWISS VOLUME AND SHARE OVERVIEW IV-47

37 WISCONSIN SWISS REGIONAL VOLUME AND SHARE ESTIMATES IV-49

38 U.S. MOZZARELLA AND SOFT ITALIAN CHEESE DISAPPEARANCE IV-51

39 WISCONSIN MOZZARELLA AND SOFT ITALIAN CHEESE VOLUME AND SHARE OVERVIEW . . • IV-53

40 WISCONSIN MOZZARELLA AND SOFT ITALIAN CHEESE REGIONAL VOLUME AND SHARE ESTIMATES . . . . . . • • • IV-55

x

TABLES (Concluded)

41 U.S. HARD ITALIAN CHEESE DISAPPEARANCE. IV-57

42 WISCONSIN HARD ITALIAN CHEESE VOLUME AND SHARE OVERVIEW . . . IV-58

43 WISCONSIN HARD ITALIAN CHEESE REGIONAL VOLUME AND SHARE ESTIMATES IV-60

44 WISCONSIN "ALL OTHER" NATURAL CHEESE PRODUCT FIRST STAGE DISTRIBUTION . • • • . • • • • • • IV-62

45 RELATIONSHIP BETWEEN KEY VARIABLES AND DISTRIBUTION PATTERNS OF WISCONSIN CHEESE . • . V-2

xi

I INTRODUCTION

The Wisconsin Milk Marketing Board (WMMB) commissioned this SRI project to determine the distribution pattern and markets for Wisconsin cheese.

In 1983, Wisconsin cheese makers produced some 1.7 billion pounds of natural cheese, about 39% of the total natural cheese output in the United States, and 0.8 billion pounds of process product (43% of U.S. output). The majority of Wisconsin-produced cheese, as a variety of natural and process cheese products, moves out of state to widespread points of consumption through a mul ti tiered dist ribution system. This complex dis t ri bu tion netwo rk has numerous part i cipan ts, i ncl ud ing c hees e manufacturers/marketers, cheese processors/marketers, cheese assemblers/ packers, grocery and foodservice distributors, food brokers, grocery wholesalers and retailers, manufacturers of processed foods, and food­service companies. Wisconsin cheese is present in virtually every market throughout the United States--although the state origin of the cheese is not always identifiable among the countless packaged products available in the marketplace--as a grocery item sold under a Wisconsin or national brand, as a random-weight, private-label product in California, as a component ingredient in a branded package of process cheese slices in Texas, or as part of a foodservice product or manufactured food product anywhere in the country.

In recognition of the importance of cheese production to the welfare of the Wisconsin dairy industry, as well as of the excellent growth prospects for cheese consumption in the United States, the WMMB wants to develop new and/or expanded programs for promoting Wisconsin cheese based on the product's identity and its quality reputation. To achieve the goal of designing effective marketing programs and of targeting program ex­penditures in support of the entire cheese industry in Wisconsin, the Board seeks quantitative estimates for Wisconsin cheese in geographic markets nationwide. These estimates will indicate where the cheese is marketed, through what channels, and in what quantities and product form. The Board also wishes to integrate into its overall marketing strategy the impact of potential changes in volume flow pattern and cheese distribution methods; doing so requires an assessment of whether, when, and in what direction such changes may occur. This informa tion is currently either not available anywhere or is available in limited and highly proprietary form only to a handful of major cheese marketers.

In July 1984, the WMMB agreed that SRI International (SRI) should undertake a study to identify the nationwide dist ribu tion channels and markets for Wisconsin cheese. This report presents the findings of that study as outlined in SRI's June 13, 1984 Proposal No. ICC 84-130,

I-I

"Distribution and Markets for Wisconsin Cheese." In addition to the major objectives of the study, SRI also agreed to provide best-effort estimates of the market presence of Wisconsin cheese in major metropolitan markets, and to solicit, integrate, and report on the cheese industry's opinions and points of view regarding the effectiveness of promotion and adver­tising programs for Wisconsin cheese. The scope of the work focused on Wisconsin-made cheese only and included:

o Estimates of cheese volume flow into regional and major metropolitan areas in the United States.

o Volume estimates for the major types of natural cheese (Cheddar, Colby, Jack, Muenster, Brick, Swiss, Mozzarella, hard Italian, and "other" cheeses) and for pasteurized process and cold pack cheeses.

o Volume estimates for each cheese by major distribution channel (branded retail, private-label retail and foodservice/manufacturing, and processing).

This report summarizes the work conducted by SRI and presents major findings and observations. Section II summarizes the findings and con­clusions. Section III reviews the method of approach employed in the study, including a survey of Wisconsin cheese producers, the interview process, and the compu~er model developed for the analysis and integration of the available data base. Section IV reports detailed estimates of the volume flow for major Wisconsin cheese types by distribution channel, by region, and by selected major metropolitan areas. Section V addresses factors influencing the future distribution pattern and use of Wisconsin cheese, including market trends, consumer tastes, effect of competing cheese production and promotion in other states, transportation, and technology. Section VI reports the concerns and opinions of industry participants regarding promotion and advertising programs for Wisconsin cheese together wi th the authors' concluding observations. Because much of the information for analysis was prOVided to SRI on a confidential basis, the levels of aggregation/disaggregation in the data reported reflect the authors' best effort to balance the Board's need for quanti­tative information against the need to preserve the confidentiality of the sources.

The study was performed at SRI under the supervision of George von Haunalter, Director, Health and Food Industries Center. Nicolo Bellanca, Senior Consultant, was the project leader as well as the leader of individual project tasks. Nancy Borgeson, Senior Economist, was the other major contributor to the entire project as well as the leader of several tasks. Additional contributors to selected tasks include Theresa Stetson, Michelle Smith, Jeffrey Larsen, Teresa Maccarone, and Mark Boettger.

SRI wishes to acknowledge the assistance provided by the entire WMMB staff, particularly that of Leslie Lamb, who served as project liaison officer, J. Ricard Johnson, and Nancy Sprecher. In addition, the SRI

1-2

project team wishes to thank all those individuals whose cooperation and expert opinion were invaluable for the successful completion of this project. In particular, the authors wish to thank J. E. Tillison, Executive Director, Wisconsin Cheese Makers Association, and C. L. Farr, Director of the Dairy Division, Wisconsin Federation of Cooperatives, as well as the members of the Wisconsin dairy and cheese industries, cheese dist ributors and brokers, major cheese wholesalers and retailers, and foodservice and food manufacturing cheese buyers, both in and out of state. This project would not have been possible without their partici­pation and contributions.

1-3

II SUMMARY OF FINDINGS AND CONCLUSIONS

Objectives and Scope

The overall objective of this project was to assist the Wisconsin Milk Marketing Board in developing a complete framework of quantitative estimates of the flow of Wisconsin cheese to geographic markets throughout the United States. This first-time undertaking is a key element in the Board's long-term strategy for designing and implementing promotion and advertising programs specifically targeted toward supporting the cheese and dairy industries in Wisconsin. The Board asked SRI International to investigate several components pertaining to the overall objective; accordingly, our efforts included:

o Tracing the volume flow of Wisconsin cheese quantita­tively from the point of manufacture to the pOint of final sale or use.

o Developing best-effort estimates of the market presence of Wisconsin cheese by region and by major metropolitan market area in the United States.

o Preparing volume flow estimates for each major type of natural cheese (Cheddar, Colby, Jack, Muenster, Brick, Swiss, Mozzarella, Hard Italian, and "other" cheeses), and for pasteurized process and cold pack cheeses.

o Allocating volume estimates for each cheese type by major distribution channel (branded and private-label retail, foodservice/manufacturing, and processing).

o Identifying the major forces for change within, and their likely effects on, the existing distribution system and flow pattern for Wisconsin cheese nationwide.

o Soliciting and reporting on the cheese industry's points of view regarding the perceived effectiveness of and interest in promotion and advertising programs for Wisconsin cheese.

In the work undertaken, the entire United States was deemed a major market for Wisconsin-produced cheese. This decision was based on the knowledge that Wisconsin cheese production (as recently as in 1983) accounted for approximately 39% and 43% of total U.S. output of natural and process cheese, respectively, and that a large portion of Wisconsin cheese moves out of state to widespread points of consumption through a

II-I

complex distribution network. Cheese output data for Wisconsin spanning June 30, 1983-July 1, 1984, were used as the baseline for developing the estimates of volume flow to markets, whereas a 2- to 5-year time frame was employed for qualitative projections of issues pertaining to the identifi­cation of major forces for change in the existing distribution system for Wisconsin cheese.

In interviews with in-state and pants, SRI explored the prospects methods and attempted to gauge the programs for Wisconsin cheese. industry participants included:

out-of-state cheese industry partici­for future changes in distribution

industry's attitude toward promotion The relevant issues discussed with

o The impact of key variables--economic growth, shifts in population, adoption of highly efficient manufacturing technologies, and the future direction of government farm support policy--on sales volume and geographic distribu­tion of Wisconsin cheese.

o The competitive position of Wisconsin cheese in light of increasing cheese production and promotion in other states, and the transportation cost advantage accruing to cheese marketed close to the point of production.

o Wisconsin cheese's excellent image and reputation for quality as differential attributes for marketing it.

o Perceived obstacles to the effective implementation of promotion programs based on the use of labels and/or logos to identify the state origin of the cheese.

o Factors within the industry/market structure and distribution dynamics for Wisconsin cheese that might constitute impediments to the formulation of promotion strategies beneficial to the Wisconsin cheese industry as a whole.

o Industry participants' opinions and suggestions regarding methods for promoting Wisconsin cheese; also, the perceived value of promotion programs that the WMMB could undertake in support of the Wisconsin cheese industry.

As much as possible, SRI has attempted to preserve the industry viewpoints on the issues in the original form in which we received them from particu­lar segments of cheese industry participants, including manufacturers/ processors, retailers, and foodservice/food manufacturing firms.

We emphasize that this project is the first effort by any organiza­tion to build an integrated framework of quantitative data on the volume flow and distribution pattern for Wisconsin cheese. Individual estimates throughout this report reflect the level of precision made possible by

II-2

reviewing data available from any source. For the most part, the esti­mates make extensive use of proprietary information that was crucial to the successful outcome of the study, and was provided to SRI on a confi­dential basis. To preserve the confidentiality and anonymity of the source, industry data have been reported only in aggregate form.

Conceptual Approach, Survey/Interview Results, and Other Findings

Rationale and Limitations

Because of the complexity of constructing an entire framework of data from information known to be extremely diffuse, of varying levels of detail and accuracy, often highly proprietary and/or confidential, and at times nonexistent, a multipronged research approach was devised and used for this study.

One "top down" approach consisted of a questionnaire survey of Wisconsin cheese producers to establish current output data and to deter­mine the first point of sale and/or delivery for the cheese from plants in Wisconsin. Computer modeling was used to project, by region and by metro­politan area, the retail universe for each type of Wisconsin cheese from available retail trade and other industry data; this modeling provided the "bottom up" approach for estimating the volume flow of cheese from Wiscon­sin. The survey and computer model were supplemented by in-person and telephone interviews with knowledgeable industry observers and with major firms (e.g., cheese manufacturers/processors, distributors, foodservice firms, chain retailers, etc.) representing different tiers of participa­tion in the overall channels of distribution for cheese nationally and in multistate operations. The industry data were expected to fill informa­tion gaps, and also to serve to define a first approximation of the second stage of Wisconsin cheese flow in-state and out-of-state, or of final links to markets and end uses.

When they were integrated into computer-simulated projections, the production, shipment, and cheese movement data from both the interviews and the plant survey were used to estimate the volume flow of Wisconsin cheese to markets nationwide and, by a process of iteration, to test the reasonableness of these first-time estimates by comparing them with rele­vant facts and figures collected from all sources. The final estimates incorporate both actual industry data and SRI's expert judgment; they may vary in precision for each cheese type, depending on the completeness of the information available when they were prepared.

Plant Survey and Interviews

Questionnaires, with cover letters and instruc tions, were mailed to 314 natural cheese plants in Wisconsin. Approximately 1.1 million pounds of output equal to 65% of the total production of natural cheese reported by the State of Wisconsin for 1983, were accounted for by the 134 plants

II-3

that participated in the survey. The survey data were internally con­sistent, with a volume variance between reported production and shipments of less than 1%.

A total of 28 cheese manufacturers/processors, including virtually all of the national cheesemarketers, were also interviewed in person. Seventy-six telephone and in-person interviews were conducted with in­state and out-of-state brokers, distributors, chain retailers, and food­service firms who extended at least some cooperation; an additional 20 firms refused to participate.

Other Findings

In addition to plant output data, the questionnaire mailed to natural cheese producers in Wisconsin asked on a conf idential basis, for volume information on: (1) produc tion mix; (2) in-plant store sales and mail order sales; (3) cheese purchased from other producers; (4) data on in­state and out-of-state shipments by point of delivery (e.g., process cheese plant, other natural cheese plant, etc.) and by recipient customer category (e.g., distributor, grocery wholesaler, foodservice, etc.); and (5) the names of major customers. The analysis of these survey data pro­vides additional insight into the dynamics of in-state and out-of-state flow patterns for Wisconsin cheese, and of intercompany shipments:

o 71 plants purchased a total of 19 million pounds of cheese, mostly from other cheese firms in-state; out­of-state purchases accounted for only 3%.

o 36 plants ship retail packaged cheese under their own brand, distributor brand/label, or store label.

o 122 million pounds of cheese were shipped to government warehouses, with 90% of the volume remaining in Wisconsin.

o Total mail order volume was less than 1 million pounds, although the total dollar value of gift packages is likely to be a hefty multiple of the value of the cheese alone.

o 696 million pounds of cheese reported in the question­naires could be traced to one of the following categories of customers: distributors, grocery chains, food manu­facturers, foodservice operations, cheese processors, other natural cheese firms, and firms with combined operations for natural and process cheese. The largest portion of this cheese (412 million pounds or 59% by volume) is initially delivered to in-state locations, and a large portion of it (15%) goes to distributors. This

II-4

category, however, also includes cheese assemblers and packers that supply cheese to other firms and to cheese processors in-state and out-of-state.

Wisconsin's Role in the U.S. Cheese Market

Wisconsin is the leading U.S. cheese manufacturing state, producing 39% of the nation's output of natural cheese and 43% of all process products. Within the natural and process categories, the Wisconsin cheese industry's share of output ranges from 86% and 76% of cold pack products and Muenster, respectively, to 17% of Swiss and 26% of process cheese foods and spreads. According to the U.S. Department of Agriculture (USDA), Wisconsin cheese output in 1983 totaled 1,728 million pounds of natural cheese (1,720 excluding Ricotta), 5% more than 1982 levels, and 837 million pounds of process products, a 20% increase over 1982 output. Some 306 plants were involved in natural cheese manufacture. The number of Wisconsin plants producing process products was not officially reported.

Wisconsin Cheese Production Accounted for in the Study

By means of the natural cheese producer survey and our interviews wi th maj or Wisconsin cheese industry participants, SRI gathered and/ or estimated production and shipment information for Wisconsin plants totaling some 1,428 million pounds of natural cheese and 738 million pounds of process products. Response varied by cheese type. More than 80% of the production of Cheddar, Jack, Swiss, hard Italian, Brick, Mozza­rella, and pasteurized products was identified by producer, but less than two-thirds of the production of Colby, Muenster, cold pack, and specialty (or "all other" types) was reported.

In terms of tracking Wisconsin cheese to final market, the project team was able to assign about 2,300 million pounds to specific market channels or uses, and 2,200 million of those pounds to final destination. For some cheeses, both reported production and final market volume esti­mates exceed both 1983 reported production levels and production/shipment data derived from the combined producer survey/interview process. There are four reasons for these discrepancies: (1) changes in production level and product mix between the 1983 calendar year and the time frame covered by the producer survey (July 1983-June 1984) and the interviews (1984 calendar year); (2) the possibility of some error in completing the producer survey form by responding cheese firms; (3) additional cheese accounted for in interviews with assemblers, packers, distributors, retailers, and foodservice firms; and (4) the possibility of some double counting of cheese as it moves through the multistage distribution system.

The difficulties encountered in tracing cheese flow and avoiding double counting can best be illustrated by data derived from the producer survey. The survey results indicated shipments from responding firms of 981 million pounds for the July 1983-June 1984 period. Of this volume,

II-5

495 million pounds, or 50%, were shipped initially to other cheese firms--for processing, cutting and packing, and/or distribution--and 333 million of those pounds were destined for in-state cheese manufacturers. In addition, 134 million pounds were reported as being shipped to dis­tributors, 63 million pounds to in-state locations. Much of the cheese that is shipped to in-state distributors is cut and packed and then reshipped to or for other cheese manufacturers/marketers. Because of this intricate pat tern of company relationships and cheese flow wi thin the state, it is very difficult to avoid some double counting of the product as it moves to points of ultimate consumption or use.

Reporting Format

Throughout this report, the estimates of both the U.S. cheese market and Wisconsin cheese flows are reported for the United States as a whole and for 10 regions. These regions were selected to represent current cheese production, distribution, and marketing patterns as well as pos­sible, and to fit the manner in which major firms chose to provide sales and market information (e.g., "20% of sales west of the Mississippi" or "60% on the East Coast from Washington, D.C., north").

In terms of the overall cheese market, reporting is by major dis­tribution channel or market outlet. These channels include retail branded and retail private-label products, foodservice/food manufacturing cheese use, processing (for pasteurized and cold pack product manufacture), government (Commodity Credi t Corporation purchases and conversions, and sales to government programs or services, such as the military and the school lunch program), and "other," which generally refers to cheese sold at cheese plant retail outlets and by mail order.

The U.S. Cheese Market

Table 1 presents an overview of the disappearance of cheese of the major types on a consolidated basis for the United States as a whole. Excluded from this overview and from the subsequent tables in this summary section are the "all other" or specialty types of cheeses, which include Blue, soft ripened cheeses, Gouda, etc. These small-volume specialty types are omitted here for two reasons: (1) little good market data on a national or regional level is available for such products, and (2) the data we derived on Wisconsin production and distribution of products in this category were insufficient for an analysis comparable in level of detail and reliability to that conducted for the larger volume "main­stream" types of products.

II-6

Table I

WISCONSIN CHEESE VOLUME AND SHARE O¥ERVIEW FOR MAJOR PRODUCT CATEGORIES

Cheese Disappearance

Distribution Channel U.S.

(million lb) Wisconsin

(million lb)

Retail

Branded Private-label

Foodservice/food manufacturing

Processing

+ Government

& Other

Unallocated

Total

*

1,930

2,127

1,440

952

53

6,502

1,242 689

939

584

543

200

33

226

2,525

469 470

Wisconsin Share (%)

49%

27

38

21

62

39%

38 68

Includes only pasteurized process, cold pack, Cheddar, Colby, Brick, Muenster, Jack, Swiss, Mozzarella and soft Italian, and hard Italian.

+

&

Includes sales of Cheddar to the Commodity Credit Corporation, and pas teurized process and Mozzarella for various uses--military, school lunch programs, etc.

Cheese factory store sales and mail order.

Source: SRI International

II-7

For the product universe covered in Table 1, about 1.9 billion pounds of cheese are ultimately sold in the United States as a retail product, and 2.1 *billion pounds are used in the foodservice/ food manufacturing segment.

A full range of cheese types is represented in both of these chan­nels, but the relative importance of each type varies depending on the channel. For example, Mozzarella, remains predominantly a foodservice product, although its retail volume is growing. On the other hand, cold pack products are almost exclusively sold retail. More pasteurized process, Cheddar, and Colby are found in the retail channel than in the foodservice/food manufacturing segment, but the opposite is true for hard Italian and Swiss. The remaining major cheeses--Jack, Muenster, and Brick--are split almost equally between retail sales and foodservice/food manufacturing use.

Within the retail segment, branded products--either manufacturer/ marketer brands or distributor brands--surpass private-label products in volume. Again, cheeses differ significantly by type; branded products are of greater significance in process cheeses, and private-label products are stronger in certain natural commodity-type products, especially American cheeses such as Cheddar, Colby, and Jack.

Processing--the manufacture of pasteurized process and cold pack cheese products--accounts for about 1.4 billion pounds of U.S. cheese use, predominantly Cheddar. The government channel takes almost 1.0 billion pounds, mostly Cheddar for the Commodity Credit Corporation, and pasteurized cheese processed under government contract, although some Mozzarella and pasteurized process products are also purchased for use in federal programs. The "other" channel, as indicated, reflec ts SRI's estimate of cheese sales through cheese plant store outlets and mail order.

The Wisconsin Cheese Market

Table I also presents an overview of Wisconsin cheese disappearance for the major cheese types on a consolidated basis, together with esti­mates of Wisconsin's share of the U.S. cheese market by distribution channel. Of the 2.5 billion pounds of Wisconsin product SRI accounted for, about 37% goes to retail, 23% to foodservice/food manufacturing, 22% (predominantly Cheddar) to processing, 8% to the government, and a little

* If it were included in this table, most of the volume for the "all other" category would be assigned to the retail channel, and particularly to the branded portion of the retail business. This adjustment would increase the total retail volume to about 200 million pounds more than that reported for foodservice and food manufacturing.

II-8

more than 1% to cheese factory could not be definitely assigned fic information. Altogether, accounted for in this study.

store sales and mail orders. About 9% to any channel because of lack of speci­about 91% of all Wisconsin cheese is

In the retail channel, Wisconsin cheese is estimated to account for 38% of branded retail product and 68% of private-label retail sales. Wisconsin's share of the foodservice/food manufacturing market is shown in Table 1 to be about 27%. However, its actual share is probably closer to 35% because it is likely that a majority of the unallocated portion of Wisconsin cheese enters this market segment. Given the predominance of pasteurized process products and Mozzarella in this unallocated volume and our knowledge of the general market orientation of the producing firms involved, our judgment is that as much as 175 to 200 million of the 226 million pounds of unallocated product is ultimately used in food service and/or manufactured food products.

In terms of process cheese product manufacture, we estimate that Wisconsin cheese accounts for about 38% of the natural cheese used as ingredients in pasteurized products manufactured both in and out of state and in cold pack products made in state. At the same time, Wisconsin cheese accounted for about 21% of government cheese purchases and for almost two-thirds of the relatively small volume of cheese sold from factory store outlets and by mail order.

One factor should be taken into account in interpreting this table, as well as the others in this report. To complete this effort, the SRI project team had to develop not only the parameters of the U. S. cheese market, in toto and by type and by region, but also comparable information for Wisconsin-produced cheese. Because of the difficulties and uncer­tainties inherent in such a task, the data and percentages shown in this table and elsewhere in this report should be considered mainly as guide­line estimates of size and share, and their precision may vary with the iuformation that is available. Thus, in Table 1, Wisconsin's share of branded product could be as high as 40%, whereas the state's private-label share could be as low as 60%. The range reflects the degree of difficulty associated wi th estimating branded and private-label cheese volumes for the United States, as well as with specifically tracing the flow of Wisconsin product by channel and label.

Overall, however, the estimates are considered reasonable indicators that Wisconsin cheese has a significant share of the retail market--higher than the State's share of u.S. cheese production--and that the retail market is likely to be the channel of distribution most responsive to well-targeted promotion and advertising efforts.

Wisconsin Cheese Regional Volume and Share Estimates

Wisconsin cheese sales by channel and region are reported in Table 2. This table covers only the retail and food service/ food manufacturing channels. Of the Wisconsin cheese used for processing, approximately 60%

II-9

Ta ble 2

* WISCONSIN CHEESE REGIONAL VOLUME AND SHARE ESTIMATES

Retail Product Foodservice/Food Branded P ri va te Label Manufacturin~ Use

Wis. Wis. Wis. U.S. Total Wisconsin Share U.S. Total Wisconsin Share U.S. Total Wisconsin Share

Region (miL lb) (mi 1. lb) --.i!L (mil. lb) (miL lb) -.i!L (mil. lb) (mil. lb) --.i!L New England 63.0 27.6 44 30.3 14.8 49 146.3 22.7 16

New York/New Jersey 134.1 68.6 51 71.8 4L5 58 242.8 61.2 25

Eastern Strip 126.2 49.0 39 73.9 48.9 66 222.5 53.1 24

Southeast 98.9 35.6 36 63.7 43.9 69 186.9 34.9 19

Upper Central Midwest 340.9 161.2 47 148.5 125.7 85 478.2 253.0 53

H Lower Central

H Midwest 102.3 29.3 29 52.7 33.8 64 139.3 22.4 16 I .....

Plains/Mountains 0 57.5 16.1 28 54.1 28.2 52 100.4 35.2 35

Northwest 40.9 6.0 15 24.6 13.8 56 88.4 8.8 10

California/ Nevada 135.8 42.0 31 95.1 33.8 36 296.2 27.2 9

Southwest 138.7 33.3 24 72.0 43.7 61 202.3 23.6 12

Unallocated 41.7 41.0

Total U.S.+ 1241.5 469.1 38 688.8 470.2 68 2126.4 584.3 27

* Includes only pasteurized process, cold pack, Cheddar, Colby, Brick, Muenster, Jack, Swiss, Mozzarella and soft Italian, and hard Italian.

+Includes Alaska and Hawaii.

Source: SRI International

is processed in state; the balance is shipped primarily to nearby states-­Minnesota, Illinois, Indiana, and Missouri--although small tonnages for processing do move as far as Idaho, Utah, Pennsylvania, and Ohio. Cheddar sold to the government normally remains in state, with the exception of that portion processed and distributed under the USDA donation program. Cheese purchased from Wisconsin sources for other government uses is distributed allover the country.

As Table 2 indicates, branded Wisconsin cheese products are marketed and consumed throughout the United States. Wisconsin cheese has a higher than average market share in three regions--New England, New York/New Jersey, and the Upper Central Midwest--and an average share in the Eastern Strip and the Southwest. Although significant volumes move to California and the Southwest, Wisconsin's share in these areas and in the Northwest, the Plains/Mountains region, and the Lower Central Midwest is substan­tially lower than average. The key factors responsible for this overall distribution pattern for the 10 major cheese types are the following:

o Logistics--A number of the larger and more diversified manufacturers/marketers of branded cheese produc ts have mul tiple plants and/or procurement sources. Such firms therefore manufacture and/or procure and distribute products in a manner best geared to meeting market needs while minimizing assembly, inventory, operating, and transportation costs. Thus, Western and Southwestern markets for some produc t categories are likely to be served from cheese facilities in the Plains/Mountains region, and those in the South Central from mid-states facilities. The distribution pattern that results for such firms is not always fixed or predictable. Plant capabilities, differential regional milk and/or cheese costs, and changes in other variables can alter product movement patterns for these firms, even to the extent that, at times, cheese may move from the West Coast to the Midwest for processing.

o Market power and representation--Some of the larger cheese firms that market branded products have developed over the years a strong consumer franchise in certain parts of the country through their own promotion and marketing efforts and/or with the aid of particularly aggressive brokers and distributors. Thus, one firm's market strength may be in East Coast cities, another's in California and the West, and a third's in the central United States.

o Competitors--In some regions, strong local manufacturers/ marketers of branded products hold a significant market position in certain types of cheeses (e.g., Tillamook for Cheddar in the Pacific Northwest). The presence and

II-ll

continuing marketing/promotional thrust of such firms, therefore, makes it difficult for Wisconsin firms to achieve market penetration in similar product segments.

o The overall market mix for branded cheese products-­Although the data in Table 2 cover 10 major cheese types, 5 cheese types are predominant among Wisconsin branded products at retail--pasteurized process cheese, Cheddar, Colby, Cold Pack, and Hard Italian. Therefore, the over­all distribution pattern and share distribution for Wisconsin cheese is strongly influenced by these five cheese types, and some of the differences in pattern and market share for the smaller volume cheese products tend to be obscured.

o Firm size--Generally, smaller Wisconsin cheese firms marketing a limited line of products from a single Wisconsin location are likely to fall into one of two marketing patterns, depending on their product mix and business strategies. If their product line consists of the larger volume, commodity-type, less differentiated cheese items, most of their sales typically are within an 800-mile radius. Firms with greater marketing expertise and a higher value, more differentiated product line may market nationwide, and they often target large urban markets--Los Angeles, Miami, Atlanta, Dallas-Ft. Worth, Boston for example--where they have good broker/ distributor connections.

o Regional consumption preferences and acceptance of private labels--In certain market areas, private-label produc ts have a stronger position compared wi th branded products than they have in other areas. Also, the mix of cheeses preferentially purchased by consumers differs by region. For example, most cold pack products are con­sumed north of the Mason-Dixon line, and Brick tends to be a cheese consumed by Midwesterners. Thus, the regional differences in consumption patterns in terms of both total per capita consumption and cheese type are ultimately reflected in the overall distribution pattern and market share of Wisconsin products.

As Table 2 indicates, generally outlined above is that the largest products in terms of total volume is along the East Coast, in California, terms of market share, strong markets Central Midwest and the Eastern United

the net result of all the variables concentration of Wisconsin branded likely to be found close to home,

and in parts of the Southwest. In for Wisconsin cheese are the Upper States.

II-12

For private-label product, the overall pattern of Wisconsin cheese distribution is a little different, but not radically so. If we adjust for the cheese volume that could not be allocated with precision, Wis­consin's overall share of private-label product would be 62%, not the 68% shown in Tabel 2. Wisconsin-made cheese has a much higher than average share in the Upper Central Midwest region and a somewhat higher than average share in the Eastern Strip; this pattern is consistent with the branded cheese pattern. The state's strong showing in the Southeast, Southwest, and Lower Central Midwest and somewhat weaker showing in California and the Plains/Mountains areas are the result of several factors:

o Key grocery chains--Some leading grocery chains whose key market territories are the Midwest and the southern tier of states procure significant volumes of Wisconsin cheese both for sale as natural cheese and for use in manufac­turing processed products to be sold primarily in their own stores.

o Major private-label cheese firms--The marketing strengths of a number of large Wisconsin cheese firms are currently in the private-label segment. The sales and shipment pat terns of these large-volume firms strongly influence the overall distribution pattern in this market channel.

o The private-label product mix--In determining tribution pattern of all Wisconsin private-label pasteurized process products and Cheddar are predominant.

the dis­cheeses, clearly

o Wisconsin private-label pasteurized process cheese flow-­For those firms that process only in Wisconsin, Wisconsin process product manufactured for private-label brands tends to flow in a more or less triangular fashion, with the apex in the Upper Central Midwest and the two base points in Florida and Texas. For major private-label cheese firms that also have processing facilities in more central locations in this triangle (e .g., in Missouri), sales of their Wisconsin-based cheese products tend to be more frequently confined to the Upper Central Midwest.

o Competitors--The strongest competitors outside the Upper Central Midwest in the private-label segment are in California and in a few of the Plains/ Mountains states for Cheddar, and in the Plains/Mountains and the Eastern Strip regions for pasteurized process products.

o Company relationships--In the private-label area, major grocery wholesalers and chains have developed over the years strong relationships with suppliers, which tend to persist as long as the buyer's needs are met.

II-13

Overall, in the private-label market, a number of key participants-­manufacturers/marketers and buyers--are so large, and the requirements for assured quality and consistency in this produc t segment are so stringent, that some types of promotional and advertising programs targeted to this channel may yield good results.

As noted earlier, Wisconsin most likely has a larger share of the U.S. foodservice/food manufacturing market than the data in Table 2 indicate. With this in mind, we can still examine our estimates to determine the pattern of distribution 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 both market shares and volumes sold declining as distance from Wisconsin increases--is a reasonable and expected one. Foodservice and food manufacturing procurement of cheese reflects con­siderations of price, product consistency, and service. Transportation costs are more important in this channel than in any other. Wisconsin cheese tends to stay close to home not only for reasons of shipping costs, but also because of the concentration of the food manufacturing industry in the Upper Central Midwest and the large number of major foodservice chains and foodservice distributors that have headquarters in this region.

It is more difficult to t race cheese entering this market channel than it is to trace movements in other channels because (i) in food manufacturing, the points of cheese use and final product consumption may be widely separated, and (2) in foodservice, firms may buy centrally for a portion of or all of their requirements; they may authorize regional subsidiaries to buy and receive product independently, or may do both. In either case, the flow of cheese may move beyond the region of the receiving entity. We have tried to compensate for this by integrating the results of numerous foodservice interviews with the pattern of cheese use implicit in consumer foodservice expenditures and varying regional taste preferences for cheese. It is quite possible, however, that the actual use pattern for Wisconsin cheese in this segment might be more geographically diffuse than our data indicate. However, although our data should be regarded with some reservations, the foodservice/food manufacturing channel does not appear to be one in which promotion and advertising programs based on product origin might provide substantial benefits. The participants in this segment see little value in such efforts.

Because of the tendency of cheese used in private-label brands and foodservice/ food manufacturing to move beyond the point of delivery-­which might be a regional grocery chain warehouse or a foodservice commissary, for example--the project team has elected to limit the estimates of Wisconsin cheese sales volumes and shares by major metro­politan area to branded retail cheese products only. For these branded retail products, major metropolitan markets that are significant for Wisconsin cheese in volume terms are listed in Table 3 and significant areas in terms of market share are listed in Table 4; metropolitan areas in which Wisconsin cheese has a relatively small market share are listed

1I-14

Table 3

u. S. METROPOLITAN AREAS THAT ARE MAJOR MARKETS F~R BRANDED RETAIL WISCONSIN CHEESE IN VOLUME TERMS

Over 30 million pounds per year:

New York

20-30 million pounds per year:

Los Angeles-San Diego Chicago

10-20 million pounds per year:

Cincinnati-Day ton-Columbus Baltimore-Washington Boston-Providence Detroit San Francisco Philadelphia St. Louis

5-10 million pounds per year:

'Ie

Cleveland Grand Rapids-Kalamazoo Jacksonville-Orlando-Tampa Pittsburgh Buffalo-Rochester Indianapolis Milwaukee Minneapolis-St. Paul Albany-Schenectady-Troy Dallas-Ft. Worth Miami Omaha-Des Moines Hartford-New Haven-Springfield Houston Kansas City Atlanta Syracuse

Ranked within categories from highest to lowest Wisconsin cheese volumes.

Source: SRI International

II-IS

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 of 50% or more:

Milwaukee New York Grand Rapids-Kalamazoo Syracuse

Share of 45-49%:

Detroit Omaha-Des Moines Peoria-Springfield Albany-Schenectady-Troy Chicago Davenport-Rock Island-Moline Kansas City Cleveland Minneapolis-St. Paul Buffalo-Rochester

Share of 40-44%:

Boston-Providence Cincinnati-Day ton-Columbus Philadelphia Hartford-New Haven-Springfield St. Louis Baltimore-Washington Scranton-Wilkes Barre

Share of 35-39%:

>II

Indianapolis Atlanta Charleston-Savannah Charlotte Los Angeles-San Diego Charleston-Huntington Greenville-Spartanburg-Asheville Jacksonville-Orlando-Tampa Miami Norfolk-Richmond Pittsburgh Raleigh-Greensboro-Winston Salem

Ranked within categories from highest to lowest Wisconsin cheese shares.

Source: SRI International

11-16

in Table 5. Within each table and for each category, the cities are ranked in terms of declining Wisconsin cheese volume, market share, or overall market size. As might be expected, a number of metropolitan areas appear regularly on Table 3 and Table 4. Only three metropolitan areas--San Francisco, Dallas-Ft. Worth, and Houston--appear in Table 3 and Table 4. Ai though significant volumes of Wisconsin branded retail cheeses are sold in these areas, the Wisconsin share in these markets remains below average. These estimates have been prepared to be respon­sive to the Board's need to establish criteria for the development of promotional and advertising programs; e.g., to promote where current market share or volume of Wisconsin cheese is high or, alternatively, to promote where the market share is low, but the markets are undergoing significant expansion.

Industry Interviews: Dynamics of Cheese Distribution and Volume Flow Pattern

In interviews wi th in-state and out-of-state industry participants, SRI identified eight key variables likely to influence the sales volume and geographic distribution of Wisconsin cheese:

o Economic growth o Population distribution o Consumer taste o Competitive cheese production/promotion by other states o Image/ quality o Transportation o Technology o Government policy.

Ai though each variable was evaluated independently for this study, overall impacts on sales volume and geographic distribution of Wisconsin cheese typically result from multiple interactions among variables at any given time. Moreover, a few variables (e.g., competitive cheese production/promotion by other states; technology) could influence Wiscon­sin cheese either favorably or unfavorably, depending on other circum­stances.

Overall, only two variables--economic growth and changing consumer tastes--were identified as having a clearly favorable impact on Wisconsin cheese. The competitive production/promotion activities and the improved quality and image of cheese from other states seemed to be the most serious threats to both the sales volumes and the geographic dispersion of Wisconsin cheese. The rationale for these conclusions and the qualitative assessments of net impact for each key variable are summarized in the following subsections.

II-17

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-Tacoma Portland Spokane-Yakima

20-25% share:

San Francisco Dallas-Ft. Worth Houston San Antonio-Corpus Christi Phoenix-Tucson El Paso-Albuquerque-Lubbock Oklahoma City-Tulsa

25-30% share:

*

New Orleans Denver Nashville-Knoxville Memphis-Little Rock Birmingham-Montgomery-Huntsville Salt Lake-Boise Louisville-Lexington Wichita

Ranked within categories from largest to smallest cheese markets.

Source: SRI International

II-18

Economic Growth

The industry consensus is generally optimistic aobout the short- to medium-term (2 to 5 years) prospects for continued growth in the U. S. economy, although pockets of economic dislocation may persist in geo­graphic areas such as the Midwest because of industry restructuring and reduced employment by smokestack industries and in farming. The prognosis is for minimal net change in the current sales volume of Wisconsin cheese, although the potential shift away from Midwest markets may alter the geographic pattern of cheese sales and distribution. Promotional programs for cheese in growing markets would help to maintain Wisconsin cheese's overall sales volume.

Population Distribution

The projected net gains in population for the South and the Southwest will be accompanied by decreases in population in other areas (e.g., the Midwest). Cheese sales volumes will be negatively affected in areas with population losses; in addition, Wisconsin cheese may face transportation cost disadvantages in the growing, but more distant, markets. Promotion programs might help to offset the potential for declining sales volumes.

Competitive Production/Promotion by Other States

Planned expansion in cheese production by other states (e.g., Arizona, California) will reduce the geographic dispersion of Wisconsin cheese, particularly in the West and the Southwest. Locally produced cheese will gradually gain market share because of good quality, trans­portation cost advantages, and competitive pricing. Promotion programs for non-Wisconsin cheese will benefit the product category as a whole, and thus will be initially favorable for Wisconsin cheese in particular be­cause of its large share representation in virtually all markets nation­wide. If such programs are not balanced by a promotional strategy targeted to Wisconsin cheese per se, however, promotion of out-of-state cheeses will eventually cut deeply into the Wisconsin cheese's market share.

Image/QuaE ty

Although Wisconsin cheese retains its excellent image and quality reputation, recent improvements in the quality of out-of-state cheese production in general make these attributes less valuable for differen­tiating Wisconsin cheese products in the marketplace. The increasingly competitive environment resulting from the gradual erosion of the quality/image differential will have a negative impact on sales volumes and geographic dispersion of Wisconsin cheese. Promotion programs may retard this anticipated trend, but they are not likely to reverse it.

II-19

Transportation

The long-term trend is for cheese marketers to increase distribution efficiency and minimize transportation costs in order to improve margins. Cheese procurement policies and deliveries to particular geographic markets will tend to favor sources closest to the point of production, provided that local suppliers can meet the buyers' requirements for quality, price, consistency, and service standards. Because of increasing availability, quality improvement, and the transportation cost advantage of out-of-state cheese, Wisconsin cheese is expected to lose volume and share in distant markets. Conversely, however, the competitive position of Wisconsin cheese will be enhanced in nearby markets. Therefore, the overall net change in current sales volume should be minimal.

Technology

Advanced technology such as ultrafiltration offers the potential for significantly reducing cheese production costs by improving cheese yields (by 10% or more), and the cost differential is large enough to offset transportation cost disadvantages. Adoption of the technology would provide a competitive advantage to early adopters, and the timing for adoption of the technology by Wisconsin cheese makers will determine the ultimate direction of its impact on the sales volumes and geographic dispersion of Wisconsin cheese. However, it is still questionable whether the use of the technology will require changes in the identity standards for cheese, and whether the quality/taste of the cheese will be acceptable to consumers.

Government Policy

Industry participants agree that current government support policies are likely to undergo revisions that will have differential regional effects on milk supply and, consequently, on the existing milk/cheese price relationship. However, this key variable defies meaningful assess­ment because of the uncertainty associated with the timing and the direction of possible changes in government policy. Periodic reassessment of this key variable is necessary so that any future policy changes can be accommodated in the Board's promotion strategy.

Industry Viewpoint: Promotion and Advertising Programs for Wisconsin Cheese

Cheese industry participants expressed a wide range of opinions regarding the perceived value of promotion and advertising programs that the WMMB could undertake in support of the Wisconsin cheese industry. Because of the structural diversity within this industry, a clear com­monality of interests is not apparent, and no single promotion program satisfactory to the majority of industry participants could be identified. Also, the Board's ability to implement such programs effectively without widespread industry support is considered doubtful. Nonetheless, industry participants are overwhelmingly favorable toward the selective promotion

II-20

of Wisconsin cheese by means of a variety of programs targeted to the specific requirements and business interests of the individual cheese industry sectors. Although industry suggestions for structuring a pro­motion package were either narrow in scope or nonspecific, they are summarized below for each respondent category to provide guidance for the Board in the formidable task of establishing broad-based promotion strategies for Wisconsin cheese.

Cheese Manufacturers/Marketers

o Frequently, large-size cheese producers/marketers expressed the opinion that the use of labels and/or logos to identify Wisconsin cheese is impracticaL Because these participants typically market branded products and procure cheese in large volumes, a Wisconsin label would impose severe restrictions on their procurement practices and increase the cost of inventory.

o Its excellent quality image notwi thstanding, cheese with a Wisconsin label does not command a premium price, and few customers request cheese products of identifiable Wisconsin origin.

o Matching funds for individual manufacturers' promo­tion programs for Wisconsin brands in key markets may be an alternative to the difficult task of formula­ting an overall promotion strategy for Wisconsin cheese. In a similar vein, some respondents sug­gested promoting brand-name cheeses in markets where the presence of Wisconsin cheese is low.

o In general, cheese manufacturers/marketers favor generic promotion and advertising programs. However, the traditional "eat more cheese/it is good for you" message, without material promoting innovative uses of cheese, is considered an ineffective approach to expanding consumption.

o Certain industry sectors, such as cold pack cheese and cheese spreads manufacturers, would like to see their products better represented in any future promotion programs for Wisconsin cheese.

o Medium-sized and small producers are typically in favor of using the Real Seal, and they would like the Board to establish promotion programs for a Wisconsin logo or some other indicator of State origin.

II-21

o Some producers feel that the Board should include support for academic research in dairy food tech­nology in Wisconsin as part of an overall promotion strategy for the Wisconsin cheese industry. They believe that Wisconsin has lost a good deal of its leadership position in dairy science to other states because of its failure to attract and retain new scientific talent.

Retailers

o Retailers favor promotion programs for Wisconsin cheese in general, particularly use of price reduc­tion coupons in conjunction with local media adver­tising.

o A Wisconsin label offers product differentiation, but it does not command premium prices because of the availability of consistently high-quality cheese from many sources, the prevalence of brand-name adver­tising, and the intensity of price competition from private-label items.

o The dissemination of literature and recipes suggest­ing innovative uses of cheese is recommended in promotion programs. Generic advertising typically does not have a lasting effect and fails to expand consumption.

Foodservice/Food Manufacturing Trade

o This industry sector generally perceives little value in promotion programs based on the state origin of cheese products. Product origi n/ identity is not an issue for use, and the promotion of cheese as an ingredient would have a minimal impact on the business.

o Cheese suppliers/assemblers for this market would benefit from a reliable, year-round supply of cheese under contracts or other long-term agreements whose firmness would not fluctuate with the milk producing season.

1I-22

III METHOD OF APPROACH

General Overview

The method of approach employed by the SRI project team to develop the data base for analysis is shown in the flow diagram in Figure 1. Also, the outline displays schematically the relative time sequence of each major task as well as the critical dependence of the project's successful outcome on several key tasks requiring a high level of coopera­tion from many cheese industry sources in-state and out-of-state. For this reason, the prospects of achieving the objectives were assessed periodically in terms of information gaps, and the project's progress was monitored by means of internal reviews. Moreover, the project team sought the WMMB's participation at critical points in the work flow.

The key tasks, which are discussed in detail in this section of the report, included:

o A cheese manufacturer/processor questionnaire survey designed to elicit the necessary data for determining the first point of sale and/or delivery of the output from Wisconsin cheese plants.

o A series of in-person and telephone interviews with major cheese firms and knowledgeable industry observers to fill information gaps in the plant survey, and to develop a first approximation of the second (and sometimes final) stage of cheese flow in-state and out-of-state.

o Additional telephone and in-person interviews with brokers, distributors, chain retailers, and foodservice firms selected on the basis of their participation in the overall movement and distribution of cheese nationally or in multistate operations. The information from this task was expected to provide the final link to markets and end uses of Wisconsin cheese we could not account for otherwise.

On completion of these tasks, published retail trade and other cheese industry data were fed into a computer model developed by the SRI team for manipulating incomplete sets of data into projections of the total retail universe for each major type of Wisconsin cheese by region and by major metropolitan area. Production, shipments, and cheese movement data collected through the survey and the interview process were then inte­grated into the computer-simulated projections, and the final estimates

III-1

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

were tested for reasonableness on the basis of their correspondence with other relevant facts and figures available to SRI from industry and other trade sources. These first-time estimates of the flow of Wisconsin cheese to markets nationwide, therefore, incorporate both actual industry data and SRI's expert judgment.

Because of the complexity of constructing an entire framework of data based on information that is extremely diffuse, of varying levels of detail and accuracy, sometimes nonexistent, and highly proprietary when it is available, the SRI project team recognizes that future refinements and/or revisions in some of the estimates reported are not only possible, but also desirable. Industry feedback and cooperative interaction with the Board may help to confirm the validity of the data.

Definitions/Reporting of Data

The natural and process cheese produced in Wisconsin and traced to market by the SRI study includes:

o Natural cheese produced and packaged in state

o Cheese processed in state regardless of the source of the cheese used for processing

o Natural cheese produced in state and cut/packaged else­where.

The portion of Wisconsin cheese output incorporated in process products manufactured out of state (mostly Cheddar) and cheese products of imported/non-Wisconsin origin marketed by Wisconsin firms are not included in the SRI estimates. The volume flow of Wisconsin cheese was traced to market by major cheese type and by distribution channel (e.g., retail, foodservice/ food manufacturing, govermnent). With few exceptions, esti­mates of volume flow for cheese at retail are reported by region and for major metropolitan areas. The retail private label and foodservice/ food manufacturing data are typically reported at the regional level only because cheese products in these distribution channels tend to diffuse away from the first point of delivery and cannot be traced to specific markets with any degree of accuracy. For example, cheese delivered to a foodservice distributor warehouse in Denver may find its way to users as far away as Idaho and the Northwest.

For this study, a vast body of proprietary data was assembled by SRI from a number of cooperating cheese firms in-state and out-of-state; this information is included in the estimates. However, many of the data re­ported have been aggregated to the extent deemed necessary by SRI to preserve the confidentiality of individual sources and in a manner respon­sive to the client's need for quantitative information.

III-)

Natural Cheese Producers Questionnaire Survey

In cooperation with the WMMB, SRI developed a questionnaire to survey the total output of natural cheese in Wisconsin by major cheese type for the period from July 1, 1983-June 30, 1984. In addition to plant output data, recipients were asked for volume information regarding production mix, in-plant store sales, mail order sales, cheese purchased from other producers, in-s tate and ou t-of-state shipment data by point of delivery (e.g., process cheese plant, other natural cheese plant, etc.) and by customer category (e.g., distributor, grocery wholesaler. foodservice, etc.), and the names of major customers. In return, SRI promised to treat the proprietary information with absolute confidentiality and to protect the anonymity of individual respondents. A copy of the questionnaire, which was mailed to 314 natural cheese plants in Wisconsin, is shown in Appendix A, together with the covering letters and accompanying instruc­tions.

Responses were received from 134 plants that account for approxi­mately 65% of the total cheese production figure for 1983 reported by the State of Wisconsin. Each questionnaire was reviewed by the SRI project team for internal consistency of reporting, and any ambiguity was resolved by means of telephone followup with the preparer. The questionnaire data were then coded and fed into the computer for analysis. Samples of the aggregate computer printouts for all cheese types and for Cheddar are included in Appendix B of the report. Volume variance, defined as the difference between production/purchases and shipments/factory and mail order sales, was less than 1% of the total cheese volume reported and served to gauge the overall consistency of the survey data.

Although the level of participation fell somewhat short of the objective for a complete survey of Wisconsin cheese plants, nevertheless the "top down" approach proved invaluable as a critical first step in gathering the data base needed for this project. Also, the analysis of survey data provided insights into the dynamics of in-state and out-of­state flow patterns for cheese, and of intercompany shipments as follows:

o Among the respondents, 71 plants indicated that they purchase a total of 19 million pounds of cheese from other sources (99% from other cheese firms); 97% of the volume is purchased from in-state sources, and only 3% from out-of-state sources (see Table 6).

o Thirty-six plants ship retail packaged cheese under several labels/brand names--own brand, distributor brand/ label, store label (see Table 7).

o Approximately 122 million pounds of natural cheese were shipped by the reporting plants to government warehouses, 90% of the volume to locations in Wisconsin and 10% to other states (see Table 8).

111-4

Table 6

NATURAL CHEESE PLANT SURVEY: REPORTED CHEESE PURCHASES BY SOURCE

Number of respondents reporting purchases:

Volume Purchased by Type of Product

Other cheese firm Wholesaler/jobber Government warehouse

Total

Volume purchased by location:

In-state Out-of-state

Total

71

Thousand Pounds

19,170 130

12

19,312

18,765 547

19,312

Average volume purchased per respondent 272

Median volume purchased per respondent 14

Source: SRI Questionnaire Worksheets

III-5

Percent

99 1

<1

100%

97 3

100%

Table 7

NATURAL CHEESE PLANT SURVEY: USE OF BRAND NAMES ON RETAIL PACKAGED CHEESE

Number of respondents reporting shipment of retail packaged cheese: 36

Use of Label/Brand Name by Type

Own Distributor Store Other

Total

No. of Labels

45 22

6 1

74

Number of respondents using more than 1 label type: 13

Number of respondents using more than 1 label: 16

Source: SRI Questionnaire Worksheets

III-6

Table 8

NATURAL CHEESE PLANT SURVEY: REPORTED CHEESE SHIPMENTS TO GOVERNMENT WAREHOUSES

State Shipments (lb. ) Percent

Wisconsin 111,336,631 90.6%

Pennsylvania 4,261,384 3.5

Indiana 2,866,063 2.3

Illinois 1,363,977 1.1

Nebraska 1,157,044 1.0

Ohio 716,516 0.6

Minnesota 496,252 0.4

New Jersey 347,940 0.3

Iowa 115,980 0.1

Missouri 100,000 <0.1

Total 122,761,787 100.0%

Source: SRI Questionnaire Worksheets

III-7

o A total of 696 million pounds of natural cheese could be traced to customers identified in the questionnaires. This aggregate of cheese deliveries is broken down by state and by customer category (distributors, grocery chains, food manufacturers, foodservice operations, cheese processors, other natural cheese firms, and firms with combined operations for natural and process cheese) in Table 9. The large volume of the sales traceable to distributors in Wisconsin results from the inclusion in this category of cheese assemblers and packers that in turn supply other cheese firms and cheese processors in-state and out-of-state.

Interviews with Major Cheese Firms

SRI interviewed in-state and out-of-state major cheese firms known to participate in distributing and marketing Wisconsin cheese at the regional or national level. The responsible individual in each firm was identified and contacted in a letter asking for the firm's cooperation in arranging for an in-person visit by SRI representatives. The letter explained the objectives of SRI's project for the WMMB, and indicated the topics we wished to discuss with knowledgeable people in the organization.

The list of topics included:

o An outline of the company's cheese manufacturing, processing, and procurement activities in Wisconsin, together with its methods and patterns of distribution.

o A quantitative, or at least qualitative, the flow of the cheese handled by the Wisconsin to U.S. consuming areas.

assessment of company from

o Opinions/points of view concerning how, where, and in what form promotional activities by the Board would be most beneficial to the company, and perceptions of the Board's role in support of the Wisconsin cheese industry.

Major cheese processors in Wisconsin were also contacted and inter­viewed in this phase of the project, for a total of 28 in-person inter­views with major cheese industry participants and several medium-size firms that had not participated in the questionnaire survey. Virtually all the national cheese marketers eventually agreed to extend some form of cooperation to the project, and are represented in the sample of cheese firms interviewed by SRI. The data on procurement and marketing activi­ties of these firms were provided on a confidential basis, and are included in the estimates of Wisconsin cheese flow to market in Section IV of this report. The participants' viewpoints regarding the exis ting and

111-8

Table 9

NATURAL CHEESE PLANT SURVEY: CHEESE SALf.S BY CUSTOMER r. ATEGORY

Deliveries b~ State (Thousand Pouods) Customer Cate~ W1 CA IL IN MA HI MO HN OH PA TX NY GA A2 Others Catesorl Total

Distributors 63,449 5,939 1,366 381 2,464 2,682 598 12,090 23,323 3,825 2,445 10,650 0 598 3,804 133,614

Grocery chains 11,877 14,257 265 7,456 0 0 7,596 12,271 0 0 160 0 3,974 2,426 346 60,628

Food manufacturers 302 0 0 0 0 0 0 1,500 0 0 0 0 0 0 1,000 2,802

Foodservice finms 3,326 0 0 0 0 0 0 0 0 0 480 0 0 0 0 3,806

Cheese processors 138,325 0 0 80 0 1,260 12,056 0 2,087 6,360 0 0 0 0 0 160,168

Natural cheese manufacturers 31,345 3,025 3,465 0 0 0 0 0 0 0 0 0 0 0 0 37,835

Combined natural/ processed cheese 163,279

H 0 63,401 719 0 8,301 28,075 15,238 0 10,168 1,088 0 5,007 0 1,808 297 ,084

H State total 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 6,958 695,937 H I

\0

SourC!e: SRI International

future pattern of cheese distribution and volume flow and their percep­tions of promotion/advertising programs for Wisconsin cheese are discussed elsewhere in the report.

Interviews with Brokers, Distributors, Chain Retailers, and Foodservice Firms

Concurrently with the interviews with major cheese firms, SRI under­took a series of telephone and in-person interviews with brokers, dis­tributors, grocery chain cheese buyers, and foodservice firms to augment and expand the information on the volume movement and distribution channels for Wisconsin cheese available from producers/marketers. Table 10 summarizes the type and number of interviews conducted in this task, and indicates the level of cooperation received by SRI. Within each category, the firms contacted were selected on the basis of identifiable, significant participation in cheese movement and distribution in major metropolitan areas, nationally or regionally. The sample universe was drawn to provide approximately equal coverage in all U.S. regions.

Table 10

CHEESE INDUSTRY INTERVIEWS

Number of Interviews Telephone In-Person

Category Participated Declined

Broker/distributor 13 9 o

Grocery chain/wholesaler 12 9 2

Foodservice firm 8 2 o

Foodservice distributor 40 o 1

Total 73 20 3

Source: SRI International

Interviewees were asked about the volumes of cheese handled/used, the share/volume of product identifiable as Wisconsin-made, the geographic markets served by the firm, and the firm's practices/rationale for sourcing cheese. They were asked to comment on whether distribution patterns for cheese may change in the foreseeable future and their ration­ale for anticipating those changes, if any. The discussion focused on the

III-10

potential for changes in key variables--quality, price, local cheese pro­duction, transportation costs, local market needs, and consumer tastes--to influence the existing pattern of distribution channels for cheese.

The quality of the information collected in these interviews ranged from marginal to excellent. The results have been integrated in the appropriate sections of this report.

Ill-ll

IV WISCONSIN'S ROLE IN THE U.S. CHEESE MARKET

Wisconsin's Share of U.S. Cheese Production

As Wisconsin cheese and dairy industry participants are aware, Wisconsin accounts for about 39% of total U.S. natural cheese output. Within the various major natural cheese types, for which 1983 production data are shown in Table 11, the state's share ranges from 76% of Muenster to 17% of Swiss. Among the other natural cheeses, Wisconsin produces an above-state-average share of Cheddar, hard Italian types and Brick as well. In the process product category, Wisconsin accounts for 86+% of cold pack cheese and cheese foods, and 48% of pasteurized process cheese, but only 26% of pasteurized process cheese foods and spreads. (The prob­able reasons for this deviation from the national pattern in pasteurized product output mix are discussed in the section dealing specifically with pasteurized process products.)

Wisconsin Cheese Production Accounted for in the Study

By means of the natural cheese producer survey supplemented by SRI's field and telephone interviews with selected major Wisconsin cheese firms, the project team gathered and/or estimated information on production and shipments by Wisconsin plants totalling about 1.4 billion pounds of natural cheese and 0.7 billion pounds of pasteurized and cold pack process product. The production volume accounted for by each major cheese type is shown in Table 12.

Two important cautions must be mentioned in regard to the Table 12 data and the distribution and market analyses by major cheese type that follow in this chapter. For some cheese types--Jack, Swiss, Hard Italian, and Brick--Table 12 shows that the combined producer survey- and inter­view-derived production figures exceed the production volumes published by the state for 1983. Two reasons for this difference are possible. The most likely one is the difference between the time periods covered by the two sets of data. Wisconsin production data cover the 1983 calendar year. The SRI producer survey covers plant output during the period from July 1983 through June 1984. The SRI field and telephone interview data, gathered principally in the early months of 1985, reflect primarily 1984 calendar year production levels. Thus, it is very likely that some of the discrepancy between the two sets of data results from cheese plant product mix changes that occurred over the reference periods. The second and less likely explanation is that responding cheese firms may have made some errors in completing the producer survey form. Although we made many follow-up telephone calls to clarify and complete plant survey data

IV-1

Table 11

WISCONSIN'S ROLE IN THE U.S. CHEESE INDUSTRY

Cheese Type

Natural

Cheddar

Colby

Monterey Jack

Total American

Mozzarella & Soft Italian

Hard Italian

* All Italian

Swiss

Brick

Muenster

All other

Total Natural

Process

*

Process cheese

Process cheese foods & spreads

Cold pack cheese & cheese foods

Total Process

Excludes Ricotta.

1983 Production (million lb) Uni ted States Wisconsin

2,351. 4 951.2

175.4 576.2

32.2

2,927.6 1,158.9

865.9 277 .0

208.6 103.5

1,074.5 380.5

205.5 36.1

14.2 8.8

69.6 52.8

131.4 83.0

4,426.8 1,720.1

1,190.4 576.7

635.1 164.5

lll.3 95.9

1,936.8 837.1

1983 Wisconsin Share (%)

40.5%

36.0

39.6

32.0

49.6

35.4

17.3

62.3

75.8

63.2

38.8

48.4

25.9

86.2

43.2

Sources: Wisconsin Department of Agriculture, Wisconsin Dairy Facts 1984; U.S. Department of Agriculture, Dairy Products, 1983 Summary; SRI International

IV-2

Table 12

WISCONSIN PRODUCTION ACCOUNTED FOR BY INDUSTRY SOURCES (Million Pounds)

Volume Accounted for

1983 Wisconsin by Survey Percent Cheese Type Production and Interviews Accounted for

Natural Cheddar 951. 2 792.7* 83% Colby 175.4 106.8 61 Monterey Jack 32.2 48.6 151

Total American 1,158.9 948.1 82

Mozzarella & Soft Italian 277 .0 233.3 82

Hard Italian 103.5 129.3 125

All Italian 380.5 362.6 93

Swiss 36.1 44.5 123

Brick 8.8 10.9 123

Muenster 52.8 26.3 50

All other 83.0 35.6 43

Total Natural 1,720.1 1,428.0 83

Process

Pasteurized products 741.2 676.0 91

Cold pack products 95.9 62.5 65

Total Process 837.1 738.5 88

*Includes washed and stirred curd.

Sources: Wisconsin Department of Agriculture, Wisconsin Dairy Facts 1984; SRI International

IV-3

received, we did not contact all responding firms, and production data were not always verified as a matter of course. differences may reflect survey errors.

Therefore, some output

The second important caution is that, although 83% of natural cheese output and 88% of process product output were accounted for, we were not always able to gather adequate information for certain cheese types to permit development of final market destination data for equivalent volumes. For a few types, however, information gathered in interviews with assemblers, wholesalers, major cheese marketing firms, and buyers allowed the SRI project team to account for the market distribution of larger volumes than those shown in our production data. The market coverage for each cheese type is discussed in more detail in the sections tha t follow.

Geographic and Market Detail

As shown in Figure 2, for reporting purposes the United States was divided into 10 major regions, the boundaries for which, except in 3 cases, follow state lines. Population for each of the 10 regions is given in Table 13.

A number of factors were considered in the process of defining these regions:

o How industry participants organize for or view the country for distribution and marketing purposes.

o The location of major processing facilities and the normal geographic pattern of pasteurized process product flow.

o Typical regional broker/distributor service areas.

o The manner in which the field and telephone interview respondents were able or willing to release sales and market information.

The one major shortcoming of the regional breakdown for cheese market analysis and data presentation lies in the inability to further subdivide the Upper/Central Midwest region. This region has the largest population concentration (24% of the U.S. total) and therefore consistently appears as the major regional cheese market for cheese from all origins as well as for Wisconsin-made product. Unfortunately, the level of detail regarding distribution and market information that the SRI project team received from many major cheese firms did not permit us to subdivide this region's cheese market with a sufficient degree of reliability.

IV-4

Plains/Mountains

Southwest

FIGURE 2 U.S. CHEESE MARKET REPORTING REGIONS

IV-5

Table 13

POPULATION OF REPORTING REGIONS--1984 ( Millions)

New England New York/New Jersey Eastern Strip Southeast Upper Central Midwest Lower Central Midwest Plains/Mountains Northwest California/Nevada Southwest

Total United States*

1984 Population

12.5 25.1 28.0 22.7 55.0 21.7 10.5 7.5

26.1 23.4

234.0

*Includes Alaska and Hawaii--l.5 million.

Source: SRI International

The 10 major regions shown form the reporting base for all cheese types and channels of distribution and are the only geographic breakdown available for both private-label produc ts and foodservice/ food manufac­turing cheese use. For branded retail cheeses, whenever possible, we have identified the metropolitan areas within regions that receive the largest volumes of Wisconsin cheese, and in which Wisconsin cheese holds the highest market share.

In terms of distribution channels, the U.s. cheese market has been broken into a minimum of four and sometimes up to six segments, depending on the particular cheese type. These segments are:

o Retail branded--cheese sold through supermarkets, cheese shops, delicatessens, and other types of retail outlets that bears the proprietary brand or trade name of a cheese producer, producer/marketer, or distributor. The segment includes both consumer packaged products and foodservice sizes that are cut for sale to consumers in service delicatessens or cheese shop operations. Examples of branded products are County Line (Beatrice), Lake-to-Lake, Wispride (The Nestle Company), Velveeta (Kraft), and Green Bay Cheese.

IV-6

o Retail private-label--cheese sold through supermarkets, cheese shops, delicatessens, and other types of retail outlets that bears a store brand. A store brand may be the same as the store name or may be another name proprietary to that store or store chain. Examples are Kroger, Springdale Farms (Kroger), and Lucerne (Safeway).

o Foodservice/ food manufac turing--cheese used in foodser­vice operations, such as fast food restaurants, or incorporated in manufactured food products, such as cheese sauces or frozen pizzas, intended for ultimate retail sale or foodservice use. This cheese mayor may not bear a producer/packer brand or a distributor label when purchased.

o Processing--cheese used as an ingredient in the manu­facture of pasteurized process or cold pack products.

o Government--cheese sold to the Commodity Credit Corpora­tion (CCC) or for government-funded programs or services, e.g., military or school lunch use.

o Other--usually refers to cheese sold at cheese plant cheese shops and through mail order programs.

Distribution channels are differentiated in this fashion primarily because (1) the advertising and promotion needs attached to the different channels vary; (2) cheese purchase considerations in each segment are qui te different; and (3) the ability to identify and track products of Wisconsin origin varies by segment.

In the sections that follow, each major cheese type is addressed in terms of U.S. and Wisconsin production, the U.S. market and Wisconsin cheese flow, market presence, and market share.

Pasteurized Process Cheese Products

U.S. Production

U.s. output of pasteurized process cheese and pasteurized process cheese foods and spreads reached 1.8 billion pounds in 1983, as reported by the U.S. Department of Agriculture (USDA), an increase of 11% over 1982 levels. Actually, production of process cheese foods and spreads, which account for about 35% of the category, declined by 9% in 1983, while production of process cheese increased by 27%. This substantial percen­tage increase in the process cheese category resulted, at least in part, from the transformation by cheese processors of surplus government Cheddar into process cheese for the USDA donation program.

IV-7

In 1983, 39 u.s. plants manufactured process cheese, and 37 produced process cheese foods and spreads. Because most processing plants make both types of product, 39 or 40 plants altogether constitute this segment of the U.S. cheese industry.

Wisconsin Production

Wisconsin output of pasteurized process products in 1983 totalled 741 million pounds, 78% of it in the form of process cheese and 22% in the form of cheese food and spreads. The number of plants manufacturing pro­cess products is not reported by the Wisconsin Department of Agriculture. In SRI's interviews, 17 companies and 18 plants were identified as being involved in pasteurized process product manufacture, 10 of them at sub­stantial levels of output (i.e., 15 million pounds per year or more).

Through a combination of in-person and telephone interviews, the SRI project team accounted for the production and likely channels and general geographic pattern of distribution of about 676 mil lion pounds of process cheese product, equal to a little more than over 90% of reported 1983 output. In reality, the percentage of product accounted for might well be somewhat higher than that because some tonnage of natural cheese grated in the state appears to be reported as process product, and this causes an overestimation of state production.

For the 676 million pounds of output for which relatively good production data were available, it is estimated that about 70 million pounds consists of product processed under government contrac ts. There­fore, about 606 million pounds are produced from natural cheese obtained primarily from commercial sources. (AI though some Cheddar is purchased from the CCC by Wisconsin cheese firms, it is our understanding that these volumes are relatively small, and that they consist of both Cheddar destined for processing and aged cheese used for cutting.)

The natural cheese sourced for commercial product manufacture is predominately Cheddar. In 1984, an estimated 280-320 million pounds of Wisconsin Cheddar were used in the manufacture of Wisconsin pasteurized process products. About 10 million pounds of Colby and a smaller volume of Swiss were used for this purpose as well.

Wisconsin's pasteurized product mix is higher in process cheese--at 78% of total process product output--than that of the u.S. industry as a whole, in which process cheese is 65% of the category total. The probable reasons for this difference in mix are that, because process cheese has a higher natural cheese content, (1) it is a higher value product and can therefore bear higher freight costs and travel farther to market, and (2) it must be produced in areas where Cheddar supplies are ample. Process cheese foods and spreads, having substantially lower natural cheese con­tents, are (1) lower value products that will be produced closer to the ul timate consumer, so produc tion will be more geographically dispersed, and (2) require less ample local Cheddar supplies. A third factor influ­encing Wisconsin's mix is the amount of production for the U.S. government

IV-8

because the ultimate output under government contracts is process cheese, not cheese foods or spreads.

The U.S. Pasteurized Process Product Market

Estimates of the U.S. pasteurized process product market were developed by the SRI project team from interview information concerning the overall distribution of use by market channel and differential regional patterns of consumption and use. USDA data on civilian per capita disappearance of process product adjusted to eliminate cold pack cheeses were used to estimate total consumption. In addition, some limited retail sales estimates were available as a guide.

SRI's estimates of the U.S. pasteurized process product market appear in Table 14. As the data show, the retail market predominates, with 45% of the total, the balance being split between foodservice/ food manufac­turing use (33%) and USDA donations, which accounted for mos t of the remaining 21% during this period. Two special factors are relevant to this market. First, only in the last few years have USDA donation pro­grams accounted for such a significant portion of overall consumption. These programs have the greatest impact on the retail channel, reportedly decreasing retail sales by roughly 1 pound sold for every 2 pounds donated. In addition, some cheese firms indicate that the programs have had some effect on foodservice markets; i.e., in certain geographic areas, process loaf purchases have declined concurrently with USDA loaf dona­tions. The second factor to consider is imitation cheese, which has been excluded from our data. Imitation cheese at retail is still a relatively small-volume product. In foodservice and food manufacturing, however, the volume is significantly greater; if it were included, total combined natural and imitation process cheese use in foodservice/food manufacturing would equal retail sales volumes.

Wisconsin Pasteurized Process Products Market

Estimates of Wisconsin pasteurized process product distribution by market channel and by region are shown in Tables 15 and 16 for the 676 million pounds that could be tracked. In Table 15, retail volume is further broken down into branded and private-label products. The data for Wisconsin-made products are based primarily on information gathered in interviews.

IV-9

Table 14

U.S. PASTEURIZED PROCESS PRODUCT DISAPPEARANCE

Distribution Channel Foodservice/ Average

Food Per Capit Retail Manufacturing Other* Total Disappear

Region (million lb) (million lb) (million lb) (million Ib) ance (lb)

New England 42.0 42.3 84.3 6.7

New York/New Jersey 95.8 64.5 160.3 6.4

Eastern Strip 89.1 62.7 151.8 5.4

Southeast 84.3 53.6 137.9 6.1

Upper Central Midwest 204.1 137.4 341.5 6.2

Lower Central Midwest 77 .3 40.3 117.6 5.4

Plains/Mountains 41.0 27.9 68.9 6 . 6

Northwest 19.4 25.6 45.0 6.0

California/Nevada 75.1 84.7 159.8 6.1

Southwest 96.7 57.2 153.9 6.6

(1,421.2) + (6.2)

** Total U.S. 825.0 603.0 388.0 1,816.0 7.8

Percent of Total 45% 33% 21% 100%

* USDA donation program (370 million lb), plus mail order.

+ Excludes USDA donation program tonnage.

** Includes Alaska and Hawaii.

Source: SRI International

IV-IO

Table 15

WISCONSIN PASTEURIZED PROCESS PRODUCT VOLUME AND SHARE OVERVIEW

Distribution Channel

Retail

Branded Private-label

Foodservice/food manufacturing

* Other

Unaccounted for

Total

*

Pasteurized Product Disappearance

U.S. (million I b)

825

603

388

1,816

592 234

Wisconsin (million lb)

333

248

741

151 183

Wisconsin Share (%)

40%

41

24

40%

25 78

USDA donation program sales to the government and mail orders.

+ May include grated natural cheese.

Source: SRI International

IV-ll

H <: I

I--' N

Region

New England

New York/New Jersey

Eastern Strip

Southeast

Upper Central Midwest

Lower Central Midwest

Plains/Mountains

Northwest

California/ Nevada

Southwest

Total U.S.+

•

Table 16

* WISCONS IN PASTEUR IZED PR OC ESS PRODUCT REGIONAL VO LUME AND SHARE ESTIMATES

U.S. Total (mil. 1b)

32.2

69.1

62.5

53.4

157.1

52.0

28.7

14.5

54.1

67.9

591. 5

Branded

Wisconsin (mil. lb)

13.1

38.9

18.3

14.6

27.3

7.8

4.1

1.4

15.0

10.1

150.8

Retail Product Private Label

Wis. Share

~

41

50

29

27

17

15

14

10

28

15

25

U. s . Total (mil. lb )

9.9

26.7

26.6

31.0

47.0

25.4

12.2

5.1

20.9

28.9

233.6

Wisconsin ( mil. 1b)

7.0

23.5

22.9

21.0

45.6

18.0

7.4

3.0

12.4

21.9

182.7

Wi s . Share'"

~

7L

88

86

68

97

71

61

59

59

76

78

Foodservice/Food Manufacturing Use

U.S. Total (mil. lb)

42.3

64.5

62.7

53.6

137.4

40.3

27.9

25.6

84 .7

57.2

603.0

Wisconsin (mil. lb)

13.9

35.5

30.9

18.1

100.2

11.8

14.8

2.4

11.5

7. 8

248.0

Wis. Share·

~

33

55

49

34

73

29

53

9

14

14

41

Wisconsin product totals 676 million pound compared with the 1983 total reported production of 74 1 million pound.

+Includes Alaska and Hawaii.

Source: SRI International

Data for several firms, generally the smaller ones, however, were relatively imprecise in terms of distribution channel. For almost all firms, information on market geography was not very detailed, so that regional allocation of product are based substantially on the judgment of the SRI project team.

As Table 15 shows, the Wisconsin product accounts for about 40% of total U.S. pasteurized product consumption. Wisconsin-made product is estimated to account for about 25% of branded retail product sales. As reported to us and shown in the table, Wisconsin process product accounts for about 78% of the private-label retail market and 41% of foodservice/ food manufacturing use. Given SRI's information on non-Wisconsin produc­tion of private-label product, however, it would appear that Wisconsin's estimated 78% private-label share is actually closer to 65%, and that the additional Wisconsin product is used in foodservice/food manufacturing, or represents government conversion and perhaps some sales to the government.

In terms of sales geography, Wisconsin-branded product has higher than average shares on the East Coast, from New England through Florida, and in California. This pattern follows the regional marketing strengths of the major branded process product producer/marketers. To the extent that our data permit, we have identified the major metropolitan area or state in each region where Wisconsin-made branded retail product has the highest volume and market share. These are:

New England

New York/New Jersey

Eastern Strip

Southeast

Upper Central Midwest

Lower Central Midwest

Plains/Mountains

Northwest

California/Nevada

Southwest

Highest Volume

Boston-Philadelphia

New York

Baltimore-Washington

Florida

Chicago

New Orleans

Denver

Seattle-Tacoma

Highest Share

Hartford-New Haven­Spri ngfield

Albany-Schenectady­Troy

Pittsburgh

Chicago

Los Angeles-San Diego Los Angeles-San Diego

Texas

IV-13

In terms of both volume and share, both private-label and food­service/food manufacturing product tend to remain closer to their point of origin than branded retail product. Wisconsin's market shares are high in the Upper Central Midwest, New York/New Jersey, the Eastern Strip, and, for foodservice/food manufacturing, the Plains/Mountains area. The over­all pat tern of Wisconsin-made, private-label and foodservice/ food manu­facturing process product use is a function of three factors: (1) the output and product mix of process cheese manufacturing plants in Idaho, Utah, Missouri, and Pennsylvania, which are better positioned than Wisconsin in terms of transportation cost to serve outlying markets; (2) the number, capacity, and location of the process facilities and distribu­tion centers operated by each of the major marketers, which establishes to a large degree each firm's national marketing pattern; (3) the existence in Wisconsin of one processing plant owned by a grocery chain, that serves its grocery stores located throughout the southern and western portions of the United States.

Cold Pack Cheese and Cheese Foods

U.S. Production

U.S. output of cold pack cheese and cheese foods is reported by the USDA to have totaled 111.3 million pounds in 1983, an increase of 69% over 1982 levels. This product category accounted for 6% of the combined process and cold pack cheese category volume in 1983 and about 2% of the more than 5.1 billion pounds of cheese consumed by civilians in the United States. In 198 3, 29 U.S. plants were reported to be involved in cold pack product manufacture.

Wisconsin Production

Wisconsin produc tion of cold pack cheese and cheese foods in 1983 reportedly totaled 95.9 million pounds, a 55% increase in output over the previous year. Cold pack products accounted for somewhat more than 11% of Wisconsin's combined process and cold pack pr oduct output as reported by the Wisconsin Department of Agriculture. The number of plants involved in cold pack product manufacture is not reported. SRI's interviews indicate that at least eight companies are involved in Wisconsin cold pack produc­tion at substantial levels of output (i.e., 3 million pounds per year or more) . A number of other Wisconsin companies produce small quantities, some for the commercial market and some for "internal" use (i.e., for employees' and/or member patrons' use, purchase or gifts).

Through a combination of in-person and telephone interviews, the SRI project team was able to account for the production and general channels and geographic pattern of distribution of 51 million pounds of cold pack products. More limited information was gathered on the output and likely distribution of another 11.5 million pounds. The remaining output--about 33 million pounds--was accounted for through other information sources extensively supplemented by the project team's judgment.

IV-14

For the 62.5 million pounds of output for which good production data were gathered, it is estimated that at least 30 million pounds of the ingredient cheeses are of Wisconsin origin, with Cheddar predominating. Other cheese types mentioned as ingredients were Swiss, Blue, Colby, and Provolone. Estimates of ingredient use, total or by type, are not avail­able for the other 33.4 million pounds of Wisconsin cold pack product output. The larger manufacturers tend to buy cheese specifically for ingredient purposes. Some smaller manufacturers use a combination of purchased ingredients and trim from other operations.

The U.S. Cold Pack Product Market

Estimates of the U.S. cold pack cheese market were developed by the SRI project team from information gathered in interviews concerning the general regional pat terns of consumption and use and the share of each distribution channel. No comprehensive publicly available information on distribution and markets exists for this category of product, which constitutes a small market in relation to other process and many natural cheeses. Therefore, guided by the information and insights shared by interviewees and with some corroboration from the very limited retail data that are available, the SRI project team developed the U.S. market data provided in Table 17. Regional per capita consumption estimates were developed for the retail channel, and foodservice use was apportioned regionally under the assumption that it would tend to parallel retail sales volumes.

As Table 17 shows, the U.S. cold pack product market is predominantly a retail market, and the majority of sales are made north of the Mason Dixon line. Both per capita and total regional sales tend to decline as one moves southward. The two largest single city markets for cold pack products are reportedly Chicago and New York City.

Wisconsin Cold Pack Products Market

Estimates of the distribution of Wisconsin cold pack product output by channel of distribution and by region are presented in Tables 18 and 19. In Table 18, cold pack products marketed through the retail channel are further broken down into branded and private-label product. The data for Wisconsin-made produc ts are based on information gathered in inter­views. This information for a number of firms was quite general in terms of market mix and geography, and the final allocation of product is based substantially on the judgment of the SRI project team.

As Table 18 shows, the cold pack market, regardless of channel or segment, is dominated by Wisconsin-made product. Wisconsin products account for almost all of the private-label and foodservice sales, and 80% of the branded retail product. Wisconsin-made products have a somewhat lower share in the branded retail segment than in other segments because at least one major branded retail cold pack manufacturer/marketer produces significant volumes outside Wisconsin.

IV-IS

Table 17

U.S. COLD PACK PRODUCT DISAPPEARANCE

Distribution Channel Foodservice/ Average

Food * Total+

Per Capita Retail Manufacturing Other Disappear-

Re~ion (million lb) (million lb) (million Ib) (million Ib) ance (lb)

New England 6.2 1.4 7.6 0.61

New York/New Jersey 12.6 2.8 15.3 0.61

Eastern Strip 11.3 2.5 13.7 0.49

Southeast 3.9 0.8 4.7 0.21

Upper Central Midwest 32.1 7.1 39.2 0.71

Lower Central Midwest 3.3 0.8 4.0 0.19

Plains/Mountains 5.2 1.2 6.4 0.61

Northwest 1.6 0.4 2.0 0.27

California/Nevada 7.8 1.7 9.5 0.37

Southwest 3.2 0.7 3.9 0.17

Total U.S. 87.2 19.2 5.1 111.3 0.45

Percent of Total 78% 17% 5% 100%

* Cheesemakers' store sales and mail order.

+ Regional totals exclude other.

Source: SRI International

IV-16

Table 18

WISCONSIN COLD PACK PRODUCT VOLUME AND SHARE OVERVIEW

Cold Pack Product Disappearance U.s. Wisconsin Wisconsin

Distribution Channel (million lb) (million lb) Share (%)

Retail

Branded Private label

Foodservice/food manufacturing

* Other

Total

*

87.2

68.8 18.4

19.2

5.1

111.3

Cheesemakers' store sales and mail order.

Source: SRI International

72.3 83%

54.8 80 17 .5 95

18.4 96

5.1 99

95.9 86%

In terms of regional market presence (reported in Table 19), in the branded retail market, Wisconsin has higher than average shares in New England, the Eastern Strip, the Southwest, and the Southeast. Lower than average shares are held in New York/New Jersey, the Lower Central Midwest, the Plains/Mountains region, and all of the West Coast region. Wisconsin shares of the regional private-label and foodservice/ food manufacturing markets have not been computed because for substantial volumes of Wiscon­sin product in both these channels, available information is inadequate to make a reliable regional allocation.

Comments Concerning Cold Pack Product Promotability

Although it is not generally considered a major product category by the Wisconsin cheese industry, the sales volumes of Wisconsin cold pack products are greater than those of such cheese categories as Swiss, Jack, Brick, or Muenster. Cold pack products appear to be a growth category, given recent output trends, and they fit well with consumers' increasing interest in differentiated specialty-type cheese products. The category is open to and is undergoing expansion through line extensions into various types of spreads. A number of participants are already connected with Wisconsin through brand name or other label information, and Wis­consin product is dominant in the marketplace. As a mainly retail

IV-17

Tab1" 19

IHSCONS IN COLO PACK PRODUCT K£ClONAL VOI.U~E AND SIIAKt: t STH11\H S

Retail Product Foodscrvi ce / Food Brallded Private Label Hanufa c turinE Use

Wis. Wi s. Wis. U.S. Total Wisconsin Sha re U.S. Total Wisconsin Sha re* U.S. Total Wisconsin Share*

Region (mil. Ib) (mil. Ib) ~ (mil. Ib ) (mil. I b) ~ (mil. Ib ) (mil. I b) ~

Nelol England 4.9 4. 3 88 1.3 0.3 1.4 0.5

Nelol York / New Jersey 9.9 7.2 72 2.7 0 .7 2.8 1.1

Eastern Strip 8.9 8.6 97 2.4 0.6 2.5 1.0

Southeast 3. 1 2.8 92 0.8 0. 2 0.8 0.3

Upper Central Hidwest 25.3 20.5 81 6.8 2.1 7.3 1.8

H Lower Centra l < Hidlolest 2.6 1. 5 56 0.7 0.1 0.5 <0.1 I ~

00 Pia i ns / Houn ta ins 4.1 2.3 55 1.1 0.2 1.2 0.2

Northwest 1.3 0.9 70 0.3 O. I 0.4 <0.1

California/ Nevada 6.2 4.5 73 1.6 0.3 1.7 0.3

Southwes t 2.5 2.3 90 0.7 0.1 0.7 0.1

Unallocated 0.0 0.0 0.0 12.8 0.0 13 .1

Total U.S. 68.8 54.8 80 18.4 17.5 95 19.2 18.4 96

* Percentages hav e not been c omputed be caus e sig ni f icant volumes c annot be a ll oc a ted by region.

Source : SRI International

product, industry. preeminence programs.

the cold pack category Thus, growth prospects, in this area make it

is a highly visible segment of the market positioning, and Wisconsin's

a likely candidate for promotion

Cheddar

u.s. Production

U. s. output of Cheddar in 1983 reached 2,352 million pounds, an increase of 9% over 1982 levels. Cheddar is the largest volume cheese produced, accounting for about one-half of all U.S. natural cheese output. The USDA reports that 383 cheese plants manufactured Cheddar in 1983, 49% of them located in Wisconsin.

Wisconsin Production

Wisconsin's 1983 output of Cheddar--951 million pounds--was 40% of U.S. production. About 189 plants were engaged in Cheddar manufacture in that year, according to the USDA.

Through the natural cheese manufacturers' survey and additional interviews, the SRI project team was able to account for the production of 681 million pounds of Cheddar and 112 million pounds of stirred and washed curd that have been combined with Cheddar for the purposes of this analy­sis; together, these volumes equal 83% of Wisconsin's reported 1983 Cheddar production. Through the plant survey ef fort and in interviews, SRI covered 97 plants, a little more than one-half of those reportedly involved in Cheddar manufacture. The tonnage unaccounted for (158 million pounds) compared with the number of nonresponding plants (97) would indi­cate that most nonrespondents have minimal volumes of Cheddar output and/ or that a number of them may have discontinued Cheddar production altogether.

The U.S. Cheddar Market

Estimates of the U.S. Cheddar market are shown in Table 20. Cheddar disappearance as natural Cheddar through major commercial channels is much more difficult to determine than that of other natural cheeses because of the complexities involved in Cheddar flow associated with CCC purchases and sales, military purchases, USDA donations, and the use of Cheddar as the major cheese input in the manufacture of pasteurized process and cold pack cheese products. To complicate estimation even more, the USDA pub­lishes data on per capita civilian Cheddar disappearance in natural equi­valent only, and does not attempt to distinguish between Cheddar consumed as Cheddar and Cheddar consumed in the form of process products.

IV-19

Table 20

U.S. CHEDDAR DISAPPEARANCE*

Distribution Channel Foodservice/ Average

Food +

Per Capita Retail Manuf ac turl ng Other Total Disappear&

ReBion (million lb) (million lb) (million lb) (million lb) ance (lb)

New england 22.6 21.5 44.1 3.5

~cw York/New Jersey 35.2 32.8 68.0 2.7

Eastern Strip 41.0 31.9 72 .9 2.6

Southeast 38.4 27.4 65.8 2.9

Upper Central Midwest 82.3 70.0 152.3 2.8

Lower Central ~Iidwest 44.8 20.5 65.3 3.0

Plains/Mountains 22.9 14.2 37.1 3.5

Northwest 22.7 13 .0 35.7 4.8

California/Nevada 60.7 43.1 103.8 3.9

Southwes t 45.4 29.1 74.5 3.2

(725.0)++ (3.1)+-~

** & Total U.S. 418.0 307.0 1,943.0 2,668.0 Pe rcent of Total 16% 12% 73% 100%

* Commercial disappearance; excludes USDA donations. but includes washed and

+ stirred curd.

&To processing, CCC, sales to military. mail order and factory store sales. Production of Cheddar. washed and stirred curd. imports. and government

**commercial sales. ++Includes Alaska and Hawaii.

Per capita estimates reflect combined retail and foodservice/food manufacturing use only.

Source: SRI International

IV-20

Through a balancing procedure, the SRI project team allocated U.S. Cheddar, washed and stirred curd, imported Cheddar, and government Cheddar sales to the end uses shown in Table 20. Of the 2.7 billion pounds of estimated domestic Cheddar supply, 1.9 billion, or 73%, can be accounted for primarily by the combination of CCC purchases and the manufacture of pasteurized process and cold pack cheese products, and secondarily by minor amounts absorbed in sales to the military, factory store sales, and mail order sales. The average per capi ta consumption of Cheddar in natural form through major commercial retail and foodservice/ food manu­facturing use channels is about 3.1 pounds per year. Retail sales account for 58% of this amount, and foodservice/food manufacturing for the balance.

The observable differences in regional per capita Cheddar consumption patterns reflect both varying retail sales and foodservice/food manufac­turing use intensities. Three areas stand out on a per capita basis: (1) the Northwest, where consumer tastes run much more toward natural than to pasteurized process products at retail and where foodservice expenditures are high on a per capita basis; (2) the eastern seaboard from New York to Florida, where the mix of retail cheese purchases incorporates greater proportions of Italian, Swiss, and other natural varieties, and thus less Cheddar; (3) the Upper Central Midwest, where Colby appears to substitute to some extent for Cheddar consumption.

Wisconsin Cheddar Market

Estimates of Wisconsin Cheddar distribution by major market channel and by region are shown in Tables 21 and 22.

As indicated earlier, the difficulties encountered in detailing the flow of Cheddar were greater than those for any other cheese category for several reasons. First, the information bases from which the SRI project team worked covered different time frames. The plant survey spanned July 1983 through June 1984. The personal and telephone interviews generally covered the 1984 calendar year. This difference alone would lead to some difficulties. Second, procurement patterns for Cheddar for processing fluctuate because major processors adjust volume requirements, inventor­ies, and sources as business conditions and supplier performance change. Third, a number of major firms were willing to share with SRI only general information or "rules of thumb" related to procurement and marketing patterns. Finally, and perhaps most important, the structure of the Wisconsin industry itself leads to data collection problems. Producers/ marketers supply bulk and/or packaged product to each other, and a number of assemblers/ packagers of varying sizes perform intermediary roles that further obscure the pattern of Cheddar flow.

The SRI project team has taken into account procurement fluctuations and these interfirm and assembler/packer relationships to the extent possible. However, some double counting probably still affects our estimates. It may explain the imbalance for Wisconsin Cheddar shown at

IV-21

Distribution Channel

Retail

Branded Private-label

Foodservice/food manufacturing

Processing

Government

Other +

Total

Imbalance &

*

Table 21

WISCONSIN CHEDDAR PRODUCT VOLUME AND SHARE OVERVIEW

Cheddar Disappearance

U.S. Wisconsin (million lb) (million lb)

418 239

234 110 184 129

307 82

* * 1,386 525

542 123

15 4

2,668 973

(+22)

Excludes government cheese processed for donation. + Cheese plant store sales and mail order sales.

&1983 Wisconsin production--951 million pound.

Source: SRI International

IV-22

Wisconsin Share (%)

57%

47 70

27

38

23

27

36%

Table 22

WISCONSIN CHEDDAR REGIONAL VOLUME AND SHARE ESTIMATES

Retail Product Foodservice/Food Branded Private Label Manufacturins Use

Wis. Wis. Wis. U.S. Total Wisconsin Share U.S. Total Wisconsin Share U.S. Total Wisconsin Share

Region (mil. lb) (mil. lb) ~ (mil. lb) (mil. lb) ~ (mil. 1b) (mil. 1b) ~

New England 12.9 4.9 38 9.7 4.9 51 21.5 3.8 18

New York/New Jersey 19.0 6.2 32 16.2 7.8 48 32.8 3.8 12

Eastern Strip 21.5 9.0 42 19.5 12.6 65 31.9 6.6 21

Southeast 21.5 9.1 42 16.9 12.9 76 27.4 3.0 11

Upper Central Midwest 50.9 45.2 89 31.4 30.2 96 70.0 36.1 52

H Lower Central < Midwest 28.6 14.9 52 16.2 9.4 58 20.5 3.3 16 I

N W Plain./Mounta1ns 7.8 4.1 52 15.0 9.6 64 14.2 6.2 44

Northwest 12.7 0.6 5 10.0 6.2 62 13.0 3.1 24

California/ Nevada 30.0 9.0 30 30.8 10.4 34 43.1 6.5 15

Southwest 28.0 7.5 27 17.4 11.7 67 29.1 9.0 31

Unallocated 0.0 0.0 0.0 13 .3

* Total U.S. 234.1 110.2 47 183.9 129.0 70 307.0 81.6 27

* Includes Alaska and Hawaii.

Source: SRI International

the bottom of Table 21. Other possible factors contributing to this imbalance are purchases from the government, the po ssi bil i ty that some Cheddar from other states has been included with Wisconsin product in terms of accounting, and continual changes in the level of Wisconsin Cheddar production and/or shipments.

Table 21 shows, that, of a total "supply" of Wisconsin Cheddar of 973 million pounds (including the 22 million pound imbalance discussed above), about 54% is used in the manufacture of pasteurized process and cold pack products in Wisconsin and elsewhere. It is estimated that 280-320 million pounds are used within the state, and that the balance of 205-245 million pounds is shipped elsewhere for processing, mainly to nearby states-­Minnesota, Illinois, Indiana, and Missouri. Some small amounts also move to Idaho, Utah, Pennsylvania, and Ohio.

From July 1983 to June 1984, SRI's survey indicated that 123 million pounds, or 12% were sold to the government. An estimated 4 million pounds were sold at cheese plant factory store outlets or by mail order. The balance--321 million pounds, or 33%--was sold as natural Chedda r through grocery stores, independent delicatessens, and other major retai l outlets, and to foodservice/ food manufacturing accounts. In the reta i l sector, Wisconsin Cheddar is estimated to account for about 47% of U.S. branded Cheddar sales and 70% of private-label products. Wisconsin's foodservice/food manufacturing share is estimated at 27%.

When Wisconsints commercial Cheddar market is analyzed on a regional basis, as shown in Table 22, Wisconsin branded product has a higher than average share in its home territory of the Upper Central Midwest, in the Plains/Mountains region, and in the Lower Central Midwest. Lower than average shares are found in New England, the Southwest, the Northwest, New York/New Jersey, and California. This concentration of Wisconsin Cheddar primarily in the central portion of the United States reflects the sourcing patterns and distribution logistics of the major branded cheese firms that market substantial volumes of Wisconsin Cheddar.

To the extent that our data permit, we have identified the major metropolitan areas or states in each region where Wisconsin-made, branded retail Cheddar has the highest volume and market share. These are:

Highest Volume

New England Boston-Providence

New York/New Jersey New York

Eastern Strip Baltimore-Washington

Southeast Miami

Upper Central Midwest Chicago

IV-24

Highest Share

Buffalo-Rochester

Baltimore-Washington

Florida

Milwaukee, Cleveland, Grand Rapids

Lower Central Midwest New Orleans

Plains/Mountains Denver Denver

Northwest Seattle-Tacoma

California/Nevada Los Angeles-San Diego Los Angeles-San Diego

Southwest Dallas-Ft. Worth Texas

In terms of private-label product, as might be expected, Wisconsin product has a higher than average share in the Upper Central Midwest. It also has a high share in the Southeast, and nearly an average share in the Southwest, the Plains/Mountains region, and the Eastern Strip. This pat­tern indicates that Wisconsin private-label product does travel substan­tial distances. The overall pattern reflects the Wisconsin production and/or procurement practices of major private-label suppliers, as well as the significant volumes purchased directly from Wisconsin cheese plants by major grocery chains whose prime market areas cover all but the New England and New York regions. Note also that about 13.3 million pounds could not be allocated on a regional basis. This unallocable volume is so large that, if its distribution were concentrated in relatively few regions, it could substantially change the regional share pattern.

Like other types of cheese in foodservice use, Wisconsin Cheddar is concentrated heavily in the Upper Central Midwest for several reasons: (1) this area is the most significant in terms of food manufacturing plants in the United States; (2) price and therefore transportation costs are a more important factor in this market; (3) the Upper Central Midwest is also the headquarters of major foodservice and foodservice distributing firms. For this last reason, some of this product may well move outside the Upper Central Midwest for final use.

Colby

U.S. Production

U.S. output of Colby is not reported separately by the USDA, but is included in the data set for "Other American Varieties," a term that en­compasses Colby, washed curd, stirred curd, Monterey, and Jack. The production volume for these five cheese types combined was 576 million pounds in 1983, a slight decrease (3%) from the previous year. A total of 223 plants were reported to manufacture one or more of these products, 48% of them in Wisconsin.

For the purposes of our market share analysis, the SRI project team had to estimate U.S. Colby production. This task was approached in two ways. First, we judged, on the basis of interview information, that Wisconsin accounts for 50% or more of U. S. Colby output. The manuf ac­turing plant survey and field interview results indicated that Wisconsin Colby production between July 1983 and June 1984 totaled 107 million

IV-25

pounds, and that virtually all large producers responded to our surveyor granted us interviews. Allowing for nonresponding smaller plants, and assuming that Wisconsin has more than a 50% share of the market, we estimate U.S. Colby output at 250 million to 300 million pounds.

Our second approach was to analyze 1983 USDA per capita disappearance data. By inference, these data imply about a 5.1 pound per capita dis­appearance for Cheddar, Colby, and Jack combined in natural form. If we subtract from that figure SRI's estimated 3.3+ pounds per capita consump­tion of Cheddar as natural cheese, it appears that about 1.8 pounds per capita of Jack and Colby combined are consumed as natural cheese, or a total of about 420 million pounds. Given the relationship between Colby and Jack volumes at retail and in foodservice use developed for this report, we can derive a rough estimate that 240 million pounds of Colby and 180 million pounds of Jack are sold at retail and used in foodservice/ food manufacturing. Allowing 40 million pounds for use of Colby in pro­cess products yields a U.S. production figure for Colby of about 280 million pounds. This figure is in the same range as the one derived from the other approach outlined above.

Wisconsin Production

Wisconsin's 1983 reported Colby produc tion was 175 million pounds. As noted previously, SRI's production estimate for the producer survey/ interview period is lower--130-150 million pounds. This discrepancy may reflect (1) some plant product mix change as a result of market condi­tions, (2) a decline in production capacity, and/or (3) the incorporation of some stirred and washed curd in the Wisconsin Department of Agricul­ture's Colby reporting category. In this report, we have used 140 million pounds as the shipment basis for the state. On this basis, SRI accounted for 76% (or 107 million pounds) of estimated output in the survey and interview phases of the project.

The U.S. Colby Market

Estimates of the U.S. Colby market are shown in Table 23. The retail channel predominates, accounting for an estimated 54% of Colby disappear­ance. The foodservice/food manufacturing segment uses a little less than one-third of total output. About 40 million pounds, or 14%, are pre­sumably used in process product manufacture or are sold from cheese plant stores and by mail order.

The average U.S. per capita disappearance of Colby through retail and foodservice/food manufacturing channels is 1.0 pound. On a regional basis, the areas that consume the largest amounts of Colby per capita are the Upper Central Midwest, the Plains/Mountains region, and the Southwest. The regions that form the U.S. perimeter, with the exception of the South­west, are below the national average in per capita consumption. Basical­ly, Colby appears to be more of an "America's heartland" cheese than other types are, particularly Jack.

IV-26

Table 23

u.s. COLBY DISAPPEARANCE

Distribution Channel Foodservice/ Average

Food *

Per Capita Retail Manufacturing Other Total Disappear-

Region (million lb) (million lb) (million lb) (million lb) ance (lb)

New England 1.6 6.2 7.8 0.6

New York/New Jersey 3.1 9.4 12.5 0.5

Eastern Strip 11.3 9.2 20.5 0.7

Southeast 8.5 7.8 16.3 0.7

Upper Central Midwest 70.2 20.0 90.2 1.6

Lower Central Midwest 5.6 5.9 11.5 0.5

Plains/Mountains 16.2 4.1 20.3 1.9

Northwest 3.7 3.7 7.4 1.0

California/Nevada 9.5 12.4 21.9 0.8

Southwest 21.8 8.4 30.2 1.3

(240.0) ( 1.0)

Total U.S.+ 152.0 88.0 40.0 280.0

Percent of Total 54% 31% 14% 1007.

* +For process product manufacture, plant store sales, and mail order. Includes Alaska and Hawaii.

Source: SRI International

IV-27

The Wisconsin Colby Market

Table 24 shows SRI's estimates of Wisconsin Colby distribution by market channel for the 132 million pounds of product that could be tracked to final market. As with certain other cheeses, following the Colby product flow is complicated because initial shipments of substantial volumes are directed to other cheese firms both in and out of state and to assemblers/distributors, which may pack it for other cheese firms as well as for their own needs. This pattern of movement to interim points shows in the data derived from the producer survey. The total volume of Colby shipments reported by survey respondents was about 90 million pounds. Of this 90 million, 60 million pounds, or two-thirds, were shipped initially to other cheese companies in state (38 million pounds) and out of state (22 million pounds), whereas 7 million pounds (8%) were shipped to dis­tributors in state (4+ million pounds) and elsewhere (3 million pounds). Only about 22 million pounds, or 24% of the reported total, were shipped directly to grocery wholesalers, grocery chains, or foodservice distributors/firms.

Table 24

WISCONSIN COLBY VOLUME AND SHARE OVERVIEW

Colby Disappearance

U.S. Wisconsin Wisconsin Distribution Channel (million lb) (million lb) Share (%)

Retail 152.0 97.6 64%

Branded 89.7 52.7 59 Private-label 62.3 44.9 72

Foodservice/food manufacturing 88.0 18.8 21

Other* 40.0 15.4 38 Unaccounted for 0.0 8.2

Total 280.0 140.0 50%

* Processing and cheese company factory store and mail order sales.

Source: SRI International

As Table 24 indicates, Wisconsin Colby, as reported to SRI, has a higher than average share of both the branded and private-label retail channels, but substantially lower shares are estimated for processing use

IV-28

and the foodservice/food manufacturing segment. It is possible that, because of the difficulty in determining total U.S. Colby output and the almost total absence of information on foodservice Colby use (or even cheese use ~ toto), SRI's estimate of U.S. foodservice/food manufacturing use of this cheese type may be too high, and that Wisconsin's share may be underestimated.

The regional pattern of flow of Wisconsin Colby is reported in Table 25. In terms of branded retail product, the largest volume of Wisconsin Colby is found in the largest market--the Upper Central Midwest. In terms of market share, Wisconsin cheese is well represented and relatively evenly represented in every market area. (The market share estimate for New York/New Jersey may well in fact be the highest for any region; note, however, that the market size for this region is so small that a downward adjustment of 0.1 million pound in the estimate of shipments from Wisconsin would reduce the state's share estimate by 6-8 points.)

Within these regions, the major metropolitan area or state where Wisconsin-made branded retail produc t has the highest volume and market share are:

Highest Volume Highest Share

New England Boston-Providence

New York/New Jersey New York Buffalo-Rochester

Eastern Strip Baltimore-Washington Philadelphia

Southeast Miami

Upper Central Midwest Cincinnati-Dayton Minneapolis-St. Paul

Lower Central Midwest New Orleans

Plains/Mountains Denver

Northwest Seattle-Tacoma

California/Nevada Los Angeles-San Diego San Francisco

Southwest Dallas-Ft. Worth Texas

For private-label retail product, Wisconsin Colby is also widely distributed throughout the United States. However, a significant volume of product could not be allocated geographically--about one-third of the total poundage in the private-label segment. If we adjusted for this unallocated tonnage, Wisconsin's average market share would decline from 72% to 48%, and in two regions--the Plains/Mountains area and the South­west--Wisconsin Colby would still have a substantially lower than average

IV-29

Table 25

WISCONSIN COLBY REGIONAL VOLUME AND SHARE ESTIMATES

Retail Product Foodservice/Food Branded Private Label Manufacturin~ Use

Wis. Wis. Wis. U.S. Total Wisconsin Share U.S. Total Wisconsin Share U.S. Total Wisconsin Share

Region (mil. lb) (mil. lb) ~ (mil. lb) (mil. lb) ~ (mil. lb) (mil. lb) ~

New England 1.0 0.6 59 0.6 0.3 51 6.2 0.3 5

New York/New Jersey 1.9 1.4 76 1.3 0.7 58 9.4 0.9 10

Eastern Strip 6.9 3.6 53 4.3 2.5 59 8.3 1.0 12

Southeast 5.0 2.9 57 3.5 1.9 54 8.7 0.7 8

Upper Central Midwest 45.3 27.6 61 24.8 14.0 56 20.1 10.9 54

H Lower Central <: Midwest 3.8 2.0 54 1.8 1.3 73 5.9 0.8 13 I w

0 Plains/Mountains 6.3 3.3 53 10.0 3.7 37 4.1 1.6 40

Northwest 2.2 1.3 57 1.5 0.7 46 3.7 0.5 14

California/ Nevada 5.0 2.7 54 4.5 2.2 48 12.4 1.0 8

Southwest 12.0 7.2 60 9.8 2.6 26 8.4 1.1 13

Unalloca ted 0.0 0.0 0.0 15.0 0.0 <0.1

* Total U.S. 89.7 52.7 59 62.3 44.9 72 88.0 18.8 21

* Includes Alaska and Hawaii.

Source: SRI International

share. Given the magnitude of the unallocable volume, however, it is not realistic to draw even this limited conclusion.

Foodservice/food manufacturing purchases of Wisconsin Colby are heavily concentrated in the Upper Central Midwest. This pattern is not unexpected given the dynamics of this market segment. However, it is very likely that a portion of this volume is ultimately consumed outside the region, after major national foodservice chains and distributors have shipped it to operating units or customers in other areas of the country.

Jack

U.S. Production

As is the case with Colby, U.S. production of Jack cheese is not reported separately by the USDA, but is combined with Colby and washed and stirred curd, and is reported as "Other American." The SRI project team's estimate of 1984 U.S. Jack output is 180 million pounds.

Wisconsin Production

The Wisconsin Department of Agriculture reports a 1983 state Jack production level of 32.2 million pounds. In the initial natural cheese plant producer survey and the interviews, we gathered data indicating a Jack output of about 49 million pounds. If we allow for the output of smaller producers that did not respond to the survey, total Wisconsin Jack output could be in the 55 to 60 million pound range, an amount equal to 30-33% of all U.S. output.

The U.S. Jack Market

Estimates of the U.S. Jack market by major distribution channel and region are presented in Table 26. After we allow for a small volume used for processing and cheese plant store and mail order sales, the remaining market--retail and foodservice/food manufacturing--splits almost equally, wi th a slight advantage in the foodservice/ food manufacturing channel. Contrary to the approach used for most other cheeses, we have not esti­mated regional distribution of foodservice/ food manufacturing Jack use solely on the basis of the pattern of food service expenditures. Adjust­ments based on judgment have been made to reflect the more intensive foodservice use of Jack in the western and southwestern states. Thus, both retail sales and foodservice/food manufacturing use follow a similar regional pattern. The resulting average per capita disappearance pattern is dominated by the four western regions--California, the Northwest, the Southwest, and the Plains/Mountains area. Per capita consump tion levels in the remaining regions are similar to each other--between 0.4 and 0.6 pounds.

IV-31

Table 26

U.S. JACK DISAPPEARANCE

Distribution Channel Foodservice/ Average

Food *

Per Capita Retail Manufacturing Other Total Disappear-

Region (million lb) (million lb) (million lb) (million lb) ance ( lb)

Ne w England 2.9 3.5 6.4 0.5

New York/New Jersey 5.3 7.0 12.3 0.5

Eastern Strip 5.8 7.0 13.8 0 . 6

Southeast 4.0 7.0 11.0 0.4

Upper Central Midwest 9.9 15.0 24.9 0.5

Lower Central Midwest 3.9 5.3 9.2 0.4

Plains/Mountains 5.8 6.2 12.0 1.0

Northwest 5.7 4.4 10.1 1.3

California/Nevada 22.6 17.6 40.2 1.5

Southwest 15.4 13 .2 28.6 1.2

(170.0) (0.7)

Total U.S.+ 82.0 88.0 10.0 180.0

Percent of Total 46% 49% 6% 1007.

* +For processing, cheese company store and mail order sales. Includes Alaska and Hawaii.

Source: SRI International

IV-32

The Wisconsin Jack Market

SRI I S estimates of Wisconsin Jack distribution and share by market channel are shown in Table 27.

Table 27

WISCONSIN JACK VOLUME AND SHARE OVERVIEW

Jack Disappearance

U.S. Wisconsin Distribution Channel (million lb) (million lb)

Retail 82.0 32.9

Branded 46.2 14.0 Private-label 35.8 18.9

Foodservice/food manufacturing 88.0 5.9

Other* 10.0 4.0

Unaccounted for 0.0 12.2

Total 180.0 55.0

*

Wisconsin Share (%)

40%

7

40

31%

30 53

Processing and cheese company factory store and mail order sales.

Source: SRI International

Of the estimated 55 million pounds of Wisconsin Jack produced, we were able to account for the distribution and marketing of a little less than 80%. Of the 43 million pounds tracked to market, about one-third is branded retail product, about 44% goes to private-label sales, and the balance is sold for foodservice use. A minor amount is used in process product manufacture. Of the 12 million pounds not accounted for, the project team judges that a significant portion is destined for foodservice use.

Again, as with other cheeses, a significant portion of Wisconsin Jack production is not sent directly to market, but instead is shipped to other cheese companies and assemblers/ distributors. Of the 36 million pounds reported in the producer survey, more than 50% was initially shipped to other cheese firms, predominantly in Wisconsin, Illinois, and Pennsyl­vania. Another 25% goes initially to assemblers/distributors, a little

IV-33

less than one-half in state, Minnesota, Missouri, and Texas. accompanied by cutting, packing, movement very difficult.

the balance primarily to California, This transshipment, which may also be and relabeling, makes tracing product

In terms of final market, we estimate that Wisconsin-origin Jack accounts for 30% of all branded retail Jack sales, 53% of private-label product, and a relatively small proportion of foodservice use.

The distribution of Wisconsin Jack by region is shown in Table 28. In branded product, the Upper Central Midwest is Wisconsin's largest volume market and is the area in which Wisconsin cheese has the highest share. It also has higher than average shares in New England and California. Its shares are lower than average in the Southwest, North­west, Lower Central Midwest, and Southeast. The state's market share in the remaining four regions is close to the U.S. average.

Whenever possible, we have identified the major metropolitan areas or states in each region where Wisconsin-made. branded retail Jack has the highest volume and market share. These are:

Highest Volume Highest Share

New England Boston-Providence

New York/New Jersey New York New York

Eastern Strip Baltimore-Washington Philadelphia

Southeast Miami

Upper Central Midwest Chicago Milwaukee, Grand Rapids

Lower Central Midwest New Orleans

Plains/Mountains Denver

Northwest Seattle-Tacoma

California/Nevada Los Angeles-San Diego Los Angeles-San Diego

Southwest Dallas-Ft. Worth Texas

In terms of private-label product, Wisconsin's share is lower than average in the Northwest, California, and the Southwest. The overall market share pattern indicates that Wisconsin Jack in private-label use stays close to home or moves south and east. A somewhat similar pattern, except for the California region, characterizes the foodservice/food manufacturing channel. However, the total volume of Wisconsin product allocated in this segment is quite small; as a result, minor changes in

IV-34

H < I

Uol VI

Region

New England

New York/New Jersey

Eastern Strip

Southeast

Upper Central Midwest

Lower Cent ral Midwest

PIa i ns/liountai ns

Northwest

Californial Nevada

Southwest

* Unallocated

Total U.S.+

*

U.S. Total (mil. lb)

1.7

3.0

3.1

2.3

6.4

2.6

2.1

3.2

11.6

9.9

46.2

Table 28

WISCO~SIN JACK REG[ONAL VOLu~E A~ SI~RE ESTIMATES

Branded

Wisconsin (mil. Ib)

0.8

0.9

0.7

0.5

5.1

0.3

0.6

<0.1

4.2

0.8

14.0

Re ta il P roduc t

Wis. Share

---ill-46

31

24

21

79

10

29

36

8

30

Private Label

U.S. Total (mil. Ib)

1.2

2.3

2.8

1.7

3.5

1.3

3.7

2.5

10.9

5.5

35.7

Wisconsin (mil. Ib)

0.8

1.7

2.2

1.6

3.4

1.0

2.5

0.6

2.2

2.7

18.9

Wis. Share

--1!.L 70

75

80

95

99

77

69

24

20

49

52

Foodservice/Food Manufacturing Use

U.S. Total (mil. lb)

3.5

7.0

7.0

7.0

15.0

5.3

6.2

4.4

17.6

13.2

88.0

Wisconsin (mil. lb)

<0.1

0.1

0.8

0.2

<0.1

2.9

0.1

<0.1

1.6

0.2

5.9

Note that 12.2 million pounds of Wisconsin product are unaccounted for and therefore cannot be allocated by +channel or region.

Includes Alaska and Hawaii.

Source: SRI International

Wis. Share

--1!.L

2

11

2

19

2

<l

9

2

the project team's judgment of where cheese goes can make a significant difference in relative regional market shares.

Muenster

u.s. Production

As reported by the USDA, 56 cheese plants were engaged in the production of Muenster in 1983, and 41% of them were in Wisconsin. Total output for all plants in 1983 was 69.6 million pounds, a decline of about 3% from the previous year.

Wisconsin Production

In 1983, Wisconsin production of Muenster was 52.8 million pounds. That amount was 76% of U. S. production, and a decrease of 8% from 1982 volume. Some 41 plants reported Muenster output to the USDA.

Through the natural cheese manufacturer's survey, supplemented by interviews, we were able to account for the production of 26.3 million pounds and the marketing and distribution of a slightly larger amount--27.6 million pounds. Thus, we were unable to t rack roughly one-half of the state's production and shipments to their final markets. This rela­tively sparse coverage of this category should be kept in mind in con­sidering the market data presented in this subsection.

The U.S. Muenster Market

The project team's estimates of the U.S. Muenster market by major channel and region are shown in Table 29. The overall market is split roughly equally between retail and foodservice; only a small volume is sold through factory store outlets and mail order or used as processing input. In terms of the geographic pattern of consumption, what evidence exists indicates higher than average per capita consumption levels in the New York/New Jersey and New England regions; the lowest levels of per capita use are west of the Mississippi. Because of these apparent regional sales differences at the retail level, we assumed that food­service use would follow not only regional food service expenditure patterns, but also tastes as reflected in grocery purchases. Therefore, foodservice/ food manufacturing use of Muenster was adjus ted judgmentally to conform more closely with the perceived regional taste preferences.

IV-36

Table 29

U.S. MUENSTER DISAPPEARANCE

Distribution Channel Foodservice/ Average

Food *

Per Capita Retail Manufacturing Other Total Disappear-

Re~ion (million lb) (million lb) (million lb) (million lb) ance (lb)

New England 2.5 2.4 4.9 0.4

New York/New Jersey 6.3 6.1 12.4 0.5

Eastern Strip 4.2 3.8 8.0 0.3

Southeast 3.4 3.4 6.8 0.3

Upper Central Midwest 8.3 7.8 16.1 0.3

Lower Central Midwest 3.3 2.5 5.8 0.3

Plains/Mountains 1.0 1.3 0.2

Northwest 0.7 1.0 1.7 0.2

California/Nevada 2.6 3.0 5.6 0.2

Southwest 2.3 2.6 4.9 0.2

(69.1) (0.3)

Total U.S.+ 34.8 34.3 0.5 69.6

Percent of Total 50% 49% 1% 100%

* Cheese factory store sales and mail order; processing volume negligible.

+Inc1udes Alaska and Hawaii.

Source: SRI International

IV-37

The Wisconsin Muenster Market

Table 30 presents our estimates of Wisconsin-made Muenster volume and market share by channel of distribution. Of the cheese we were able to track to market, the greatest portion entered the retail channel, more frequently as a private-label than as branded product. In terms of share, the almost 28 million pounds of Muenster assigned to particular markets accounted for 46% of all branded retail sales and 72% of private-label volume. Only about 7 million pounds was determined to enter food­service/food manufacturing use, or 21% of all Muenster used in that market segment.

Table 30

WISCONSIN MUENSTER VOLUME AND SHARE OVERVIEW

Distribution Channel

Retail

Branded Private-label

Foodservice/food manufacturing

* Other

Unaccounted for

Total

*

Muenster Disappearance

U. S. (million lb)

34.8

34.3

0.5

69.6

18.3 16.5

Wisconsin (million lb)

20.3

7.1

0.2

25.2

52.8

8.4 1l.9

Cheese factory store and mail order sales; processing volume is negligible.

Source: SRI International

Wisconsin Share (%)

58%

21

40

76%

46 72

As with many other cheese types, much of the output of smaller Wisconsin Muenster producers is shipped initially to other Wisconsin cheese manufacturers or to assemblers/ packers that supply larger cheese firms. Data from the producer survey confirm this. Of the 18 million pounds of shipments reported by survey respondents, about one-half was shipped initially to in-state cheese firms or assembler/packers. Because of this pattern, and because Muenster is one of the smaller volume "major"

IV-38

Wisconsin cheeses, it is difficult to track Muenster distribution accur­ately. The data we obtained from the larger cheese marketers tended to follow average patterns for each firm's entire product mix. Such data, of course, would be heavily skewed by process cheese, Cheddar, Colby, and Mozzarella sales, and would therefore be less representative of sales of Muenster and other small-volume cheeses such as Brick.

The estimated regional market pattern for Wisconsin Muenster by distribution channel is reported in Table 31. As could be expected from Wisconsin's large share of U.S. Muenster production, Wisconsin product flows into every region and channel. In terms of share, Wisconsin has a significantly higher than average branded retail share in the New York/New Jersey region and a relatively high share in the Eastern Strip and the Southwest. The lower than average share shown for the Upper Central Midwest probably results more from the limited coverage of Wisconsin produc t flow than from any significant inflow of Muenster from other states. For private-label product, Wisconsin cheese has a high share everywhere except in New England and on the West Coast. Much the same share pattern exists for foodservice use, even though the Wisconsin share of total reported use in this segment is much lower than its share of private-label products.

In terms of the branded retail product, the following tabulation identifies the major metropolitan area or state in each region in which Wisconsin-made Muenster has the highest volume and market share:

Highest Volume Highest Share

New England Boston-Providence

New York/New Jersey New York New York

Eastern Strip Baltimore-Washington Philadelphia

Southeast Miami

Upper Central Midwest Chicago Grand Rapids

Lower Central Midwest New Orleans

Plains/Mountains Denver

Northwest Seattle-Tacoma

California/Nevada San Francisco Los Angeles-San Diego

Southwest Dallas-Ft. Worth Texas

IV-39

H <: I

.c­O

Table 3l

WISCONSIN MUENSTER REGIONAL VOLUME AND SHARE ESTIMATES

Region

New England

New York/New Jersey

Eastern Strip

Southeast

Upper Central Midwest

Lower Central Midwest

PlainS/Mountains

Northwest

California/ Nevada

Southwest

* Unallocated

*

+ Total U.S.

U.S. Total (mil. lb)

1.3

3.0

1.9

1.8

4.7

1.9

0.4

0.4

1.3

1.4

18.3

Branded

Wisconsin (mil. lb)

0.5

Z.5

1.2

0.5

2.0

0.2

0.1

0.1

0.4

0.8

8.4

Retail Product Private Label

Wis. Share

~

41

82

62

30

42

10

19

32

34

59

46

U.S. Total (mil. lb)

1.2

3.3

2.3

1.6

3.6

1.3

0.6

0.4

1.3

0.9

l6.5

Wisconsin (mil. lb)

0.5

1.9

1.8

1.6

3.5

1.0

0.6

(0.1

0.3

0.8

11.9

Wis. Share

~

38

60

80

97

98

73

92

14

24

81

72

Only about SO%: of Wisconsin Muenster production has been allocated to market. remainder has not been determined and therefore is not shown here.

+Includes Alaska and Hawaii.

Source; SRI International

Foodservice/Food Manufacturing Use

U.S. Total (mil. lb)

2.4

6.1

3.8

3.4

7.8

2.5

1.3

1.0

3.0

2.6

34.3

Wisconsin (mil. lb)

0.1

0.6

1.0

0.5

3.1

0.5

0.2

0.1

0.3

0.1

7.1

Wis. Share

~

6

9

25

14

40

19

19

14

9

28

21

The market segmentation of the

Brick

u.s. Production

Brick is one of the smaller volume "mainstream" cheeses, with output in 1983 reported to be 14.2 million pounds, a slight decrease from 1982 levels. The USDA reported that 41 cheese plants, 68% of them in Wisconsin, were engaged in Brick manufacture in 1983.

Wisconsin Production

Wisconsin has the lion's share of Brick output (62% of the U.S. total); production in 1983 totaled 8.8 million pounds, about the same as 1982 output. The USDA reports that 28 Wisconsin cheese plants produced some Brick in 1983.

Through the producer survey and interview process, the SRI team was able to account for an estimated 10.9 million pounds of Brick production, 23% more than the amount reported as output for 1983. This volume differ­ence most likely reflects (1) changes in product mix output in cheese plants over the time period covered by the survey and interviews, or (2) production estimation error for some plants made by the project team. It is also possible that some survey respondents reported shipments in excess of production for the July 1983 to June 1984 period; such excess shipments are not uncommon for a number of cheeses because of aging requirements and inventory changes.

The U.S. Brick Market

SRI's estimates of the pattKrn and channel of U.S. Brick disappearance are shown in Table 32.. Of all Brick consumed, about 44% moves through regular retail channels, and the balance, except for a small volume sold from cheese factory stores and by mail order, is used in foodservice and food manufacturing. In terms of the regional pattern of consumption, Brick is more popular on the East Coast and in the Upper Central Midwest than in other regions of the country. As with Muenster, the existence of such regional taste differences at retail was taken into account in allocating foodservice/food manufacturing use. Regional dis­appearance in this channel was adjusted on the basis of the project team's judgment.

* Note that units in this table are in thousands of pounds, not millions as with other cheeses, because of the smaller tonnage involved.

IV-41

Table 32

u.s. BRICK DISAPPEARANCE

Distribution Channel Foodservice/ Average

Food *

Per Capl ta Ret311 M~lnu f iiC t ur i ng Other Total Dlsappeii r-

Region (thousand lb) (thousand lb) (thousand lb) (thousand lb) ance (lb)

New Englilnd 250 425 675 0.05

New York/New Jersey 1,005 1,225 2,230 0.09

Eastern Strip 1,119 1,2 50 2,369 0.08

Southeast 454 600 1,054 0.05

Upper Central Mid wes t 1,652 1,900 3,552 0.06

Lower Central Midwes t 434 515 949 0.04

Plains/Mountains 210 325 535 0.05

t>;o rthwes t 149 200 349 0.05

Ca1ifornla/Nev~da 521 650 1,171 0.04

Southwest 468 550 1,018 0.04

(14,007) (0.06)

Total U.S.+ 6,277 7,730 150 14,157

Percent of Total 44% 55 % 1% 100%

* Cheese factory sto re sales and mail order.

+ Includes Alaska and Hawaii.

Source: SRI Int er national

IV-42

The Wisconsin Brick Market

The SRI project team was able to develop reasonable distribution and market data for about 4.6 million pounds of Brick, equal to 52% of re­ported 1983 production and 41% of the output estimated in this project. The distribution of this cheese by major market channel is shown in Table 33. Of the volume tracked to market, a little less than 60% went to retail outlets, and the balance, except for a small amount sold through factory store outlets and mail order, went to foodservice and food manu­facturing. Given this shipment base of 4.6 million pounds, Wisconsin cheese accounted for 36% of branded retail product, 53% of estimated private-label use, and 23% of foodservice/food manufacturing use.

Table 33

WISCONSIN BRICK VOLUME AND SHARE OVERVIEW

Distribution Channel

Retail

Branded Private-label

Foodservice/food manufacturing

Other*

Unaccounted for

Total

*

Brick Disappearance

U.S. (million lb)

6.3

7.7

0.2

14.2

3.5 2.8

Wisconsin (million lb)

2.7

1.8

0.1

1.3 1.5

Cheese factory store and mail order sales.

Wisconsin Share (%)

43%

23

50

62%

36 53

+ Equivalent to 1983 production, not the higher level of output estimated by the project team.

Source: SRI International

IV-43

* Table 34 shows the same total volume by major channel on a regional basis. As expected, Wisconsin-made product accounts for a high percentage of Upper Central Midwest use in all channels. For both branded and private-label product, much of the volume that we could account for tended to move eastward to final markets, and only small volumes moved much west of the Mississippi or south of St. Louis. The foodservice/ food manu­facturing pattern differs by having a more even distribution of tonnage outside the Upper Central Midwest. This difference primarily reflects the significant volume of Brick that is destined for food manufacturing west of the Mississippi which tends to even out the overall flow.

All these data on Brick should be considered less reliable than the data for other cheeses. In all other cases, production volumes are greater, and the project team's information ba-se was more complete.

Swiss

U.S. Production

The USDA reports 1983 U.S. Swiss production at 209.5 million pounds, a 5% decrease from 1982. Some 62 cheese plants were engaged in Swiss manufacture in 1983.

Wisconsin Production

The output of the 21 cheese plants in Wisconsin totalled 36.1 million pounds in 1983. This amount is a 1. 5% dec rease from 1982 levels, and is equal to about 17 % of all U.S. production.

Through the producer survey and project interviews, the SRI project team accounted for 44.5 million pounds of Swiss output, a substantial increase over reported 1983 levels. This difference in production esti­mates most likely results from a change in production levels or product mix of one or more of the larger plants equipped for Swiss cheese production during the project period. Given that the distribution and market information we received during the project period was geared to this higher output level, the SRI project team has made 44.5 million pounds the base for the Wisconsin cheese accounting that follows.

The U.S. Swiss Market

Table 35 summarizes SRI's estimates of the U.S. Swiss cheese market by distribution channel and region. Of the total Swiss cheese supply, which includes about 68 million pounds of imports of Emmenthaler, about 5%

* Note that the units in this table are in thousands of pounds, not millions as with other cheeses, because of the smaller tonnage involved.

IV-44

Table 34

WISCONSIN BRICK REGIONAL VOL~E AND SHARE ESTIMATES

Retail Product Foodservice/Food Branded Private Label Manufacturin~ Use

Wis. Wis. Wis. U.S. Total Wisconsin Share U.S. Total Wisconsin Share U.S. Total Wisconsin Share

Region (thous. lb) (thous. lb) ~ (thous. lb) (thous. lb) ~ (thous. Ib) (thous. Ib) ~

New England 129 33 25 120 50 42 400 0 0

New York/New Jersey 516 126 25 499 250 50 1,250 46 4

Eastern Strip 669 110 16 450 242 54 1,250 90 7

Southeast 248 0 0 207 129 62 600 30 5

Upper Central Midwest 946 944 99 705 625 89 1,900 888 47

H Lower Central < Midwest 237 20 8 197 98 50 515 124 24 I ~ \J1 Plains/Mountains 105 20 19 105 45 43 325 192 59

Northwest 81 0 0 68 0 0 200 100 50

Cali fornia/ Nevada 240 5 2 281 2 650 177 27

Southwest 284 0 0 183 14 8 550 162 29

Unallocated

* Total U.S. 3,464 1,258 36 2,814 1,455 53 7,730 1,809 23

* Includes Alaska and Hawaii.

Note: Wisconsin estimates do not account for at least 4.3 million pounds of Brick.

Source: SRI International

Table 35

u.s. SWISS DISAPPEARANCE

Distribution Channel Foodservice/ Average

Food *

Per Capita Re tail Manufacturing Other Total Disappear-

Re gion (million lb) (million lb) (million lb) (million lb) ance (lb)

New England 4.8 12.2 17.0 1.4

New York/New Jersey 19.2 32.2 51.4 2.0

Eastern Strip 11.7 22.0 33.7 1.2

Sout heast 5.0 12.0 17.0 0.7

Uppe r Central Midwe s t 21.6 35.0 56.6 1.0

Lowe r Central Midwe s t 4.9 10.0 14.9 0.7

Plains/Mountains 4.5 8.0 12.5 1.2

No rthwes t 2.5 6.5 9.0 1.2

California/Nevad a 8.5 20.0 28.5 1.1

Southwest 6.6 14.0 20.6 0.9

(263.7) (1.13)

Total U.S.+ 89.8 173.9 14.0 277.7

Pe r cent of Total 32% 63% 5% 100%

* +For processing, cheese plant factory sales and mail order sales. Includes Alaska a nd Hawaii.

Source: SRI International

IV-46

is estimated to have been used in the manufacture of process cheese products and in sales at plant factory outlets and through mail order. Another 32% finds its way into retail markets, where it is the most popu­lar delicatessen cheese product. The balance--63%--is used in foodservice and food manufacturing. There are some regional differences in per capita disappearance. The New York/New Jersey area is the leader in consumption, and the Lower Central Midwest and Southeast consume the smallest amounts. Most other regions fall close to the national average--between 0.9 and 1.4 pounds per capita.

The Wisconsin Swiss Market

SRI's estimated distribution of Wisconsin Swiss by market channel is shown in Table 36. Because the most complete data were assembled for smaller producers and the least specific information was on larger plants, these estimates are less reliable than the project team would have pre­ferred. A substantial amount of judgment was used in developing these data, so they must be regarded as an initial effort, not as a final analysis.

Table 36

WISCONSIN SWISS VOLUME AND SHARE OVERVIEW

Swiss Disappearance

Distribution Channel

Retail

Branded Private-label

Foodservice/food manufacturing

Processing

* Other

Unaccounted for

Total

*

u.S. (million lb)

89.8

51.8 38.0

173.9

13 .0

1.0

277.7

Sales from factory stores and mail order.

Source: SRI International

IV-47

Wisconsin (million lb)

22.8

9.6 13 .2

19.6

2.0

0.2

44.5

Wisconsin Share (%)

25%

19 35

11

15

20

16%

As the table indicates, of the 44.5 million pounds of Wisconsin Swiss reported, a little more than one-half enters the retail channel, and 44% is used in foodservice and food manufacturing. The balance goes primarily to process product manufacture, although a small amount is sold at cheese factory store outlets and through mail order.

In terms of the regional distribution of Wisconsin product, which is presented in Table 37, branded retail Swiss has above average shares in the Upper Central Midwest, New York/New Jersey, and the Eastern Strip. Little, if any, use of Wisconsin Swiss is reported west of the Missis­sippi. A similar east-west break appears in private-label products; the same three regions receive the largest volumes and have above average Wisconsin shares. There is little apparent pattern in the foodservice/ food manufacturing segment because two-thirds of the Wisconsin product could not be tracked to its final markets.

Within the branded retail segment, the following tabulation shows, for each region for which sufficient data are available, the metropolitan areas that receives the largest volume of Wisconsin Swiss and the cities in which Wisconsin Swiss holds the highest share:

New England

New York/New Jersey

Eastern Strip

Southeast

Upper Central Midwest

Lower Central Midwest

Plains/Mountains

Northwest

California/Nevada

Southwest

Largest Volume

Boston-Providence

New York

Pittsburgh

Miami

Chicago

New Orleans

Los Angeles-San Diego

Dallas-Ft. Worth

IV-48

Largest Share

New York

Pittsburgh and Ph Hadel phia

Indianapolis

Los Angeles-San Diego

Table 37

WISCONSIN SWISS REGIONAL VOLUME AND SHARE ESTIMATES

Retail P roduc t Foodservice/Food Branded Private Label Manufacturin~ Use

Wis. Wis. Wis. U.S. Total Wisconsin Share U.S. Total Wisconsin Share U.S. Total Wisconsin Share

Region (mil. lb) (mil. lb) ...QL (mil. lb) (mil. lb) ...QL (mil. Ib) (mil. lb) ~

New England 2.7 0.4 13 2.1 0.3 14 12.2 0.1

New York/New Jersey 11.5 3.1 27 7.7 0.8 11 32.2 0.6 2

Eastern Strip 6.1 1.3 22 5.6 1.2 23 22.0 1.3 6

Southeast 2.7 0.3 12 2.3 0.9 41 12.0 0.8

Upper Central Midwest 13 .2 4.3 33 8.4 5.6 67 35.0 3.5 10

H Lower Central

<: Midwest 3.1 0.1 5 1.8 0.8 46 10.0 0.7 I ~ \0 Plains/Mountains 2.2 0.0 0 2.2 1.3 58 8.0 1.1 14

Northwest 1.3 0.0 0 1.1 0.4 31 6.5 <0.1 <1

California/ Nevada 4.3 <0.1 <l 4.2 0.6 14 20.0 0.1 <1

Southwest 4.3 <0.1 2.3 1.2 54 14.0 1.5 10

Unallocated 9.9

* Total U.S. 51.8 9.6 19 38.0 13.2 35 173.9 19.6 11

* Includes Alaska and Hawaii.

Source: SRI International

Mozzarella and Other Soft Italian Pizza-Type Cheeses

U.S. Production

As reported by the USDA, U.S. output of Mozzarella and similar types of cheese reached 866 million pounds in 1983, a 13% increase over pro­duction in earlier years. Mozzarella accounted for 19% of all U.S. natural cheese output in 1983. Overall, its growth has been impressive; production has increased an average of about 8% per year since the mid-1970s. In 1983, some 141 U. S. plants were reportedly engaged in Mozzarella production.

Wisconsin Production

In 1983, Wisconsin produc tion of Mozzarella and similar pizza-type cheeses reportedly totaled 277 million pounds, 32% of total U.S. output, and an increase of 13% over 1982 produc tion. The USDA reports that 45 Wisconsin cheese plants were engaged in Mozzarella production in 1983.

Through the natural cheese manufacturers' survey and our interviews, the SRI project team was able to account for the production of 233 million pounds in the July 1983 to June 1984 period, and for the marketing and distribution of about 191 million pounds. If 1983-1984 state output is basically unchanged from 1983 levels, then the tables and analyses that follow account for the equivalent of 69% of Wisconsin's Mozzarella production.

Only 15 plants engaged in Mozzarella produc tion responded to the initial producer survey. Together, they accounted for about 74 million pounds of output in 1983-1984. Production volumes for these plants ranged from 38,000 pounds up to 18 million pounds. Through interviews, the SRI project team accounted for an additional 159 million pounds of output associated with another 13 plants; production at the largest of these plants was more than 30 million pounds. These figures suggest that the estimated 44 million pounds of production we have not accounted for is spread over 17 more plants, many of which must produce quite small quantities of Mozzarella.

The U.S. Mozzarella Market

Estimates of the U.S. Mozzarella and pizza-type cheese market are shown in Table 38. They were developed in a manner similar to that used for the other major natural and process cheeses, from USDA production and disappearance data, interview information, and earlier market estimates from SRI's data files. Imitation product is excluded. Because the Mozzarella market is dominated by foodservice/food manufacturing use, the pattern of regional consumption should be closely aligned with foodservice sales. In the estimates in Table 38, U.S. regional foodservice expendi­tures have been used to allocate the foodservice/food manufacturing portion of the Mozzarella market. Because no data on the regional food­service/ food manufacturing use of real Mozzarella and imitation produc ts

IV-50

Table 38

U.S. MOZZARELLA AND SOFT ITALIAN CHEESE DISAPPEARANCE.

Distribution Channel

Region

New England

New York/New Jersey

Eastern Strip

Southeast

Upper Central Midwest

Lower Central Midwest

Plains/Mountains

Northwest

California/Nevada

Southwest

*

+ Total U.S.

Percent of Total

Retail (million Ib)

6.0

15.3

15.0

9.5

41.3

6.4

11.6

4.9

25.8

11.9

148.6

17%

Excludes imitation products.

+ Includes Alaska and Hawaii.

Foodservice/ Food

Manufacturing (million Ib)

47.2

72.1

69.4

61.7

153.7

45.0

31.1

28.6

94.6

64.0

674.0

78%

Other (million Ib)

5%

& Estimated U.S. government purchases and plant store sales.

** Based on retail and foodservice/food manufacturing use only.

Source: SRI International

IV-51

Total (million Ib)

53.2

87.4

84.4

71.2

195.0

51.4

33.5

120.4

75.9

(822.6 )

865.9

100i.

Average Per Capita Disappear­ance** (lb)

4.3

3.5

3.0

3.1

3.6

2.4

4.1

4.5

4.6

3.2

(3.5)

are publicly available, we have assumed that the patterns of use for both types of products are the same.

As Table 38 shows, and as indicated earlier, the U. S. Mozzarella market is predominantly a foodservice/food manufacturing one; 78% of use in this category. Retail sales account for about 17%, and government purchases (primarily for the school lunch program) for about 5%. In terms of per capita disappearance, regional differences in poundage result from the combined effects of regional differentials in foodservice expenditures and estimated retail cheese sales. Per capita disappearance estimates for New England and the Northwest are significantly higher than the average, primarily because of the higher than average per capita foodservice expen­diture in these regions. The high per capita consumption estimate for the Plains/Mountains area results primarily from higher than average estimates of per capita retail sales volumes based on the limited retail data at hand. The California market area ranks high in terms of both per capita retail sales and foodservice use, whereas the Lower Central Midwest ranks relatively low on per capita retail and foodservice consumption for this cheese type.

Wisconsin Mozzarella and Soft Italian Cheese Market

Table 39 shows SRI's estimates of Wisconsin Mozzarella and soft Italian cheese distribution by market channel for the 190 million pounds of product that could be tracked to market. As with some other natural cheeses, tracking this produc t category is difficul t because for sub­stantial production volumes, initial sales are to other cheese firms both in and out of state or to in-state distributors that may cut/shred and/or pack the product for other cheese firms. An analysis of our survey data, which cover about 74 million pounds of production, shows sales of 23% of the volume to other cheese companies and 11% to in-state firms categorized as distributors. Because most of our survey and interview data are not specific in terms of intercompany transfers or distributor-cheese company transfers, problems of double counting occur. It is also possible that some reported cheese company or distributor purchases originate with com­panies outside our producer survey and interview universe; if so, we may have underestimated the amount of cheese that we actually accounted for.

In the handling and manipulation of the data, the SRI team opted for the more conservative approach of first balancing shipments to other in-state cheese companies and to distributors with purchases by such firms unless information was available that indicated otherwise. Thus, we chose to risk underestimating the cheese accounted for rather than to risk significant double counting.

As Table 39 indicates, of the Wisconsin product we could account for, about 62 million pounds moves into the retail channel and 127 million pounds is used in foodservice and food manufacturing. Within the retail channel, 44% of Wisconsin Mozzarella is sold as branded products, and 56% as private-label produc ts. The producer survey and interview data give

IV-52

Table 39

WISCONSIN MOZZARELLA AND SOFT ITALIAN CHEESE VOLUME AND SHARE OVERVIEW*

Mozzarella and Soft Italian Cheese Disappearance

U.S. Wisconsin Wisconsin Distribution Channel (million lb) (million lb) Share (%)

Retail 148.6 62.5 42%

Branded 78.4 27.2 35 Pr ivate-label 70.2 35.3 50

Foodservice/food manufacturing 674 . 0 127.2 19

Other +

40.0

Unaccounted for 86.3

Total 865.9 277 .0 32%

* +Excludes imitation products. Estimated U.S. government purchases and factory store sales.

Source: SRI International

some indication of the split between ultimate foodservice and food manu­facturing use. Of the 127 million pounds accounted for in this channel, about 26 million pounds, or 20%, is employed in food manufacturing, pri­marily in the production of pizza and Italian-type dishes for eventual retail sale.

As the data indicate, Wisconsin produc t has a higher than average share of retail product, both branded and private-label, and a relatively low share of the foodservice/food manufacturing segment. An interesting observation is that, even if SRI had been able to account for the equivalent of all 1983 Wisconsin Mozzarella production, which constitutes 32% of U.S. production, rather than the 22% shown, the state's share of both branded and private-label product would still be higher than its share of total product output. In terms of promotional program design, Wisconsin products' higher than average share of retail sales, and particularly of sales of branded products, is of interest because in the last year or two, Mozzarella has been one of the "mainstream" cheeses with growing retail sales.

IV-53

The regional distribution pattern for this cheese type is reported in Table 40. As can be seen, Wisconsin product appears in all regions. The largest volumes and shares are in the Upper Central Midwest, and both volumes and shares decline as distance from this region increases. In private-label products, Wisconsin Mozzarella also has higher than average shares in the Southeast, the Lower Central Midwest, and the Northwest. In foodservice/food manufacturing use, although the data indicate that 60% of the reported volume is delivered within the Upper Central Midwest, it is very likely that much of this product ultimately moves beyond this region because it is shipped by major foodservice chains and distributors to out­lets and customers elsewhere, or it is incorporated in manufactured food products that may then be marketed nationwide.

For branded retail product, the following tabulation identifies the major metropolitan area or state within each region in which Wisconsin­made Mozzarella has the highest volume and market share. To the extent our data permit, these are:

Highes t Volume Highest Share

New England Boston-Providence

New York/New Jersey New York Syracuse

Eastern Strip Philadelphia Philadelphia

Southeast Jacksonville-Orlando Florida

Upper Central Midwest Chicago Milwaukee

Lower Central Midwest New Orleans

Plains/Mountains Denver

Northwest Seattle-Tacoma

California/Nevada Los Angeles-San Diego Los Angeles-San Diego

Southwest Dallas-Ft. Worth Texas

Hard Italian Cheeses

U.S. Production

u.S. production of hard types of Italian cheese reached 208.6 million pounds in 1983, an increase of 2% over 1982 output. The USDA does not publish data on the number of cheese plants involved in this production, but it indicates that 37 plants were engaged in the production of "other Italian types," which include hard Italian varieties as well as Ricotta and some other types of soft Italian cheese. Of the 37 plants reported, 34 are in Wisconsin.

IV-54

Table 40

WISCONSIN MOZZARELLA AND SOFT ITALIAN CHEESE REGIONAL VOLUME AND SHARE ESTIMATES·

Retail Product Foodservice/Food Branded Private Label Manufacturing Use

Wis. Wis. Wis. U.S. Total Wisconsin Share U.S . Total Wisconsin Share· U.S. Total Wisconsin Share·

Region (mil. lb) (mil. lb) --1!L (mil. lb) (mil. lb) ~ (mil. lb) (mil. lb) ...QL

New England 3.3 1.0 31 2.8 0.2 7 47.2 2.4 5

New York/New Jersey 8.0 2.7 34 7.4 1.9 26 72.1 12.3 17

Eastern Strip 7.9 1.9 24 7.0 3.1 44 69.4 6.8 10

Southeast 4.8 0.9 18 4.5 2.7 60 61.7 7.5 12

H Upper Central < Midwest 24.4 15.9 66 17.0 15.5 91 153.7 76.7 50 I

V1 V1 Lower Central

Midwest 3.9 1.0 26 2.5 1.3 52 45.0 1.9 4

Plains/Mountaios 3.6 0.3 9 7.9 2.4 30 31.1 10.4 33

Northwest 2.6 0.4 16 2.3 2.0 87 28.6 2.0 7

California/ Nevada 12.0 1.5 12 14.0 4.2 30 94.6 4.7 5

Southwest 7.) 1.6 21 4.4 2.1 48 64.0 2.5 4

Total U.S. 78.4 27.2 35 70.2 35.3 50 674.0 127.2 20

• SRI's data on total Wisconsin shipments accounted for 190.7 million pound compared with reported 1983 production of 277 million pounds.

Source: SRI International

Wisconsin Production

Wisconsin production of Italian cheese other than Mozzarella was 111.7 million pounds in 1983, a 3% increase over 1982 production. In the SRI producer survey and interview phases of the project work, we collected information on the production and sales of about 129.3 million pounds of what SRI categorized as hard Italian cheese, equal to 58% of 1983 U. S. production. This number exceeds the 1983 production level for two likely reasons: (1) products and/or volumes produced by state cheese plants may have changed over the project time period; (2) we have incorporated string cheese in the hard Italian category, but the state may report it in the Mozzarella category instead. Although string cheese is not normally as hard in texture as Romano, Parmesan, and Provolone, we have included it in this category because it is not predominantly a pizza cheese, as Mozza­rella is, and it is more likely to be distributed as Provolone and similar cheeses are.

The U.S. Hard Italian Cheese Market

SRI's estimates of the distribution by channel and region of hard Italian cheeses, which include natural cheese imports as well, are shown in Table 41. The majority of sales are for foodservice/food manufacturing use; that channel accounts for 59% of total disappearance. The retail channel accounts for 39%, and the balance is sold through cheese plant factory stores and mail order or used in process products.

In per capita terms, the major consuming regions are New England, New York/New Jersey, the Pacific Northwest, and California. The Upper Central Midwest and the Plains/Mountains region parallel the national average, and the South--including the Southwest, the Lower Central Midwest, the South­east . and the Eastern Strip, which extends into North Carolina--are below the national average.

The Wisconsin Hard Italian Cheese Market

This segment of the Wisconsin cheese manufacturing industry was less responsive than any other to the manufacturer's survey and interview process. Therefore, significant volumes of shipments and sales could not be accounted for by channel (12% of production), and an additional 14% of the volume could not be assigned to end markets within certain segments.

As Table 42 shows, of the Wisconsin cheese that we could allocate to market channels, about one-half is sold retail and one-half is used in foodservice/food manufacturing, with a small volume of plant store sales, mail order sales, and use in processing. The SRI project team believes that of the almost 16 million pounds that we could not allocate by chan­nel, about two-thirds is probably destined for foodservice/food manufac­turing use. In the retail segment, branded Wisconsin product is estimated to account for 68% of branded retail product, both whole cheese and grated, and 56% of private-label product. We were able to track to food­service/food manufacturing use of quantities equal to 42% of U.S. dis­appearance in that channel.

IV-56

Table 41

U. S. HARD ITALIAN CHEESE DISAPPEARANCE

Distribution Channel Foodservice/ Average

Food *

Per Capita Retail Manufacturing Other Total Disappear-

ReSion (million lb) (million lb) (million lb) (million lb) ance (lb)

New England 4.3 9.2 13.5 1.1

New York/New Jersey 11.9 14.7 26.6 1.1

Eastern Strip 9.7 13.7 23.4 0.8

Southeast 5.3 11.7 17.0 0.7

Upper Central Midwest 18.0 30.0 48.0 0.9

Lower Central Midwest 5.1 8.8 l3.9 0.6

Plains/Mountains 3.5 6.1 9.6 0.9

Northwest 3.9 5.0 8.9 1.2

California/Nevada 17.7 18.5 36.2 1.4

Southwest 6.9 12 .5 19.4 0.8

(218.2 ) (0.9)

Total U.S.+ 86.6 l31.6 4.0 222.2

Percent of Total 39% 59% 2% 100%

* For processing, cheese factory sales and mail order.

+Includes Alaska and Hawaii.

Source: SRI International

IV-57

Table 42

WISCONSIN HARD ITALIAN CHEESE VOLUME AND SHARE OVERVIEW

Distribution Channel

Retail

Branded Private-label

Foodservice/food manufacturing

* Other

Unallocated

Total

*

Hard Italian Disappearance

U. S. (million lb)

86.6

131.6

4.0

222.2

59.2 27.4

Wisconsin (million lb)

55.7

55.9

2.0

15.7

129.3

40.1 15.3

Wisconsin Share (%)

64%

42

50

58%

68 56

Processing, cheese factory store, and mail order sales.

Source: SRI International

Table 43 reports Wisconsin-made hard Italian cheese distribution both by market and by region. For branded product, Wisconsin holds signifi­cantly greater than average shares in the Upper Central Midwest and the Southeast. It has below average shares west of the Mississippi and in the Lower Central Midwest. Within the branded segment, the cities or states within each region in which Wisconsin cheese accounts for the largest volumes and largest market shares are as follows.

Highest Volume Highest Share

New England Boston-Providence

New York/New Jersey New York New York

Eastern Strip Baltimore-Washington Baltimore-Washington

Southeast Miami

Upper Central Midwest Chicago Chicago and Grand Rapids

IV-58

Lower Central Midwest New Orleans

Plains/Mountains Denver

Northwest Seattle-Tacoma

California/Nevada Los Angeles-San Diego Los Angeles-San Diego

Southwest Houston Texas

For private-label product, Wisconsin holds higher than average shares in all areas except New England, California, the Southwest, and the Plains/Mountains region. For foodservice/food manufacturing, it is diffi­cult to discern a pattern because (1) such a substantial portion is un­allocated, and (2) some of the volume here assigned to the Upper Midwest region is most likely shipped later to other areas by major foodservice firms and foodservice distributors.

All Other Cheeses

U.S. Production

U.S. production of what we here term "all other" cheeses--all cheeses except those major types reviewed individually earlier in this section-­was about 131 million pounds in 1983, 4% less than 1982 production. This ca tegory includes a wide range of cheese types--Limburger, Blue, Brie, Camembert, Edam, Gouda, Bond Ost, Farmers, the soft spreadable hors d' ouvres type cheeses such as Rondele, goat cheeses, and many specially flavored cheese mixes. The USDA reports production individually only for Blue and Limburger, and groups the others in the "all other" category. The 1982-1983 USDA data show a small increase in produc tion of Blue (+1.6%), a sizable percentage decline in production of Limburger (-21%), and a moderate percentage decline in production of all others (-6%). These figures seem to contradict ' the reported growth in the market for specialty cheeses, the category in which most of these products fall. This apparent inconsis tency partly reflects growth in imports, particu­larly in the nonquota types of products, and aggressive pricing and promotion of them. Specialty cheese imports rose from 171 million pounds in 1982 to 182 million pounds in 1983, an increase of 6%. The greatest increases (7.5 million pounds, or 19%), as would be expected, were in the nonquota types, primarily the soft spread cheeses and Pecorino. A second reason for the inconsistency is that 1984 U.S. production data, when they are available, should show an increase in U.S. specialty cheese output, given the expansion in the number of small specialty product plants over the last year or two.

According to the USDA, 9 U.S. production of Blue cheese in 1983, involved in other specialty types, 22

cheese plants were engaged in the 3 in Wisconsin, and 86 plants were of them in Wisconsin.

IV-59

Table 43

WISCONSIN HARD ITALiAN CHEESE REGIONAL VOLUME AND SHARE ESTIMATES

Retail Product Foodservice/Food Branded Private Label ManufacturinE Use

Wis. Wis. Wis. U.S. Total Wisconsin Share U.S. Total Wisconsin Share U.S. Total Wisconsin Share

Region (mil. lb) (mil. lb) ~ (mil. Ib) (mil. Ib) ~ (mil. lb) (mil. Ib) ..J.!L New England 2.9 2.0 67 1.4 0.4 28 9.2 1.6 18

New York/New Jersey 8.2 5.6 68 3.7 2.3 62 14.7 6.3 43

Eastern Strip 6.7 4.3 64 3.0 1.8 61 13.7 3.6 26

Southeast 4.1 4.0 98 1.2 1.0 83 11.7 3.8 32

Upper Central Midwest 12.7 12.4 98 5.3 5.2 98 30.0 19.8 66

H Lower Central <: Midwest 3.6 1.5 42 I

1.5 0.8 53 8.8 0.4 5 0\ 0 Plains/Mountains 2.2 1.3 60 1.3 0.5 38 6.1 0.4 7

Northwest 2.6 1.3 51 1.3 0.8 65 5.0 0.6 12

California/ Nevada 11.1 4.7 43 6.6 1.2 18 18.5 1.0 5

Southwest 4.9 3.0 61 1.9 0.6 31 12.5 0.5 4

* Unallocated 0.6 18.0

Total U.S. 59.2 40.1 68 27.4 15.3 56 131.6 55.9 42

* About 15.7 million pounds of additional Wisconsin product are not included here because they cannot be allocated by channel.

Source: SRI International

Wisconsin Production

Wisconsin output of these "all other" types totaled 83 million pounds in 1983, 63% of U.S. production. Wisconsin plants accounted for 100% of U.S. Limburger output, 54% of Blue, and 66% of the remaining cheeses combined. For each of these cheese categories, production declined in 1983, by amounts ranging from 0.3% to 4%.

The U.S. Market

Because of the wide variety of cheese products in this category and their small volumes, we have not attempted to develop a U.S. market profile by channel of distribution and region. The available data do not provide a sufficient basis for a profile. Many of these products are delivered direct to retail stores, and therefore do not appear in any of the general warehouse withdrawal market measures. Information on food­service use of these types is basically nonexistent. Thus, this sub­section simply reports the Wisconsin producer survey and interview data on an aggregate basis.

The Wisconsin Product Flow

In the producer survey and interview phases of the work, we gathered information on 21 million pounds of these "all other" cheese types, an amount equal to 25% of 1983 Wisconsin output. The flow of these products on a re~onal basis to various types of recipient firms is summarized in Table 44 •

As suggested by the estimates of shipments to distributors, the grocery channel, and the foodservice/food manufacturing segment, some Wisconsin output is destined for virtually every region of the United States. The large volumes in the foodservice/food manufacturing channel consist primarily of cheeses used in food product manufacturing, such as Blue. The "unallocated" volume in the distributor channel is branded product distributed nationwide, primarily to grocery stores. In fact, most of the distributor volume is likely to be branded product destined for the grocery channel. Also, most of the 4 million pounds assigned to other cheese manufacturers is likely to be sold ultimately as branded retail product.

* Note that the units in this table are in thousands of pounds, not millions as with most other tables.

IV-61

Table 44

WISCONSIN "ALL OTHER" NATURAL CHEESE PRODUCT FIRST STAGE DISTRIBUTION

Grocery Other Cheese Regional Wholesalers/ Foodservice/Food

Manufacturers* Di st ri butors Chains Manufacturing Total Region (thousands Ib) (thoussnds lb) (thousands lb) (thousands Ib) (thousands Ib)

New England 0 96 0 0 96

New York/New Jersey 0 ISS 15 0 203

Eastern Strip 0 2 0 0 2

Southeast 0 281 0 0 281

Upper Central 3,956+ Midwest 631 112 2,412 7, III

Lower Central Midwest 0 0 0 0 0

H < Plains/Mountains 0 241 0 0 241 I

'" N Northwest 0 6 S 15

California/ Nevada 0 197 9 0 206

Southwest 0 160 IS 0 178

Unallocated 0 2,599 594 9,500 12,693

Total U.S. 3,956 4,401 756 11,913 21,026

• Includes assemblers/packers that sell to major cheese firms, if they were identif iable.

+ Includes some production of these firms themselves.

Source: SRI International

V THE DYNAMICS OF CHEESE DISTRIBUTION AND VOLUME FLOW PATTERNS

As part of the extensive interview process with in-state and out-of-state cheese producers/marketers, distributors, brokers, assem­blers, and foodservice and grocery chain cheese buyers, SRI raised the issue of whether the existing pattern of volume flow and cheese dis­tribution methods might change in the foreseeable future. A preliminary list of variables likely to influence the sales volumes and geographic distribution of Wisconsin cheese was developed by the SRI project team and served as the initial focus for discussion with industry participants. The list was modified or expanded during the interview process to include variables mentioned in the comments of members of the cheese industry.

Eight key variables were ultimately identified in this manner: economic growth, population distribution, consumer taste, competitive production/promotion by other states, image/quality, transportation, technology, and government policy. These variables together wi th the applicable rationale for and a qualitative assessment of their likely net impact on the sales volume and geographic distribution of Wisconsin cheese, are summarized in Table 45. A more detailed discussion of each variable is provided in the following subsection. The impact evaluation for two of the key variables, competitive production/ promotion by other states and technology, was formulated for several sets of alternative assumptions.

Economic Growth

Industry consensus about economic factors is optimistic through 1986. Similar trends are projected for the next 2- to 5-year period although some economists predict pockets of economic dislocation to persist in certain geographic areas, such as the Midwest, because of industrial re­structuring and the resulting decline in employment in smokestack indus­tries (e.g., auto, steel) and farming. Therefore, economic growth in the Midwest will lag behind national projections. This prediction does not portend an overall net change in the current sales volume of Wisconsin cheese, although the geographic distribution of cheese sales may shift somewhat from markets in the Midwest toward those in other areas with stronger economies. Promotional programs targeted to growing markets would assist the Wisconsin cheese industry in maintaining its overall sales volume.

Population Distribution

The largest net gains in population are expected to be in the South and the Southwest as a result of the above average economic growth, greater employment opportunities, larger supplies of housing, and warmer climates in those regions. This growth is likely to be accompanied by

V-l

Table 45

RELATIONSHIP BETWEEN KEY VARIABLES AND DISTRIBUTION PATTERNS OF WISCONSIN CHEESE

Net Effect On

Key Variable

Economic Growth

Consumer tastes

Population distribution

Competitive production/ promotion by other states

Image/ quality

Transportation

Technology

Government policy

Likely Trends

Favorable outlook; Midwest lags behind national projections

Specialty cheeses; demand for differentiated, quality products

Shift toward South and Southwest

Promotional programs for local production increasing

Excellent Wisconsin image; differentiation declining because overall high quality of all cheese

Major impact on margins; trend toward more efficienct distribution systems

Increased production efficiency (ultrafiltra­tion); potential for better margins

Differential regional impact on milk supply; affects milk/cheese price relationship.

V-2

Sales Volume

o

+

+

o

+

?

Geographic Distribution

+

+

o

+

?

decreases in population in other areas of the country, including the Midwest. The net resul t would be a decrease in sales volumes in the Upper/Central Midwest region, the largest and strongest market for Wisconsin cheese, that may not be fully offset by sales expansions else­where because of the transportation cost disadvantage that Wisconsin cheese faces in markets further removed from the point of production. Promotional programs targeted to southern and southwestern markets could prove beneficial in offsetting the potential decrease in sales volume for the Midwes t •

Consumer Taste

A trend in consumer preferences toward specialty cheeses is well-documented, although the boundaries of this product category remain somewhat ill-defined. Overall consumer demand for differentiated, good tasting, and high-quality specialty cheeses seems to be increasing nationwide because of consumer affluence and a desire for unique taste experiences. This trend should increase the sales volumes and broaden the geographic distribution of high-quality Wisconsin cheese. These effects could be reinforced by a strategy of selective advertising and promotion programs.

Competitive Production/Promotion by Other States

Planned expansions in cheese production in other states (e.g., pro­cessed cheese in Arizona and natural cheese in Southern California) are expected to restrict the geographic distribution of Wisconsin cheese, particularly in the West and the Southwest. In these markets, good­quality local cheese, competitively priced because of transportation cost advantages, will graduallly gain market share at the expense of cheese imported from other states, of which a large portion is now Wisconsin cheese.

Promotion programs by other states, such as California's Real California Cheese Program are expected to have mixed effects on the sales volume of Wisconsin cheese. On one hand, the advertising and promotion of cheese is likely to increase sales for the entire product category, inclu­ding Wisconsin cheese. However, in the absence of a promotional strategy for Wisconsin cheese per se, the long-term effect of promotion of domestic cheese in other states would be a loss of market share for Wisconsin cheese.

Image/Quality

Various industry participants readily agree that Wisconsin cheese has an excellent image and a reputation for quality in the marketplace. None­theless, they also point out that these attributes alone no longer suffice to differentiate Wisconsin's product because of the general improvement in the quality of cheese produced in other states. With the help of academic researchers who have turned the art of cheese making into a science, other

V-3

states have been able to create or expand domestic cheese production and have upgraded their product quality standards to match those of Wisconsin cheese. This gradual reduction in quality/image differentiation in an increasingly competitive environment eventually translates into decreased sales volumes and less extensive geographic distribution for Wisconsin cheese. Specific advertising and promotional programs may slow the trend, but they are not likely to reverse it.

Transportation

Transportation costs directly affect margins for cheese marketers and undermine the competitive position of Wisconsin cheese producers in dis­tant markets with growing access to domestic cheese production (e.g., California, the Southwest). To improve margins, marketers concentrate on improving the efficiency of the distribution system. Examples of this trend are the increasing use of common carriers, full truckload shipments, and backhauling of off-grade, lower cost cheese and cheese scraps for processing.

Notwithstanding the emphasis on a more efficient distribution system, it is likely that transportation costs will continue to somewhat restrict the geographic distribution of Wisconsin cheese. Conversely, expected increases in the market share of Wisconsin cheese, particularly in areas where its competitive position is enhanced by proximity to the point of production, are expected to have only minimal impacts on sales volume. The long-term trend is for marketers to minimize the cost of cheese procurement by delivering products to each geographic market from the closest available source of production. A similar rationalization in the procurement/distribution patterns of major grocery and foodservice buyers is likely. These buyers are increasingly turning to sources close to major corporate distribution centers, providing, of course, that local suppliers can meet their quality, price, consistency, and service standards.

Technology

Future cheese markets are more likely to be affected by improved efficiency in cheese production (e.g., higher yields) achieved through adoption of advanced technology (e.g., ultrafiltration) than by any technological breakthroughs in cheese making. The use of ultrafiltered milk reportedly can boost cheese yields by 10% or more, and thus can significantly reduce the unit cost of production. The cost differential between cheese produced by this method and conventional cheese is large enough to offset any competitive disadvantage resulting from transporta­tion costs. Therefore, the early adoption of advanced technology by Wisconsin cheese producers is likely to have a positive impact on both the sales volume and the geographic distribution of Wisconsin cheese. The opposite effect is also possible, if out-of-state producers become early adopters of advanced technology and Wisconsin producers lag too far behind.

V-4

It is still not clear whether cheeses made by ultrafiltration meet current standards of identity, or will require changes in them. It is also unclear whether these cheeses will be acceptable in quality/taste for markets in which such factors are important.

Government Policy

All industry participants agree that the current farm support policies will be significantly revised at some point, and that such changes will most likely have differential regional effects on milk supply, and therefore on existing milk and cheese prices. However, because of the uncertain timing of government action and the unpredictable magnitude and direction of its effects, this key variable defies any meaningful assessment at this time. However, because of the potential impact of regulatory changes on the dairy and cheese industry as a whole, it is imperative to consider this possibility in strategic planning and to reevaluate the prospects periodically to determine effects of intervening changes in farm support policy.

V-5

VI INDUSTRY PERSPECTIVE ON PROMOTION AND ADVERTISING PROGRAMS FOR WISCONSIN CHEESE

During interviews with cheese industry participants in Wisconsin and elsewhere, the SRI project team solicited opinions about the potential value of promotion and advertising programs for Wisconsin cheese. The purpose of this task was to prepare a composite profile of the industry's need for and level of interest in promotion programs that the WMMB could undertake in support of Wisconsin cheese, and to identify issues perceived as obstacles to effective implementation of the programs nationwide. In its integrated form, the information is intended to provide practical guidelines for the Board to use in designing promotional efforts and in targeting expenditures in a manner that is supportive of and consistent with the interests of the Wisconsin cheese industry as a whole.

The opinions expressed and the reasons for them are summarized in this section by category of respondent (cheese manufacturers/marketers, retail outlets, and foodservice/ food manufacturing users). Note that we have made no attempt to rank opinions on the basis of their source, the order in which they surfaced in the interviews, or the frequency wi th which they were mentioned.

Cheese Manufacturers/Marketers

The use of a Wisconsin label or logo for promotional purposes is frequently considered impractical by large cheese manufacturers/marketers because of the restrictions that it would impose on the manufacturer's cheese procurement practices and the additional cost of carrying separate inventories for cheese from particular sources. Typically, these partici­pants market branded products and must procure large volumes of cheese that meet the quality standards for the brand. They have only minimal concern about its origin. Procurement limited to Wisconsin cheese and the maintenance of a separate inventory to preserve the product identity for labeling would further complicate an already complex systems of logistics for marketing large volumes of cheese.

Only a few customers demand a product label that identifies the origin of the cheese as Wisconsin. Although Wisconsin cheese has an excellent quality image, consumers appear to resist paying premium prices for cheese solely because it comes from Wisconsin. Therefore, neither the manufacturers nor the retailers are able to pass along the additional handling and carrying costs associated with Wisconsin cheese labels.

Given the current market structure and dynamics, it is difficult to formulate acceptable program strategies for promoting Wisconsin cheese selectively. One approach suggested by a few respondents is for the Board

VI-1

to provide matching paigns for branded cheese.

funds for individual manufacturers' promotion cam­products in major markets for Wisconsin-produced

An alternative strategy, similar to the one just described, suggested the promotion of branded cheese products in metropolitan markets where the presence of Wisconsin-produced cheese is below average or low. This pro­motion strategy not only would avoid direct competition for share among Wisconsin brands in specific markets, but also could produce a larger return per dollar spent on promoting Wisconsin cheese in those areas.

For the most part, the cheese manufacturing sector favors generic promotion and advertising of cheese, although manufacturers cannot gauge with precision the direct effects of such programs on their branded business. However, they would like to see a shift away from the tradi­tional message of "eat more cheese/it is good for you" toward promotional material for innovative and specific new uses of cheese to expand overall consumption.

Manufacturers/marketers in some product segments (e.g., cold pack cheese and cheese spreads) do strongly favor a Wisconsin identity program and would like to see programs/ advertising materials incorporating their particular types of products, because they feel that these products have received little or no attention to date.

Medium-sized and small cheese producers typically market under their own brand names only limited quantitites of cheese from in-state sources other than their own production; therefore, they do not have the inventory problems of the large marketers. These Wisconsin cheese producers are very much in favor of using the Real Seal and of having the Board estab­lish promotional programs for a Wisconsin logo or some other form of state identity. They feel that the benefit of expanded product sales from this form of advertising would accrue to their brands.

Because out-of-state cheese production is increasing and the quality of cheese from many sources is now equal to that of Wisconsin cheese, there is a feeling that the dairy industry in Wisconsin has been laggard in supporting dairy and cheese research at academic institutions through­out the state. By failing to attract and retain new scientific talent in the state, Wisconsin has lost a good deal of the leadership position in dairy science and technology to other states where academic programs re­ceive strong support from the local dairy industry. Some producers feel that the Board should include support programs for academic research on dairy food technology in Wisconsin as part of an overall promotion strategy for the Wisconsin cheese industry.

Retail Trade

Retailers appear to be favorably disposed toward promotion programs for Wisconsin cheese, and they are prepared to cooperate. Distribution of price reduction coupons in conjunction wi th local media advertising was suggested as the most promising means of promotion.

VI-2

Retailers agree with cheese manufacturers/ marketers that cheese carrying a Wisconsin label fails to command a premium price from con­sumers. The effect of brand advertising, price competition by private­label items, and the availability of consistently good-quality cheese from many sources are all factors that blunt the product differentiation advantage of Wisconsin cheese based on its origin.

Retailers would prefer promotion programs for cheese that include literature and recipes suggesting innovative uses of cheese. They believe that generic advertising produces only short-term effects and often fails to expand consumption.

Foodservice/Food Manufacturing Trade

Members of this industry sector generally see little value in adver­tising programs that selectively promote the origin of cheese products. These are typically large-volume buyers of cheese, and they make pur­chasing decisions based on price, consistent quality, availability, and the supplier's performance in delivery and service. Product origin/ identity is not an issue for product use, and promotion of cheese ingre­dients to consumers would have a minimal effect on the business.

Suppliers/assemblers of cheese for the foodservice/food manufacturing trade would benefit from a reliable, year-around supply of cheese from producers. Because of fluctuations in milk supply--which is low in the spring and plentiful in the fall--the commitment of cheese producers in Wisconsin (and elsewhere) to honoring supply contracts or other long-term agreements may also sometimes fluctuate with the season.

Industry-Wide Conclusions

The wide range of opinions expressed by various industry participants reflects the structural diversity within the cheese industry in Wisconsin. Among the industry representatives that we interviewed, we were not able to identify a clear commonality of interest in promotion and advertising programs for Wisconsin cheese that would satisfy all types of cheese industry participants. Skepticism is apparent throughout the industry about the feasibility of designing one promotional program with universal appeal and implementing it effectively without the support of the entire industry membership.

On the other hand, the industry is overwhelmingly in favor of the selective promotion of Wisconsin cheese by means of multiple marketing programs specifically targeted to the requirements and business interests of the individual cheese industry sectors. Participants believe that this approach would allow the Wisconsin cheese industry as a whole to derive maximum benefit from the planned promotion expenditures by the WMMB. Although few specific ideas about how to structure an effective promotion package for Wisconsin cheese, were offered during the interviews, the opinions and points of view reported here may prove helpful in assisting the WMMB in its formidable efforts on behalf of the Wisconsin dairy and cheese industries.

VI-3

Appendix A

WISCONSIN PLANT SURVEY QUESTIONNAIRE

Executl". Office. JAMES TILLISON Executive Director

(608) 255·2027

WISCONSIN CHEESE MAKERS ASSOCIATION P.O. BOX 2133 • 222 W. WASHINGTON AVE., SUITE 502 • MADISON, WISCONSIN 53701

September 10, 1984

Dear Cheesemaker,

The WMMB needs your helpl

And, in helping them, you'll be helping yourself.

Enclosed is a short questionnaire that you should fill out and return immediately in the envelope provided. Basically, the Wisconsin Milk Marketing Board is trying to track where the cheese manufactured in Wisconsin is going. Once that is determined, the WMMB will be designing a long range plan for promoting Wisconsin Cheese in key markets throughout the nation.

The questionnaire asks for specific information about how much of what type(s) of cheese you produce and who you sell to. We have been assured that all specific plant information will be considered strictly confidential. No one involved in the industry will even see your completed questionnaire, since it will be mailed by you directly to SRI, the independent research firm doing the study. Only summaries and totals that are non-proprietary in nature will be made available as part of the research report.

Complete this simple questionnaire and return it immediately and you'll get two things. First, all participating plants will receive a summary of the report findings.

More importantly, the sooner you complete the report and send it in, the sooner the Wisconsin Milk Marketing Board will be able to design and launch a Wisconsin specific cheese promotion program that will increase your market share and your sales.

Help the WMMB help you. Complete the enclosed report and mail in the enclosed r~turn envelope as soon as possible. If you have any questions, please feel free to call me.

Sincerely, ~NSIN~AKERS

4.':::~. :;:~ Executive Director

ASSOCIATION

A-3

Rod Niisestuen Executive Secretary

30 West Mifflin Street Madison, Wisconsin 53703

Dear Cooperative Dairy Plant Manager:

Telephone: (608) 258·4400

The Wisconsin Milk Marketing Boa~d (WMMB) hRspngaged SRI research firm to Eurvey all Wisconsin cheese plants to determine the volume produced and whl2re it is marketed. The infol"mation collected from vou will be confidential. However, a~ the completion of the project~ cooperating plnntG ~ill be provided a summary of.~he·findings.

You and your member dair-I f;rL"lUets vli11 benefit from this project as ~TMMB '.'Jill learn morE:! about vltsccnsin cheesE: markets Rncl will be in a strong position to develop and institute the right advE.rtisi;.g programs for cheer-e. A major benefit lNill be to shore up you~ cheese markets.

The Dairy Divi~ion Comm1.ttee of WFC reviewed the concept and goals of th~ W~MB study and the committee feels that the appr.oach is sound. Therefore, \Ie "..-auld urge thflt you comply by taking the time to complete and return the survey form to ~RI. The: divid2nds of the program Yd.ll be· measured by tile increased sales of Wisconsin cheese. You, can and must be a part of this new and exciting project by Hl-i!"'iB to.,13rket and sell che(-!se. so act nov ... Remember your h.g\lreS will held j.n the strj.ctcst confidence.

Thank you.

CLF:ra.b

A-4

September 13, 1984

TO THE MEMBERS OF THE WISCONSIN CHEESE INDUSTRY

SRI International has been awarded the contract by the Wisconsin Milk Marketing Board to conduct a study to identify:

o The quantitative flow of Wisconsin-produced cheese from point of manufacture to point of final use.

o The existing U.S. distribution system for cheese together with those factors of change that could affect shipment volumes and sales of Wisconsin cheese in the future.

Collection and analysis of the information resulting from this effort will provide the Wisconsin Milk Marketing Board with a much needed, cur­rent data base upon which to plan and implement cost-effective promotions for Wisconsin-made cheese. The Board will also be in a position to assist Wisconsin cheese industry members with information useful for targeting their own sales and promotional programs.

SRI International (formerly known as Stanford Research Institute) is an independent, non-profit research and consulting organization with head­quarters in Menlo Park, California, and with regional offices across the United States and overseas. We conduct client private projects for both business and government organizations worldwide. The SRI participants in this study are professional members of SRI's Food and Agriculture Indus­tries Program with intimate knowledge of and prior experience in the food industry. We are very pleased to have been selected for this assignment, and welcome the opportunity for a professional association with the Wisconsin dairy and cheese manufacturing industries.

In order to follow the flow of Wisconsin-made cheese to domestic markets, we have selected a "top-down·' approach that requires the col­lection of detailed output and shipment data from Wisconsin cheese manu­facturers by means of questionnaires and interviews. One major role for SRI will be, therefore, to preserve the absolute confidentiality of the information received as well as the anonymity of · the individual respon­dents. We plan to do so by collecting, analyzing, and consolidating all responses prior to reporting the consolidated findings to the Wisconsin Milk Marketing Board. However, the client remains the sole owner of the data reported and will be responsible for its dissemination and distribu­tion to industry members.

SRI International 333 Ravenswood Ave. • Menlo Park, CA 94025 • 14151326-6200 • TWX: 910-373-2046. Telex: 334486 • Facsimile: 14151326-5512

A-5

TO THE MEMBERS OF THE WISCONSIN CHEESE INDUSTRY Page 2

Enclosed with this letter you will find a questionnaire that we have prepared and are asking you to complete. Again, the information provided to SRI will be treated as highly confidential and will never be released in its raw form. When the questionnaire is returned to us, your company will be checked off as having responded, and all identifying information on the questionnaire will be removed.

We ask your cooperation in this effort. If you have any questions regarding the information requested, please call SRI at (415) 859-6014 or contact Mr. Les Lamb, Wisconsin Milk Marketing Board, at (608) 271-1021.

May we ask that you return the questionnaire in the pre-addressed envelope to my attention no later than October 1, 1984. Thank you.

Sincerely,

tt~/W?tU~-i Nick Bellanca 7

Senior Industry Consultant

SRI staff members:

Nick Bellanca, Senior Industry Consultant Nancy Borgeson, Senior Economist Theresa Stetson, Consultant William Ferry, Director, Food and

Agricultural Industries Program

A-6

WISCONSIN CHEESE MANUFACTURING PLANT SURVEY

INSTRUCTIONS

This survey covers all types of natural cheese made in Wisconsin.

The attached questionnaire asks for certain production and shipment data

on natural cheese produced by plants located in Wisconsin during the

period July 1, 1983 through June 30, 1984. If you have more than one

natural cheese plant, you may elect to report on each plant separately or

on an aggregate basis. Do not include production/shipment data for

natural cheese plants located out-of-state or for plants dedicated solely

to the production of pasteurized process cheese. Use the back of the page

should you run short of space for your answers.

Please complete the questionnaire and return it in the stamped,

pre-addressed envelope provided no later than October 1. Also, retain a

copy of the completed form should it become necessary for us to contact

you by phone for clarification.

If you have any questions regarding this survey , please feel free to

contact us. All of the information provided in the questionnaire will be

held in the strictest confidence and will ' be used only in a generic

fashion for reporting.

SRI International 333 Ravenswood Ave . • Menlo Park, CA 94025 • (415132&-6200 • TWX: 910-373-2046. Telex: 334486 • Facsimile: (415132&-5512

A-7

BUSINESS PROFILE

PLEASE PRINT OR TYPE

COMPANY NAME:

ADDRESS:

RES PONDENT NAME & TITLE:

TELEPHONE NO.: ~( __ ~) ____________________________________________ __

o List below the address(es) and location(s) of the Wisconsin natural cheese plant(s) for which you are reporting:

o Is pasteurized process cheese also produced at any of the above locations?

Yes No ----

o Do you have any Wisconsin plants that make only pasteurized process cheese products, i.e., make no natural cheeses? Yes , No If yes, how · many:

A-8

WISCONSIN NATURAL CHEESE PLANT OPERATIONS

o Total plant( s) production of natural cheese for the period of 7/1/83 thru 6/30/84: lbs.

o Please list below the poundage produced by cheese type and style for the period 7/1/83 thru 6/30/84.

Natural Cheese Type Style

Example: cheddar 5000 barrel, 40# block

Total Production

Pounds Produced

3,500,000

o Do you purchase additional natural cheese for the plant(s): Yes No ---

o If yes, please list the poundage purchased by origin (in-state or out-of­state) and by source (government warehouse, other cheese firm, etc.) for the period 7/1/83 - 6/30/84:

Poundage Purchased Origin Source

Example: 1,000,000 out-of-state Government warehouse

Total:

A-9

o Do you shred, grate, slice, cold pack or cut and package in retail sizes any natural cheese? Yes ____ , No Approximately, how many pounds?

lbs. --------o If you ship natural cheese packaged for retail sale, please indicate what

label(s) is used and supply brand name(s).

Yes No Brand Name(s)

Own label

Distributor label

Store label

Other (specify)

o Do you sell natural cheese directly to consumers through retail outlets at the plant(s)? Yes ___ , No Approximately, how many pounds do you sell of:

Own production lbs.

Purchased cheese lbs.

o Do you sell natural cheese by mail? Ye s ___ , No Approximately, how many pounds? lbs.

A-IO

SALES AND SHIPMENT OF WISCONSIN NATURAL CHEESE

o Do you sell natural cheese to other producers of natural and/or pasteurized process cheese (e.g.. Borden. Schreiber. Sargento, etc.)? Yes • No If the answer is yes, please complete this page. If the answer is no, gato page 6.

o Please report the total poundage of each cheese type sold and shipped to other cheese plants and indicate the percent delivered by State during the period 7/1/83-6/30/84 (as shown in the example):

Point of Delivery

Example: Pasteurized process cheese plant

Pasteurized process

cheese plant

Other natural

cheese plant

Combined natural/

process cheese plant

Aging warehouse (for

shipment elsewhere

by the customer)

Cheese Type

1) Cheddar 2) Swiss

TOTAL SOLD AND SHIPPED

Total Pounds Sold & Shipped

1,000,000 500,000

Percent Delivered by State

WI 50%, ID 10%, MO 40% WI 757., MO 25%

o Please list the names of the customers that together account for 80% or more of the above shipments. For each customer, indicate the percent of shipment delivered by State:

Customers

Example: Kraft Sargento

Percent Delivered by State

WI 60%, ID 57., MO 35% WI 100%

o Approximate total volume accounted for (7/1/83 thru 6/30/84) by the customers listed above: lbs.

A-ll

o Do you sell cheese to distributors, grocery wholesalers or chains, food manufac-turers, foodservice finns/restaurants, the government, etc.? Yes , No If the answer is yes, please complete this page. If the answer is no:-skip this page.

o Please report the total poundage of cheese by type sold and shipped to each cate­gory of recipient and indicate the percent delivered by State during the period 7/1/83-6/30/84 (as shown in the example):

Recipient Category Example: Distributor

Distributor (e.g., Sysco, Marketing Assn. of America)

Grocery wholesaler/ chain (e.g., Kohl's, Kroeger)

Food manufacturer (e.g., Pillsbury, General Foods)

Foodservice firm (e.g., McDonald's)

Government warehouse

Other (specify)

Cheese Type 1) Swiss 2) Jack

TOTAL SOLD AND SHIPPED

Total Pounds Sold & Shipped

1,000,000 500,000

Percent Delivered by State

WI 30%, NY 40%, IL 30% WI 15%, NY 45%, CA 40%

o Please list the names of your customers that together account for 80% or more of the above shipments. For each customer, indicate the percent of shipment de­livered by State:

o

Customers Example: Sysco

IGA

Percent Delivered by State WI 30%, NY 40%, CA 30% WI 100%

Approximate total volume accounted for by the customers listed above:

o About how many customers do you have in the above categories combined? A-12

____ -lbs.

Appendix B

SAMPLE OF WISCONSIN PLANT SURVEY

COMPUTER PRINTOUT

WISCONSIN NATURAL CHEESE PLANT OPERATIONS SUNttARY -

NO. OF NATURAL CHEESE PLANTS REPORT INS Also Producing Process Cheese Other Processing Plants O.ned

REPO~TED PRODUCTION BY CHEESE TYPE: Cheddar lbs. Stirred Curd lbs Washed Curd lhs. Colby lbs. Jack lbs. Muenster I bs Brick lbs. Swiss Ibs. Moz.arella lbs. Semisoft pizza cheese lbs

Tctal lbs. Hard Italian Cheese lbs.

Provolone & String Ibs. Paraesan, ROllano, etc. lbs

Total I bs. All Other Cheeses lbs.

Blue, gorgonzola, etc. lbs. Brie & Calembert lbs Other Types lbs.

Total Ibs.

TOTAL REPORTED PRODUCTION Ibs.

Cheese purch2sed in-state lbs. Cheese purchased out-of-state !bs. Total Cheese Purchased lbs.

CHEESE CUTIWRAP RETAIL lbs.

In-plant store sales Ibs. Own production Ibs. Purchased cheese Ibs.

TOTAL IN-PLANT STORE S~LES Ibs.

SALES BY MIL Ibs

tSTIMAT~D TOTAL SHIPMENTS 1 bs.

Cheese shipeents Ibs. By point of delivery Ibs. By recipient category Ibs.

TOTAL REPORTED SHIP~ENTS Ibs.

VARiANCE Ibs. B-3

TOTAL 131

4

588481069 108747089

3121881 89829285 36437617 18E1351) 2938291 8680(100

72086531 2200000

742E6531

.37861665 5966000

43827665

0 1804224 5685520 7489744

982170522

16674127 519025

18948767

47271345

4052620 2692137 6744757

72682Q

993M7712

0 55806~811

423603432 981667243

-11980469

Pasteurized Combined Natural! Cheese Process Cheese Other Natural Process Cheese Aging Tvpe State PI ant Cheese Plant Plant Warehouse Total

CHEDDAR WI 12068022') 49019269 31673496 28652246 230025231 OH 7947 2349417 0 0 2357364 ~o 200'18756 5225682 90 ')2563 0 34327001 CA 0 0 1454670 0 1454670 MN 6916560 41622 0 0 6958182 IL 28696736 1860318 21611990 0 52167044 FL 0 0 (t 0 iJ

MI I] 0 (J 0 0 ~A I) 0 14750 0 14750 OR 'J 0 0 (I 0 Al 0 0 0 0 (I

UT 0 (I 0 (I (I

NY 0 0 0 0 0 I\A <) (! 0 0 C IX 1470196 1321236 0 0 2791432 F'A 13644323 141144 0 (I 13785472 NH 0 0 (I 0 0 RI 0 0 0 0 0 CO I) 669966 0 0 669966 OK 0 0 0 0 0 NV 0 0 0 0 0 ID 1173750 0 0 (I 1173750 NJ 114203 0 () 0 114203 TN 0 18271g 0 0 182718 NC 0 I) 0 0 0 LA 0 0 0 (I 0 IN 0 723750 0 0 723750 IA 0 0 (I (I 0 fiA 5253172 (I (l 0 5253172

0 r) 0 (I 0 0 0 0 0 0 0 0 (I 0 (I

0 0 0 0 0 0 0 (I (: 0 I) 0 0 0 0 0 (I Ij (I 0 0 0 0 0 0 0 0 0 (I (I

0 0 0 0 0 Not speci f • 0 38596 (I 0 38596

Total 198055863 61573718 637J7469 28652246 352039301

8-4

Cheese Grocerv Food Food Type State Distributor Wholesaler "anufacturer Service Other Totai

CHED~AR WI 29487882 8675876 475000 326141 2500000 414b4999 OH 19356206 5531362 0 1033096 0 25920664 ~O 731250 0 0 217494 0 949744 CA 4096436 9880413 827174 54373 0 14958396 "N 8268936 8655196 0 0 (I 16924132 IL 7711~ J.l • .,J 1813402 1040(' 3806:4 0 2277541 FL 5400 1613402 0 0 (I 1618802 "I 378125 0 0 815602 (I 1193727 WA 78525 0 0 0 0 78525 OR 0 I) 0 0 0 0 AZ 893125 200(100 0 59eH:8 0 1691233 UT 0 0 0 !) 0 I)

NY (I 0 I) (I 0 (I

1'1 A 5902882 0 25000 (I 0 5927882 TX 2623212 40000(: 0 163120 0 3156332 PA 2044500 0 0 0 0 2044500 NH (I 0 0 0 0 0 RI 11211 07 0 0 0 0 1121107 CO 585000 0 0 380614 0 905614 OK 73125 oj 0 0 0 73125 NV 0 0 0 0 0 (I

ID 0 200000 0 0 0 200000 NJ 6925525 0 0 217494 (I 7143019 TN 0 0 0 54373 0 54373 NC 0 489745 0 0 0 ~89745

LA 73125 ,0 0 108747 0 181872 IN 73125 2099783 0 380614 0 2553522 !A 28800 164400 0 0 (I 193200 KA 438750 0 0 326241 0 764991 AL 0 0 0 380614 0 380614 AR 73125 0 0 0 0 73125 6A 73125 3864367 0 0 0 3937492 KY 0 0 0 0 0 0 MS 73125 0 0 0 0 73125

Not spec if . 4727058 107000 0 232700 0 5066758

Total 88204594 43694946 1337574 5670045 250000() 141407159

B-5

Appendix C

SAMPLE OF CHEESE FLOW COMPUTERIZED PROJECTIONS

NATURAL CHEESE Total, " IBrand Total '( W!Brand

Regions/~etro Area POQui.tion Regiuoal Reglor,al ~et ~o ~etro Br and ! Br and 2 Br and 3 Br and 4 ~r and 5 Br and " Br anc 7 3~ and a Brond 9 Brand 10

Nor thoest (WA. OR cr lui Seattle-Tacol. 3002. O~ (· . tt 0.00 0.00 0.00 0.00 0.00 0.00 O. 00 0.00 0.00 0.00 O. 00

Portland 2825.00 0.00 0.00 0.00 0.00 O. 00 0.00 0.00 0.00 0.00 0.00 0.00 O. 00

Spokane-Yab la 1346.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 O. 00 O. 00 0.00 0.00 0.00

Non-eetro 2S1. 00 0.00 O. 00 0.00 0.00 0.00 \ 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total 7456.00 0. 00 0.00

California/Nevada (CA. NVi LA-San Oi ego t5264.00 O. OC· O.OC 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

5an Francisco 9371.00 O. ':.: 0.00 0. 00 0.00 0.00 0.00 0.00 0.00 0.00 ~.OO 0.00 0.00

Non-~etro 1430.00 Cr ,1:0 O. 00 O. 00 0.00 0.00 0.00 0.00 0.00 O. 00 ('.00 0.00 O. C·)

Total 26065.00 0.00 O. 00

South.est m, AI, N~, OK) Housten 4110.00 0.00 O. 00 0.00 0.00 0.00 0. 00 0.00 O.J~~ 0.00 O. 00 O.GO 0.00

Dai I as-Ft. Wor th 4259. 00 0.00 0.00 0.00 0.00 0.00 0.00 UO 0.00 0.00 0.00 0.00 0.00

San Antonio-C.Christ 3460. 00 0.00 0.00 0.00 O. C~ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

El F a.o-OI b. Lubbod 28S4.00 O. 00 0.00 0.00 0.00 0.00 0.00 O. 00 0.00 0.00 O. 00 0.00 0.00

~hoenix-TuS(on 2967 . 00 (1 .00 0.00 0.00 0.00 0.00 0.00 0. 00 0.00 0.0) ".00 0. 00 0.00

Okla. cty<ul.a 294S.00 O. CO 0.00 O. 00 0. 00 0.00 0.00 O. 00 0.00 0.00 O. 00 0. 00 0.00

Non-;ctro 2756. 00 0.00 0.00 0.00 O. 00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

(") Total 23384. 00 0.00 O. 00 I W

Plai ns/ftts (ID,ftT , ND.5D, WY, UT, CO, WY-S, NNE ) Denver 2745.00 0. 00 0.00 . 0.00 0.00 0.00 (1 .00 C.OO 0.00 0.00 0.00 ~ . 00 0.00

Salt Lih! CtY-Doi se 2319.00 0.00 0.00 0.00 0.00 0.00 0.00 O. 00 0.00 0.00 0.00 0.00 0.00

~ichi ta 993. 00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Non-Ietro 4429. 00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0. 00 0.00 0.00 O. 00 0.00

Tatal 10486.00 0.00 O. 00

He. England (ME,VT,~A,HH,CT,~!J Bo.ton-Pnev _ 6763.00 0.00 0.00 0.00 0.00 O. 00 0.00 0.00 0.00 0. 00 0.00 O. 00 0.00

Hartferd-NH Spring 2030.00 0.00 O. 00 0.00 0.00 0.00 1i.00 0.00 O. 00 0.00 0.00 0.00 0.00

Nan-tetro 3097. 00 0.00 0.00 0.00 O. 00 O. 00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total 12490 .00 0.00 0.00

Hn York/Ne. Jersey (NY, NJ) He. York 17596.00 0.00 O. OC 0.00 0.00 0.00 O. 00 0.00 0.00 0.00 J.OO 0.00 0.00

Al banv-Schen-Troy IS8UO 0.00 O. 00 0.00 0.00 0.00 0.00 0.00 0.00 O. 00 0.00 0.00 0.00

Buff al o-Roch. 3022. 01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 O.CO 0.00 O. 00

Syr icuse 2350.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 O. -)0

Non-DI!tro 278. CO 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total 25135.00 O. 00 0.00

o I

*'"

Eastern Strip I~D,PA,OC,OE,WV,VA , NCI

Balt,WA 7SB3.00 Phil adelphi a 7430.00 Soranton-N.Barre 1035.00 Pittsburgh 4152. 00 Norfoll-Ri ch 2940.00 Ral ei gh-6reens. WS Chariest-Hunt. Non-oetra Total

2882.00 1743.00 219,00

27994,00

Southeast INC,SC,GA.FLI At! a~t a 3502, ')0 Cherle,\ce-Sav. 1109 .0') Charlotte 2324.00 6reenv,Spart.Ashe 1:78.00 ~iali 4001.00 Jacrsanv. Or J. T .. ~a 6048. 00 Non-Ietro 4355.00 Total 22717.00

Looer Central ILA,AR, TN.KY,~S,ALl Ne. Or leans 3759.00 Nashville-,nox 3197,00 ~eephi s-LR 3232.00 Louisville-Lex. Birl."onLHunts Non-Ietro Total

2223.00 2B84.00 6416.00

2lil1.00

0.00

0, 00

0.00

0.')0

0.00

0.00

UpDer Central ~inn.St.Paul

I"N,"O,W!, IL,OH, IN, lA,~I, CKS, CNEJ 3210.00

~i! .au'ee Oetroi t Grand Rapids-Kal Chi colgo Quad Ci Ii es Cincin-Dav.Col Cleveland lndioll1apolis Olaha-Des~oi nes Peor i a-Spr i ng Kansas City 5t. Loui s Non-Ietro Total

Alas,a , H .. aii U. S. 10tal

2422.00 5333.00 2296.00 8757,00 1310 ,00 5448.00 4369, 00 2649.00 muo 1486.00 2176.00 2974.00

10214,00 55050.00

1502. 00 233990, 00

0.00

0.00 0.00

0.00

0.00 0.00

0.00) (' , 00 0,00 0.00 O. 00 0,00 O. ')0 0.00

00 .00 00

C.00 'J.00 0.(10 0,00

0.00 0,00 0.00 0.00 0.00 0.00

0.00 'l.00 0.00 0.00 (\('0 O. GO 0.00 Q. 00 O. co 0.00 v.OO 0.00 C,OO 0),00

(I. 00 0. 00

0.00 0.0') 0.00 ,i , (,0

0.00 0.00 0.00 0, 00

o. 00 0.00 0.00 ,). a·) O. dO O. O'l 0.00

0.00 O. 00 o. OC 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 O. OJ 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.0:'0 0,0:)

0, (JO 0.00 o. ,0 J.)O v.00 O. OG O. 00 0.00

0.00 0.00 0.00 0.00 0.00 'l.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0,00 0.00 0.00 O. 00 0. 00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 O.CO O. 00

0.00

0.00 0.00 ,'.00 0,00 0.00 0,<)0 0.00 0.00

0.00 0.00 0.00 0.00 0,00 0.00 0.00

0.00 0, 00 0.00 0.00 0.00 0,00

0.00 0.00 0.00 0.00 0.00 0, 00 0.00 0.00 0.00 0.00 0.00 0.00 0.)0 O,~O

0.00

0.00 0. 00 O.O'J 0.00 0.00 O. 00 0.00 o. 00

0.00 0.00 0.00 0,00 0.00 \l,00 0.,10

0.0(' 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0,00 0.00 0.00 O. (10 0.00 0.00 0,00 0.00 O.O'l

C.OO

0.00 0.00 \1.~0

(1,00 0.00 O. 00 0.00 '0.00

0.00 0,00 0.00 0.00 0.00 o. 00 0.00

0.00 V.OO 0.00 0.00 0.00 o. 00

0.00 0.00 0.00 0.<)0 0.00 o. 00 0.00 0.00 o. 00 0,00 0.00 0.00 C,.OO 0.00

0.0(1

0.00 O. or) (1.0) 0.(,0 0.00 0.00 0.00 o. 00

0.00 0.00 0.00 0.00 0. 00 (1,00 0.00

(1,00 0.00 0,00 0.00 0.00 0.00

o. 00 0.00 0.00 0.00 0.00 O,CO o. 00 (I,OC 0.00 0.00 O. co 0.00 0.00 o. OC

0.00

0.00 v.O) O. (I) O. 'j0 0.00 0.00 0.00 0.00

O.OJ 0,00 ,). 00 0.<)0 0.00 0, 00 0.00

0.00 O. (0 0,00 O. 00 0.('0 O. CO

0.00 o. 00 0.00 O. DC 0.00 0,00 0.00 0.00 o. 00 O. 00 0.00 o. 00 0.00 o. OC

0.00

0.00 0.00 U.O') (I , (Ie

0.00 0.00 0.00 0.00

0.(10 0.00 0.00 o. 00 0.')0 0.00 0.00

0.00 0.00 (' .00 0.00 o.oe 0,00

0.00 0.00 0.00 O. 00 'J.('O 0. 00 O. 00 0.00 0.00 0.00 0.00 0.00 0.00 O. 'lO

v_(:c

0.00 0.00 0.0') 0.00 0.00 0.00 0.00 O. 00

0.00 0.00 0.00 O. 00 O. GO 0.0'1 0.00

0.00 0.00 O. co O. 00 0.00 0.00

0.00 O.O 'l O. OC 0.00 0.00 0.00 O. 00 O. 00 O. 00 O. 00 (1.00 0.0') O. 00 0.00

e. OJ

O. 00 C,. C~ ,~ .00 'c.OO 0.00 0.00 0.00 0.00

0.00 0.00 0.00 (1,00 C.OO 0.00 0.00

'U0 (1.00 0.00 O.'lO 0.00 0.00

0.00 0,00 0.00 0.00 O. 'J" 0.00 O.OC 0. \10 ,j. 00 0.00 ~. 00 0.')0 O. -:JO 0.00

0.00

~I , Ov 0.00 O. (10 <) .00 0.00 0.00 0.00 0.00

9.00 0,00 0.00 O.OC 0.00 0,00 0.00

0.00 0.00 l.Oe v.oo O. 00 (I. '}O

0.00 0.00 C, 00 O. ~O 0.00 '}.OO 0.0(' O. 00 O.O'l 0, 00 (1.00 O. '}O 0.00 0.00

0.00