The Biggest U.S. Yogurt Company Is Cleaning Up Its Supply Chain
In the last decade, the niche farm-to-table dining trend has grown into a vibrant, albeit small, industry of its own. Farmers markets have popped up (and expanded) throughout the country. Individual farmers have become celebrities. Yet making farm-to-table accessible on a broader scale has remained difficult. Chipotle, which struggles to find enough sustainably sourced meat to fill all its restaurants, has so far been the only large corporation to make a concerted attempt to take farm-to-table to scale.
That changed Wednesday as yogurt maker Dannon—the leading supplier in the United States—announced that it is throwing its hat in the ring.
In July, products in Dannon’s Oikos, Danimals, and Dannon yogurt lines will be reformulated to include fewer overall ingredients and fewer sourced from GMOs. The company will remove fructose, switch from beet sugar to cane sugar, and source non-GMO starch, according to Mariano Lozano, president and CEO of the Dannon Company. Starting in 2017, cows whose milk supplies these lines will be switched to non-GMO feed. In addition, the seven farming families partnering with Dannon on these changes will start receiving a more reliable income in the form of an agreement that will guarantee a certain margin of profit and offset costs.
“In the last three years we have had the highest- and lowest-ever milk prices,” said Lozano. The open-book contracts will remove “uncertainty and volatility” by ensuring a long-term relationship with farmers. One of Dannon’s Kansas-based milk suppliers, Ken McCarty, explained that this type of deal is “incredibly different” from what is typically seen in the dairy industry.
“To say that being attached to the open market is difficult is an understatement,” he said. “Being freed from that uncertainty allows you to focus on the things you’re truly passionate about and the truly impactful things, like sustainability, animal welfare, and community revitalization.” One of the investments McCarty has been able to make is in a milk-condensing plant that will reclaim 20 million gallons of water a year.
Yet there are a number of unknowns in Dannon’s plan. While McCarty and other dairy farmers often grow some of their own feed and can make the transition to non-GMO corn and soy without much difficulty, those crops are a relatively rare commodity. To supply the three yogurt lines, the company will need enough feed for about 50,000 cows, said Lozano. Most dairy cows require roughly 50 pounds of food every day. Even to supply Dannon alone would require more than 900 million pounds of non-GMO feed every year. “Today the reality is that there is very limited availability,” Lozano said.
Between 2014 and 2015, 94 percent of all soybeans and 89 percent of all corn grown in the United States was produced with some form of biotechnology, according to the USDA. But low prices for commodity crops may be pushing some farmers toward non-GMO crops. Earlier this month, The Des Moines Register reported, “A farmer growing a non-GMO soybean crop could get as much as $2 a bushel for soybeans and $0.35 a bushel for corn over the market price.”
McCarty said his expertise is in dairying, not growing feed crops, and that “it remains to be seen” how difficult growing non-GMO feed will be. “We don’t know exactly how we’ll find all that feed,” he said, though he believes local partnerships with farmers could make the goal achievable.
With stores such as Costco and Walmart looking for more sustainably produced, natural items, it’s likely that there is a market for Dannon’s improved product. But Dannon acknowledged it does not know how much of the increased costs of production will be passed on to the consumer. “We are entering this journey firmly believing there is value to be created,” Lozano said. If more large suppliers follow Dannon’s example, that may reduce some of the company’s costs by making non-GMO feed (for example) less expensive.
“Do we have all the answers? No. But we have a strong willingness to go down this path,” Lozano said.