Is Nestlé dealing directly with dairy farmers?
In the US, for the most part, we are dealing directly with dairy farmers or with farmer-owned dairy processors.
Larger dairy co-ops will have multiple customers including Nestlé, but we do have some individual farmers that ship all of their milk to us, and we agree to buy all of their milk, and if we don’t use it, we are responsible for selling it.
How has the US dairy farmer/supply base changed in recent years?
There’s been a lot of consolidation over the past 10 years; farms are getting larger, although a lot are still family owned, and we’ve seen fewer farmers and more cows. While a cow can ultimately only produce so much milk, I expect we’ll continue to see increases in productivity in the immediate future.
Are you worried about the future of dairy supply given recent depressed prices?
The dairy industry has its cycles like every commodity-based industry, based on supply and demand, it’s just economics 101. For us, the effect [of depressed prices] is neutral, as all of our competitors are facing the same issues: if we’re paying less, so are they.
As for farmers, prices will always go up and down, but the farm community is much more sophisticated now at managing price risk, in part because the government is less willing to step in and essentially rescue them. That’s one of the areas where we have worked with farmers – on risk management.
How would you characterize Nestlé's relationship with farmers?
Of course we’re in business and we need to make money, but I always say to farmers that I’m not here to win against you, you’re not my competition, you’re part of our team. We want them to win. I grew up on a farm, I’ve got a degree in dairy science, and I actually had my own dairy farm in my 20s and early 30s so I understand what they are facing.
I’ve got a farm background and my primary dairy buyer grew up milking cows in Iowa, so we have that connection to the farm community, so I am a kind of translator between the corporate world and the farm world.
We want to work with farmers to improve efficiency and sustainability, so we do on-farm assessments with our farmers covering everything from animal care and soil erosion to water quality and stewardship. But it’s not pass or fail, just a case of this is where you are now, and this is where we want you to go. They then need to come up with an action plan explaining how they are going to get there; it helps them become more competitive.
How are those relationships with farmers changing?
There’s a tendency towards cultivating longer term relationships now. In the past, dairy in particular was a very commodity-driven world where people would just buy what they needed for that year, whereas today we are thinking more about what our consumers will be looking for two years from now, or five years from now - do they want organic, pesticide free, non-GMO, rBST free and so on - which means we have to get our farmers and suppliers ready now because we have very strict specifications and standards and complicated recipes and formulas. That’s across all raw materials.
For example, we launched an organic line within Lean Cuisine that’s doing quite well and as organic is not readily available in the marketplace as a commodity, it’s an area where we need to partner with farmers.
What’s your background?
I grew up on a dairy farm in Pennsylvania and went to one of the schools that’s considered a flagship in dairy science, Virginia Tech, and then I went off and I had my own dairy farm for about 10 years before I started working for the dairy co-op where we shipped our milk. It was here that I got interested in the economic side of the operation and so I did an MBA in food and agribusiness and ended up moving to California.
Coming to Nestlé was my first time working for a big public company. I was a bit nervous at the time, because I really wanted to stay connected to farmers, but one of the reasons I decided to come was because it has a unique connection to the farm community around the world. I headed up global dairy procurement in Switzerland for three years and then I was in Singapore heading up commodities for Asia, Oceania and Africa, and ended up visiting cocoa plantations and working with farmers again.
I think when you work for a large corporate entity, people think that you sit behind your desk all day and wear a suit and tie, but really at Nestlé I’ve found it to be just the opposite.
Patty Stroup is chief procurement officer at Nestlé USA. Before joining Nestle in 2006, she was director of dairy procurement and policy at Hilmar Cheese Company in California and, prior to that, director of communication, education and legislation at Maryland and Virginia Milk Producers in Virginia.
She holds a bachelors degree in communications with a cognate in Dairy Science from Virginia Tech, and an MBA in Food and Agribusiness from Purdue University.