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|Articles - January 2010|
|Thursday, December 17, 2009|
It says something about a place when almost 1 million people a year make a pilgrimage to a cheese factory. Yes, the Tillamook County Creamery Association produces more than that, but this house was built on the rock of cheddar 100 years ago and it’s not moving.
A wise CEO does not mess with this kind of thing lightly.
So it would seem that Harold Strunk is well suited for the job: low-key, Midwestern unflashy, with a famous cow in his past. He has spent more than 20 years in marketing and sales in the dairy products industry, including 12 years at Borden in Columbus, Ohio, home of the Eagle Brand Sweetened Condensed Milk and the iconic Elsie the Borden cow. Borden no longer exists and Elsie’s likeness is now licensed to various companies such as Smuckers. “There was no discipline or planning,” says Strunk in explaining the demise of the company, which was at one time the largest producer of dairy products in the U.S. It’s a mistake he will not make at Tillamook. “We are very focused on cheddar cheese.”
Since he arrived two years ago, Strunk has been upgrading business systems and infrastructure so TCCA can compete on the customer service front and be positioned for controlled growth. That growth will stay focused on the core dairy products. “There is not a lot of product innovation at Tillamook,” he says. “It’s a risky proposition.” In 2000, TCAA built a new 85,000-square-foot cheese-making plant in Boardman, and then expanded it again in 2006 to 150,000 square feet, which increased TCCA’s total output by 50%.
“I think it can be a billion-dollar company,” says Strunk. “It’s that strong a brand. It’s one of the truly differentiated products I’ve worked on in my career … This reminds me a lot of Coors beer in the 1970s. There’s a buzz about it back East. There’s a mystique, and zealots.
“One of the biggest things I learned at Borden was the emotional connection to Eagle Brand Sweetened Condensed Milk. It’s the same thing people in the Northwest have — an emotional connection to this cheese. We ran out of sharp earlier this year and there was such an outcry.”
TCCA is a farmer-owned cooperative that is publicly traded and privately held, and also a packaged-goods company. It’s a unique challenge when the suppliers are the owners.
“One different side of [this job] is how to keep the farmers healthy. We try to pay the most for milk, not the least.” TCCA used to lock in the milk price it paid to the co-op farmers for a whole year. Strunk changed that to quarterly, then to monthly pricing.
“How do you grow a co-op based product? There is tension all the time,” Strunk says. “The farmers are interested in their milk supply. What does their milk check look like? I’m trying to get them to understand that they are investors in a company that should grow.” There is also tension around whether to build equity or get a payout.
“The dynamic with the farmers has been really different for me. The idea of keeping your farmers whole has been very difficult. Every farm situation is different. You don’t know what the break-even point is for them.”
Tillamook cheese is a product that takes time to make and age, and pricing needs to be premium, but not too high, says Strunk. Finding that sweet spot on pricing to help manage the margins is where Strunk feels he brings expertise. Still, farmers call him all the time and want to know why he doesn’t charge more for the cheese.
Part of Strunk’s strategy is to keep the emotional connection strong. But being beloved in the Northwest doesn’t mean you can rest on your curds.
The company has invested heavily in social media, notably piling up more than 25,000 fans on its Facebook page. It also will launch this month the Loaf Love tour (“Put a little loaf in your heart”) and a new spokecheese: Loafy, a two-pound Tillamook cheddar loaf. The two-pounder, incredibly, does not exist on the East Coast. “We need people to taste us,” Strunk says. “Then they’ll fall in love.” The tour starts in Tucson and will travel around the country with VW buses reshaped as cheese loafs in tow. It will give Tillamook a chance to tell its story.
“If you don’t go directly to the consumers,” says Strunk, “you put your brand in the hands of the retailers.” He wouldn’t say what markets he might be targeting, but believes “There is cheddar potential everywhere.”
The next question is inevitable. In a Loafy vs. Elsie smackdown, who wins? Strunk quickly considers and decides it would be cow over cheese now, but one day, “I would like Loafy to be as big as Elsie.”
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Back in May, we shared a common Wall Street quote about investing, “Sell in May and go away.” Fast forward to July and the most common question we have been getting from clients is, “When is the market pullback going to occur?”
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BY TERRY "STARBUCKER" ST. MARIE
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