Back to school; some dairy marketers are learning a new appreciation for school business

Dairy Foods, August, 1990 by Jeff Reiter

About three years ago, Superior Dairy pulled out of the school market. For the Canton, Ohio-based dairy, the move was simply a matter of economic slow product margins and high distribution costs had made selling to schools unprofitable.

Now, after watching other dairies take over the school accounts it had served for years, Superior has reconsidered its decision.

"I think it was a mistake," says Marvin Zabel, Superior's key accounts manager, noting that the dairy is uneasy knowing that the local schoolchildren are seeing and drinking the milk of its competitors. Accordingly, Superior is once again sending out bids, hoping to get back some of the business it walked away from.

Other companies, no doubt, have walked away and never looked back. The school market-defined here as elementary schools, junior highs and high schools-has a reputation among most milk processors for being difficult to serve and hard to make money in. Some simply avoid the business, finding it too much trouble given the small case loads per stop and the requirement by some schools that dairies furnish milk coolers. Frequent delivery requirements (sometimes five days a week) and restrictive delivery schedules are other negative factors.

But despite the drawbacks, schools are still an important business segment for many processors. Indeed, the mere size of the market makes it hard to ignore.

Every school day, through the National School Lunch Program, about 24 million lunches are served in 90,000 schools. In addition, the School Breakfast Program feeds about 3.6 million children daily in approximately 40,000 schools. These meals, subsidized by the U.S. Department of Agriculture (USDA), have significant dairy components milk, cheese and butter, to name a few.

Long-term growth prospects for the market are positive, too: The Department of Education projects that elementary school enrollment will reach more than 49 million by the mid-1990s, up from 45.4 million in 1988. Enrollment in secondary schools is expected to reach 31 million (up from 29.3 million) over the same period. Adapting to change Based on size alone, the school market is obviously very important to the dairy industry overall. But it's also quite meaningful to a great many individual processors and distributors. In fact, current trends, such as healthier foodservice menus, have led to new sales opportunities.

Elgin-Honey Hill Corp., Hillside, Ill., is one company that's finding the school market rich with potential. Frozen yogurt has become a staple on high school a la carte meal programs, as many schools have invested in soft-serve machines. For Elgin and its distributors, this has meant a nice boost in mix business.

Elgin also has a new hard pack product that meets federal meal pattern requirements for the National School Lunch Program. Bee-Lite, a nonfat, cholesterol-free frozen yogurt, is portion-packed in 4-ounce styrofoam cups. The dessert has been especially well-received in elementary schools where soft-serve machines are less common. "Schools have been putting it on their bid sheets," says Jim Newlin, director of marketing.

A la carte foodservice, extremely popular and expanding in high schools, has proven a good outlet for dairy sales. Strong sellers include fresh (non-frozen) yogurt, cottage cheese (for salad bars), and cream cheese (for bagels). In addition, two foods that use cheese-pizza and cheeseburgers-are among the most popular lunch items at any school.

Cheese, however, is a sore subject among school foodservice operators these days. Until this past school year, cheese was readily available at no charge through USDA's bonus commodity program. Now, however, schools must buy most of the cheese they need from commercial sources-a significant economic hardship considering cheese is a key ingredient in so many school entrees. The new situation has created a windfall of new business for foodservice distributors with full dairy lines such as Fox River Foods Inc., Montgomery, Ill.

"The lack of government commodities has driven the cheese market right through the roof," says Jim Fauth, head of Fox River's school foodservice division. To help schools cope, Fox River created an educational booklet called "Say Cheese Please!" which includes descriptions and serving suggestions for a wide variety of cheeses.

"Schools had gone so many years without having to buy cheese that they knew nothing about the market," says Fauth, explaining the rationale for the booklet. Breakfast club Meanwhile, other ongoing trends in the school market should come as good news for fluid milk marketers. First, to cut costs, many school systems are consolidating. For dairies, this often means fewer total delivery stops and more cases per drop, resulting in lower overall distribution costs.

Another positive is the growth in school breakfast programs. Participation is building rapidly as more cafeterias add breakfast to their meal plans. At least three statesTexas, Florida and Massachusetts-have recently passed legislation requiring schools to offer breakfast, and New York has a new law pending.