The modern milkman: with quality customer service, premium product development and plans for...

With 2002 sales of $50 million, North Aurora, Ill.-based Oberweis Dairy Inc., has grown dramatically over the past few years, doubling the number of its company-owned ice cream and dairy stores to 29 and expanding its home-delivery base to 45,000 people. What started as a humble milk-delivery

At Your Service

Oberweis Dairy's home-delivery service carries dairy products and premium grocery items to thousands of homes in Chicago, Northwest Indiana, Indianapolis, Central and Southern Illinois, and St. Louis.

The company offers an extensive product lineup. In addition to Oberweis Dairy's whole, 2%, fat-free and chocolate milk (notably still packaged in glass bottles), trucks carry such products as the company's award-winning ice cream, co-packed cheeses, sour cream and yogurt, farm-fresh eggs, whipping cream, spring water, cookie batter, chicken breasts and more.

"We have been providing home-delivery service since 1927 and it continues to be a thriving part of our business," says Bob Renaut, president and chief executive officer. "As long as consumers continue to crave the convenience of having fresh products delivered to their door, this segment of our business will continue to flourish." While customers are enjoying the company's famed fluid milk products, Oberweis Dairy is also producing premium ice cream. "For nearly 50 years, we have manufactured ice cream using the finest ingredients and time-tested quality processing," says Renaut. The company's classic flavors include vanilla, chocolate, strawberry, chocolate chip, butter pecan, chocolate peanut butter, cookie dough, cookies and cream, black cherry, coffee, rocky road and mint chocolate chip. In addition, Oberweis Dairy introduces seasonal flavors throughout the year such as peppermint, brandy, egg nog and cinnamon.

Introducing the Single Serve

In January 2003, the company known for its glass-bottled milk and home delivery launched its own line of single-serves packaged in 12-ounce PET bottles. Produced in five varieties, the milk is available at Oberweis ice cream and dairy stores, through home delivery and various grocery stores in the company's delivery area.

From a safety perspective, the plastic bottle is a more suitable option for one of the company's most important target audiences--children.

"We know that parents need to feel good about the products they're giving their kids," says Renaut. "That's why we made the conscious decision to use 2% instead of whole milk. In truth, the flavor of our 2% is similar to many other companies' whole milk. In the end, we are providing a great-tasting product with some additional health benefits without the higher fat content."

From a marketing standpoint, however, the company created the single-serve package to appeal to various age groups. "In terms of graphics, our goal was to create a 'fun' package that would appeal to both kids and adults," says Mark Vance, director of marketing. "The bottles feature colorful 'happy cow' artwork that is customized for each flavor. The combination of the milk's eye-catching graphics and rich Oberweis flavor make it an appealing alternative to soda, no matter what age the consumer may be."

What's more, the single-serve plastic bottle, says Vance, is helping Oberweis Dairy sell more milk through school vending machines.

Marketing Distinction

In conjunction with National Ice Cream Month in July 2003, Oberweis Dairy kicked off its first-ever television advertising campaign in the company's 76-year history with four new spots airing on Chicago-area network and cable programs.

The eight-week series of commercials features company chairman Jim Oberweis and his 10-year-old grand-daughter promoting summertime ice cream consumption and Oberweis Dairy's home-delivery service. The four spots, created by Washington, D.C.-based I Imagine and featuring the company's "Simply the Best" tagline, are titled "Grandpa," "Love at First Sight," "Sunny Side Up" and "It's Your Morning."

"We hope to be able to see whether or not this campaign has an actual effect on our business. If it does, we hope to be able to continue down this path. We have been pleased with the results so far and we are excited about the increased brand awareness this new communication effort will establish," says Vance. "What we've tried to do this year is be much more aggressive in our promotional and advertising efforts. Historically, we've grown our business by word of mouth and occasional print ads. A couple of years ago, we began radio advertising, but on a rather limited basis. This year we decided to advertise 52 weeks out of the year. We are selling milk and ice cream 52 weeks out of the year, so we should be talking about milk and ice cream 52 weeks out of the year."

Oberweis Dairy has enhanced what Vance considers the company's "direct mail" component, even though the literature is not necessarily mailed. "Our home-delivery customers receive a piece of promotional literature every time a delivery is made. We have increased the frequency of that distribution and enhanced our advertising message from there," he says.

Oberweis Dairy has also expanded its relationship with some local sports teams. "We like to hang out where our customers hang out. Whether it's at the zoo, ballparks or soccer tournaments, we want to be with them in some form or fashion," says Vance. "They can't all come to us, so we go to them. It's part of a strong grassroots initiative, being in the community doing positive things while promoting our products at the same time. Our Oberweis RoadShow, where we provide organizations the opportunity to serve our products to their employees, volunteers or visitors, has been extremely successful this year."

Social Responsibility

Oberweis Dairy is committed to supporting its communities through specific philanthropic activities. In June, the company held a food drive to benefit the Northern Illinois Food Bank. Due to the gifts of its customers and the efforts of its employees, Oberweis Dairy collected approximately 9,000 pounds (4.5 tons) of food that was distributed to local food pantries.

According to Vance, the company is committed to supporting the communities in which it serves. "Our Moola for Schools program, for example, donated 10 percent of each sale of certain products to designated schools," he says. "Some of our profits this year went to the Smarter Kids, Safer Kids program. We are also planning a major program to benefit children's hospitals during the upcoming holiday season. These are just a few examples of corporate citizenship, of doing what's right for the communities around us."

Renaut says the company has a responsibility to exhibit quality corporate citizenship to its own employees as well. "For example, we offer a scholarship program for our dairy store kids. For every year they work for us, they receive a $750 school scholarship. Last year we gave out over $93,000 in scholarships to store employees. We are really helping these kids." he says. "The Oberweis family has always stressed the importance of education and doing what's 'right.' No matter what we do, we make sure it really makes a difference."

DAIRY-AT-A-GLANCE

History

* In 1915, dairy farmer Peter Oberweis began selling his extra milk to friends and neighbors. Oberweis Dairy was founded in 1927.

* In 1951, the first Oberweis Dairy store opened in Aurora, III.

* Oberweis Dairy has grown from 3,500 home-delivery customers and one retail store in the late '80s to serve more than 45,000 homes and an abundance of customers in 29 retail stores.

Oberweis Milk

* Oberweis Dairy processes, bottles and delivers its milk within 36 hours of the milking process.

* Oberweis Dairy works closely with more than 40 local family farmers to produce its quality milk The company's farm partners produce exclusively for Oberweis Dairy and have committed to providing milk without the use of rBGH (artificial bovine growth hormone, or antibiotics. Farm partners are also committed to producing milk from well-run farms with clean and healthy cows. Oberweis milk meets the company's other standards of quality such as low somatic cell and standard plate counts.

* Oberweis milk is "cold separated" and homogenized, but not UHT pasteurized. Consequently, raw milk is not heated to remove fat or held at a high temperature for a long period of time during the pasteurization process.

* Oberweis milk is gravity-fed into glass bottles then stored in a refrigerated warehouse. Cooler lights are filtered of all ultraviolet rays that can damage milk.

* Milk is rotated on a daily basis to ensure the freshest milk.

* This entire process prevents excess heat and light--natural enemies of milk freshness and taste.

Growth

* Oberweis Dairy serves home-delivery customers in Chicago, Northwest Indiana, Indianapolis, Central and Southern Illinois, and St. Louis.

* Oberweis Dairy will have opened six new ice cream and dairy stores by the end of 2003, including locations in McHenry and Schaumburg, Ill., along with three additional stores in St. Louis.

COMPANY ROUNDTABLE

Dairy Field asks Bob Renaut, president and chief executive officer, and Mark Vance, director of marketing, key questions concerning the business of Oberweis Dairy.

Q What specific products have been most successful over the past year?

Bob Renaut: "This year our marketing efforts have involved the expansion of our 12-ounce single-serve milk line. We introduced two coffee-flavored milks this year--French Vanilla and Mocha Cappuccino. These were added to the chocolate, vanilla and strawberry flavors we introduced under our brand name in January. We now have five different single-serve flavored milks in our market to choose from, as well as iced tea, fruit punch and lemonade. This segment of our business has been very successful for us.

"Likewise, our school-vending business is thriving. We are selling 800 to 900 bottles of fluid milk per week per vending machine. And these are not 5-year-olds or 8-year-olds selecting our milk--these are teenagers. We still have a long way to go to convince teenagers that milk is the best choice, but we are heavily invested in this effort and very positive about the future."

Mark Vance: "On the ice cream side of the business, we actually let consumers decide what new flavors Oberweis Dairy would introduce this year. We conducted an online survey that asked our customers to vote for their favorite flavors. The survey explained that the top three vote-getters would be flavors the company would create and introduce to the market this year. And vote they did. We later introduced Black Raspberry, Chocolate Chocolate Chip Cookie Dough and Heath Bar Crunch. Profitably speaking, these new flavors have done very well for us."

Q What are the main selling points emphasized when promoting the company and its products? Furthermore, how does Oberweis Dairy maintain its competitive edge?

Bob Renaut: "Let's break off into dairy stores for a second. The competitive edge there really hinges upon the quality of our customer service. If the customer does not have a good experience in one of our stores, no matter how good the ice cream tastes, they're not coming back.

"We have a store design that is very appealing. In fact, the new design introduced this year has been received exceptionally well by our customers.

They feel the stores are warmer, more friendly and enticing. As a result, they are more likely to come back. Superb customer service is something that we really stress--it is one of the key ways we maintain our competitive edge.

"On the home-delivery side of the business, even though it's inherently unique, customer service is very important. It is crucial that we look at what the best practices are for delivering our products. For example, we make sure all of the drivers on our routes deliver milk the same way. So, if the customer moves from one route to another, they know exactly what to expect. We demand the same consistent service across our entire home-delivery network.

"We also believe it is important to attentively be in touch with our customers. We actually want to talk to our customers. When you call our company, for example, you get a live person, not a machine. And I think that is one of the ways we differentiate ourselves from the competition--by staying in touch with what our customers want and need, what we're doing right and more importantly, what we're doing wrong. If we have things to work on or improve, we need to know about it."

Mark Vance: "I would only echo the emphasis on customer service. We place a lot of weight on service in terms of training and continued support of our employees. We work diligently to help them understand the value of superior customer service.

"Likewise, you will find themes in everything we do that communicate the significance of superior product quality. When speaking with consumers, the answer is always the same--the reason they like us, the reason riley choose us, is the quality of our product. And 'quality' is a kind of term you can't really define--it's user-defined, so to speak. But we know what tastes good, our customers know what tastes good to them, and we try to deliver, consistently, every single time."

Q What is the strategy for expanding company's market share?

Bob Renaut: "Our growth strategies include diversifying our product offerings to our existing customers, geographic expansion and increased penetration within our existing markets."

Mark Vance: "I think the most important growth strategy we have is helping people understand how we do business. We have a different marketing plan for each of our channels. What works for a dairy store, for example, is different from what works for home delivery. Therefore, what we are trying to do in terms of our product assortment, pricing strategy and promotional activities in all of our business channels is help customers understand how Oberweis products fit into the choices they make for themselves and their families.

"One of our other strategies is emphasizing what's not in our products, like artificial growth hormones or antibiotics. We are really focused on helping consumers understand the inherent qualities of our product."

Q What challenges does the industry face and how is Oberweis Dairy responding to these challenges?

Bob Renaut: "I think one of the biggest challenges in the dairy industry is competing against the Pepsis and Coca Colas of the world and impressing upon children and teenagers that it's cool to drink milk. Obviously, those marketing giants have a head start on successfully convincing the public that their drinks are wholesome and fun to drink. As an industry, we still have a long way to go--but the tide is turning.

"The fact that soda giants are introducing milk-based beverages, on some level, legitimizes the single-serve fluid market. Sure it's competition, sure we are at a disadvantage in terms of marketing dollars, but we have responded to this challenge by concentrating on producing a great-tasting, fresh product. What we do have, from an advantage standpoint, is an understanding of what it takes to make a premium product. Side by side, our products taste better, and that's how we remain competitive.

"On the ice cream side, one of the challenges we face is managing the growing number of SKUs produced. As customers want more choices and different flavors available all the time, it becomes more and more difficult to meet that demand. Coming up with new flavors that keep the category fresh and excite the customer is an ongoing challenge for every ice cream producer.

"Regarding the recent attack on ice cream and the issues concerning the current obesity crisis in this country: A dessert is a treat; you have a choice. Some people eat an apple for dessert. Some people eat a handful of grapes. Some choose ice cream. The intelligent public knows the difference."

Mark Vance: "But at the same time, consumers are telling us to give them more choices. We respond to our customers by offering low-fat alternatives to higher-fat ice creams. We even have frozen yogurt. And as producers in the industry, we must offer more options to consumers."

Q Where do you expect the company to be in five years?

Bob Renaut: "Five years down the road, we expect to continue to be growing 15 to 25 percent annually. We anticipate being well on our way to becoming a national company with stores located throughout more states. We are currently putting in 10 to 12 new stores a year, and we see that number increasing as we grow. We also see ourselves manufacturing more of our own products, diversifying our product mix--bringing yogurt and cottage cheese in-house, for example.

"We are going to be breaking ground here soon on a 6,000-square-foot new freezer that we absolutely need to support our growth from an ice cream standpoint. It will also allow us the space to double our capacity for milk production. We continue to see development and opportunity in this particular market segment, and we are investing heavily for a company our size to support that growth."

Mark Vance: "From a marketing and sales perspective, I would like us to be a company that has national away ness. I want people everywhere to understand the Oberweis message--quality, consistency, excellent service and freshness of product.

"I want to be able to say that we have reached our potential in the markets in which we are currently operating. We have a lot of density we have yet to tap into. But in five years, I expect us to be poised to flip the national switch."