Oregon-based Tillamook has grown revenues from $477m in 2012 (when Criteser became CEO) to $800m in 2017 by adding over 6,000 stores to its distribution network east of the Rocky Mountains region (available in retailers including Kroger, Walmart, Target, and Publix), entering new product categories, and leveraging its farmer-owned co-op identity to build consumer awareness and interest in brand transparency.
Becoming a national brand
“One of the things we talked about during those early days was the opportunity for the company to pursue more of a growth strategy. We talked about the co-op model as a unique way of shortening the distance between agriculture and the consumer,” Criteser told FoodNavigator-USA.
The Tillamook board consists of dairy farmers who all share ownership of the co-operative and contribute to its dairy production. Tillamook’s dairy farmers had felt the squeeze of a contracting domestic dairy market and felt strongly about setting in motion a plan to grow the business beyond the Pacific Northwest.
“Farmers have been largely left out of the conversation through the food supply chain. Frankly, one of the big drivers behind their decision to support a more aggressive growth strategy was out of necessity.”
It is not an easy time to be a dairy farmer right now with many losing their supplier contracts and facing market pricing pressures. The US milk price (the market price dairy farmers are paid per 100 lbs of raw fluid milk) in August 2018 was $15.90, the same price as it was in August of 1989, according to USDA data.
“Milk prices are historically low. Their costs have increased but the price they’re getting paid has not so they’re really struggling, all dairy farmers across the country are struggling, especially these smaller farms tucked away on the coast of Oregon,” Criteser said.
Tillamook has been revving up its marketing engine to build consumer awareness of the brand including reopening its visitor center where its production factory is housed this past July – in that month alone 10,000 people visited the factory per day, according to Criteser.
Breathing new life into stale categories
“We like to say we’ve introduced more products in the last four years than we did in the previous 40 [years],” Criteser said.
“We aspire to be a premium brand with a premium product offering but one that’s accessible. You’re going to pay a little bit more for the Tillamook product, but we want it to be not so much more that you only find it in a fancy cheese shop.”
Since 2012, Tillamook has introduced a Greek yogurt line, super premium ice cream products, ice cream novelties, farm-cut shredded cheese products, and a ‘Sauce Starters’ line that has injected innovation into what Criteser describes as the "commoditized" category of shredded cheese.
“We looked at each of the categories through the lens of ‘what can we add that a consumer can’t already get?’
“When we looked at shredded cheese, that category had become really compressed and more of a price battle without a higher quality premium offering.”
In 2017, Tillamook introduced its farm-style cut shredded cheese, which is cut thicker than other products meaning that less anti-caking agent is needed and the consumer is able to taste more of the cheddar cheese.
According to Criteser, its farm-style shredded cheese product is growing at 10x the rate of the overall shredded cheese category.
In the process of launching and expanding the availability of a thicker-cut shredded cheese, Tillamook decided to answer another unmet consumer need: creating a cheese sauce with real cheese that didn’t come from a can filled with preservatives and other additives.
Its recently-launched Sauce Starters are products featuring shredded cheese, seasoning, and simple stove top directions where the consumer adds milk to create their own cheese sauce from scratch.
“The Sauce Starters is over 70% incremental to the dairy aisle,” Criteser said.
"Awareness is building and repeat purchases are good."
In order to keep up with its aggressive growth strategy of reaching $1bn in sales within the next few years, Tillamook will continue to solidify and form its retailer partnerships as well as strengthening repeat purchase behavior through expanded marketing initiatives.
"We’ve got to be on track, this has to work for these dairy farmers to continue to do well," Criteser added.