According to Tom Gallagher, CEO of Dairy Management Inc., the investment in milkfat research that dairy farmers have been making is beginning to pay off.
"For more than two and a half decades, dairy farmers have invested in research on butterfat," explains Gallagher. "Without that long term investment we would not be sitting here today talking about the value of milkfat. Developing those relationships is why this story about milkfat is moving faster than anyone imagined."
In 2009, DMI changed their business plan and got away from television advertising and retail promotions and started partnerships. One of their first partnerships was with McDonald's.
"We have similar relationships with a half dozen big players including Taco, Pizza Hut and Domino's," Gallagher says. "We did this when McDonald's was about to introduce McCafe. We wanted McCafe to be dairy centric, not some alternative beverage centric."
McCafe products are "really milk with some coffee flavoring," he says. "Our scientists are the ones that created those products. They have sold over 600 million pounds of milk per year through McCafe. Our scientists created McDonald's mozzerella sticks, which are about to go national, and are just dynamite. If you eat a product at McDonald's that has dairy in it, one of our scientists created that product."
Today, there are 20 different McDonald's breakfast menu items that contain butter.
Gallagher says they talked to McDonald's for quite a while about consumers wanting natural and real food.
"So when they told us they wanted to use real American butter instead of margarine in their U.S. restaurants, and they needed our help to make the switch, it was the result of many factors, including the research, the relationships, the credibility of staff and their ability to help companies grow dairy sales," Gallagher says.
In late September, McDonalds did away with using liquid margarine and now use butter instead.
"One of our people wrote all of the specks for the butter, did all of the testing to see how it would melt and trained all of the owner/operators and sold it into management. Our person, not a McDonald's person, did all that."
It's a big story for dairy farmers and the industry, Gallagher believes.
"We feel that we are conservative in estimating that butter at McDonald's will add 500 to 600 million pounds of milk equivalent over the course of a year," he says. "That's the equivalent to the amount of butter that was exported from this country last year."
Gallagher anticipates a larger payoff may be just around the corner.
"It's not just what McDonald's does it's that everyone else has to follow. The number is going to grow much bigger because other chains will want to tie into that too."
Of note, Bob Evans restaurants announced last month that they too are switching to all butter.
The ripple effect is beginning.