• TABLE OF CONTENTS
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 Title Page
 Center information
 Table of Contents
 List of Tables
 Acknowledgement
 Summary
 Introduction
 Findings
 Conclusion
 Appendix
 Reference






Group Title: Industry report - University of Florida, Florida Agricultural Market Research Center ; no. 79-5
Title: Foodservice markets for Florida milk
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Permanent Link: http://ufdc.ufl.edu/UF00026916/00001
 Material Information
Title: Foodservice markets for Florida milk a report
Series Title: Industry report Florida Agricultural Market Research Center
Physical Description: viii, 53 p. : ; 29 cm.
Language: English
Creator: Mathis, Kary, 1936-
Degner, Robert L. ( joint author )
Publisher: Florida Agricultural Market Research Center
Place of Publication: Gainesville
Publication Date: 1979
 Subjects
Subject: Dairy products -- Marketing -- Florida   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Bibliography: p. 52-53.
Statement of Responsibility: by Kary Mathis and Robert L. Degner.
General Note: "A research project conducted for the Dairy and Food Nutrition Council, Dairy Farmers, inc."
Funding: FAMRC industry report ;
 Record Information
Bibliographic ID: UF00026916
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: aleph - 000096787
oclc - 06456352
notis - AAL2220

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Table of Contents
    Title Page
        Page i
    Center information
        Page ii
    Table of Contents
        Page iii
    List of Tables
        Page iv
        Page v
    Acknowledgement
        Page vi
    Summary
        Page vii
        Page viii
    Introduction
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
    Findings
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
    Conclusion
        Page 27
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
        Page 34
    Appendix
        Page 35
        Page 36
        Page 37
        Page 38
        Page 39
        Page 40
        Page 41
        Page 42
        Page 43
        Page 44
        Page 45
        Page 46
        Page 47
        Page 48
        Page 49
        Page 50
        Page 51
    Reference
        Page 52
        Page 53
Full Text













FOODSERVICE MARKETS FOR FLORIDA MILK


A Report by

Kary Mathis and Robert L. Degner
















a research project conducted for the
Dairy and Food Nutrition Council,
Dairy Farmers, Inc.



August, 1979

The Florida Agricultural Market Research Center
a part of
The Food and Resource Economics Department
Institute of Food and Agricultural Sciences
University of Florida, Gainesville, 32611


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The Florida Agricultural Market Research Center

A Service of
the Food and Resource Economics Department
of the
Institute of Food and Agricultural Sciences


The purpose of this Center is to provide timely, applied research

on current and emerging marketing problems affecting Florida's agri-

cultural and marine industries. The Center seeks to provide research

and information to production, marketing, and processing firms, groups

and organizations concerned with improving and expanding markets for

Florida agricultural and marine products.

The Center is staffed by a basic group of economists trained in

agriculture and marketing. In addition, cooperating personnel from

other IFAS units provide a wide range of expertise which can be applied

as determined by the requirements of individual projects.





















ii


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TABLE OF CONTENTS

Page

LIST OF TABLES ................... .............. .................. iv

LIST OF APPENDIX TABLES.............................. ............... v

ACKNOWLEDGEMENTS.................................................... vi

SUMMARY ................................................ ........... vii

INTRODUCTION... .................................................. 1

Objectives and Pr.cf ,ureh for the Study........................ 5

FINDINGS ...................... ...................... .............. 6

Volume and Sales Characteristics.............................. 8

Processors .............................................. 8
Foodservice Operations............ ................ ........... 9

Costs, Prices and Margins.............. ........ ............ 17

Handling, Distribution and Packaging........................... 19

Market E
CONCLUSIONS ................................. .............. ......... 27

Product Development.......................................... 28

Distribution and Pc'r.aging .................................... 29

Promotion Problems and Opporturities.......................... 31

A. PE PE D I ................................... ......................... 35

REFERENCES...... ........................................... ..... 52











iii


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LIST OF TABLES


Table Page

1 Share of consumer expenditures for farm "ood. by product
group, 1976.................................................. 2

2 Dairy product sales per capital and changes, 1976, 1977 ...... 3

3 Foodservice firms included in study, and number of outlets or
lo action: in Florida ......................................... 7

4 Florida dairy production: Total, Class I and proportion to
foodservice markets, 1978.................................. 8

5 Milk and dairy products used by different types of Florida
foodservice outlets....................................... 11

6 Weekly customer count, fluid milk sales as beverage, and
sales per customer, Florida foodservice organizations in-
cluded in study, 1979....................................... 12

7 Beverage sales, shares and ranks in Florida foodservice
outlets in study, 1979 ........................................ ..... 15

8 Shares of milk sales, fluid milk products in Florida food-
service outlets in study, 1979.................................. 15

9 Share of fluid milk sales by mealtimes, Florida public eating
places in study, 1979 ......................... ............ 16

10 Beverages served as a share of family meal occasions, U.S.,
1978 ......................................................... 16

11 Beverage costs and retail prices reported by foodservice
executives included in study, 1979........................... 18

12 Dairy product and dairy substitute sales trends expected by
foodservice executives in study, 1979, and changes in per
capital consumption, 1967-1977................................ 24

13 Comparisons of advantages of milk and dairy products, and of
other beverages and non-dairy products from foodservice
executives interviewed, 1979................................. 25


iv


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LIST OF APPENDIX TABLES


Table Page

I Monthly utilization and classification of milk at pool plants
in Federal Milk Market Order areas 6, 12 and 13, 1978........... 50













































v


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ACKNOWLEDGEtEFITS


This study was funded in part by a grant from the Dairy and Food

Nutrition Council of Florida. Thanks go to Dr. C. Bronson Lane, Executive

Director, for his interest and support. Dairy Farmers, Inc., as the

parent organization for DFNC, also is due appreciation for its support

and its progressive approach in research. Mr. Charles Williams, President,

Dairy Farmers, Inc., and staff members Mr. William R. Boardman, Executive

Director and Mr. Ron Hamel, Director of Information Services, are due

thanks for their leadership.

We acknowledge with :!.nr,.'tc'ation the assistance of members of food-

service organizations contacted during the study, as well as the help of

Florida dairy processors in providing information for this study.

Typing, manuscript preparation and su.,r "ies of data were done by

Ms. Ellen Bishop, and Ms. Patricia Beville.













This report is circulated without formal review by the Food and
Resource Economics Department. Content is the sole responsibility of
the authors.


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SUMMARY


The foodservice sector has grown greatly in recent years. Milk and
dairy products have not shared in this expansion of away-from-home
eating.

Objectives of this study were to determine the importance of the
foodservice market to the Florida dairy industry, and if the dairy share
could be expanded.

Executives from public eating places (PEP's) and captive outlets
(CO's) having a total of 1,900 locations in Florida were interviewed,
along with Florida dairy processors.

The Florida dairy industry produces mainly Class I fluid products,
with 93 percent of total volume in Class I. Emphasis in the study was
placed on fluid milk as a beverage in foodservice uses.

About 26 percent of all Florida dairy products and 23 percent of
Class I production go to the foodservice market. Individual processors
sell less than 15 percent of their volume to foodservice outlets, while
other plants sell over 40 percent of their output in the foodservice
market.

Milk and other dairy products are usually delivered to the in-
dividual foodservice outlet or location by a local processor or dis-
tributor. Schools and many other CO's usually take fairly large quanti-
ties of dairy products, but volume delivered to individual PEP's is
often small.

Fast-food restaurants typically offer the smallest number of different
dairy productst, medium-priced restaurants offer more, and better restaurants
make a wide array of dairy items available. Schools offer about half of
the dairy products included in the study, while hospitals and other CO's
offer nearly all of the items.

Quantities of fluid milk sold weekly vary widely among foodservice
Oc erati.jnL. Captive outlets sell more milk per outlet and more per
customer than PEP's. Weekly fluid milk sales ranged from 18 to 312
gallons per CO, and from 5 to 75 gallons per PEP.
Milk accounted for 2 to 10 percent of beverage sales in PEP's, 90
percent in schools, and 10 to 40 percent in other CO's. Carbonated
drinks represented 50 to 90 percent of beverage sales in PEP's and 20 to
80 percent in CO's other than schools.

Whole milk was the primary fluid item in most foodservice organizations
contacted. Some schools and hospitals offer only low-fat milk, however.

vii


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About half of fluid milk sales in PEP's was made at breakfast, with
25 percent at noon, and 20 percent at the evening meal. These pro-
portions varied widely, however, depending on the type of PEP and
clientele makeup.

Fluid milk costs foodservice operators more than carbonated drinks,
coffee or tea, or other non-alcoholic beverages. Milk cost is 50 to 60
percent of its retail price, compared to 12 to 23 percent of retail
price for the other beverages.

Foodservice operators were complimentary of milk quality and
cleanliness, and of Florida processors' sanitation, quality control and
service. Processors have some problems in supplying fo.jd ~ri-ice outlets,
such as restrictive delivery hours, small volumes per stop and a few
others.

Bulk disperil.er'- for milk are preferred by :aIny foodservice ex-
n,-. 4 4 v- I nnrnr r vr I4- -A k-r. "-f rA 4 % A i n In r
ecutives and by processors, but are not used in many arIas due to local
health regulations. Several findings regarding half-pint cartons were
reported.

Florida processors expect Class I sales to foodservice outlets to
increase about 5 percent in the next five years. Foodservice executives
s.pecrt per customer sales of whole milk, cream and a few other products
to remain stable, while low-fat and skim milk, cultured and flavored
products and some others are. expected to increase in per customer volume.

Milk and dairy products had some advantaries over non-dairy :..j petitors
in foodservice uses, but non-dairy items had some significant advantages,
too.

The foodservice market is expected to continue growing. Foodservice
executives interviewed felt that the dairy industry must offer more
D!-Lucct variety, improve technology, and become more efficient in distri-
bution to capture more of this market.

Promotion opportunities are relatively limited. Processor and
foodservice executives cited several obstacles. Some carefully targeted
promotions might be accepted by the foodservice sector. Coordinated
effo-ts by all -egnents of the dairy industry would increase probabilities
for success of promotion programs.










viii


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FOODSERVICE TMA'rPET'- FOR FLORIDA NiL-


Kary Mathis and Robert L. Degner

INTRODUCTION

Americans are spending more time and money eating out each year.

Expenditures for food away from home amounted to $77.3 billion in 1977,

35 percent of all consumer food expenditures. This was an increase of

140 percent over the 1967 level of $29.7 billion for food away from

home. -:Eprditures in 1967 were 32 percent of total food expenditures.

The foodservice sector -- business serving food -- has grown

rapidly in recent years. The number of eating and drinking places in

the U.S. increased from 348,000 in 1967 to 372,000 by 1977. Sales of

these establishments grew by 167 percent between 1967 and 1977, to $63.6

billion.

Growth of fri-ncv-sed and chain restaurants has been the most

publicized portion of foodservice expansion, but other public eating

places such as cafeterias, hotels, motels and vending outlets have grown

substantially as well. The institutional or captive outlet area which

includes schools, colleges, hospitals, plant and office feeding, and

similar types of foodservice operations, has also grown rapidly.


KARY I'"IHI-, is professor and ROBERT L. DEGNER is assistant professor
of food and resourc'- economics, University of Florida.


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2


Milk and -iny dairy products have not shared fully in this food-

service growth. Dairy products ac:ccntei: for 17 cents of each dollar

sent for farm foods in 1976, compared with 20 cents of each dollar for

food at home (Table 1).


Table 1.--Share of consumer expenditures for farm foods by product
group, 1976.


Expenditure share
Product group At home Away from home

--------- Percent-------------

Meat 35 51
Poultry 13 6
Dairy 20 17
Fruits and v>..^etables 16 13
Bakery 4 4
Other 12 9

Total 100 100

Source: Technomic Consultants.


1nsot1Ier disturbing trend is declining consumption of dairy products.

Per capital :uinsumiiti,-rn of all dairy products dropped about 4 ierce-rrt.

from 1967 to 1977, but there were sizeable differences in consumption
chlanqe for different dairy products. Fluid whole milk, cream and

several other products showed declines in per capital sales, while low-

fat milk, cheese and some other items showed increases (Table 2).

The foodservice market seems likely to keep growing. A Bureau of
Labor Statistics consumer expenditure survey showed that the proportion

of food budget spent away from home was highest for upper income, single


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Table 2.--D,-iry product sales per


Product 1967 1977 Changes

------ Pounds ----- Percent

Fluid whole milk 230.0 167.0 -27.4
Low-fat fluid milk 37.6 88.4 35 1
Fluid cream 6.1 5.6 8.2
Butter 4.9 4.0 -18.4
American cheese 6.0 9.0 50.0
Other cheese 3.7 6.9 86.5
Cottage cheese 4.5 4.8 6.7
Evaporated and
condensed milk 9.0 4.3 -52.2
Ice cream 18.1 17.8 1.7
Ice milk 6.9 7.5 8.7
hnerbet 1.5 1.5 0
Nonfat dry milk 5.0 3.2 36.0

Total 333.3 320.0 4.0

Source: 1978 Handbook of Agricultural Charts, Agriculatural Handbook
No. 551, USDA.

consumers and small families. The characteristics that generated the

eating out boom are even more evident now than in the past.

For e>cmple, a family of three with an income of $20,688 spent $777

edtin' away from home, while a three-person family with $7,434 income

spent $372 eating out (Gallo, Boehm and LeBovit). College graduates eat

out 50 percent more often than those ,ith less education. With 24 per-

cent of people 25 to 29 years old having four or more years of college

in 1977, compared with only 11 percent in 1960, more restaurant and in-

stitutional customers seem assured.

Small families are more likely to eat out than large families. The

average number of persons per household dropped from 3.3 in 1960 to 2.9


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capital and changes, 1967, 1977.








in 1977, and over half of the households had only one or two p-'erson..

Families where the wife is employed outside the home eat out more fre-

ue't.ly. Data frcrn the National Restaurant Association show that the

family with a working wife will eat lunch out 15.5 times and eat dinner

away from home 10.9 times during an 8-week period, compared to 12.7

times and 0.1 times, respectively, for families where the wife is not

employed outside the home (Stafford and Wills). Thie proportion of

females in the civilian work force grew from 33 ,::ernt; in 1960 to over

41 percent in 1978, and married women with dependent children are a

major part of UIthe female work force.% II II
Many of these same population chara.-:teristics are pren,.t in

Florida. While per capital income in the state is about 95 percent of the

U.S. average, eight counties show per capital incomes above the national

a /erc-.. Tnespe counties have 47 percent of Florida's population. Also,

average household size in the state is 2.7 persons, compared with the

U.S. average of 2.9 noted earlier. Females made up about 38 percent of

the civilian work force in Florida in 1977, compared with 34 er-cent in

1960. However, a -rowing population with growing incomes and a large

tourist industry strengthen the foodservice sector in the state.

Florida population grew at 3.5 percent per year from 1970 to 1976,

compared with 0.9 percent annually for the U.S., and per capital income

inc-eased 65 percent from 1970 to 1976, slightly higher than the U.S.

percentage increase. This growth is expected to continue.

Alth-ujgh detailed data are not available on the Florida foordiervice

sector, several indicators show the growth in recent years. The number

of all foodservice establishments in the state increased from 17,267 in

1971 to 24,370 in 1977, a 41 percent increase. Sales of restaurants and


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lunchrooms grew from $1.5 billion in 1972 to $2.9 billion in 1977, an

increase of 97 percent.

Objectives and Procedures for the Study

The Florida dairy industry is concerned with the growing food-

service market, and with determining if the dairy share of this market
can be expanded. Specific objectives were to:
(1) Determine the quantities used and key factors affecting the

use of milk and milk products by foodservice outlets in Florida.

(2) Identify needs and problems of -ood:irice firms using milk

and milk products, and )ppf1'jtL.rities for expanding milk use.
P'-ce uret used included review of published data and previous

studies, and interviews with Florida dairy processors and foodservice

executives. P'r-vioiu reports and published data on the foodservice

industry are few. The U.S. Department of Agriculture (USDA) conducted a

detailed study on type, quantity and value of foods used Ijrirn 1966-

1969 (Van Dress). Another USDA study (Linstrom and Seigle) and USDA
periodic reports (Manchester, Stafford) provided some information on

trends in foodservice markets and on consumer characteristics .ff-ctin,]
the foodservice sector.

Structured, in-depth personal interviews with executives of Florida

foodservice firms provided much of the information for this study. Food-
,er'vice outlets are classified as public eating places (PEP) or captive

outlets (CO). Examples L, public eating places are restaurants, cafeterias,
fast food outlets, hotels and motels, drug sture~, vending firms, and
entertainment outlets, such as movie theaters and amusement parks.


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Captive outlets include schools, colleges, hospitals and nursing

homes, military installations, airline and railroad foodservice, and

plant and office feeding. E.-,c'.'tives in firms and outlets re :''e.;nt-

ative of each type of away-from-home operation were interviewed using a

detailed questionnaire (see Appendix). Most were at the corporate or

retioriil level but several managers of individual outlets were inter-

viewed as well. A total of 25 different foodservice organizations, with

about 1,900 outlets in Florida, were ci-tacted (Ta'rle 3).

'a.Iny. of these organizations operate nationally and internationally.

The firms listed in Table 1 had a total of 20,500 Jutlic eating places

and 27,500 captive outlets.

In addition, all Florida dairy processors were asked to complete a

questionnaire (see Appendix) indicating ;u~rri-et volume and sales trends

in foodservice outlets, problems with this market and other relevant

factors (see Al.penliix). Approximately 75 percent of the fluid milk pro-

cessors in the state completed questionnaires. These processors account

for approximately 90 percent of the state's fluid milk volume.

"'IDINGS

The Florida dairy industry, from farms to processors, produces

mainly Class I fluid milk and products. About 93 percent of total

volume in Federal Milk l~arkr: Order Areas 6, 12, and 13 is in Class I

products, with 7 percent in Class II items (Nord)1. Therefore, fluid



Class I produJts included are whole, skim and low-fat milk, flavor-
ed and milk drinks and buttermilk. Class II items are half and half,
light and heavy cream, frozen desserts and a small amount of other products.
Areas 6, 12 and 13 include all of Florida except for Escambia, Okaloosa,
Santa Rosa and Walton Counties.


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Table 3.--Foodservice firms included
locations in Florida.


in study, and number of outlets or


Public eating places Outletsa Captive outlets Locationsb


Burger King

Chick-Fil-A

Collins Food Int'l
(Kentucky Fried Chicken)

Kentucky Fried Chicken
of Florida

McDonald's

Semoran Management
(Pizza Hut)

Denny's

Sambo's

Sizzler Family
Steak House

Red Lobster

Sweden House

Morrison's

Maas Brothers

Eckerd's

Walt Disney World

Unifood (Sheraton)


190

25


30


205

225


14

43

43


Alachua General
Hospital

Veterans Administration
Hospital, Gainesville

Alachua County Schools

Dade County Schools

Dobbs House

Eastern Airlines

Wometco

Morrison's

Servomation


1 (Y19


aNumbers are approximate as of June 1979. Many firms are opening new
outlets frequently.
bMany firms will have more than one operation at a given location.
For e.*mle, hospitals typically have patient feeding, a cafeteria, and
a snack bar. Firms such as Wometco, Morrison's, or Servomation have
school, college, plant and office, vending and several other types of
outlets.


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1


1

31

250

13

11

500

40

18


864









milk received the most emphasis in interviews and other portions of this

study.

Milk, whether whole, skim or low-fat, is used as a beverage and in

cooking and food preparation by foodservice outlets. Nonfat dry milk

also has many uses in cooking, but was not included in most aspects of

the study. Most evaluations and discussions were concerned with milk as

a beverage.

Detailed firdinri: are discussed in this section under the following

headings: Volume and sales characteristics; costs, prices and margins;

handling, distribution and undc':.ing; and market expansion possibilities.


Volume and Sales Characteristics


About 26 percent of all Florida dairy products go to foodservice

outlets, with 23 percent of Class I production into this market (Table

4). Florida dairy plants in Federal '.-'ret Order Areas 6, 12 and 13

produced about 2.40 billion pounds of milk and dairy products in 1978,

Table 4.--Florida dairy production: Total, Class I and proportion to
foodservice markets, 1978.


:duct Totala Foodservice use


1,000,000 Pounds Percent

Class I 2,052 472 23
Total 2,402 LL 26

a
Volume from plants in Federal Milk Market Order Areas 6, 12 and 13.

Source: "Florida Fluid Milk :iic-t and Florida dairy processors.


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of which 2.05 billion pounds were Class I products. The shares of Class

I and total production to foodservice uses are based on data provided by

processors.

Individual processors reported d a wide range of sales to PEP and OU

foodservice customers. Some plants sell more than 40 percent and some

less than 15 percent of plant volume to foodservice markets. Sales to

PEP's accounted for less than 5 percent in some plants, up to 20 percent

of others' volumes. Movement to CO's ranged from under 8 percent of plant

sales to 30 percent.

Schools represented the greatest share of CO volume in most plants.

Processors with higher percentages of sales to PEP's generally supplied

tourist areas and entertainment complexes with a high concentration of

restaurants and motels.

Foodservice Operations


Milk and dairy products are typically delivered to the individual

foodservice outlets by a local dairy plant. Individually-owned or franchised

outlets usually negotiate contracts with the local plants, while chain

restaurants often have regional or state contracts for all their outlets

with one dairy processing firm.

In practically all cases, fluid milk and dairy products are deliver-

ed directly to individual foodservice outlets by local processors or

distributors. Bread and fresh produce are other items distributed
similarly. Chain restaurants and large C's usually have their own4
-, I0 14 J _- ... I lA-0"31 Ai S r, I UI U 'J 3 U3UU IA I iuv_ L IaI I UVII

distribution centers for nearly all their other items.

The various types of foodservice operations purchase and use

different combinations of milk and dairy product:. "Typical" fast food


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outlets have a limited number of dairy items, while medium priced PEP's

offer more. Better restaurants offer the widest array of dairy products

(Table 5). Schools offer about half of the items available while hospitals

usually provide all of those listed. It is emphasized that the groupings

in Table 5 are representative of the .i-odlJt use of the types of outlets

shown. Given firms or npe' -itions may use fewer or many more of the

products discussed.

Foodservice executives were asked for quantitative information on

product sales, costs, prices and margins, with emphasis on the fluid

milk products. Ere.jutives were asked quantities of milk and dairy

products used and sold, each milk item share of total milk sales, and

milk share of total beverage sales.

Volume and sales data for foodservice outlets are generally ex-

pressed in amounts per week, or quantities per customer. The nu-Iper of

individual customers or meals served during a week ranged from 1,000 to

14,000 per outlet d'a,.oinj the PEP's providing such data (Table 6). Some

national fast food firms do not make such information available because

of the intense competition in their market .,eqren-ts.

Captive outlets also have a wide rJr.ge of customers or meals per

unit per week. Those reporting had from 750 to 10,000 meals weekly

(Table 6), Captive outlets differ from PEP's in several ways. First,

most school meals are served at lunch, but many serve breakfast also.

Hospitals serve three meals daily to patients, plus morning and afternoon

refreshments. Many hospitals also provide a cafeteria for visitors and
employees, as well as a snack bar. Airline operations provide snacks

and full course meals, while vending outlets provide snacks and beverages.


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Table 5.--Milk and dairy products used
f.ol:,oiF .ice outlets.


by different types of Florida


Products used by PEP's Products used by CO's


Group I


Whole milk
:.Ihcclate milk
Shakes
Non-dairy coffee whitener
Margarine

Group II

Low-fat milk
Coffee cream
Co'ttge cheese
Imitation sour cream
Ice cream
Sherbet
Butter

Group III

Skim milk
");t. tert .ilk.
Whipping cream
Toppings
Sour cream


Fast food restaurants Group I
Medium-priced restaurants Groups I
and II
Better restaurants Groups I, II
and III


Whole milk
Low-fat milk
Chocolate milk
Sha:.es
Cottage cheese
Yogurt
Ice cream
Ice milk
DU ttr
Margarine

Group II

Skim milk
Buttermilk
Non-dairy coffee whitener
Coffee cream
Whipping cream
Toppings
Sour cream
Imitation sour cream


Schools Group I
Hospitals GroLp', I and II


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" I










Table 6.--Weekly customer count, fluid milk sales as beverage, and sales
per customer, Florida foodservice organizations included in
study, 1979.


Outlet type and
customers per week



Public eating places

Fast food


1,000 1,500

4,000 5,00(

Medium priced

3,000 5,000

7,000 8,500


Total


Gallons


12.5 62.5

5.5 12.5


9.0 16.0

10.0 75.0


Fluid milk sales
Per :ustot-


Half pints


.20 .67

.02 .04


.02 .14


Better


4,000 10,000


6.0 9.0


Cantive outlets

Schools


3,000 3,500


187.5 218.8


Hospitals


9,000 10,000


281.0 312.5


Airl ines


2,000 6,000


18.0 34.0


Thursday, May 10, 2007.max


.02 .01


.14 .09









These differences in operations and types of clientele result in

wide differences among PEP's and CO's in kinds and volumes of milk and

other dairy products sold. Milk sales vary considerably j-T :,n- firms of

the same type, and among individual outlets in the same firm. Thus,

data reported below should be taken as representative of a given kind of

foodservice operation, but should not be inte'-r. ted as data from any

one firm nor as an average of all firms of a given type.

As shown in Table 6, the fast food outlets with 1,000 to 1,500

customers weekly reported larger milk sales per customer than fast food

firms with 4,000 or more rLct mtoer; per week. Medium-priced restaurants

with 3,000 to 5,000 customers showed larger milk purchases per customer

than rest3urants with 7,000 to 8,500 customers. Better, more expensive

restaurants had the lowest per customer sales of PEP's.

Captive outlets generally reported higher milk usage per customer

than PEP's (Table 6). As noted earlier, schools serving meals under

Federal school lunch programs are required to provide a half-pint of

milk for each student meal served. Even airlines, who place milk on

meal flights in a ratio of one half-pint per seven to eleven passengers,

reported higher per customer milk volumes than most PEP's. Airline and

flight foodservice executives pointed out that the ratio of milk to

passengers was one carton to three or four passengers on flights serving

Orlando, because of the large nunbe" of families with children on those

flights.

When asked what share of total beverage sales was accounted for by

fluid milk, foodservice executives could not always provide percentages.

However, practically all stated that milk had the smallest share of the

four categories of beverages considered. Milk accounted for 2 to 10


Thursday, May 10, 2007.max









percent of beverages in nearly all public eating places, with carbonated

drinks representing as much as 90 percent in some PEP's (Table 7).

Carbonated beverages were ranked first in sales in both PEP's and

CO's (excluding schools) and coffee and tea combined ranked second

(Table 7). Milk accounted for 90 percent of beverage sales in school

cafeterias, and 10 to 40 percent in other CO's.

Executives were questioned in detail about the individual fluid

milk products used, and each product's share of milk sales. Whole milk

was the most widely used. Some schools and hospitals offer only low-fat

milk. Some hospitals and nursing homes offer both low-fat and skim

(Table 8).

Flavored milk constituted 75 percent of milk volume in schools

where offered, but is not served at all in some school systems. Flavor-

ed milk represented up to 15 rir:cent of milk volume in hospitals and

other CO's and up to 25 percent in PEP's (Table 8).

About half of all milk sold, on the average, is sold at breakfast,

according to respondents in PEP's (Table 9). However, the range in the

share of daily milk sales at breakfast was very wide, as was the range

in sales at other mealtimes. On the average, 25 percent of the day's

milk volume is sold at noon and 20 percent at suppertime in PEP's contact-

ed (Table 9). The remaining 5 percent is sold as snaki.- between meals.

Many executives were unable to give percentage shares by mealtimes,
but could rank the meal or snack occasions in milk volume. Breakfast

was r.iriaed first in milk sales, but the noon and evening meals were

close behind, according to this ir-oun of executives. Whether milk

volume at different meals was reported in percentages or by rank, there

was a wide range among PEP's as to when most milk is sold (Table 9).


Thursday, May 10, 2007.max






15


Table 7.--Beverage sales, shares and ranks in Florida foodservice outlets
in study, 1979.



Captive outlets
Public eating places Range, share of
Range, share of beverage sales Rank
e'.,er a beverage sales Rank Schoola Other School Other

------ Percent ------ --- Percent ---

Milk 2 10 4 90 10 40 1 3

Carbonated drinks 50 90 1 -- 20 80 1

Coffee and tea 20 40 2 -- 40 60 2

Other beverages 5 25 3 10 5 20 2 4


a
Sales through school meal programs.

b
Includes fruit and vegetable juices and non-carbonated drinks.


Table 8.--Shares of milk sales, fluid milk products in Florida Fc'ud'~.ev/ice
outlets in study, 1979.



Range, share of milk sales
Fluid milk Public eating Captive outlets
products places Schools Hospitals Others


--------------------------- Percent --------------------


Whole milk

Skim and
low-fat milk

Flavored milk

Buttermilk


75 100


0 10

0 25

0 1


0 90


0 90

0 75


0 80 85 100


15 60


1 -2


0-5

0 -15


0- 1


Thursday, May 10, 2007.max


--






16


Table 9.--Share of fluid milk sales by mealtinre5, Florida public eating
places in study, 1979.


Share of daily milk sales
Average ,-.'


Breakfast

Ilorr'ing snack

Noon

Afternoon snack

Supper

Nighttime snack

Total


-------------- Percent -----------

50 10 100

2 3 10

25 5 80

2 1- 7

20 5 -70

1 0-5

100 --


Table 10.--Beverages served as a share of family meal occasions, U.S.,
1978.



Share of family-eater occasions
Beverage Breakfast Noon 'jppe


---------------------- Percent ----------------

Cc ffv 58.6 t9.9 "5.8

Milk 9.0 4.8 3.9

Hot or iced tea 2.9 7.0 6.2
a a
Other beverages 2.8 ---- --

Soft drinks 2.2 36.7 26.1
a
Shakes and malts ---- 4.6 4.9


a
Not reported.

Source: Florida Restauranteur, January 1979.


Thursday, May 10, 2007.max


I


ii. sr A J-,.. .









Tiiese differences are due primarily to the type of outlet and the

makeup of its clientele. Fast food operations typically have the largest

proportion of customers and total food sales from 11:00 a.m. on, so

breakfast milk sales are not as large as in other typc- of restaurants.

Some outlets do not open until 11:00 a.m., and have their aIdr4- t trade

in the evening.
Medium-priced restaurants, many of which are open 24 hours a day,

sell a high proportion of daily milk sales in the after-midnight and

early morning hours, and with noon meals. According to executives with

these firms, these sales patterns reflect the large number of young
working adults that patronize the medium-priced restaurants.

The findings on shares of daily milk sales are supported by in-

formation published by the Florida Restaurant Association. Milk was

served with 9 percent of breakfast meals, compared with less than 5

percent at noon and less than 4 percent at supper (Table 10).

Costs, Prices and Margins

Fluid milk is one of the most costly beverages handled by foodservice
-zpe nations While milk sales prices are kept near those of soft drinks

and other non-alcoholic beverages, the cost of milk to the outlet is

considerably higher resulting in smaller profit margins for milk. Milk

costs the foodservice operation 50 to 60 percent of its retail price,

compared with 12 to 23 percent for other beverages (Table 11).

Relatively few of the foodservice operations contacted served beer,
wine, or cocktails. Those that did reported their costs as 25 to 60

percent of retail price. Actual costs and retail prices for alcoholic

beverages are, of course, generally above those for milk. Because these


Thursday, May 10, 2007.max









Table ll.--Beverage costs and retail prices reported by foodservice
executives included in study, 1979.


Cost as share r.*~'1le Gross
Beverage of retail price Cost Price profit

---- Percent --- per 8 ounces

Milk 50-60 25 40 15

Carbonated drinks 17-23 6 30 24

Coffee and tea 12-22 4 30 26

Other 14-18 7 45 38


a
Non-carbonated drinks, fruit and vegetable juices.


items are not close competitors for milk in the foodservice market, they

were not discussed in detail with executives.

The cost of fluid milk compared with competing beverages was an

overriding factor in the views of nearly all foodservice personnel

contacted. None of the executives considered placing their retail prices for

milk high enough to provide a mnrgirl similar to other beverages. This

is not surprising, since the cost of milk at $0.25 per 8 ounces would

have to retail for $1.10 to provide a cost/retail price ratio similar to

some carbonated drinks (Table 11). Thus, the higher cost and smaller

margin for milk, relative to competing beverages, was an overriding

factor in most respondents' comments. In foodservice executives' views,

the cost-margin factor was a major barrier to promotion programs or

other efforts to increase milk sales. Many expressed concern that

promotion of milk would reduce sales of higher profit beverages.


Thursday, May 10, 2007.max








Costs for cream and butter were also obstacles to increased use of

these items, according to many executives. The lower cost of margarine,

non-dairy coffee whiteners, and other non-dairy substitutes was the

pri jry factor in their substitution for butter, cream, sour cream and

other dairy products. All those contacted acknowledged the quality and

desirability of butter, cream and other dairy products. These items

help to :grJade the "quality image" of restaurants, executives said, and

some have resumed using them in place of non-dairy items for that reason.

Nonfat dry milk is used in cooking by several foodservice outlets,

particularly large institutional feeders and fast food operations with

centralized preparation. This product and its use and characteristics

were not discussed with executives, due to the specialized nature of its

use and the fact that nonfat dry milk is not produced in Florida.

Handling, Distribution and Packaging

Milk and most other dairy pi'odu.cts are delivered to individual
fo:jdser,,'ce outlets by local dairy processors and distributors, as noted

earlier. Milk, as a fresh and perishable item, is delivered from once

to five times weekly, depending on types and quantities of products

used.

Very few problems with product quality, processor services or milk

packaging were noted by foodservice executives. Practically all those

interviewed praised the overall quality and sanitation of milk and dairy
r and were ct-pli Imentary of processors' delivery services.

While a few foodservice operations occasionally had milk out of date or

spoiled, executives interviewed said these problems were due to handling

or lack of care in the foodservice outlet.


Thursday, May 10, 2007.max









Schools .-ep)ted a few more problems. Most _ornplaints dealt with

milk being too warm or with leaking or dirty cartons. Comments from

school fodrlsrvice directors were prompted partially by the very large

volumes of milk handled and by their concern for student health and

nutrition. School personnel admitted that cafeteria workers and student

complaints about milk not being cold eFnio clh were partly due to handling

methods in schools and to lack of desirable storage and refrigeration

equipment. Some schools cannot afford suitable refrigerated storage

cases in school cafeterias.

Schools also have fairly restrictive hours, so milk deliveries must

be made on schedule. Dairy processors occasionally had difficulty in

meeting these schedules, but problems were rare, overall. Delivery

times are also important to PEP's. Restaurants do not wish to handle

milk deliveries (or any product delivery) Jurinr rush hours. Generally,

executives from PEP's had no complaints about times of dairy deliveries,

but said processors and distributors were most willing to accommodate

restaurant hours and delivery times.

Processor delivery personnel usually stock foodservice refrigerated

stro~-a with needed arrcurntf. of milk and other dairy products, rotate

stock on hand, check ;redLiCt dates and collect any reLJr-ned merchandise.

This level of service, considering that many PEP's sell less than 100

half-pint cartons of milk a week, is costly to the processor. Part of

the cost of an individual, small-volume delivery may be offset by hain.i

several such stops close together. Where foodservice outlets are in or

near major shopping centers which also contain supermarkets, delivery

costs per stop are lower than for isolated foodservice accounts. Never-

theless, processors feel that low volume per delivery stop is a problem

for them.


Thursday, May 10, 2007.max






21

Other problems with PEP's that jr.:ce'.Sr' reported were demandd. for

added service and for additional equipment. Processors said that several

of their PEP customers requested or expected them to provide refrigerated

cases, milk dispensers and other equipment for handling dairy products,

at no cost to the foodrservice firm.

Problems that processors noted with CO's were restrictions on

service and discontinuity in contracts. Schools have restrictive schedules

for delivery times, as already mentioned and other institutions also

i-npose other restrictions on deliveries. Schools, hospitals, military

installations and other CO's usually contract annually with the -roc:'t.ur

who submits the lowest bid for supplying milk and dairy products. A

processor previously handling such a large volume account may suddenly

be without that volume if his bid is not accepted.

Both processor and foo,,serv'ice executives *-e-i'rrtte.. wide diffFrences

between health ordinances in different cities and counties concerning

use of milk dispensers. Some local ordinancesr or enforcement policies

allow bulk dispensers while others do not. Processors and a number of

foodservice executives preferred dispensers over half-pint ca-toris.

Dispensers can be serviced more quickly and easily than half-pint

storage cases, milk can be kept colder, cost per serving is lower and

profit margin larger than for half-pints. However, dispensers must be

kept clean and sanitary and dispenser refills may be too heavy for some

foodservice workers. Further, use of a dispenser requires use of serving

glasses. Even so, more f'.uds,~rivice outlets, especially P'EP's, would

probably use dispensers if not restricted by health ordinances.

Foodservice executives, particularly those from school systems,

noted that the standard case of half-pints was sometimes too heavy for


Thursday, May 10, 2007.max









female workers in school carete-'as. These same executives also comment-

ed on occasional cartons that were dirty, leaking or difficult to open.
On the other hand, some PEP executives felt the individual half-pint
carton was attractive to consumers, and was easier to serve than milk

from a dispenser.
Most foodservice personnel were satisfied with the half-pint con-
tainer, or with an eight-ounce serving if using a dispenser. However,
executives from one firm noted that they used a 12-ounce glass for
serving water, tea or carbonated drinks. They feel that a half-pint of
milk in this size glass is noticeably less than conri'eting beverages and
contributed to less acceptance For milk.

Another firm, a national restaurant chain, uses nine-ounce glasses
because its corporate headquarters and many of its outlets are in
California, and a California statute requires that restaurants advertis-
ing eight-ounce servings must provide a full eight ounces. Thus, the

firm uses nine-ounce glasses to make certain that this requirement is
met.

California regulations also allow the sale of a one-third pint
carton, and some foodservice firms there have begun using that size
container. In contrast a fast food firm in Florida began selling one-
pint cartons of milk rather than half-pints. Executives in this chain

report selling the same number pints as they previously sold half-pints.
CO's, especially airlines, serving breakfast would like to offer a
four-ounce carton of milk for use on cereal. However, airlines, airline
cates-es and other nationwide firms felt they must standardize containers,

and very few processors offer a four-ounce carton of milk. Such a

carton is not offered because total volume of requesting fir'is is not


Thursday, May 10, 2007.max








largc enough to make the addition economically feasible, according to an

executive.

M! 'rket E::xp. ani1- n Prj ifbil ti-e

Florida dairy processor'. generally expect Class I milk sales to
tr.oe:-vice outlets to increase in the future. Processors were asked

what the changes in their sales had been for the past five years, and
what changes, if an;, they expected for the next five years. The composite

trend e-.,'pected for the Zn-ringl five years was a growth in sales of 5
percent.. Sales to PEP's were e:,pect i to grow slightly more than volumes

to CO's. Only one p!'.eaesso expected Class I sales to foodservice
outlets to decline, and only t',c expected no -hanqe in Class I volume to
the foodservice market.

Foodservice executives could not estimate per-centage change: in

fluid milk sales but did state e:,.pecter trends in milk, other dairy
p ductss and dairy biL-titutes they used most. Generally, the ."odu);"

that have increased in the past were the items most foodservice ex-
ecutives expected to continue growing. Table 12 su iniar'izes executives'

,iew- on future trends, and compares these with data on per capital

:hargre', over the 1967-1977 period from Table 2.
The group of products that fc.dservice respondents expected to remain

stable on a per customer basis have declined in per capital consurlption,

with the exception of margarine. Executives expect sales per customer

to I,-i...... for f it. ". Exvrcept for butter, per cA.rit. ,:ns-.i;.,ipti.on
of these items has increased over the past decade (Table 12).
Tnii executives' reversal of butter and margarine from the historical

trends reflects a renewed consumer interest in the perceived quality of


Thursday, May 10, 2007.max









Table 12.--Dairy r r'Jduct and dairy substitute sales trends e.-.peL Ltr by
foodservice executives, 1979, and changes in per capita
consumption, 1 67-1977.



Changes in per capital
Product Expected sales trend consumption, 1967-1977

------ Percent -----

Whole milk Stable -27.4
Cream Stable 8.2
Sour cream Stable ---- a
Ice cream Stable 1.7
Sherbet Stable 0.0
Margarine Stable 20.0
Low-fat milk Tn:re,-.ing 135.1
Skim milk Increasing -----a
Flavored milk Increasing -----a
Shakes Increasing -----a
Ice milk Increasing 8.7
Yogurt Increasing 474.5
Butter Tn reasing -18.4
CLttdaj cheese Inr:reas.ing 6.7
Imitation sour cream Increasing ---.-a

a
Not available.

butter and in consumer desires for "real" or "natural" products. Several

respondents added a ,.-Jtion, thciuh, regarding continued consumer concerns

over the fat and cholesterol content of dairy products, especially in

butter.

The "oodiervice per-.cjnanl were ;iskEd tf they considered milk and

other dairy Iroduct to have advantages over other becie-ges and non-

dairy substitutes. Tncy were also asked about the advantages of other

beverages and non-dairy products over milk and dairy items.

The advantages of each group of products over the other are summaries

of views and opinions by foodservice personnel (Table 13). The advantages


Thursday, May 10, 2007.max








Table 13.--t'jr;parisons of advantages of milk and dairy products, and of
other beverages and non-dairy products, by foodservice executives,
1979.


Advantages of milk and dairy products

Individual c;'t."'n is convenient for :jstco-ric, easier to serve, more
sanitary.
No free refills with milk as with coffee or tea.
Flavored milk is attractive to children
Milk is a favorite of .youl wor l.,iiw, adults.
Dairy products have an image of quality, cleanliness and nutrition.
Milk contributes to a family image and ,:tfmo.-phiere' for fast food and
other type, of PEP's aiming for family business.

Advantages of other beverages and non-dairy products

Lower cost, greater profit margin.
Easier handling, no refrigeration needed, less spoilage,
Larger volume, faste- turnover.
More promotion, more innovation in products.
l1ore attractive to children.


listed are highly subjective, and come from the executives' experiences and

judgments. The Jdvamntlae-- listed for dairy products indicate areas possible

for sales expansion. On the other hand, the advantages noted for non-dairy

products make plain the obstacles that must be overcome for dairy sales

expansion.

Foodservice executives were asked a hypothetical question regarding

non-dairy substitutes for fluid milk. The question was, "Suppose that

new substitute products for whole milk, low-fat and skim milk have been

developed. Assume that these are still primarily dairy products, but

part of the natural ingredients have been replaced by less expensive

vegetable products, resulting in a product that:

1. Costs you 10 percent less,

2. Ten percent of milk drinkers can detect a slight flavor difference

and prefer the all-dairy product,


Thursday, May 10, 2007.max









3. Dietary regulations permit its use as a milk substitute.

;*'ht would be the likelihood of your cp:e-.-tifr substituting the new product

for all-dairy products? Please rate the likelihood on a 9 point scale

where 1 is extremely likely and 9 is extremely unlikely."

Executives from PEP's uniformly rated their likelihood of using such

a product under the conditions specified at 9. Many comments reinforced

their stateiients that they would be extremely unlikely to use a product

that 10 percent of their customers would find unsatisfactory. Quality

was stated by several as a key factor. One executive said, "We want to

give our customers quality prodUUcts, and part LI synthetics simply won't

do."

Another stated, "When people ask for milk, they want the real thing."

Nutrition, particularly for children, was an important reason PEP operators

would not use a non-dairy substitute for fluid milk. One espr, den :

mentioned truth-in.-neru requirements as another reason for using 100 percent

natural milk. An astute comment by one executive was revealing: "There

are some things you don't play around with milk, coffee and hamburger."

There were two other as'eutf to the substitute question. First,

several executives said that a 10 percent saving was not large enough to

offset expected customer dissatisfaction. Secondly, some stated that

milk sales were so rrTall that they would not risk adverse reaction to save

a small Eriiint of money. For a PEP where 3 percent of customers buy milk,

a 10 percent saving is not significant.
Personnel from CO's put their ratings at the opposite end of the

scale from PEP executives, however. Cost savings on large volumes would

be significant for CO's, so executives from schools 'r. 1itals, and other

institutional feeders would be more likely to use a fluid milk substitute


Thursday, May 10, 2007.max








if one should be offered. There were exceptions to the '-atinr of "extremely

likely to use" by CO executives. Airlines and airline caterers had the

same rating as PEP's.


CONCLUSIONS

Paid growth and increased variety of the foodservice market has

attracted much attention. Dairy Farmers, Inc. is wise to investigate

this market and its potential for milk and dairy products. About one-

fourth of Florida dairy production goes to the Florida foodservice

sector.

With about 35 percent of total consumer food expenditures going for

away-from-home eating, it would appear that dairy products are not

receiving their "fair share" of consuluervs' atiar-out dollar. However,

comparing dollars :pltn on food away from home with those for food

consumed at home exaggerates the away-from-home proportion. Prices of

restaurant meals include many things other than the food used. Recent

USDA estimates of food expenditures using retail store prices for all

food items show away-from-home eating takes 25 percent of food pu-'chai'e

CManchester).
The USDA estimate also calculated food expenditures by members of

households, by taking out costs of meals served to servicemen in military

installations and restaurant employees, expense account meals by business

people, and meals served in institution and group quarters.

The total share of food expenditures paid for and cnnsuined by
people living in households thus drops to 17 percent, compared with the

35 -L.ent figure reported earlier for total expenditures for away-from-

home meals. Further, while total e.perditures for away-fr:~oi-home meals


Thursday, May 10, 2007.max








almost doubled from 1970 to 1977, et- enditures for food at home -- two-

thirds of all money spent for food -- rose 82 p=-r-ent in the same period.

The market for food, including dairy products, at home has thus

grown greatly in the past decade. Trends shown by USDA data, and those

projected by Florida dairy processors and foodservice executives, point

to the at-home market as the major one for Florida dairy products over

the IE:.. five to ten years.

Nevertheless, the foodservice sector should not be injured. This

market will continue to grow, though perhaps not at the rate of the past

10 to 15 ,eIrs. Foodservice executives interviewed expected per capital

sales of several dairy products to continue iri-reasing (Table 12).

Fluid whole milk and fluid cream, major items in the Florida dairy

industry, are not irio'i.j the products expected to show increases in per

capital sales, however.

Given this background, several conclusions regarding dairy product

potential in foodservice i,'r;.etl can be drawn. These are discussed

briefly below under the headings of iirriuc. development, distribution

and .:ckjaying, and promotion.


Product Develcprment

Many of the foodservice executives interviewed characterized the dairy

industry as n.IL innovative and having a limited product line. Compared to

its competitors in beverage sales, the dairy industry offers relatively
few p-n ,ucts, particularly for the foodservice market.

Specific product areas pointed out by foodservice respondents were

more flavored and novelty milk and dairy drinks, and a greater variety of

processed products, particularly cultured products building on sales


Thursday, May 10, 2007.max









ir.c-eases in cottage cheese and yogurt. Other' areas where foodservice

personnel felt innovation was needed were in extending shelf life, and

improving ease of handling for milk and dairy products. Such applications

of technology as ultra-high-t.err.-erature processing of milk and cream

were noted. Improved storage, dispensing and handling equipment would

also be welcomed by the foodservice industry. American consumers,

whether in -epensive restaurants or public schools, expect milk to be

served cold. Foodservice storage and handling methods frequently do not

provide this.

Cooking uses, and related containers, equipment and methods should

also be examined. Foodservice users, particularly large volume kitchens

or central preparation units, do not always have appropriate containers

or packs. Institutional recipes featuring milk and dairy prl-od.1t uses

in attractive items adaptePd for volume preparation and serving would be

well received. Seafood restaurants have a greater interest than in

previous year' in using butter in cooking and sauces, particularly in

drawn uses. However, pure butter senar-ate and is more difficult to

handle than non-dairy or partially-synthetic products now widely used.

Sound and aggressive efforts to solve these kinds of problems could open

new markets.

Distribution and Packaging

Recent increases in fuel and tradn';purtation costs only emphasize
the importance of improving distribution efficiency for dairy pro*?*'-::t:..

Milk and dairy .ir-ujc;ts are particularly dependent on timely refrigerated

transportation and handling. Foodservice outlets often handle relatively
small amounts of variety of products. As distribution costs rise, such
low-volume stops are less attractive to processors.


Thursday, May 10, 2007.max









Improved distribution efficiency will be necessary for the dairy

industry simply to maintain its share of the foodservice market, and

essential for any market increase. Of course, Florida dairy processors

are directly concerned with distribution to foodservice operations,

while dairy farmers are primarily concerned with pickup of milk from

their farms. Trchniquew are available for evaluating collection and

distribution systems, and for devising efficient transportation net-

works.2

The pns'bility of dairy processors delivering to chain restaurant

distribution centers could also be investigated. Several national firms

maintain distribution centers in Florida which supply their outlets with

virtually all of their food and supplies. Processors might be able to

deliver truckload lots to these centers rather than making individual

stops for very small deliveries. One major problem is that of getting

fluid milk and other date-coded products to individual outlets quickly

enough so that the products will be used before expiration. New products

or new eth~i~Io could contribute here, also.

The dairy industry should be mor-e vigorous in determining food-

service needs and in attempting to meet many of those needs. The industry

as a whole could possibly help to clear up confusion or conflict in

local ordinances affecting milk dispenser use in foodservice outlets.

As stated earlier, several foodservice executives would prefer to use


2
See Reducing Milk Tran_,.Jrtj.tion Costs for Upper Florida Producers,
by Robert L. Degner and Kary Mathis, Industry Report 78-1, Florida Agri-
cultural Market Research Center, Food and Resource Economics Department,
University of Florida.


Thursday, May 10, 2007.max








dispensers because milk would cost them less per zervini than with half-

pint cartons, and they feel they would sell more milk as well. Processors

would also prefer to deliver dispenser refills to many kinds of outlets.

The industry might also wish to explore the feasibility of offering

four-ounce cartons to airlines, other CO's or other outlets serving
breakfast. While the initial reaction would be to say that milk sales

would be reduced, it is possible that this attention to specialized

requirements and more aggressive marketing could generate more milk
sales. Dairy industry per-onnel should also work with foodservice
uperAtions to sell pint instead of half-pint cartons in certain kinds of

outlets.

Schools appear to be more concerned with cartons and carton problems
than other types of foodservice outlets. However, the school foodservice

directors interviewed did not rate those problems as particularly severe,

and were generally satisfied with existing carton;.

Promotion Problems and Opportunities

Foodservice and processor executives were asked several questions

about promotion r-nrrarnm for fluid milk. They were asked if they had

conducted any fluid milk promotions in the past five years and their

evaluations of those conducted; and what kind of promotions they felt

might be helpful in expanding milk sales in foodservice outlets.
Most executives responding, from both dairy and foodservice firms,

felt there were very few promotion opportunities for fluid milk. Several
obstacles to effective promotions were cited.

The major problem disc.:u-i-jrdinri promotion programs is the cost of

milk relative to its sale price and relative to other beverages.


Thursday, May 10, 2007.max









'ce


sales '


beverages.

in additional

stated,

it's


S felt milk promotions m .'' increase milk

. the 'on, but at the of other more profitable

Also, as one executive noted, "Soft drink promotions bri.

al customers; milk would not." ': executive

1k is better for you than other drink on the market,

- 've to promote ,"


Several foodservice executives and a few processors stated that

milk could be promoted if prices were reduced. ~-- restaurant executive

said his rule of thumb for an `...tive t'on would be to 'ce milk

at triple its costs.

.' lem areas 5-7 .ti... promotions included the continuing

'lic image of dai products as harmful due to cholesterol and "
-; : This concern was particu ly noted f .ice

in south Florida and on the west t, where a high '.:. of

restaurant are elderly. ". .ital and school i ,ce

directors also this concern over attempts to milk

use.

S"ves from PEP's stated that their '. "sing or on

would concentrate on their name and image, or their : .tured menu item.

Milk, as a relatively minor sa item, did not justify special promotion,

accordi- to

Some -* '. .-., however, It promotion programs were possible,

but would .. : large *- "' .:, to have sufficient '. : t. Moreover,

national PEr's would usually 'cipate onuy in a Lnationw-ie promotionL .

A few 'ties t' *. ... be .: :. from

study findings. First, the ..lity, cleanliness, nutrition and "natural"

k dairy are very favorab characteristics


Thursday, May 10, 2007.max









in the eyes of foodservice executives. One executive Lt.iU!. that these

factors should be emphasized in consumer education, advertising and

promotion programs. This emphasis would strengthen at-home sales and

cause more people to request milk when eating out. "We will serve what

our customers demand," he concluded.

Butter and cream are particularly reinforcing for a "quality image"

in restaurants, several foodservice personnel said. As competition

becomes even more intense in an already-competitive market, chain restaurant

executives are seeking to upgrade and di='e-entiate their outlets.

butter, cream, whole milk, "real" ice cream and milk shakes, and sour

cream are used in this effort by medium-priced and better restaurants.

Fast food firms are offering a greater variety of menu items and

changing their buildings and decor. Medi in-priced restaurants are doing

the same things to a greater degree, and are seeking to dispel any "fast

food image" they may have with customers. Properly designed and targeted

promotion programs could be attractive to the medium-priced restaurant

firms.

Nationwide chain restaurants are seeking to "localize" their outlets,

to incorPorate regional characteristics into their menus and even their

architecture. Joint promotional efforts with local dairy farmers,

processors and chain outlets might be attractive and effective.

Executives of medium-priced restaurants felt promotions with yuui.

working adults, 18 to 30 years old, had some pFsi.iilities. This customer

group makes up a Zlrge proportion of patrons in med ium-priced restaura nts
especially those that are open 24 hours a day. This appears to be one

of the highest milk-sales segments currently, and foodservice executives

in these firms felt some expansion was po-s.ible.


Thursday, May 10, 2007.max








New or different products, particularly flavored drinks and processed

products, had promrhtion potential, also. Milk is already regarded as a

"check builder" by some foodservice operatcrs and a wider product line

could be attractive.

In general, ne'ther processor nor foodservice executives were

highly optimistic about i;2.Aond-iIrn dairy product sales through foodservice

promotions. Some limited, carefully targeted opportunities might be

developed. Any effort would require the suLip-po' and participation of

all e~niel-ts of the dairy industry.

-rodWct development and imrproveinuri in distribution and packaging,

as well as promotion efforts, have a much higher probability of being
effective if they are joint efforts of dairy farmers and dairy processors.

The nature of participation and cooperation cannot be specified here,

but must be tailored to the particular effort.


Thursday, May 10, 2007.max



















































































Thursday, May 10, 2007.max








CONFIDENTIAL


Food and Resource Economics
Departrent
Florida Agri-Lltural Market
Research Center
For Internal use Only


City
Firm
Name
Title
Date


;,CDJSERVILL FIRM QUESTIONNAIRE

We are trying to determine the importance of milk and selected milk
products to firms such as yours. We also want to explore with you any problems
that milk poses for your operation and identify ways to better meet your needs.

1. Type of foodservice operation:


PEP's


No. units No. Fla. Captive


Fast food
Full service
Casual, sit down
Hotel/motel
Drug, department
Other- (list)


No. units No. Fla.


Primary schools
Secondary schools
College/Univ.
In plant/office
Hospitals/narsfri
homes
Mobile-elderly
Airline
Prison
Vending
Other (list)


2. Which of these products do you regularly serve or use
foods? (Hand card A)


in preparation of other


How used (%)
Menu Ingredient


Item


Homogenized Vit, D. whole milk .........,,
Low-fat................. ...........,,..
Skim (fat-free)...........................
Flavored (Chocolate, etc.)...............
Buttermilk...............................
Shakes....................................
Non dairy coffee creamer................. X
Coffee creamer, including (&) ........... X
Whipping cream (L & H)................... X
Toppings.......................... ....... X
Cottage cheese............................... X
Sour cream.............................., X
Imitation sour cream......................
Dips......................................
ogurt...................................____
Ice cream ................................
Sherbet..................................
Ice milk.... ........................... ..
Butter....................................
Margarine.................................


Thursday, May 10, 2007.max


~
L
~


~


~


~


_~













3. Who is responsible for menu planning in your firm? (circle)


Corporate Hdq.


Units


Other


4. If committee, specify composition:


5. How are menu changes made?


6. What criteria are used in appraising new items (emphasis on beverages)?




7. Trends in per customer usage by your firm.


Trend, %A
Item Past 5 years

Homogenized Vit. D whole milk.,
Low-fat...... .................
Skim (fat-free) ................
Flavored (chocolate, etc)......
Buttermilk.....................
Shakes.........................
Non dairy coffee creamer.......
Coffee creamer, including (&)__
Whipping cream (L & H)..........
Toppings ......................
Cottage cheese...................
Sour cream....................
Imitation sour cream...........
Dips.... ......................
Yogurt .........................
Ice cream......................
Sherbet.........................
Ice milk.......................
Butter.........................
Margarine....... ...............


Outlook %A
Next 5 years


Thursday, May 10, 2007.max


Comments


Comments







38






8. We want to concentrate our discussion on the major fluid milk products served
as beverages, i.e., items 1-5 on Card A.

At what meals or times of the day are these fluid milk products served as the
beverage ? What proportions are served at:


Sreal:fast Morning snack Lunch Afternoon snack Dinner


Nighttime
snack


Whole milk
Low-fat
Skim
Flavored
Butterniik


9. Which of these meals or snacktimes, if any, do you feel have the potential of
profitably increasing milk sales for your operation?


Why?


10. What proportion of your total beverage (sales-retail) or
non retail) is represented by:


(use on a serving basis-


Cost or MU


Fluid milk ro.dui ts...................
Shakes...............................
Carbonated drinks...................
Non-carbonated drinks...............
Coffee................................
Tea............. ....................
Fruit, veg. juices....................
Alcoholic drinks......................
Other ._..............


Total Ty

For your fluid milk product sales only, what proportion are:


Whole milk ...........................
Low fat....................... .......
Skim.................F.. ... .. .......
Flavored ............... ................
Buttermilk .............................


Cost or MU


Thursday, May 10, 2007.max


~I ~~


it. e















11. What are the advanta.~ie of serving competing beverages?

(1)

(2)

(3)

12. What are the primary disadvantages of serving competing beverages?

(1)
(2)

(3)

13, Why do you serve these fluid milk products as beverages?
Advantages

(1)


(3)
Disadvantages

(1)
(2)

(3)


Thursday, May 10, 2007.max





40







.14. What complaints, if any, have your customers had about:

A. Whole Milk

1) Frequency

2) F____ Frr-q c nr

3) Freq i. ri..v
8. Low fat

1) _________________ Frequency

2) Frequency

3) Fr-qj-|..y
C. Skim

1) ______ Frequency

2) __ Frequency

3) Frequency
D. Flavored

1) Frequency

2) Frequency

3) Feq JE nri-y!
E. Buttermilk

1) Frequency

2) Freq Jen,:,

3) Frequency


Thursday, May 10, 2007.max














Physical Product Problems

15. As a general rule, how would you rate 1) the overall product quality
2) shelf life of (on a scale of 1-9, where 1 excellent,
9 poor.)


Clality Shelf life










product problems, if any,

Problems


% of Spoilage Comments










have you experienced:

Suggestions for improvement


Thursday, May 10, 2007.max


Item

Whole milk

Low-fat

Skim

Flavored
Buttetremi. lk

What other

Item

Whole niilk

Low-fat

Skim

Flavored

Buttermilk














15. Packaging

Item
Whole milk

Low fat

Skim

Flavored


Package type


Size(s)


Rating
1 = Excell.; 9 = Poor)


Buttermilk 1)
2)


Distribution

16. How or where do you obtain your fluid milk requirements?

(1) Direct to use-site by dairy processors)
(2) Warehouse delivery by dairy processors with company
owned delivery to use-sites.
(3) Pick up at dairy processor with company owned delivery
(4) Delivery to use-site(s) by institutional purveyor
(5) Other:


% of Product


17. What problems, if any, do you typically experience with dairy processors'
distribution services?

(1)
(2)

(3)

What would be your solutions to these problems?
(1)
(2)

(3)


Thursday, May 10, 2007.max
















18. What problems if any, do you typically experience with institutional
purveyors distribution services?

(1)

(2)

(3)
What would be ',.ur solutions to these problems?

(1)

(2)

(3)


19. Have you ever conducted any type of promotional activities ircldrl'n
displays, table tents, posters, etc. for any fluid milk products?


Yes

If Yes, what?


What was the result?


20.Wha tye ~FUIL)IUFd~ IV~I~woud jruILaly _rii_ U


20. What type of promotional activities would profitably increase sales of
fluid milk products for you?





Why?


Thursday, May 10, 2007.max


__ __ __ ~














21. 'SI',tIt, utej
Let me present a hypothetical situation to you. Suppose that new substitute
products for whole milk, low fat, and skim milk, have been developed. Assume
that these are still primarily dairy products, but part of the natural ingredients
have been replaced by less expensive vegetable products, resulting in a product
that:

(1) Costs you 10% less,
(2) 10% of milk drinkers can detect a slight flavor difference and prefer
the all-dairy product,
(3) Dietary regulations permit its use as a milk substitute,

What would the likelihood be of your operation substituting the new product
for all-dairy products? Please rate the likelihood on a 9 point scale where:

1- Extremely likely and 9 Extremely unlikely Rating:
Why?


22. We would like to get an idea of the relative importance of the milk products
your firm buys. During 1978, what were your average weekly purchases of:

Average weekly purchases
(Dollars)
Whole milk (Homo. Vit. D.)
Low-fat
Skim
Flavored (Choc.)
Butter
Shakes
Non dairy coffee creamer
Coffee creamer, including (&a)
Whipping cream (L&H)
Toppings
Cottage cheese
Sour cream
Dips
Yogurt
Ice cream
Butter
Margarine


Thursday, May 10, 2007.max













23. What are your average weekly expenditures for all foods?



24. Approximately how many individual meals did your entire operation serve
in a typical week during 1978?



25. What were your firm's qrcs, sales during fiscal year 1978?

FY thru $


Thursday, May 10, 2007.max











CONFIDENTIAL City
Food and Resource Economics Firm
[e-,a r tr ri t
Person
Florida Agricultural Market
Research Center Title
For Internal Use Only
MILK PROCESSOR/DISTRIBUTOR LI.UE I ONNAIRE

We are t.-'.in.- to find out how imnnrtant the foodservice industry is to the Florida
dairy industry. We are interested in all t',pi- of foodservice outlets, such as
fast food restaurants, full service restaurants (including hotel/ motel),
vending customers, schools, hospitals, nursing homes, military, prisons, and
institutional purveyors. In short, we are looking at everything except that which
is ultimately sold through retail food stores.

1. What .oj.:irtin of your firm's total dollar sales goes
to all food service? -- What proportion of total unit
sales? (Dollars) %
(Unit) _

2. What proportion of your total Class I fluid milk sales
(Vit.D., low fat, choc., skim, flavored, buttermilk,etc.)
goes to all foodservices? (Dollar) %
(Unit) %

We would like to get an idea of the various types of foodservice outlets that
are most important to your firm's fluid milk sales. We have grouped the food-
service outlets into the two categories, 1) public eating places (all rest-
aurants, including restaurant suppliers) and 2) captive outlets (all other
institutional) 'ii:lpri"i; schools, military, prisons, rest homes, etc.

3. What proportion of your total fluid milk sales goes to
public *t'in,. places? %

4. What proportion of these sales is made to captive
outlets? %

5. Of sales made to PEP's what proportion is made directly... %

6. ...and what proportion is made through intermediate handlers
such as institutional purveyors? %

7. Of fluid milk sales made to captive outlets what proportion
is made directly.... %

8. ...and what proportion is made through intermediate ihanller- __ %

9. What problems, if any, do you experience with institutional
-urvey -Os?

1)

2)

3)


Thursday, May 10, 2007.max













10. What has been the overall trend during the last 5 years in yourfluid
milk sales to PEP's?
....to CO's?

11. We want your opinion of the outlook for fluid milk sales for the
next 5 years. For the milk industry as a whole, what do you feel
the percentage change in sales of fluid milk to PEP's will be
from current levels in 5 years? (+) % (-) %
.... to captive outlets? (+) (-) %

12. What has been the overall trend during the last 5 years in your
sales of fluid cream products (coffee cream, excluding non dairy;
light and heavy whipping creams, sour cream, cottage cheese.)
to PEP's
to CO's
13. Projecting 5 years ahead for the dairy industry as a whole, what
do you feel the percentage change will be for fluid cream product
sales to PEP's? (+) % (-) %
to CO's? (+) ___ % (-) %
Public Eating Places
Let us consider public eating places (restaurants, etc.) in more detail.
14. What are your most serious problems with serving PEP's?
(low volume, fluctuating volume, packaging, service demands,
credit, equinrlel t)

1)
2)
3)
15. What do you see as the solutions to these problems?

1)

2)
3)
16. Has your firm tried any special fluid milk promotions in PEP's
during the past 5 years? Yes No

17. If yes, what?
18. What is your evaluation of this type of promotion?


Thursday, May 10, 2007.max






48


Captive Outlets



Let us consider captive outlet (institutions) in more detail.
19. What are your most serious problems with serving CO's?
(service restrictions, discontinuous contracts, credit, slow pay, etc.)

1)
2)
3)
20. What do you see as the solutions to these problems?




3)
21. Has your firm tried any special fluic milk promotions in CO's during
the past 5 years? Yes No
22. If yes, what?
23. Ah'. is your evaluation of this type of promotion? _




24. From the stand point of the entire milk industry, what do you feel the
most serious problems are with respect to gaining increased fluid milk
sales to foodservice firms?
1)
2)
3)
25. What do you see as solutions to these problems?

1)
2)
3)


Thursday, May 10, 2007.max







49







26. What type r.'aP, iru'i do you feel Would be fost successful in expanding
the foodservice demand for fluid milk >raducts?

1)
2)
3)
27. One final question one that's very confidential. Of course we won't
disclose your answer to anyone. What was your total fluid milk volume
in 1978? Your total dairy sales last year?

(Volume) ($ Sales)
Other Comments:


Thursday, May 10, 2007.max



















Appendix Table 1 .--Monthly utilization and classification of milk at pool plants in Federal Milk Market Order areas 6, 12 and 13, 1978.


Calendar year 1978 January February March April May June


Class I Milk

Whole milk

Skim and low fat

Flavored and milk drinks

Buttermilk

Total Class I


Class II Milk

Half and half

Light cream

Heavy cream

Frozen desserts

Other Class II Products

Total Class II


115,573,243

38,196,515

10,605,860

2,966,388

167,342,006



2,037,111

130,437

262,129

10,147,836

4,309,148

16,886,661


108,037,862

36,501,273

10,192,492

2,707,859

157,439,486



2,166,988

147,517

308,862

9,332,432

4,017,397

15,973,196


119,653,400

40,472,715

10,426,452

3,025,508

173,578,075



2,3: 3,911

143,565

359,136

10,495,530

4,710,376

18,079,518


106,874,591

31.352.438

10,593,028

2,724,191

156,545,248



1,903,999

111.174

281,707

10,433,870

3,920,712

16,651,462


108,492.394

36,743,216

11,419,840

2,782,734

159,438,184



1,750,285

103,913

260,048

11,051,612

4,397,922

17,563,780


104,858,310

34,733,782

6,358,236

2,682,591

148,632,919



1,622,324

90,294

280,142

10,707,378

3,863,152

16,513,290


173,412,682 191,657,593 173,196,710


TOTAL 184,228,667


177,001,964 165,146,209




















Appendix Table 1 .--Continued


Calendar year 1978 July August September October November December Yearly total


Class I Milk

Whole milk

Skim and low fat

Flavored and milk drinks

Buttermilk

Total Class I


105,110,556

33,597,469

4,929,443

2,506,032

146,143,500


107,377,280

34,998,702

5,804,668

2,667,929

150,848,579


108,040,933

37,298,943

10,446,059

2,549,416

158,335,351


108,204,577

39,001,701

10,913,657

2,615,684

160.735,t61 3


108,856,293

39,161,824

10,862,569

2,608,659

161,489,345


113,466,535


10,717,007

2,679,397

166,421,667


1,314,545,974

446,608,306

113,269,311

32,516,388

1,906,949,979


Class II


Half and half

Light cream

Heavy cream

Frozen desserts

Other Class II Products

Total Class II

TOTAL


1,570,897

92,303


11,280,218

3,681,553

16,858,912

163,002,412


1,603,338

95,309

218,727

11,303,963

3,871,410

17,092,747

167,941,326


1,507,772

87,293

204,328

10,081,721

4,171,557

16,052,671

174,388,022


1,758,794

90,304

224,209

9,556,588

4,276,847

15,906,742

176,642,361


1,948,488

113,781

328,510

9,268,913

4,657,818

16,317,510

177,806,855


7,478,302

125,472

40. ,785

8,293,874

6,456,918

17,558,351

183,980,018


27,.71 ,209

1,31.362

3,315,524

121,953,935

52,334,810

201,184,840

2,108,134,819


John D. Nord, Market Administrator, Fort Lauderdale.


---------------L--- ~^^^~~~1~~"1"-"-~----


Source: "Florida Fluid Milk Report"














REFERENCES


Chain Store Guide. Chain Restaurants 1978. New York: Business
Guides, Inc., 1978.

Gallo, Anthony E., William T. Boehm and Corinne LeBovit. "Changes in
Food Expenditures by Income Group," National Food Review, l..,, USDA,
Winter 1979.

Linstrom, Harold R. and N. Seigle. Convenience Foods for the Hotel,
Restaurant and Institutional Market: The Processor's View. Ag.
Econ. Reor-t 344, ERS, USDA, July 1976.

Mlanch ester, Alden C. "Eating Out," National Food Review, ESCS, USDA,
September 1977.

"Eating Out: Fast Foods," National Food Review, ESCS
USDA, January 1978.

_. "Total Food Expenditure A New Series," National Food
Review, ESCS, USDA, April 1978.

"Why the Decline in Dairy Consumption?" National Food
Revieww, L CS, USDA, March 1977.

Nord, John D. "Florida Fluid Milk Report," Federal Milk Market Admin-
istrator, Ft. Lauderdale.

Stafford, TbhonTi H. and John H. Wills. "Consumer Demand Increasing for
Convenience in Food Products," National Food Review, ESCS, USDA,
Winter 1979.

Technomic Consultants. "The Foodservice Industry How Big in 1978?",
Chicago: TRA Information Services, January 1978.

Th: '!n,.'jn, Ralph B., ed. Florida Statistical Abstract 78, Bureau of
Economic and Business Research, University of Florida. Gainesville:
The University Presses of Florida, 1978.

U.S. Department of Agriculture. 1978 Handbook of Agricultural Charts.
Agricultural Handbook 551. Washington: U.S. Government Printing
Office.






52


Thursday, May 10, 2007.max










U.S. Department of Commerce. Statistical Abstract of the United States.
Washington: U.S. Government Printing Office.

Survey of Current Business. April 1979.

Van Dress, Michael G. The Foodservice Industry: Type, Quantity and
Value of Foods Used. Stat. Bull. 476, MED, ERS, USDA. Washington:
U.S. Government Printing Office, November 1971.
The Market for Food Consumed Away from Home: Dcllar Value
Statistics. Stat. Bull 491 (Suppl. to St t. Bull. 476) ERS, USDA.
Washington: U.S. Government Printing Off ce, September 1972.


Thursday, May 10, 2007.max




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