Industry

- Sub-industry of the dairy products manufacturing industry; those that manufacture

dairy products from raw milk, processed milk and dairy substitutes.
- Pre-industrial Age: milk and dairy products were sold and consumed near farms.
Products were sold in local farmers markets.
- Industrializing Age: Population growth caused increased demand. Wholesale and
retail sales emerged to fill the need. James Kraft started a wholesale door-to-door
cheese business in 1903 that grew to become Kraft Foods. Circulars were used in
1911 by Kraft to advertise.
- Industrial Age, Sales Era: Pasteurized processed cheese invented in 1915,
extending the shelf life and allowing for international expansion. National
advertising begins.
- Industrial Age: Market Segmentation: Product diversification occurs to meet the
demand of different market segments. Products, such as sliced cheese and Cheese
Whiz, processed cheese sauce, hit the market.
- Postindustrial Age: Industry focused on higher level needs such as cultured dairy
products that spotlight the ‘healthy’ effects of dairy, low carbohydrate options and
probiotic bacteria. Business to business opportunities increase; single serve
portions for foodservice outlets. Increased global competition.

Macro-environment

- Demographic: Hispanic population growth provides opportunities; this segment

views cultured dairy products as a staple in daily diet and meal prep. Shrinking
US household size a possible threat in this market. Changing workforce and
lifestyles lead to demand for convenience items and smaller or travel size
packaging.
- Economic: Global recession has led to changing consumer needs; customers are
more price-conscious.
- Political/Legal: International expansion and promotion could be impacted by
differing laws. Also, the dairy industry is regulated by the Food and Drug
Administration. Increases or changes in regulation could increase product cost.
- Mother Earth: Distribution could be impacted by severe weather conditions.
Sustainable or “green” initiatives are a growing concern for consumers.
Sustainable practices and packaging are a competitive advantage.
- Technological: Advancements led to efficient product packaging and distribution.
Just in time order fulfillment and point of sale systems have decreased spoilage.
- Socio-cultural: Diversity initiatives improve chances of success in global markets
and enhance competitive advantage.

Company History

- 1983 - Carl and Marion Wolf bought the marketing rights for Alpine Lace brand
reduced-salt and reduced-cholesterol cheese for their company First World
Cheeses

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- Developed and started the distribution of their reduced fat Cheddar and low fat
Swiss cheeses to deli sections of a limited number of supermarkets
- 1985 – net sales - $11 million
- 1986 - First World Cheeses went public and started selling their products
nationally
- 1990 – acquired fat replacement technology from Egyptian food scientist Dr. Aly
Gamay: it removes fat from cheese product and adds flavorings
- 1991 - the company changed its name from First World Cheeses to Alpine Lace
Brands, Inc. and started competing with national brands
- Extended distribution of their products from supermarket delis to club stores and
to food service accounts
- Promoted their products as having important nutritional benefits: fat free, low fat,
low cholesterol, low sodium.
- Priced their products a bit higher than average leading brands
- 1991 – net sales - $113.7 million; pre-tax earnings - $1.4 million; Stockholders'
equity - $6.6 million
- 1992 – the company held 20% market share and was the second largest light
cheese brand
- 1992 - Alpine Lace Brands introduced Free N' Lean Fat Free cheese spreads
(utilizing their fat replacement technology) in a variety of flavors that could also
be baked and microwaved
- Promotional campaign for the new product: free bagels with cream cheese were
offered to people of New York at the train stations and the Staten Island Ferry's
terminal (more than 50,000 free bagels were distributed)
- 1992 – Net Sales - $117.8 million, pre-tax earnings - $0.2 million
- 1994 – Net Sales - $132.4 million, pre-tax earnings - $1.1 million
- 1995 - Marolf Dakota Farms Cheese, Inc., a company’s cheese packaging
subsidiary, purchased a high-speed slicing production line to increase productivity
and improve product quality
- 1995 – the company brought a lawsuit for patent infringement against its major
competitors, Kraft, Borden and Beatrice Cheese, and lost it to Kraft
- 1995 – the company introduced new products: a fat-free, low-sodium turkey
breast; reduced-fat feta cheese; fat-free Parmesan cheese; fat-free shredded
Mozzarella and Cheddar cheeses with improved taste
- The company established an industrial and food service business
- Expanded their channels of distribution, which included licensing, co-branding,
and industrial and international sales
- Started negotiations with restaurant chains for their use of Alpine Lace brand
cheeses in their food items.
- Introduced a co-branded with Richard Simmons line of low-fat food products,
such as cheese sauces and salsa
- Expansion of sales to Canada and Puerto Rico
- The company added an international division and started developing the
distribution channels for the international markets
- 1995 – Net sales - $145 million; Pre-tax earnings - $4.4 million

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 - 1996 – Alpine Lace Brands had more than 200 sizes and types of cheese products
to offer to consumers
- Introduced a new product: 97 percent fat-free ham
- 1996 - controlled 50 percent of the low-fat cheese market and 19% of the low-fat,
low-calorie cream cheese market
- The company’s products were selling in 99 percent of all U.S. supermarkets
- Texan chef Pam Mycoskie was contracted to create a cookbook where the
company’s products were used in the recipes
- The company started exploring the use of Internet for their marketing efforts
- 1997 – Alpine Lace Brands Inc. was acquired by Land O’Lakes, Inc.
- 2008 – Land O’Lakes Net Sales - $12,039.3 million; Net earnings – 159.6 million

Current Consumer Trends

- Preference for low carb diets and alternatives

- Specialty flavored cream cheese style spreads
- Probiotic or ‘good-for-you’ bacteria that are touted to aid in digestion
- Brand name single serve containers served at retail outlets

Company’s Current Situation

- Controls 50 percent of the low-fat cheese market and 19% of the low-fat, low-
calorie cream cheese market
- Main competitor – Kraft with 36% share of the low-fat, low-calorie cream cheese
market

Company’s Business and Financial Plans and Projections

- To increase market share of low-fat, low-calorie cream cheese market to 23.75%

by the end of the 1st year, to 24% by the end of the 2nd year
- To sell 12,000 cases by the end of the 1st year
- The cost of maintaining a market share point - $0.1 million
- The cost of winning a new market share point - $0.3 million
- The cost of producing Alpine Lace Fat-Free cream cheese (wholesale) - $9 per
case
- Other variable costs - $3 per case
- Fixed costs - $10 million per year

(NOTE: Below sections will be revised after all of the initial analysis is done)

Product - Cream Cheese

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 - An American invention that dates back to 1872
- The key ingredient in a cheese cake and many other deserts; can also be served
with fruit and bread
- A smooth soft cheese, made from cow's milk, is considered an unripened cheese
and by definition must contain at least 33 % milk fat
- Available in full fat and low-fat varieties
- Possible substitutes: Neufachatel cheese; cottage cheese & cream & butter;
cottage cheese & margarine; ricotta cheese & plain yogurt
- Difficult to manufacture; timing of heating must be accurate or product becomes
substandard
- The product is in the mature stage of the product life cycle

Price

- $18.00 per case of fat free cream cheese – wholesale (data from the case)
- Prices their product somewhat above competitors’ prices

Promotion

- Online: The Alpine Lace website promotes their cheese products to customers,
introduces free healthy recipes featuring brand’s products, various online
promotions/sweepstakes, health and wellness tips, and promotes their distribution
channels in where to buy section.
- The Land O’Lakes website also points customers to Alpine Lace website
- In-store coupons
- Packages their products under Alpine Lace Brands name, not Land O’Lakes name

Place (Distribution)

- Products available in 99 percent of all U.S. supermarkets, such as Kroger, Meijer

- Industrial sales – restaurants, delis, bakeries
- Wholesales; direct sales