SPECIFICATIONS/BRIEF Design and implementation of a collective information and promotional campaign for European Butter in THE UNITED STATES OF AMERICA 2019-2021 BUYER: CNIEL Contact: CHARLES DUQUE CNIEL/FRENCH CHEESE BOARD 428 BROADWAY NEW YORK, NY 10013 +1 646 645 0220 [email protected] PROCUREMENT TYPE: Open Tender LE CNIEL: CENTRE NATIONAL INTERPROFESSIONNEL DE L’ÉCONOMIE LAITIERE The CNIEL is an association created in the cow's milk sector, in 1974, by the national organisations representing milk production and processing. Acknowledged by the European Union and French law as an interprofessional organisation, the CNIEL helps to promote cow's milk and its derivative products (cheese, cream, etc.) in France and abroad. The information and communication programme that is the subject of this contract is co-financed by the European Union and the CNIEL. ARTICLE 1: PURPOSE OF THE CONTRACT The purpose of the contract is to design and carry out a collective information and communication campaign in favor of European butter in the United States of America 2019-2021. This communication and information campaign is co-funded by the European Union and the CNIEL. The communication programme was accepted by the European Commission in November 2018. The programme is scheduled to be implemented over the course of 2019. The contract will be signed during the first half of 2019. The services will be performed in USA. Details of the activities are given in ARTICLE 4.2 The graphic axis validated by the European Commission will be provided to the agency awarded the contract. ARTICLE 2: DOCUMENTS MAKING UP THE CONTRACT The documents making up the contract are as follows, in order of priority: - The deed of commitment signed by the parties, to which is attached the schedule of unit prices (SUP), - These specifications and its appendices, - The successful tenderer's bid. ARTICLE 3: CONTEXT OF THE CONTRACT Following the agricultural crisis affecting European dairy products, the continuance of the Russian embargo on European agricultural and agro-food products, It is urgent for the dairy sector to find new outlets in third countries and to accelerate the development of certain promising third countries in terms of the market for EU butter, In order not to stifle the European market, to ensure that the sector as a whole keeps its production and therefore its income, and to promote European butter to support target country’s market and consumption to better position it vis-a-vis other imported butters. Collective Information and Communication Campaign EU Butter Page in the United States of America 2019-2021 2 / 33 THE WORLD MILK SITUATION While the overflow reached 6 billion liters at the beginning of the year, output continued to increase in 2015. The increase in the first half, reached 3.1%. All the major players - the European Union, North America, Australia, and New Zealand - have contributed. However, the EU, world leader, more so than the others. China's demand, which does not yet have the means to guarantee the sanitary quality of milk, stimulated enthusiasm then suddenly, its demand, was cut in half. In both New Zealand and Europe, dairy farmers are suffering from a slowdown in purchases from China, who after buying milk powder at high prices in January eventually built up stocks. In New Zealand, milk prices on the world market have decreased by 30%. New Zealand producers saw their income dissolve from 430 € per ton in January 2014 to less than 200 € today. Add to this the effects of the Russian embargo and the 250,000 tons of European cheeses that have engulfed the market. World demand continues to rise [+2.1%], but supply has increased too [+3.1%]. Falling prices in Europe has only encouraged producers to increase their production. One liter of extra milk does not require investment: the immediate way to offset falling prices is to increase volumes. As a result, world prices for butter and powder dropped from -10% to 2,217.50 euros per ton for butter and -5.6% for powder in the first half of the year. Milk collection for the world's top five producers rose 1.2 percent to 165 million tons in the first seven months of 2015, as reported by FranceAgriMer. Of these five producers, the European Union, the United States, New Zealand, Australia and Argentina, only the last one saw its production fall. The others increased their collections by between 1 and 2%, and by 5.4% for Australia. The process of CAP (Common Agricultural Policy) reform in the European Union cannot be dissociated from the changing pattern of global demand for agro-food products. Since the early 1990s, the European Commission has acknowledged that growth in world demand will stimulate markets for agro-food products. Policy reforms have, been designed to ensure that European dairy sectors are more competitive in world markets. With the EU dairy sector reforms reaching the final stage of implementation, the sector is preparing to serve growing world markets for dairy raw materials and value added dairy products, butter, cream and cheese, relying heavily on the reputation of European dairy products in terms of quality and safety. The process aims to find opportunities for increasing or even maintaining milk production following the abolition of production quotas in 2015. Overall, the Commission's forecasts indicate that the abolition of quotas steers to an increase of the EU's annual milk production of some 9 billion liters, mainly in Denmark, France, the United Kingdom, Ireland, the Netherlands and Germany. No less than 67% of this increase in production (more than 6 billion liters) will have to find outlets outside of Europe. The context of the global dairy sector can be seen as conducive to the pursuit of this strategy - milk production in emerging markets is growing more rapidly than in developed economies, but demand in these emerging markets is growing faster than supply. China and other Asian markets appear to offer the best export opportunities for countries producing a milk surplus, but the European dairy industry faces competition from other global exporters (mainly New Zealand and the U.S.) which have easier access to these markets and produce at prices that serve as benchmarks for world trade in dairy products. The European MILK sector and world markets In the medium and long term, Europe has an interest in developing the production and exports of value added dairy products such as butter. In the short term, however, exports of skimmed milk powder have been the driving force behind the growth of EU exports, and is expected to continue over the next few years. Collective Information and Communication Campaign EU Butter Page in the United States of America 2019-2021 3 / 33 The US Butter Market Retail sales of branded butter showed gains on private label butter in the last year. Though dollar sales of private label butter increased 3.4%, unit sales decreased 1.3%, suggesting that retailers raised prices. The leading brands, Land O Lakes and Challenge, showed unit sales increases of 5.3% and 6.7%, respectively. Information Resources Inc., Chicago, reported the data for the 52 weeks ended Sept. 4, 2016. Overall, the butter products measured by IRI increased dollar sales by 5.8% on unit sale increases of 1.7%. The story is different for margarines and butter blends. Dollar sales of margarine dropped 2% and unit sales dropped 3.4%. The picture is worse for the much-smaller butter blends segment. Unit sales plunged 34.8%, causing dollar sales to plummet 25.1%. A growing appetite Annual per capita butter consumption has increased almost one pound in the last 10 years. In 2015, Americans ate 5.6 pounds of butter, compared to 4.7 pounds in 2006, according to the U.S. Department of Agriculture. After rising for six consecutive months at the end of 2015, butter prices dropped in January of this year. They rebounded for three months and declined again from May through July. In August, the Consumer Price Index for butter rose 1.5%. On the supply side, monthly U.S. butter production peaked in March of his year and has declined every month since then. Inventive new products Dairy processors continued to develop new products. Arden Hills, Minn.-based Land O’Lakes developed a pumpkin pie-spice flavor for sale during the holiday baking season. This limited-time offer follows the lead of ice cream makers and fluid milk processors, who regularly release new flavors based on seasons or events. In the October Dairy Foods, Land O’Lakes COO Beth Ford said the dairy cooperative’s research and development team is working on butters with added health benefits, such as Omega-3. Consumers seek foods with added healthy ingredients rather than those making “less than” claims. “We’re looking at that from a health platform perspective. We also look at convenience. We are looking at packaging types. There are a number of items, in our innovation portfolio, that will allow for continued growth. But as I say, we still are growing in that butter category and are growing above the category level at a healthy rate.” Grassland Dairy Products, Greenwood, Wis., is relaunching its flagship retail brand called Grassland. “The retail line will feature a fresh take on our classic packaging design. We have also monitored consumer demands and trends, and our brand will be rBST-free,” said Grassland President Trevor Wuethrich. New products from the Wisconsin creamery include a clarified butter packaged for retail consumers in 8-ounce cups. It is also packaging its premium foodservice butter for the retail market. Called Wüthrich, the 83% fat European-style butter is sold as one-half pound consisting of two quarter-pound sticks.