The partnerships with the National Fish and Wildlife Foundation (NFWF) and rePlant Capital were announced during last month’s International Dairy Foods Association (IDFA) forum in Arizona. Danone North America’s CEO Mariano Lozano spoke about why innovating in the supply chain will be key for dairy moving forward.
The first deal with the NFWF is a multi-year agreement that will provide $3m of state and federal funding from the USDA’s Natural Resource Conservation Service (NRCS). This $3m is part of a new set of agriculture grants from NRCS specifically concerning soil health.
In the next three years it will be used to support practice adoptions on farms that are part of Danone’s soil health program. This program began in March 2018 with 26,000 acres of US farmland.
It uses a platform from Sustainable Environmental Consultants, EcoPractices, for data gathering on the farms. This tracks factors like whether the farm is utilizing cover crops, what varieties they are planting, their water and moisture use in irrigation, and more.
Tina Owens, senior director of agriculture at Danone North America, told DairyReporter the company’s soil health program has now been expanded to more than 50,000 acres, with the majority organic. The partnership with NFWF has Danone assisting farmers in translating the data into an actionable plan at their farm.
They can provide funding or incentive to help them further progress on regenerative conversion practices. In the last two years, all of Danone’s regenerative efforts have been focused on its footprint in dairy.
Reinventing the finance-dairy relationship
Apart from well known dairy brands like Dannon and Oikos, Danone North America also owns major plant-based alternatives brands like Silk and So Delicious. But for now it’s investing in its dairy agriculture, Owens said, because more than 90% of its farm acres in the US are housed within the dairy shed.
“When we look at our footprint, impact and where we have the most need, it’s within our dairy shed. We’re very focused on helping farmers adopt practices that can help them not only with regenerative conversion and potential for soil carbon sequestration, but that can also lead to better economic resiliency for those farms,” Owens said.
Beyond the data analysis and mentoring through EcoPractices, Danone is trying to take the relationships a step further by providing access to capital for farms, considered small money loans. They have lower interest rates than what traditional banks offer, and Danone believes this is reinventing the way the finance community is engaging with farmers.
Owens said this takes form in Danone’s other partnership, with rePlant Capital. It’s a commitment to invest $20m in Danone’s farmer partners with low-cost loans for converting farmland to organic and regenerative.
“One of the biggest burdens that we are still seeing is the amount of debt that those farmers are sitting with,” Lozano said at IDFA.
Shedding the market with cost-plus
The new partnerships build off Danone’s cost-plus model in its milk program. Roughly 40% of the milk Danone purchases in the US comes through agreements where Danone pays the cost of production plus a margin.
Started in 2012, the model utilizes 770 farmers without following the market price. Instead, long term contracts offer stability to farmers and an alternative to the commoditized milk prices.
“This takes away the burden of the farmers worrying about the market, and keeps them farming,” Lozano said.
He believes dairy brands and producers need to keep innovating and reinventing, not only with end products, but also in the way they engage with farmer partners. The profitability impact is important, but the ‘people and planet impact’ of supply chains is equally critical in business.
“We are very passionate about climate change, so we are a strong believer that sustainability is not good enough. It needs to be regenerative, we need to restore the organic material soil. We need to get our actions out there with a strong, bold pledge,” Lozano said.
