Quality Chekd Dairies, Inc. Business Information, Profile, and History

Company Perspectives:

At Quality Chekd, top quality is a must. When the government establishes standards for the dairy industry, we push them further to provide customers the freshest, best-tasting products possible.

History of Quality Chekd Dairies, Inc.

Based in Naperville, Illinois, Quality Chekd Dairies, Inc. is a non-profit cooperative owned by some 40 independent dairy processors located in the United States as well as Mexico, El Salvador, and Columbia. Most U.S. consumers are familiar with Quality Chekd's trademark logo, a red checkmark inside a blue Q, stamped on a wide range of dairy products found in the supermarket. In fact, according to internal studies, almost 90 percent of consumers are aware of the QC logo. The co-op's marketing efforts include the designing of packaging as well as the production of TV and radio commercials that can be adopted by its members. In addition, Quality Chekd offers a number of other valuable services to members. It provides quality assurance testing using an independent laboratory, Silliker Labs, to conduct two random tests in order to make sure that the products of its members surpass industry standards. In this way, not only are consumers confident that QC-stamped products are of the highest quality, but the reputation of the individual dairies is protected. Quality Chekd also assists member dairies with a purchasing program through which the independent operators take advantage of their combined size in order to realize the best possible prices for ingredients and packaging materials. As a result, members are able to lower prices on their dairy products and gain an edge in the market. The organization helps further by making business consultants available to assist members with the implementation of new computer technology and accounting systems. Moreover, Quality Chekd provides the staff of member dairies with training and education through its Cow Tech program, which offers a broad-based curriculum of subjects, from personnel issues to technical matters. In addition to classes taught in person, Cow Tech also informs through video tape, interactive CR-ROMs, and the Internet.

World War II Origins

Quality Chekd was originally created to benefit ice cream makers in anticipation of increased competition after World War II. The first commercial ice cream plant in the United States dated back to the mid-1800s, but because of the difficulties in properly transporting frozen products, the industry initially developed along local lines. Americans' love of ice cream grew so rapidly that virtually every community boasted its own milk and ice cream operation. Three large ice cream makers emerged in the early decades of the 20th century: Sealtest, Borden, and Meadow Gold. World War II forced restrictions on many of the ingredients of ice cream, and manufacturers were limited to 65 percent of the amount produced during the period of December 1, 1941 to November 30, 1942. As a result, independent dairies were able to sell as much ice cream as they could make, but by 1944, when it became apparent that the war would soon be over, the big three as well as other large ice cream makers were gearing up aggressive marketing campaigns that would be implemented once the restrictions were lifted. Local independent dairies would be at a clear disadvantage in the postwar world, and it became apparent that in order to survive they would have to band together.

Quality Chekd grew out of a committee established by five member companies of the United Dairy Products Buying Association. Although member dairies felt comfortable joining forces to save money on the purchase of supplies, they remained competitors in many cases, and it was agreed that the committee should operate independent of the association. Representatives from the five ice cream makers, three of which were located in Iowa and two in Wisconsin, began to meet monthly in Chicago at their own expense to develop a mutual advertising and merchandising program. Ultimately the group turned to Chicago's L.W. Ramsey Advertising Agency to develop a professional program, including a trademark that could be used by all the participating companies, a carton design, and a year-long advertising-merchandising program. Quality Chekd's five founding members split the $10,000 cost of the project. During much of 1944, the committee met with the Ramsey Agency to develop the initial program, which was ready by October of that year. According to research conducted in the Midwest, the agency learned that the primary concern of homemakers buying ice cream after the war would be the quality of the product. As a result, the program focused on assuring the consumer that the ice cream of member dairies was of the highest quality, a pledge that would be backed by regular product checking at an independent laboratory. It was this commitment to testing that led to the coining of the phrase "Quality Chekd" and the use of a red check mark in the trademark created by the Ramsey Agency. Originally the elements symbolizing product approval were contained within a cartouche, a decorative scroll.

On October 25, 1944, 21 ice cream manufacturers, including the five founding companies, were invited to Chicago for a presentation of the Quality Chekd program created by the Ramsey Agency. It was so well received that all 21 candidates immediately signed on. A cooperative was then incorporated under the laws of Wisconsin and named Quality Chekd Ice Cream Association. One of the five original committee members, Irving B. Weber of Sidwell Dairy Company located in Iowa City, Iowa, was named president, a post he would hold for the next 25 years. The remaining four members of the committee formed the organization's first board of directors. It was determined that member companies were to be charged annual dues of $250 and .75 cents on each gallon of ice cream sold. At this stage, Quality Chekd was represented by companies in only five states: ten in Wisconsin, seven in Iowa, three in Minnesota, and one each in Michigan and South Dakota. The total sales volume of the 21 charter members was $15 million. By the time of the first general meeting held in Chicago on April 25, 1945, additional members also joined the cooperative.

Operational After World War II

Once wartime restrictions were lifted and Quality Chekd became operational, a managing director was hired to run the organization, Charles T. Walker. Because he lived in Cincinnati, Ohio, Quality Chekd was initially located there. Walker was successful in adding new members, but due to health problems was forced to step down after just a year and a half. His replacement, Harlie F. Zimmerman, enjoyed a much longer tenure, serving some 33 years in the post. A graduate of Iowa State University, where he majored in the dairy industry, Zimmerman gained practical experience in the business working at Babcock Dairy Company in Toledo, Ohio, a Quality Chekd member. Moreover, he possessed innate political instincts that served him well over the decades. He maintained close relationships with each member, allowing him to preserve harmony by resolving complaints before they reached the board. Moreover, he was an excellent public speaker and well represented Quality Chekd within the dairy industry.

When Zimmerman took over in March 1949, Quality Chekd's headquarters were moved to Chicago, at first consisting of nothing more than a six-foot-square office. With the economy picking up after the war, and young baby boomers eating ice cream at an ever increasing pace--in 1920 the average American ate 6.43 quarts each year, a number that increased to 14.66 quarts by 1950--Quality Chekd added new members and hired two field representatives, requiring the procurement of larger accommodations. In 1950, the organization needed even more space to support its activities, which now included a milk program. To better reflect Quality Chekd's broader interests, which would ultimately include a wide range of dairy products, the co-op changed its name from Quality Chekd Ice Cream Association to Quality Chekd Dairies, Inc.

With the hope of increasing its membership, Quality Chekd decided in 1952 to try national advertising, which would be used to support the rollout of a new product. Without conducting any market research, the organization's overly aggressive board settled on root beer-flavored ice cream they dubbed "Jolly Root Beer." It appeared at first to be an inspired idea, given the appeal of root beer in the early 1950s. The drink was sold at roadside barrel-shaped stands, and root beer floats that featured a scoop of vanilla ice cream were popular across the country. Quality Chekd spent $8,000 on advertising and also created point of sales materials to promote its root beer ice cream. After some initial success, however, sales quickly tailed off. Although a disaster at the time, Jolly Root Beer would be long remembered by the chastened board, which now knew the value of market testing and was determined not to repeat its mistake.

Later in the 1950s, Quality Chekd changed its logo and carton design. A chance meeting on a train by one of the directors led to a connection with Walter F. Landor, a well known industrial designer. He invited the entire board to his design offices in San Francisco, which was the site of that year's International Milk and Ice Cream Association's convention. Landor introduced the men to a sophisticated method of designing and market testing cartons. They balked, however, at his price to redesign the co-op's logo and create a carton series: $35,000. The board subsequently met with five other industrial designers, who failed to excite them, and finally in 1958 decided to go with Landor, despite the fact that by now his bid had increased to $45,000. Landor's efforts were instrumental in the continued refinement of the Quality Chekd logo, as well as an ongoing commitment to top-notch carton design.

Membership Peaks in 1955

In 1955, Quality Chekd moved its offices from downtown Chicago to the suburb of LaGrange, Illinois. Also in that year, the number of members peaked at 156 dairies located in 37 states. Because of consolidation in the industry, the membership began a steady decline, although total member sales volume continue to grow at a steady pace. The organization also spread to new states, and in 1959 the first dairies in Canada joined Quality Chekd, a development which paved the way for even- tual expansion into Latin America. A key to attracting new members, and retaining old ones, was the 1960 introduction of a purchasing program, which transformed Quality Chekd into a full-fledged cooperative. By pooling its purchasing power with other Quality Chekd members, individual companies were soon able to cover their annual dues and fees from the savings realized by participation in the program. In 1963, Quality Chekd again attempted national advertising, this time with much better results than the Jolly Root Beer experience of a decade earlier. Periodic campaigns to promote the Quality Chekd brand furthered enhanced the value of the organization to individual members.

Under Zimmerman's leadership, Quality Chekd thrived. By 1977, total sales had grown to $825 million, but Zimmerman was nearing retirement and, with board approval, he began a search for his replacement. He settled on Mel Rapp, an executive with considerable experience in the dairy industry, including Quality Chekd member companies. Rapp succeeded Zimmerman in December 1981 and was instrumental in taking the co-op to the next level. Total member sales volume grew at an even faster clip. After reaching the $1 billion mark in 1980, Quality Chekd topped $1.5 billion in 1985 and $2.5 billion in 1990. The organization was so successful that in 1987 it was able to build its own office building, a three-story, 36,000-square-foot structure located in Naperville, Illinois, some 30 miles outside of Chicago. In addition to gaining new office space, Quality Chekd was now able to house the independent laboratory that conducted testing on member products. It was also able to offset costs by leasing the top two floors. In honor of the co-op's first president, Irving B, Weber, and its long-time general manager, Harlie F. Zimmerman, the structure was named the Weber-Zimmerman Building.

Quality Chekd's national advertising program reached a new level of sophistication in the early 1990s. Television commercials promoting the Quality Chekd logo were run on such major cable television networks as CNN, WTBS, USA, Nick at Nite, Lifetime, and The Discovery Channel. This effort was also a key factor in persuading large companies like Flav-O-Rich to join the cooperative. Another major national advertising campaign to support milk and ice cream products was launched in 1997. By 1999, one-quarter of the organization's budget was devoted to marketing efforts.

The commitment to promoting the Quality Chekd logo was especially important because of the changing conditions in the dairy industry. Total member sales volume topped out in the mid-1990s at the $3 billion range, then began to recede somewhat. Because of further consolidation in the industry, Quality Chekd faced competition from even larger competitors. This trend, however, made joining Quality Chekd an even more attractive option for dairies that desired to remain independent. With less bureaucracy than multi-unit processors, Quality Chekd and its members were able to adjust more quickly to a changing marketplace. Nevertheless, the organization also needed to find ways to sustain growth if it was to thrive in a new century. In 2001, the first South American dairy joined the fold: Alqueria, the largest fluid milk processor in Bogota, Columbia.

After serving 20 years as Quality Chekd's managing director, Rapp stepped down in favor of Peter Horvath, effective January 1, 2001. With only four managing directors in its history, Quality Chekd enjoyed great stability for more than five decades. Although it was improbable that Horvath would stay as long at the helm as Zimmerman and Rapp, it was more likely that under his leadership Quality Chekd would continue to find a way to adjust to changing business conditions and continue to offer valuable services to its members. Perhaps the co-op's greatest asset, a legacy left by its founding members, remained the highly recognizable logo, which enjoyed the kind of brand recognition that was the envy of its corporate rivals.

Principal Operating Units: Productions and Quality Assurance; Training and Education; Marketing; Purchasing; Accounting/MIS.

Principal Competitors: Dairy Farmers of America; Prairie Farms Dairy Inc.; Foremost Farms USA Cooperative; Michigan Milk Producers Association.

Chronology

• Key Dates:
• 1944: Quality Chekd Ice Cream Association is formed.
• 1949: Harlie F. Zimmerman is named managing director of the cooperative.
• 1950: The cooperative add a milk program and changes its name to Quality Chekd Dairies, Inc.
• 1960: A purchasing program is introduced.
• 1977: Revenues reach $825 million.
• 1981: Zimmerman retires.
• 2001: Peter Horvath becomes the fourth managing director of the cooperative.