DAKOTA, Ill. — Over the past several years, Berner Foods, Dakota, Ill., has focused on making a place for itself in the dairy business by meeting the needs of the untapped niche markets demanded by consumers.

A little more than a decade ago, the company was best known as a contract manufacturer producing Swiss cheese for companies. At that time, the company, then known as Berner Cheese, found that there was a void in the processed cheese arena and proceeded to build its first processed cheese facility. Today, little more than 10 years later, the company still makes Lacy Swiss but also is well-known for its processed cheese sauce and other easy-to-use cheese products including Easy Bagel Cream Cheese Spread, a private label cream cheese spread in an aerosol container.

• Moving into the soy and vegetable fat business

For a company that for the past 58 years has focused on dairy products, moving into the soy and vegetable fat business is a significant move. But as the company looked at both its short-term and long-term strategies, it became evident that not only was there a need for cholesterol-free dairy products but that soy products were a wave of the future that Berner executives believed they could ride to the top.

"I have sold dairy items all my life," says Steve Fay, vice president, sales, Berner Foods. "But right now there is a wave of positive health information pertaining to soy.

"We're hedging our bets. We see soy products as probable displacements of some our dairy products," he continues, quickly adding, though, that he sees these products as a niche market that won't dig deep into the dairy industry.

For example, Fay says there is well more than a billion dollars' worth of sour cream and sour cream dips sold in the United States annually. If soy alternatives to these products took 2 to 3 percent of the market share and Berner had only a portion of that, it would result in significant growth for a company which reported 2000 annual sales at an estimated $85 million.

"I anticipate Earth's Answer products will be a part of a $150 million segment sometime in the next five years," Fay says.

That said, Berner executives don't see these products as a replacement for typical cheeses and sour creams — or as a direct competition with them.

"It's a specialty item geared toward a niche market," Fay says.

The Earth's Answer line is focusing on consumers who want the products for health reasons — such as the need for cholesterol-free or lactose-free products, he further explains.

"If you're going to eat cheese and you have a serious cholesterol problem, the Earth's Answer line is an option," Fay says.

"We're targeting cheese lovers who have a concern about cholesterol consumption," adds Joe Egan of Family Foods, a Massapequa, N.Y., sales and marketing firm retained by Berner to represent the Earth's Answer brand. "We're competing with the cholesterol in natural cheese."

When developing the cheese, the company's target was to meet 90 percent of the taste and functionality of ordinary cheese.

The company's staff did a lot of internal tasting of the product to achieve that target, Fay says, and feels that it has succeeded. While the cholesterol was reduced to zero, saturated fat was only reduced by 70 percent in order to retain the necessary taste and functionality, he adds. The cheese isn't labeled as 100 percent lactose-free, although it is very low in lactose content, he also notes.

Earth's Answer cheese comes in four flavors — Ched, Mozz, Pepper Jack and Swiss Lace. It is made at the company's Rock City, Ill., plant and is made basically just like any other natural cheese — except for the company's technology which allows the milkfat to be replaced with vegetable oil, Egan says.

The launch of the line has just begun with recent trade shows this spring and the company is taking it slowly, Egan says, so that the line is rolled out successfully.

While the Earth's Answer cheeses aren't made with soy, the company also will soon roll out its soy alternatives to sour cream, dips and cream cheese later this year under the continued first phase of the Earth's Answer product launch. To facilitate the introduction of these products, Berner earlier this year completed construction on an addition to its Rock City plant which allows it to produce 1.25 million pounds of soy solids each week. The soy products, which will contain no dairy solids, will be lactose-free as well as organic, Fay notes.

• Marketing into the future

As Berner begins to roll out these products, the focus is on getting them into delis in mainstream grocery stores as well as in specialty stores.

"We're moving slowly, positioning this in the service deli initially to qualified retailers who can introduce it and present it and train their deli associates on it," Egan says.

"We want to make sure the introduction is handled correctly" both in terms of training and not overcommitting production capacity as the product is just first introduced, he adds.

The company is putting together a comprehensive in-store campaign for the line, Egan says. Part of that includes training sales associates so they understand the value and deliver the message about the product, he says.

In addition, there will be point-of-purchase materials available, so the company can bring the story of the product line directly to the deli counter. Sampling also is an important part of the program that the company is putting together, he says, as Berner aims to reach one consumer at a time.

A second phase for the product line is planned as well. Besides the products being rolled out — or about to be rolled out — the company also is looking at soy-based instant breakfast mixes and soy-based nutrition drinks.

Egan is looking ahead to the future, too, when the product also is marketed towards foodservice. He believes that the Mozz has potential on pizzas in a number of settings.

"Can you imagine pizza with this cheese on a foodservice menu at a hospital?" he says.

The product line also eventually will be made available in the dairy case in selected markets.

"The press on cholesterol is high," Egan adds. "The timing of this is really exciting."

CMN