Change in the countryside.

Rural America has seen dramatic change over the last 100 years. Some of those changes include farm population now near 2% when it was once over 50%, rural county populations which had consistent declines until the late 1980s and '90s. Recently, the USDA reported that only one in five families living in rural counties make their living through farming activities. USDA reports that manufacturing is the number one occupation of the rural county population at 21%.

This change poses a dilemma if you are Land O' Lakes Purina Feed. With brands over 100 years old that are deeply rooted in rural America's production agricultural segments, this could be an unsavory change.

If you look deeper, the change is an exciting one for the lifestyle animal business. The American Horse Council points out in their "2005 Economic Study" there are nine million horse owners that spend over $39 billion in direct spending and have an over $100 billion economic impact on the economy. There are an estimated six million show animal projects in the U.S. Deer management is at an all-time high and wild bird feeding is the second fastest growing outdoor activity behind gardening.

MORE ANIMALS THAN KIDS

According to the USDA, two million acres of farmland was used for housing starts in the last ten years--57% of those housing starts were on ten or more acres. This acreage bodes well for future animal ownership. To encapsulate the opportunity, there are more animals in American households today than there are children.

In October 2001, Land O' Lakes, Inc., purchased Purina Mills, LLC. "We were able to gain leading strategic brands, a strong distribution footprint with the Purina Dealer network and expertise in dealing with the lifestyle animal owner through the purchase of Purina Mills," notes Fernando Palacios, Exec VP/COO of Land O'Lakes Purina Feed.

Brad Schu, Dir of the Lifestyle Business Unit for the company, has been involved in the lifestyle-type business for nearly 25 years. He points out, "One of the biggest challenges you have to get your head around is that the decisions the consumer makes in the lifestyle business are seldom economic in nature. Over 90% of your customers have a negative cash flow as it relates to their animal passion."

Schu adds, "If you think about the discretionary time and discretionary income the consumer invests in backyard animals, it would resemble what an avid bass fisherman, gardener or movie fanatic would spend. In other words, you are competing with, and are in the entertainment business."

Land O'Lakes Purina Feed has worked to set up its lifestyle business to cater to this consumer that, in most animal owning segments, is over 80% female. "This involved quite a number of changes in how you do business," notes Mark Chenoweth, St. Mkg Dir at Land O'Lakes Purina Feed. "Our products had to be tailored in their positioning, packaging consistency and messaging to be geared toward this value-added consumer. An example of this is our new positioning for our Lifestyle products: Animals Make Better People, We Make Better Animals."

He adds, "Our LongView Animal Nutrition Center located in eastern Missouri has specialty animal and horse research units which have been the cornerstone of the product changes we have made."

The list of innovative products for these lifestyle consumers is numerous and includes Purina Equine Senior horse feed for mature horses, Ultium Sports Performance horse feed, SunFresh All-Natural family flock diets, Antler Max Deer Chow and Mazuri brand Exotic Animals and Zoo feeds and many more. For sale through the cooperative network channel is a complete line of lifestyle products for all species under the Lake Country brand name.

HELPING THE DEALERS

Another key change that needed to be addressed was how and where the products were sold. Schu notes, "The cooperative and dealer store locations which have traditionally sold feed in most cases were set up to serve the production agriculture market. This new consumer wants a shopping experience that is appealing from the road as well as while in the store. We knew we needed to help our dealers and cooperatives make the changes, we just didn't know how to go about the process. It was evident we needed to hire the expertise."

After sorting through the hardware, fast food, department and discount store businesses, Land O'Lakes Purina Feed assembled a Retail Development team that helps dealers, cooperatives and investors be more productive in capitalizing on the growing lifestyle market.

Ray Keith, Dir of the Retail Development team, pointed out, "Our role is to make what can be a major life changing event for a dealer or cooperative into a more manageable investment endeavor and to help them steer through their choices."

Those investment endeavor choices include the America's Country Store (ACS) program which is a 12,000 square foot turnkey retail operation with "ground up" construction.

Another choice is the Premier Services (PS) program package which entails taking existing dealer or cooperative facilities that are in the right locations and upgrading interiors, exteriors and operations to delight lifestyle shoppers.

Keith says, "We have over 230 Concept Stores (ACS and PS) open and we have learned something from doing each one. The great news is that dealers have witnessed increased sales and, in most cases, much higher margins as a result of the program."

To keep the retail dealer and cooperative stores up to date with the needs of lifestyle consumers, Land O'Lakes Purina Feed holds Retail Solutions Expos. Approximately 2,500 dealers and co-ops will attend these in four locations this year. There will be more than 100 outside vendors, product, store operations and merchandise training.

The lifestyle animal owner is an information-seeking group. They spend a high percentage of their time on the Internet and reading enthusiast magazines. "Our biggest success in this arena of information dissemination has been group seminars," explained Schu. "We have the luxury of having a highly communicative sales team."

Horse Owner Workshops (HOW), which provide basic to advanced horsemanship knowledge and involve equine practitioners in a "live format" with horse owners, is an example of this success. "Each spring, we hold approximately 900 of these meetings in coordination with dealers with outstanding attendance," said Schu. "We also have continued this into other lines, such as deer and show animals."

Land O' Lakes Purina Feed also includes sponsors into these meetings including John Deere, Primedia, Pfizer, Lexol/Corona, Wrangler, Carhart, 3M, Equibrands, Sundowner Trailers, Hamilton Halters and EquineVacations.com just to name a few. "We are excited about how we are positioned for the future in this business," says Palacios.

Reaching consumers in the lifestyle business can be a challenge. "When less than 2% of the population owns the animal segments we are talking about, you have to be selective and creative in how you focus your marketing dollars," Schu says.

"We focus on trial across all of our segments as a mechanism for growth and attempt to create customers through the cycle of their animal ownership." To do this, the lifestyle team, uses couponing and offer mechanisms to get interaction with consumers and the retail outlet. Enthusiast magazines and database marketing are the key delivery mechanisms to accomplish that.

In summary, Schu notes, "In a nutshell, the great thing about this business is there is no handbook. As we look at the changes that have happened in this business in the last decade, we know we will be experimenting to make our brands grow in the future. The key for us is to stay focused on making better animals."