The state of forest industry checkoff programs today

Mention agricultural checkoff programs and a lot of people instantly think of the famous “Got Milk” ad campaign. For the uninitiated, the USDA works with ag-based industries who want to band together for the purposes of pooling resources to conduct research or promote an industry’s products. In reality, there are many checkoff programs that operate in relative obscurity and yet still have a substantial positive impact growing demand, improving profitability or slowing declines in consumption. The beef industry in the U.S. was facing a potentially crippling crisis with the first case of Mad Cow Disease discovered here in 2003. The beef industry checkoff stepped up to fund both the research and the communications campaign to inform consumers that U.S. beef was safe. Both beef and eggs were labeled as foods to limit consumption of in the early 90s – beef for being high in fat and for being high in cholesterol. Both the beef and egg producers funded multi-million dollar campaigns to combat these erroneous images and educate consumers on how to eat these products as part of a healthy diet. Checkoffs are also currently playing a major role in the U.S. Farmers and Ranchers Alliance as they address reputation issues and challenges from the environmental community similar to those facing the forest industry.

In the forest products industry today, there are three checkoff programs in place and several others under consideration. The Softwood Lumber Board was originally authorized in 2011, the Paper and Packaging Board was authorized in 2014, and the Christmas Tree checkoff was authorized earlier this year. A checkoff for the hardwood industry is expected to come up for an authorization vote later this year and efforts to organize a checkoff representing the wood-to-energy sector are ramping up.

At our recent Small Log Conference in Coeur d’Alene, representatives from the forest products checkoffs that are up and running &ndash and one that is being created – shared with conference attendees about how their programs are being developed, how they operate, and what sort of results can be expected from their efforts.

The Hardwood Checkoff Committee

Grace Terpstra with the Hardwood Checkoff Committee talked about the high bar for getting a new checkoff program authorized by the USDA and subsequently approved by the industry, a process the Committee is actively pursuing. An industry vote seeking approval is expected later this year. For the Hardwood Checkoff Committee, this has been a 5-year effort funded entirely by the handful of hardwood sector companies on the Committee with assistance from the U.S. Endowment for Forestry and Communities.

Checkoff programs have traditionally focused on several key areas to promote growth for their specific product: research into market opportunities, new product development, influencing codes and standards, education, and foreign market expansion. Grace indicated that the Hardwood Checkoff Committee believes that focusing on revising codes and standards to allow hardwoods for more applications will provide substantial payoff for the sector.

She also shared some interesting information on other industry checkoff programs, their funding levels, and growth in sales resulting from checkoff research and promotion activities. The examples shared ranged from a low of $5.55 in increased sales for every checkoff dollar for the beef industry to a high of $27.73 for the watermelon checkoff. Funding levels range from a low of $1.5 million for watermelon to $281 million for milk.

The 2015 Small Log Conference Forest Products Checkoff Update1

Credit: Hardwood Checkoff Committee

The Paper and Packaging Board (P+PB)

The Paper and Packaging checkoff, voted on November 2013 and published in the Federal Register in January 2015, is preparing to launch its program this summer to stem the decline in paper and writing paper grades usage and in growing demand for kraft, container board, and paperboard packaging. Annual funding for the P+PB is estimated at $25 million.

According to Mary Anne Hansan, Executive Director of P+PB, their consumer facing program is aimed at a high potential audience of consumers, identified through consumer segmentation research, that they call “Expressives.” Expressives represent 28% of adults 18–49, or 36 million consumers, and index more highly than other audiences on the number of trips to the grocery store, online shopping, use of paper in the office, and propensity to read both books and on e-readers. The P+PB’s comprehensive media plan includes TV, print and outdoor advertising, public relations, and social media components as well as a dedicated website. The underlying goal of the consumer program messaging is to reinforce the benefits of paper and paper-based products and alleviate the guilt perpetuated by inaccurate green claims about digital technology.

The 2015 Small Log Conference Forest Products Checkoff Update2

Credit: Paper and Packaging Board

The Softwood Lumber Board

The Softwood Lumber Checkoff (SLB) program is the granddaddy of the forest products sector programs. Steve Lovett characterizes the goals of the SLB succinctly as “sell more lumber.” Authorized in 2011, market segmentation research led to a concentration on competing more effectively to recapture share in specific markets. An important focus for the Board is increasing the use of wood over competing products for applications where wood has not traditionally been considered, such as commercial, non-residential and multi-family housing, and pioneering the use of wood for new applications like tall buildings. A total opportunity volume of 11 billion board feet of lumber sales has been identified in these segments. SLB is spending softwood checkoff dollars to directly fund programs like the American Wood Council, reThink WOOD, WoodWorks, and Wood, Naturally to pursue these opportunities.

Credit: Paper and Packaging Board3

Credit: Softwood Lumber Board

SLB also identified challenges to softwood lumber including changing demographics leading to less housing construction, and direct threats from competing products. The SLB is taking direct steps to combat these challenges as well.

The initial results for SLB are impressive. While the official third-party evaluation of SLB performance has not yet been completed, preliminary estimates of the combined impact of SLB efforts over the 2-½ years since inception (last 6 months of 2012, 2013, and 2014) are very conservatively estimated at 800 million board feet of new softwood lumber demand. The SLB expects the results of the independent evaluator to be published later this year.

Common Elements

All forest sector checkoff programs share a few common traits. They tend to be very low overhead. In fact, the SLB has no bricks and mortar office and only two staff members, both outsourced along with all accounting and back room functions. The programs are overseen by a board made up of industry leaders who focus on spending the allocated funds exclusively where it can deliver results. The programs are research driven to both identify the best opportunities for success and develop messages that will be most impactful.

Finally all national agricultural checkoff programs operate with oversight form USDA. The ROI calculations must be documented and take into account macro-economic effects, changing market conditions, and anything else that might influence increased sales outside of the efforts of the checkoff program so that checkoffs claim credit only for the impacts they create. Finally all checkoffs must undergo periodic referenda by the industry companies that invest funds to support them. The SLB is reapproved every 5 years, and the P+PB is reapproved every 7 years.

Conclusions

Checkoff programs have proven to be an effective means for promoting specific industry products. Designed and run by industry participants, and overseen by the USDA, they tend to be fiscally conservative and very efficient. The return on investment for these programs is well documented. The wood products sector has been facing increased competitive pressure from alternative building materials and challenges from industry critics. If you consider a total of four wood products sectors (softwood, hardwood, paper and packaging, and biomass energy), each with a checkoff program funded at $15–$25 million, that adds up to a war chest of between $60–$100 million to address these challenges and help the industry grow as a whole.

At FBN, we believe in the value of checkoff programs to support the industry. As the hardwood checkoff program will be coming to a vote later this year, we encourage anyone in the hardwood business, or anyone who knows someone in the hardwood business, to please voice your support for getting the hardwood checkoff approved to help fund the efforts to grow the wood products industry. And keep an eye out for the Wood-to-Energy checkoff coming soon.


Dave Parcell is FBN’s VP of Communications. Dave has over 30 years of experience in marketing and communications including almost 20 years running his own agency providing market research, strategic planning, public relations, advertising, promotions and a variety of other communications related services for a wide array of clients including big brand companies such as Black and Decker, Campbell’s Soup, Kraft General Food, and Pillsbury. In 2005, David took over marketing and communications responsibility for the Rocky Mountain Elk Foundation where he became engaged in issues related to conservation, forest health, and forest products, which led to his current role at FBN.

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