Midwestern Stronghold

July 1, 2004
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Midwestern Stronghold

America’s agricultural heartland is home to some of the industry’s most successful independent players
In the world of dairy, there is something to be said about remaining true to a brand’s regional heritage. And refusing to become the next national mega company has proven to be a profitable move for several industry independents. But remaining successful and independent is not without its challenges.
Still, many autonomous dairy manufacturers agree their longevity comes from giving customers what they’ve come to expect: a sense of ownership, trust in product character and company pride that can come only from a valued reputation and consistency — providing consumers with what sometimes gets lost in corporate America.
What follows is an exploration of the market conditions some leading independent players in the Midwest/Midsouth region face amid national competition.
Prairie Farms Dairy Inc.
Carlinville, Ill.
Prairie Farms Dairy Inc. is one of America's largest manufacturers of consumer dairy food products. Founded in 1938 as a farmer-owned dairy cooperative, Prairie Farms and its joint venture partners currently produce high-quality dairy products at 28 plants in 15 states throughout the Midwest.
Since its founding in south-central Illinois in 1938, Prairie Farms' growth has naturally branched out from this heartland location. “Prairie Farms Dairy appreciates the discerning tastes that Midwestern consumers have for high-quality cultured dairy products,” says Bill Montgomery, marketing director. “We believe our line of cultured products consistently rewards consumer's expectations.”
The company offers a full line of traditional fresh dairy milk, cottage cheese, sour cream, dips and ice cream — virtually all dairy food products with the exception of hard cheese items. In addition, Prairie Farms produces a variety of orange juice and fruit drinks. Responding to the latest low-carb craze, Prairie Farms subsidiary Ice Cream Specialties Inc. offers various frozen treats under the North Star brand CarbWise line of low-carb products.
With an already active school vending machine program, Montgomery anticipates this segment growing to make milk the beverage of choice among young consumers. “Our Ice Cream Specialties subsidiary has also developed a vending machine program for frozen-treat products,” he says.
The industry concerns of Prairie Farms are likely to be similar with other dairy operations, says Roger Capps, chief executive officer, with the volatile butterfat market at the top of the list. But with net sales in 2004 of about $1,058 billion, Capps says the company plans on continued internal growth.
Yarnell Ice Cream Co. Inc.
Searcy, Ark.
Yarnell Ice Cream Co. is a fourth-generation, family-owned company founded in 1932 when Ray Yarnell picked up the pieces of a bankrupt dairy. Processing ice cream and other frozen desserts ever since, Yarnell’s is now the only ice cream company in Arkansas.
Over the years, with the help of its loyal consumers, the company has become one of the nation’s leading regional ice cream companies, serving the entire state of Arkansas and major markets in adjoining states.
In addition to the company’s premium ice creams and products for health-conscious consumers, Yarnell’s manufactures innovative frozen novelties. And being a direct-store-delivery company, Yarnell’s places its products in frozen food cases at all supermarkets by its own professional route salesmen.
The company’s growth has not been limited to new products alone. In fact, Yarnell’s says it has achieved an aggressive expansion program. According to the company, additions are continuously being made to the manufacturing capabilities and ice cream storage capacity at the Yarnell’s Searcy plant.
Sales routes are found in western Tennessee, Arkansas, Mississippi and Missouri. In order to better serve its market areas, the company has branch facilities in Fort Smith, Springdale, West Memphis, Hot Springs, Paragould and Texarkana, Ark.; and Tupelo, Jackson and Gulfport, Miss. Additionally, Yarnell’s has been exporting products to Russia since 1991.
Yarnell’s says it is determined to remain the best ice cream company in its region of the United States. The company employs independent market research firms to conduct periodic taste tests to compare its products with the other leading brands. This, in addition to Yarnell’s own sensory evaluation facility, assures the company will remain No. 1 in taste and quality, Yarnell’s says.
Also, Yarnell’s says its vision is to move from being a small regional company to a mega regional company in the direct-store-delivery frozen dessert sector while simultaneously achieving national recognition through its Guilt Free products.
Berner Foods Inc.
Dakota, Ill.
With corporate offices in Dakota, Ill., and corporate sales office in nearby Roscoe, Berner Foods Inc. is a privately held multi-divisional company whose current product lines include process cheese products; natural cheese products such as Swiss, muenster and havarti; and soymilk. In its process-foods division, the company manufactures approximately 70 percent of all private label cheese sauces and spreads in North America, approximately 85 percent of private label salsa con queso products, 90 percent of private label aerosol canned cheese products and an assortment of portion control cups ranging from 1 to 5 ounces.
Berner Foods operates a natural-cheese facility that processes about 1.5 million pounds of milk a day into Swiss, muenster, havarti and specialty performance low-cholesterol cheeses, plus a food-grade soy solids production platform that manufactures soy concentrates for soymilk. Finally, the company has a sister division — Illinois Protein — where Berner Foods receives about 20 million pounds of whey per week that is concentrated into human food-grade whey concentrates.
The company plans to open its fourth division — a single-serve bottling operation — in early 2005 which will be dedicated to producing healthy, single-serve nutrition drinks, says Steven Fay, senior vice president.
Berner Foods recently completed a 72,000-square-foot expansion of its process-foods facility, says Fay, and a retrofit for increased brining capacity at its natural cheese plant. “A reconfiguration and expansion of our soy facility is planned this year,” he says.
According to Fay, what makes the Midwest unique as a region and a place in which to do business is the availability of high-quality milk. “Obviously, for a company that has made cheese for 61 years, it is the proximity to a very high-quality milk source that has contributed to our success,” he says. “Midwest milk yields more cheese per hundredweight than milk from many other regions. We also have access to a labor force with a good Midwest work ethic. Our centralized location also affords us opportunities to sell coast to coast. This region is a central location for food processing and affords us many opportunities for co-manufacturing.”
Regarding favorite regional flavors and tastes, Fay recalls a funny story about the production of Limburger cheese that was once banned from shipment by the U.S. Postal Service. “The battle raged for months until Midwest cheese makers ultimately prevailed,” he says. “It seems the Limburger cheese was so strong that the postman’s bag would smell for days afterward and most of the mail he delivered would have the wonderful aroma of Limburger saturating it.
“The Midwest is a repository of diversity. We are black, white, Asian, Hispanic and American Indian. We have German bratwurst and beer, we have Scandinavian lefse (a potato-based soft, flat bread) and lutefisk, we have greens and chitlins. Milwaukee has a dozen fests every year, from Polish Fest to Italian Fest.”
Responding to the low-carb craze, Berner Foods has several initiatives in place to make customers more aware of the company’s low-carb product offerings. “Private label products like those we make are often the last to respond to fads,” says Fay.
In terms of current industry issues having an affect on the company, Fay says the consolidation of retailers can be very challenging. “As they grow larger, we have our eggs in fewer baskets. The costs to serve and interface with these giants are sometimes daunting for smaller manufacturers,” he says. “The other issue looming on the horizon is retailers leveraging their size through things like e-bidding and auctions for their business that has depressed margins in the food manufacturing sector and may put some companies that supply them at peril.”
Associated Milk Producers Inc.
New Ulm, Minn.
Associated Milk Producers Inc. (AMPI) is a dairy cooperative owned by 4,600 member dairy farms in Iowa, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wisconsin. The cooperative’s member farmers produce 5.2 billion pounds of milk with annual sales of $1 billion.
About 1,700 AMPI employees in 13 locations across the upper Midwest process and market a full line of dairy products and ingredients for the retail, foodservice and food ingredient sectors. The cooperative’s products include cheese, butter, instant milk, shelf-stable cheese and pudding, plus a host of value-added dairy ingredients.
In the retail case, AMPI dairy products are sold under the AMPI State Brand and numerous private labels. The Midwest cooperative is among the top 10 largest in the United States in terms of milk volume. It is also one of the nation’s largest producers of cheese, butter and instant milk.
AMPI adds value to milk, which enables the cooperative to return value to its dairy farmer members. This value is measured in terms of on-farm milk prices, return on investment, an annual cash dividend, timely equity revolvement and early equity revolvement for retired members.
AMPI also offers services to help members with their on-farm business. These services include milk contracting, equipment financing, milking system analysis and daily milk component testing.
Because AMPI is a cooperative, dairy farmer members have a voice in how their business is operated. Through a system of grassroots representation, members help guide the cooperative and craft policies that promote an environment in which they can produce milk at a profit. Each member of the AMPI corporate board of directors is an active dairy farmer.
AMPI says its mission is to maximize the return on milk marketed and equity invested while keeping ownership in the hands of current members, building a viable market for future members and representing Midwest dairy producers in the development of dairy policy.
Regional Dairy Advocates
The Midwest has several strong support systems. The Wisconsin Milk Marketing Board, the Midwest Dairy Association and the Wisconsin Dairy Products Association are three major organizations helping to increase dairy equity in the Midwest.
The Wisconsin Milk Marketing Board (WMMB), funded by Wisconsin dairy producers, voted in 1983 to establish a mandatory state milk marketing order to help affect demand for dairy products made from Wisconsin milk.
Increasing demand for Wisconsin’s raw milk remains WMMB’s goal. Because the majority of that raw milk is used to make cheese, the most effective way to accomplish this goal, the organization says, is to focus on marketing and promotion programs for Wisconsin cheese.
Wisconsin dairy producer funds are put to work accomplishing WMMB’s objectives in a variety of ways, including the deployment of sales and marketing programs in the retail, foodservice and food processing channels. WMMB has expanded its retail promotions to all 50 states and is increasing its emphasis on foodservice operators. Already, more cheese is sold through foodservice channels than retail outlets, and the foodservice market continues to grow. WMMB has programs in place to capitalize on this trend and increase Wisconsin cheese sales.
An integrated communications program, says WMMB, also plays an important role in building demand for Wisconsin milk by maintaining, and in some cases establishing, awareness of the high quality found in Wisconsin milk and the dairy products produced with it. Through advertising, publicity and promotional work, Wisconsin dairy producer checkoff dollars are building brand awareness and greater demand for Wisconsin-produced dairy products.
The Midwest Dairy Association (MDA) is a non-profit organization financed and directed by the dairy producers in nine states — Arkansas, Illinois, Iowa, Kansas, Minnesota, Missouri, North Dakota, South Dakota and eastern Oklahoma. The organization’s mission is to develop and implement programs that build demand for dairy products and lead to the economic betterment of Midwest and U.S. dairy farmers.
The Midwest Dairy Council, MDA’s nutrition-education division, works with health professionals, teachers, school foodservice personnel and community leaders to help develop sound and effective dairy nutrition education programs for their clients and students. Registered dietitians are trained to serve as media spokespeople to communicate the nutritional attributes and safety of dairy foods to consumers.
The Wisconsin Dairy Products Association (WDPA) is the only Wisconsin trade association that represents all segments of the dairy industry. Its processor member companies (both cooperative and proprietary) process fluid milk, cheese, butter, ice cream, yogurt, dried milk and dried whey, as well as market fluid milk, package cheese and distribute a wide variety of dairy products. The organization’s associate members are companies that provide supplies and services to the dairy industry. WDPA members are responsible for 80 percent of the milk and dairy products marketed in Wisconsin.
Continually striving to improve the business climate for its members in order to assist them in achieving their profit goals, WDPA says its primary mission is to represent its members in the formation and adoption of rules and regulations pertaining to the dairy products industry. The association also provides educational opportunities for its members to improve their business operations.
Company Fast Facts
1978—Introduced the first all-natural ice milk in the nation.
1989—All-natural ice milk replaced with 95% Fat-Free Premium Lite.
—Introduced 98% Fat-Free Lowfat Frozen Yogurt.
1990—Introduced a nonfat, no-sugar-added fudge bar made with NutraSweet-brand sweetener.
—Markets nonfat, cholesterol-free frozen yogurt.
—Regular Pal Bar joined by no-sugar-added look-alike.
—Introduced lowfat frozen yogurt bars.
—Developed and introduced Guilt Free, the nation's first fat-free, no-sugar-added ice cream featuring NutraSweet and Simplesse.
1992—Improved sherbet line re-introduced as FrostiFruit, a 99 percent fat-free sherbet with chunks of fruit.
1993—Extended Guilt Free line of fat-free, no-sugar-added products to include frozen yogurt, Pal Bars and Fudge Bars.
1994—Granted Dean Foods Co. an exclusive license to manufacture and market nonfat and lowfat dairy and specialty food products under Yarnell’s Guilt Free brand throughout the United States excluding region Yarnell’s serves.
1995—Completed largest expansion program in its history. The enlarged and additional facilities doubled the company’s production capabilities.
—Introduced Guilt Free ice cream sandwiches.
1996—Introduced Guilt Free sorbet, the country's first no-sugar-added nonfat sorbet.
1997—Introduced Homemade family of flavors.
1998—Introduced new easy-to-find-your-flavor cartons.
1999—Introduced Yarnell Light, containing half the fat of regular ice cream.
2000—Introduced new feature flavors such as Homemade Apple Pie, Homemade Peach, Cotton Candy and Blackberry Cobbler.
2001—Expanded manufacturing facility to 56,000 square feet adding two new frozen treat lines capable of producing stick novelties from 1.75-ounce bullets to 4-ounce flat bars at the rate of 40,000 dozen per day.
2002—Repackaged Yarnell’s premium ice cream line by adding new color-coded flavor labels to improve product recognition and added Lots of Stuff line of feature flavors.
2004—Expanded Guilt Free line by adding three new novelty flavors — Guilt Free Fruit Bars, Chocolate Decadence and Strawberry Cheesecake 8-ounce cups in a four-pack.
2004—Introduced Guilt Free CarbAware™ in response to consumer demand for low-carb offerings.

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