When dairy processors look back on 2005 in the years to come what will they remember most? Was it the year of the yogurt smoothie? How about the year of the great school milk package debate? It was certainly a year when the U.S. industry and that of the rest of the world came together in many ways. Two traveling international events came to our shores this year, and Worldwide Food Expo helped showcase our industry for the world.



Early in the year, a controversy emerged over adherence to the pasture access provisions of the USDA National Organic Standards pertaining to organic milk.
Editors Note: The end of the year is upon us, so it's the perfect time to introduce one more new editorial feature to readers. The year-in-review is a staple of news reporting that allows us to take stock of what has taken place this year before we charge into the next. We hope you find it useful reading.

When dairy processors look back on 2005 in the years to come what will they remember most? Was it the year of the yogurt smoothie? How about the year of the great school milk package debate? It was certainly a year when the U.S. industry and that of the rest of the world came together in many ways. Two traveling international events came to our shores this year, and Worldwide Food Expo helped showcase our industry for the world.

There was also the start up of a New Mexico cheese plant that will provide a new measurement for what constitutes a large plant. And it might be the year that probiotics got a foothold in the U.S. And for the first time, the largest American dairy processor was building on sales of more than $10 billion.

Some might look back and say that was the year that organic dairy went corporate. Some might say it was the year that flavored milk sales stagnated.

You could say that nothing earth-shattering took place in 2005, but you might also note that there were lots of significant changes and events.

In March The four winners of Stonyfield Farm's YoBaby Cover Baby Contest were revealed in a delightful way-with a New York photo session.

Numbers and sales trends

The numbers aren't all in yet, but we can make some general statements about what transpired at the cash register in the first three quarters of 2005.

Yogurt showed the most growth of all four dairy categories, according to data through Oct. 2 provided by Information Resources Inc. Dollar sales increased 6.5% compared to the same period last year, unit sales were up 8.0%.

More than $2.3 billion worth of yogurt was sold during those first 9 months. These figures account for supermarkets, drugstores, and mass merchandisers other than Wal-Mart.

Quarterly sales of yogurt drinks have grown dramatically in the last two years, but this year, comparing quarterly reports to the same periods last year shows that the market is becoming established. For instance, quarterly dollar sales grew by about 24% in the period ended March 27, by 3.7% for the period ended June 26, and 6.4% for the period ended Sept. 25.

Natural cheese also showed decent growth during the period, but not the kind of spectacular growth seen in the past. Those in the cheese business say the best growth right now is in foodservice and wholesale sales to other food processors.

Ice cream sales grew by about 3% for the year with practically all of it coming from foodservice, and milk sales were down by just a bit, which is much better than the 2% or 3% shrinkage that has been seen in past years.

Headlines by the month

In January a controversy emerged over adherence to the pasture access provisions of the USDA National Organic Standards. CoolBrands announced that it would buy Kraft's Yogurt business, and Kraft announced that it would change the way it marketed its least healthful foods in order to encourage children to eat better. Dairy Farmers of America bought out its partners at Keller's Creamery, and the dismissal of a lawsuit objecting to California's Happy Cow's ad campaign was upheld on appeals. Chr. Hansen made some significant changes in its front office, among them the appointment of David Carpenter as pres./CEO.

February brought great misfortune to CoolBrands when its co-CEO Richard Smith died after surgery. Tillamook County Creamery Assn. complained that Monsanto, Inc. was intruding on its decision making process regarding the use of rBST. Dean Foods reported that its 2004 sales reached $10.8 billion, although its earnings were down compared to 2003.

In March Steve Demos, founder of WhiteWave, resigned as president of Dean's WhiteWave Foods division, less than 6 months after the organic/soy/value-added division was created. He was later replaced by a food and consumer products veteran executive from Gillette. Farmland Dairies, the new company created from Parmalat USA, won approval of its reorganization plan.

Bravo! Foods and Coca-Cola Enterprises announced in July that Coca-Cola Enterprises would become a stake holder and exclusive distributor of Bravo.
April brought news that Jim Oberweis, owner of Oberweis Dairy was throwing his hat into the Illinois gubernatorial race. DCI Cheese, Mayville Wis., was acquired by the Fairmont Food Group, led by former Dean Foods executive Bing Graffunder. Organic Valley Family of Farms introduced Texas Pastures, one of a series of regional, fresh organic product lines the co-op is developing with local farmers and processors.

In May Dean reported 12% first quarter sales growth, Saputo acquired Wis.-based Schneider Cheese, and Lifeway Foods Kefir products were recognized with a Retailer Choice Award at the FMI show. Fog Filler Co. introduced Micro-bloc Antimicrobial technology as a new feature in its elastomers and lubricants. Meanwhile Denmark's feta cheese manufacturers lost their appeal in European court, as they fought to overturn an EU ruling that gives Greece cheesemakers some exclusive claims to the term feta.

June saw Lifeway formalize an agreement with Target Corporation to provide four flavors of its LowFat Kefir in select Target stores. Company stock jumped more than 30% on the news. Betsy Holden stepped down as president of global marketing & category development for Kraft saying she would take a 9-12 month sabbatical before resuming her career elsewhere. The industry lost a pioneer when Faye Wells, of Wells' Dairy died in LeMars, Iowa at the age of 82.

In July Bravo! Foods announced that Coca-Cola Enterprises had agreed to become a stakeholder and master distributor of Bravo's flavored milk products. Groupe Danone's president was busy squelching rumors about a possible takeover by PepsiCo. HP Hood and equipment manufacturer Shibuya received notification from FDA accepting the first rotary bottle filler intended for aseptic milk packaging. Meanwhile, Wisconsin-based Uplands Cheese Co., has won the coveted "Best of Show"award at the 22nd annual American Cheese Society competition for its "Pleasant Ridge Reserve."

MilkPEP said its "St. Louis School Milk Test" resulted in an average increase in milk sales of more than 12% through the use of improved flavors and improved paperboard packaging.

North America became ground zero of the global dairy industry in the fall. In September Dairy Foods published its second international issue.
By August, PepsiCo had introduced a new line of flavored milk called Quaker Milk. Organic Valley Family of Farms and Stonyfield Farm established a transition program to help provide supplemental funding for Northeastern dairy farmers who choose to go organic. Dreyer's Grand Ice Cream Holdings, Inc. announced 17% growth in sales for its company-owned brands in the second quarter.

The global dairy industry began a procession to North America in September, for a series of industry events starting with the Fourth International Whey Conference, co-hosted in Chicago by the American Dairy Products Institute. With the WTO Doha Round talks on the minds of the world industries, Vancouver, B.C. hosted the International Dairy Federation's World Dairy Summit. A month later Worldwide Food Expo came to Chicago. Also in September Dairy Foods published its second international issue.

The got milk lawsuit, filed by a farm family wishing to opt out of the check-off program was finally rejected in U.S. appellate court. Dairy companies and their customers were recovering from Hurricane Katrina, and finding ways to help victims. Stonyfield agreed to pay the cost of having New Hampshire state inspectors travel to New Zealand, as the yogurt maker was searching the globe to bolster its supply of organic milk.

In October, Southwest Cheese, an entity created in late 2003 as a partnership between Glanbia Foods, Dairy Farmers of America and Select Milk cooperative, began trial runs on one of the lines at its humungous new plant in Portales N.M. A couple weeks later at Worldwide Food Expo, an executive with the project's chief equipment supplier and process engineer described the scope of the plant as being about 100 times the size of what was the average U.S. cheese plant just ten years ago. Schreiber Foods announced its acquisition of Hilltop Valley Dairy yogurt, and Marathon Cheese unveiled plans to build a small cut and wrap facility in southwestern Idaho. A new got milk campaign that lampoons Major League Baseball's steroid scandal was revealed and quickly drew the ire of the baseball profession.

November brought a report of double-digit third-quarter sales growth from Dreyer's Grand Ice Cream Holdings. USDA indicated that a new process to continuously make films from the milk protein casein could lead to edible, water-resistant coatings on several products commonly found in grocery-store dairy aisles. Kraft said it would raise prices on prepared foods by about 6% in response to rising costs and shrinking profits.

In Washington...members of the industry were tickled in January when the new Dietary Guidelines for Americans was released calling for at least three daily servings of lowfat dairy products. In February debates began on the future of the Milk Income Loss Contract program, (and the issue still had not been conclusively settled in early November). FDA issued a heath advisory in the spring warning pregnant women against consuming soft cheeses made with raw milk. Debate on Central American trade began in April, and the CAFTA agreement was approved by a narrow margin in August. Dairy state democrats introduced legislation in May that would prohibit products containing dry ultrafiltered milk products, milk protein concentrate of casein from being labeled as domestic natural cheese. USDA announced in August that it had joined with other agencies to develop new protections for the food supply. IDFA and a coalition of consumer groups came together in September to oppose a measure that would create new import tariffs on some dairy proteins. And in October the Bush Administration signaled a desire to cut subsidies by as much as 60% in preparation for this month's WTO meeting in Hong Kong. Just last month, the House Agriculture Committee reviewed the status of the WTO Doha Round agricultural negotiations.