With new executives in some top 10 companies, new partnerships, and one company emerging from bankruptcy, the U.S. dairy industry is in some ways starting fresh

Executive personnel changes in the top tier dairy companies include Rick Smith taking over for Gary Hanman at Dairy Farmers of America.

At the outset of 2006, leaders of the dairy processing industry came together in the California desert for the International Dairy Foods Association's Dairy Forum. New leadership was one of the themes of the annual address from IDFA Pres./CEO Connie Tipton.

Tipton made reference to the prior evening's keynote speech from Rick Smith, the new leader at Dairy Farmers of America. She also pointed out that Dean Foods' Dairy Group had a new man at the helm in Alan Bernon, and that Chris Policinski had risen to the top position at Land O'Lakes.

AsDairy Foodspresents its 13th installment of the Dairy 100, there are some other new things to consider as well, such as the relatively new partnership between Glanbia Foods, DFA, and other dairy cooperatives that has given birth to a massive new cheese operation in New Mexico known as Southwest Cheese LLC.

While the dairy industry continues to experience a period of relative stability, there are significant changes that had an impact and will continue to impact the industry's landscape.

That's reflected in this year's Dairy 100 where many companies, both large and small had financial results in FY 2005 that were not all that different from those of 2004. You won't see a lot of movement in the ranking of the industry leaders this year, but reading between the lines, it's easy to see how the top companies are building for the future.

The former Parmalat USA now has its first full year on the books as Farmland Dairies LLC. Farmland is a smaller company, but still did $300 million in 2005, and it comes in at No. 51.

Fresh leadership

Last September Dean Foods announced that veteran executive Pete Schenkel was retiring from his position as president of the Dean Dairy Group, but would continue to serve on the Dean Foods board of directors in a new position as co-chairman.

"We are deeply grateful to Pete for his countless contributions to Dean Foods Company over the past five years," said Gregg Engles, chairman and CEO. "Pete has more than 50 years of dairy industry experience and provides unmatched expertise and invaluable leadership for our organization."

While under Schenkel's leadership, the Dairy Group became the nation's leading dairy processor, growing to more than 100 processing plants nationwide and encompassing more than 50 regional dairy brands. Schenkel also was instrumental in consolidating the company's dairy operations following the merger of Dean Foods and Suiza Foods Corporation in 2001.

Bernon joined Suiza in 1997, when it acquired Garelick Farms, Franklin, Mass., where he was the third generation to work in the family business.

This was not the only key personnel move for the nation's largest dairy processor. Around the same time that the Dairy Group changes were announced, Dean Foods hired a former Coca Cola executive to fill the position left vacant by WhiteWave founder Steve Demos. Demos parted company with the Dallas-based corporation less than a year after he was given autonomous control of all of Dean's value-added, high growth product lines, including Horizon Organic. In addition, Dean Foods announced last fall that Chief Financial Officer Barry Fromberg would leave the company in the spring.

In June 2005, Dean completed the spin-off of subsidiary TreeHouse Foods, Inc. In August 2005, the company completed the sale of portions of the Marie's® dips and dressings and Dean's® dips business, and licensed the Dean trademark to Ventura Foods for use on certain non-dairy dips. The selling price was approximately $194 million.

Most recently, Wall Street analysts have provided a boost to Dean's historically-steady stock by upgrading their valuation of the company, saying that the White Wave division in particular presents significant growth opportunities.

At Kansas City-based DFA, Smith took over the top spot of the nation's top co-op upon Gary Hanman's retirement.

A native of north central Missouri, Hanman, 72, had been CEO of DFA since its creation in 1998. From 1975-1997, Hanman served as CEO of one of DFA's predecessor cooperatives, Mid-America Dairymen, Inc., Springfield, Mo. Before that, he was the first hired chief executive officer of the Square Deal Milk Producers Association of Highland, Ill., a cooperative which became part of Mid-Am in 1968.

"DFA was created by dairy farmers, who wanted to take control over their destiny in a rapidly changing business environment, and Gary Hanman helped us make that a reality," said Tom Camerlo, chairman of DFA's board of directors. "We're grateful to Gary for his leadership. "With him, we built a marketing cooperative that can compete on a global level, while providing a grassroots structure that ensures dairy farmer input and control."

Just last month, Kraft Foods, the nation's largest food manufacturer made a somewhat surprising announcement that it was replacing its chief executive. Irene Rosenfeld, a former Kraft Foods executive who most recently served as CEO of the Frito-Lay division of PepsiCo Inc. was hired back at Kraft to replace Roger Deromedi. It's been less than 3 years since Deromedi was given full leadership control at Kraft. For more on this story see Newsline p. 16.

Upstate Farms Cooperative (No. 60) recently completed construction of a greenfield cultured products plant near Buffalo N.Y. that includes the latest in plant security technology.

Fresh beginnings

One company made a significant move downward in the Dairy 100 rankings, but its management and staff are thrilled with its 2005 results.

Farmland Dairies is a new company of sorts that emerged from the Parmalat financial scandal. Parmalat USA underwent bankruptcy proceedings in 2004, and six of its eight plants were sold or closed. The slimmer company now has its first year under its belt.

"During the bankruptcy, we were dealing with a number of negative situations and attitudes, which we really worked hard to turn these around into creating a more positive energy towards our objectives," says Pres./CEO Marty Margherio, the former Crowley Foods chief hired to lead the reorganization. "The bankruptcy also provided us with an opportunity to focus on defining our core business-what are the brands and what do we do well. From there we decided on a direction for the company, and then developed a business plan to support that direction."

Farmland continues to be one of the top regional companies and brands in the New York City area. It has maintained the Parmalat line of aseptic milk products and expects it to remain strong. Its Special Request Skim Plus brand-a reformulated milk product which offers higher levels of protein and calcium-is the top fat-free milk in the market.

Company sales are down to $300 million from somewhere around $500 million in previous years, and the company has dropped from the top 30 into the No. 51 position, but none of that matters as the company looks forward. Farmland is quick to point out that 2005 sales included $47 million in new business.

The outsized Southwest Cheese plant in Clovis, N.M., is just one of many dairy and beverage projects currently in some stage of development.

Fresh facilities

No. 31 Glanbia Foods has a new facility in its listing. It's the Southwest Cheese LLC plant in Clovis, N.M., and what a plant it is! When fully operational, the massive operation will produce 250 million lbs of cheese and 16 million lbs of whey per year, so it will certainly contribute to Glanbia climbing higher in the ranks of the Dairy 100.

But Southwest is not the only new kid on the block. In April Upstate Farms Cooperative (No. 60) completed construction of a new cultured products plant in western New York.

The state-of-the-art facility has been built on 19 acres of land located in West Seneca (S.E. of Buffalo, NY) and is easily accessible from the New York State Thruway. The transition from their old plant to the new one has been completed just before May 1.

The 165,000 sq ft plant (plus 40,000 sq ft mezzanine) has been designed not only from an efficiency and quality standpoint, but also with security in mind, using the latest security technologies. This new building is able to handle in excess of 100 million pounds, annually.

Dreyer's Grand Ice Cream (No. 12) has finished the major expansion of plants in Bakersfield, Calif., and Laurel, Md. Tillamook County Creamery Association (No. 47) spent the first few weeks of the year putting the finishing touches on a full-scale expansion of its Boardman, Ore. plant, and currently, Stonyfield Farm (No. 55) is in the midst of several improvements that will add capacity at its Londonderry, N.H. plant.

Meanwhile, just across the state line from the Southwest Cheese plant, Hilmar Cheese has broken ground in Dalhart, Texas, on what will be a $200 million cheese plant.

The top 10 and beyond

The rankings of the top 10 shifted only a bit this year, but for the second year in a row the top five companies held their positions. DFA moved into the No. 6 spot from No. 8, bumping HP Hood and Kroger down to No. 8 and No. 9 respectively. Schreiber Cheese stays at No. 5, while reaching a record $3 billion in sales last year according to our estimates.

No. 10 is a bit of a surprise, with Agropur Cooperative jumping up from No. 15 to nudge out a neighbor. Parmalat, Canada moves to No. 12. Good Humor-Breyers maintains the No. 11 position, so again this year there is no ice cream company in the top 10.

Speaking of ice cream companies-Wells' Dairy Inc., moves up a couple spots on the strength of its Blue Bunny and Weight Watchers brands. Wells' joins the billion dollar club which now has 22 members.

The Pacific Northwest's largest dairy company has gone back to using the Darigold name (No. 14) rather than Westfarm. National Dairy Holdings stays fairly close to home at No. 16 this year. It is finally back to operating quietly and efficiently after having been at the center of some of the largest deals in the industry in recent years. Yoplait, North America's top selling yogurt maker, continues to grow and is now at No. 18, up two spots from last year.

While it has been a relatively stable year in terms of the Dairy 100 rankings, there have been a few acquisitions in the past year. In fact, a flurry of activity was noted inDairy Foods'Newsline early this year.

In February, Giant Food LLC said it was selling its dairy operation and processing plant in Landover, Md., (No. 79) to the Maryland & Virginia Milk Producers Cooperative (No. 39). That sale marks Giant's exit from food manufacturing-part of a refocusing effort after years of sluggish performance following its purchase by Dutch-owned Royal Ahold in 1998.

In March, Prairie Farms Dairy Inc., Carlinville, Ill., (No. 19) acquired Turner Dairy Holdings LLC, Covington, Tenn., (No. 57). Turner's five plants in Tennessee and Arkansas, will join Prairie Farms' 17, which are located in the Midwest and mid-south.

Also, the Fairmont Food Group, Dallas, continues to acquire specialty cheese companies.