It’s time again to look back at another year in the dairy industry, and what a year it’s been! It’s quite likely that dairy processors will most remember 2007 as a year of record high prices for commodities, including milk. Whether it was the growing market for ethanol, demand from emerging world markets, or some combination there of, the continued high price of raw milk impacted the industry more than any one factor in the last 12 months, sending the country’s milk leaders into a financial tailspin as sales slipped and margins were squeezed.
Another major development that began in 2006 but carried over in 2007 was the move by dairy processors to require raw milk suppliers to produce their milk without the help of artificial growth hormones.
While the move toward organic products made a big splash in 2006, thanks to Wal-Mart, an even broader trend in 2007 could be seen in the efforts of all business to become greener. Everyone has been talking about carbon footprints in 2007, and you can expect that to continue.
In Washington, Congress toiled with a 2007 farm bill throughout much of the year, but failed to come up with something to vote on. For a while, it looked as if the dairy industry would see more of the same policy, but on Nov. 16 the Senate fell five votes short of the 60 needed to limit debate. As November came to a close, there was talk of extending the 2002 Bill another year.
High prices hindered volume sales of milk and cheese, but not as much as might have been expected, at least when averaged out for the year.
As 3rd quarter results were posted, many processors, particularly those focussed on value-added branded products, still showing decent margins.
Headlines by the monthIn December of 2006 Dairy Foods reported that Dean Foods saw third quarter earnings drop thanks in part to higher input costs for the WhiteWave division. The Dannon Company was recognized by Dairy Foods as our Processor of the Year with a December issue cover story.
Safeway Inc. said it would invest millions of dollars in the coming year to open about 25 new stores and remodel 275 others.
Stonyfield Farm, Londonderry, N.H., entered the energy drink market with an alternative to the caffeine-fueled energy drinks. Its new Shift product promised a sustainable energy source with a combination of protein, vitamins, acai and ginseng. The cultured dairy drink is certified organic and is 100% natural, with no starches, gelatin, preservatives, or artificial flavors or colors.
With the start of the new year in January, the maker of Laughing Cow was looking to expand its operations in Canada in order to capitalize on the growing popularity of the processed cheese that had been recommended by diet gurus.
Coolbrands International announced that it was selling its Breyers yogurt business to Healthy Food Holdings, a Colorado-based company run by Horizon Organic founder Chuck Marcy. Healthy Food Holdings, owned by private equity firm Catterton Partners, went on to combine Breyers with the previously acquired YoCrunch line, making Breyers Yogurt Company one of the leading players in the yogurt market.
Tillamook County Creamery Assn. announced that CEO Jim McMullen had resigned from his position to allow Tillamook to find a top exec with more national brand experience. It took some time, but Tillamook later hired Harold Strunk to fill the position. Strunk is a 25-year veteran of the consumer packaged goods industry, having worked most recently with Eagle Family Foods and having done a stint with Borden Inc. starting in 1986. McMullen landed an operations executive position with the superpremium potato chip maker Kettle Foods.
In February Kraft Foods unveiled a recovery plan that included significant spending for both marketing and product development. It also indicated that to a large extent those new products would make use of Kraft cheese.
Also that month, sources in the organic dairy segment told us that the supply of organic raw milk was about to crest due to a cutoff date for changes in the USDA organic standards.
The Associated Milk Producers Inc. and Cass Clay Creameries of Minnesota announced a merger that would create a cooperative with more than $1 billion in annual sales, and Dairy Foods readers were given a look inside the massive new Southwest Cheese plant in Clovis, N.M.
In March our Dairy Market Trends showed readers how dramatically the frozen yogurt category had turned around. Dean Foods reached an agreement to acquire New York-based cultured products-maker Friendship Dairies. Canadian dairy leader Saputo said it was closing two Canadian dairy division plants, while investing $10 million in automation at other Canadian facilities. The news came on the heels of the announcement that Saputo was purchasing the California Cheese operations of Land O’ Lakes.
Meanwhile, Unilever Ice Cream, Green Bay, Wis. was rolling out a new line of ice cream products under the ubiquitous Goya Hispanic foods brand. Also in March, Publix Super Markets’ Sticky Buns Premium Ice Cream took the award for the most innovative flavor at IDFA’s Ice Cream Technology Conference. McCadam Cheese’s extra sharp cheddar took the top prize at the U.S. Cheese Championship in Madison with a score of 99.1.
April brought news that Woolwich Dairy of Ontario was forming a strategic partnership with Norseland Inc., Stamford, Conn., for Norseland to handle sales and distribution in the U.S. of Woolwich’s goat cheese product lines. Woolwich also broke ground in April on a 28,000 sq ft. Wisconsin production facility.
April was also the month when our Cultured Product Trends feature told readers about probiotics showing up in yogurt and even cottage cheese and introduced the newest entrants in the growing Greek-style yogurt category.
In May, General Mills’ Yoplait division was introducing its new Yo-Plus Yogurt, which offers specific culture strains to aid in digestion, plus the prebiotic fiber inulin.
Our May Dairy Market Trends had lowfat milk sales volumes leveling off as dollar sales began to rise along with price increases. Refrigerated iced tea showed six quarters of strong growth. In the same issue of Dairy Foods’ readers were given a tour of the Breyers Yogurt Co. plant in North Lawrence, N.Y.
In May business news, it was announced that HP Hood had acquired Crystal Cream and Butter Co., Sacramento, Calif. The industry’s promotional organizations agreed to curb the weight loss messages that had become the central part of generic marketing efforts in recent years. Industry Pioneer John Utterback died in Los Altos, Calif. The founder of All Star Dairy Association was 88.
The June issue of Dairy Foods included our first multi-page feature article about the growing organic dairy market, just in time to explore the latest debate about food sources: organic vs. local. Bravo! Brands and Coca-Cola Enterprises agreed to end a 10-year master distribution agreement, after a May downsizing at Bravo that included the release of CEO Roy Warren.
A year-long centennial celebration by Blue Bell Creameries, Brenham, Texas, included a July party that drew more than 30,000 people over three days to the local fairgrounds. The festivities included free samples of more than 40 flavors of ice cream, games for kids and milking demonstrations. MilkPEP recognized innovative dairy marketing efforts by dairy processors in the first ever MilkPEP awards, held at the 2007 Dairy Sales and Marketing meeting in Minneapolis.
A local newspaper in Rochester, Minn. reported that Kemps Ice Cream’s Rochester plant has recently received organic certification and that a new production line was producing a pelletized ice cream product called Ittibitz.
Meanwhile, in the same month, Shamrock Farms of Arizona was rolling out a brand new line of Shamrock Organic dairy products, and Fiscalini Farms Cheese Co. of Calif. released Hopscotch, a Cheddar infused with Scotch Ale.
In August Dairy Foods presented the 14th Annual Dairy 100, which showed that the number of billion-dollar companies had grown to 25. The combined total sales for the top 100 was $75.5 billion for the 2006 fiscal year, which represented about 1.9% growth over the 2005 numbers.
Also in August our Dairy Market Trends feature indicated that rising prices were having a negative impact on volume sales of lowfat and skim milk. Meanwhile Dairy Farmers of America said it was looking to improve the bottom line of its cheese division by closing its Corona, Calif. facility and transferring parts of its American cheese business to Wisconsin-based Schreiber Foods Inc. Smith Dairy Products Company of Ohio introduced the Ruggles Organic Premium Ice Cream line.
Meanwhile, Leelanau Cheese Co., Suttons Bay, Mich., beat out more than 1,200 entries to take the best of show award for its Aged Raclette at the 24th Annual American Cheese Society Conference and Competition.
In September, three yogurt marketers, Breyers Yogurt Co., Yoplait, and Blue Bunny were busy rolling out new products fortified with omega 3s. Real California Milk joined Real California Cheese in the Golden State’s generic promotion efforts. Former Coca-Cola executive Rick Zuroweste joined the Dean Dairy Group in the newly created position of chief marketing officer.
In October, Dairyfoods.com broke the news that as a result of an acquisition by our publisher BNP Media, the two main competitive dairy processing industry trade magazines, Dairy Foods and Dairy Field were to join forces in 2008, with an expanded Dairy Foods that will include a new section-Dairy Field Reports.
HP Hood announced that it would sell the Crystal Cream and Butter business, but keep the newly acquired California plant for production of ESL fluid products. Meanwhile, Glanbia US announced that it was entering the organic cheese business, and Dean Foods said it was cutting 600 to 700 through a voluntary work reduction program.
In November the owners of Masters Gallery Foods, Plymouth Wis., and Green Meadows Dairy LLC, which is currently building a cheese production facility in northwest Iowa, announced they had entered into a multi-year marketing agreement. Under terms of the agreement, Masters Gallery Foods will purchase all of the cheese produced by the new Iowa plant, which is expected to open in late 2008. Dairy Foods recognized eight individual dairy products as the Best New Products of 2007. The group included cheese, milk, cultured and frozen products that were designed to meet the needs of very specific clients ranging from moms and babies to insomniacs.