As the top producer of American-style cheese, Glanbia Foods Inc. continues to expand in the marketplace here and abroad.
The Twin Falls, Idaho-based processor already has a leg up on the world stage, through relationships with longtime customers that do business overseas, as well as the global dealings of its Irish parent company. And as this article goes to press, the company is getting ready to assign a cheese salesperson to a sales office in Shanghai, China, the firm’s first such location representing U.S.-made cheese.
“The opportunity to export cheese from the United States is huge,” says Jeff Williams, president and chief executive officer. “The feedback we are getting from our export customers is they like the product quality and consistency. The key is turning this tactical opportunity into a strategic opportunity whereby you are developing these markets for the long term.”
Serving most major industrial converters of bulk American-style cheese into retail, foodservice and ingredient use, Glanbia Foods already has a proven formula for success, one that netted the cheese and whey processor $1.2 billion in sales for 2007, up from $770 million a year earlier. Its Idaho factories already going full tilt, Glanbia launched a joint venture two years ago to create Southwest Cheese LLC, the mega plant in Clovis, N.M., that’s part of the dairy boom in the Southwestern United States.
But how is that boom fixed to weather the storm of rising costs and a softened economy?
“What we’re seeing is a consumer shift from brand to private label,” says David Snyder, vice president of cheese sales, noting that as a leading supplier to private label cheese companies, this shift is good for Glanbia. But Glanbia also has major customers in the foodservice business.
“On the foodservice side, we’re kind of removed from the consumer. But are portions being reduced in foodservice?” Snyder says. “Yes – sizes are definitely being affected. However, it’s not backed up in terms of how it’s affected our business.”
The growth and availability of products like ready-to-serve cheese, he says, is a boon to Glanbia and the cheese industry in general.
“There’s a shift for consumers to move toward meal solutions at retail,” says Snyder, who expects to see more restaurant buying groups emerge. “In the long run, it will be bad for cheese at foodservice, and it will be tough to get back. … But retailers have done a good job with meal solutions for consumers and we’re benefiting from that.”
Meanwhile, opportunities abroad are a bright spot on the horizon, as indicated by the Shanghai office. “The reason dairy hasn’t been there is because there was no refrigerated distribution infrastructure and the economy wouldn’t support it. That’s changing,” Snyder says, noting that foreign economies are being helped by the current weakness of the U.S. dollar. “The opportunities are incredible, to say the least.”
Overseas demand will be “an important driver, but not the key driver,” Snyder says. “We’re a global cheese and natural ingredient company, and we’re going to continue to grow globally.”
Snyder is upbeat about dairy’s future abroad, recounting his recent visit to a new modern dairy farm in Mongolia. “You’ve got 1.3 billion people just getting a taste for dairy,” he says of growth in the Far East. “This is a really neat time to be in the dairy industry.”
Doing it very wellGlanbia manufactures American-style cheese, whey and other dairy powders. Williams says 40-pound blocks are brisk sellers for export markets, as are 500-pound barrels for domestic B2B customers and proprietary whey blends sold worldwide through the company’s sister organization, Glanbia Nutritionals.
Sales success is propelled by several key points, Williams explains. First, a guaranteed supply for Glanbia’s customers: “We will grow with you and we will not compete against you,” he says. Next, high product quality, backed up by 22 medals over the past 10 years in the World and U.S. Cheese Championships.
Further, Glanbia offers a good value. “We are very efficient converters of milk into cheese and value-added dairy ingredients,” Williams says, noting the company’s growth strategy is supported by a $3 billion corporate parent.
And, he says, “We have a good relationship with our milk suppliers, both independent dairy farmers and co-ops, which allows us to keep our factories running at capacity, 24/7/365.”
Snyder remarks further: “It’s really simple: quality, service, consistency, availability, responsiveness. Customers know what they’re getting from us, day in and day out. We don’t try to be all things to all people, but we do what we do very well.”
John Lanigan, vice president of cheese operations, adds: “That’s why we have our own cheese trucks on the road, so we have it when the customer wants it.”
Such commitment to service has helped Glanbia grow its U.S. market share for American-style cheese from 7% a decade ago to 17%, in the face of competitors like Hilmar, Davisco, Darigold and AMPI.
But the Glanbia team says they have an edge in an area that’s largely a mystery to the general cheese-eating public but vitally important to the growth of the dairy industry. “One thing that differentiates us is our direction on the whey side,” says Brendan Britton, vice president of supply chain, noting that Glanbia is making strides with products enhanced with flax and omega-3’s.
Carl Garcia, whey operations director, says R&D in this area is “something you typically don’t see from other providers.” To that end, Glanbia is constructing a whey applications lab at its Twin Falls research center.
Research efforts in Idaho compliment R&D efforts at the home office in Ireland, where a full-time staff of 37 works to develop new products.
Snyder explains that customers, especially those making processed cheese, are looking to Glanbia to enhance the functionality of its products so as to improve the finished product.
But while cheese R&D is more customer driven, whey is the opposite, Garcia says.
“We’re past infancy – we’re maybe in the teenage years,” he says. “We’re looking beyond the body builder. We’re finding it now in everyday foods, in drinks.”
The next frontier, Glanbia’s team says, is nutritional foods aimed at combating muscle loss in older folks and “beauty from within” products that enhance skin textures and aid wound healing.
“Glanbia plc’s vision is all about global cheese and nutrition so we fit nicely into that mix,” Williams says. “Our parent company has been willing to invest sizeable capital into its U.S. cheese and whey processing businesses, and will continue to make capital available as long as the ROI is acceptable for our shareholders. One of the biggest challenges is finding an economical model that makes sense for a public company that may have a higher hurdle to jump from a return perspective than either a co-op or a proprietary dairy company.
“Glanbia Foods Inc. would like to continue to maintain its number-one market share position in American-style cheese. However, we will only do that if we can insure a reasonable rate of return to our shareholders.”
Why Idaho?Certainly most consumers would think of potatoes before milk when they think of Idaho. But the Gem State’s dairy industry has been growing at a steady pace, closing in on the No. 3 spot among milk-producing states.
“Idaho is a good location for cheese manufacturing for its abundance of economically priced milk that continues to grow; a hard-working, non-union work force; inexpensive hydroelectric power; proximity to Far Eastern markets for exporting; and a pro-dairy, pro-business environment both at local and at state level,” Williams says.
Further strengthening the state’s position in the industry, Glanbia continues to make improvements. “We’ve added some up-front milk UF capability so we could flatten out the cheese yield curve (mitigate seasonal fluctuations in milk components) to insure we could deliver the same quantity of cheese to our customers 12 months out of the year,” Williams says. “We’ve also made some additional whey and lactose processing capacity and plant upgrades to insure our ability to maximize the value from all the components in the milk and to insure our plants capability to manufacture products suitable for the infant formula market.”
The company strives to make improvements within its existing footprint, and operates its facilities at above their rated capacities. “We’re constantly trying to find efficiencies to manage costs,” Lanigan says. “In 1990, the four intake bays [at the Gooding plant] were taking in a million pounds a day. Today, those same bays take in over 9 million pounds a day because we found a way to do it. When I came to Idaho 13 years ago, we were doing 20 million pounds of milk a week. Now it’s 20 million pounds of milk a day.”
So, what presents the biggest challenges to the industry as it and Glanbia continue to grow?
“Cloning and rBST are potentially the biggest hurdles the dairy industry needs to clear successfully to make sure consumer demand is not negatively impacted by the continued use of rBST and the potentially poorly managed consumer communication around cloning when the FDA moratorium is lifted,” Williams says. “It is hard to come up with a good argument as to why either of these technologies is good for the consumer. Maybe the best argument is from a carbon footprint standpoint and, if that is the case, we need to carefully manage the message and successfully convince the consumer that these technologies are indeed good for the environment and therefore good for the consumer.” Williams says the industry needs to convince consumers that dairy products from cows treated with rBST or dairy products from cloned animals are perfectly safe. “I don’t think we have done that yet,” he says.
Meanwhile, Glanbia has elected to stop accepting milk from rBST-treated cows, a move accepted “extremely well” by producers, Lanigan says. “We have written to our milk suppliers to announce we will be going rBST-free by March 1, 2009,” he says. “Most of the milk processors in the Magic Valley have followed suit.”
Lanigan estimates 25% of dairy cows in the Magic Valley are treated with rBST. Abandoning use of the artificial hormone is expected to reduce the growth of milk production from 7% to 4% next year, he says.
And the trend is here to stay, says Lanigan, who predicts the eventual end of all rBST use. “I think consumers have become more aware of what they’re eating,” he says. “I think they were made aware by marketers and they might not have known it was there to begin with. … We’re going to see the end of it, and perception got us there.”
Managing the environmental impact of the dairy industry also will be a challenge, Williams says – something on which Glanbia already has a good handle (see the Plant Close-up in this issue).
Human resources are a crucial factor in good operations, so much so that Glanbia upped its starting rate nearly 38 percent last year to attract new employees, Lanigan says. The company’s recruitment and retention team aims to reduce turnover, something it did last year by 20% over the previous year, with a similar goal set for 2008.
Employees receive a monthly cheese allotment and are treated to a company banquet for the winter holidays, along with other perks like cash awards for service milestones. “There’s a lot of people still with us since Day 1 of Glanbia in 1990,” Lanigan says.
Glanbia extends its family attitude into the community. “We pride ourselves in being a ‘local company’ in that we try to be a good corporate citizen and give back to the communities where we have a presence,” Williams says. “As part of our Corporate Social Responsibility initiative, we select a local charity and make a multiyear commitment to not only fund a need but provide employee volunteers to serve that charity.”
Indeed, the goodness extends beyond the wholesome qualities of milk and cheese. So where does that all put Glanbia, as the company looks to the road ahead?
“We expect to continue to be the number-one American-style cheese producer in terms of size and in terms of quality,” Williams says. “We see the American-style cheese sector consolidating similar to the mozzarella cheese sector and we intend to be on top of it.”
HistoryThe history of Glanbia Foods in Idaho dates back to 1907, when Nelson-Ricks Creamery opened a cheese factory in the town of Richfield. The business was later purchased by Clifford Ward and renamed Ward’s Cheese.
Operations continued for more than six decades before the factory was moved in 1972, to the present location of Glanbia’s dedicated whey plant outside of Richfield. Two years later, Ward’s Cheese established a whey processing operation in Richfield.
In 1990, Avonmore Foods acquired 100% of the outstanding stock of Ward’s Cheese. Shortly thereafter, the company was renamed Avonmore West Inc. The following year, Avonmore West moved its cheese operations from Richfield to a new plant in Gooding, leaving Richfield as a dedicated whey facility, which it remains today.
By 1993, Avonmore West had acquired a cheese plant in Twin Falls from Western Dairymen Cooperative Inc. (now part of Dairy Farmers of America). Avonmore remodeled the facility, nearly doubling its capacity. Four years later, the company began operations at a new whey processing facility adjacent to its Gooding cheese plant.
Then in 2000, Avonmore West changed its name to Glanbia Foods Inc., reflecting the name change resulting from a merger by its parent company in Ireland. “Glanbia” is an Irish word meaning “pure food.”
Based in Twin Falls, Glanbia Foods Inc. is one of the largest producers of cheese and whey-based ingredients, and the largest barrel cheese manufacturer in the world. Its four locations throughout Idaho’s scenic Magic Valley collectively process more than 12 million pounds of milk every day, yielding more than 400 million pounds of cheese and 110 million pounds of dairy ingredients annually.
Glanbia Foods is a business unit of Glanbia plc, a leading international food and ingredient company based in Kilkenny, Ireland. Glanbia plc is one of Europe’s leading dairy companies and one of the world’s largest cheese manufacturers.
The Glanbia Family of ProductsGlanbia Foods isn’t a name American consumers are going to find on supermarket shelves. Among its customers are the dairy industry’s leading converters of commodity American-style cheese, who turn Glanbia’s products into processed cheese, shreds, slices and other value-added formats, sold under national brands and private labels.
“Other than some proprietary whey products, we do not have a branded presence,” says Jeff Williams, president and chief executive officer. “We have an ethos that has served us well over the years, particularly with our cheese customers: we won’t compete against you in the marketplace.”
Glanbia manufactures American-style cheeses in 500-pound barrels and 40- and 640-pound blocks. Varieties include American, cheddar, Monterey jack, colby, colby jack and pepper jack. The company’s cheeses have received gold medals at both U.S. and world cheese championships.
In addition, Glanbia Foods produces refined, edible-grade lactose and highly purified whey protein concentrates that deliver functional and nutritional benefits to many applications. The company’s WPCs are derived from fresh dairy whey; refined lactose is manufactured from sweet dairy whey, and is completely soluble and an excellent flavor carrier in its applications.
Glanbia makes WPCs in concentrations of 34, 70 and 80%, the latter sold under the brand name Salibra. Its 90% whey protein isolate is marketed under the Provon brand, along with lactose, lactoferrin and TruCal, a branded milk calcium product. In addition, the company makes a number of proprietary, customer-specific formulations in the higher protein categories.