Top 100

15th Annual Dairy 100

The numbers are in and they’re big, but maybe not as big as you might have guessed. With dairy prices having soared in 2006 and 2007 it might follow that 2007 fiscal year sales numbers would be up. But prices had already started to jump in 2006, so you might have to go back to 2005 to measure that particular change among North America’s top 100 dairy processors.

There are other notable changes too. A few companies have grown or shrunk enough for there to be some noticeable (but not extraordinary) movement in the rankings. A couple of well known companies have gone the way of consolidation and are now on the books of someone else’s company, and there are a couple of newcomers.

All told, the field is fairly stable again this year, much as it was last year when we took our measure of the industries leading firms.

The growth trend

The combined sales for the top 100 dairies totaled $77.34 billion dollars for FY2007. The determination of the figure involves some educated estimation, and each year the field shifts a bit, but some anecdotal comparison can be made year-to-year. The Dairy 100 group totaled $75.52 billion, in 2006, so this year’s number is up about 1.82 billion or about 2.3%. The growth rate we estimated from 2005 to 2006 was a bit lower at 1.9%.

The ’05 total came in at $74.08 billion. So the overall growth in the last two years was about $3.25 billion, or about 4.5% compounded.

The top 10 companies had total sales of $34.95 billion, which was actually off a bit from $35.63 billion total reported last for FY 2006. But to put things into a Dairy Foods-centric historical perspective, the $34.95 billion of this year’s top 10 dwarfs the $10 billion in sales the top 10 was doing when we launched the Dairy Foods Top 50 back in 1994.

Another way to cut it is to look at the different dairy segments or sub categories. Not surprisingly, the top milk bottlers have seen dramatic gains, even when you compare 2007 to the already robust dollar sales of 2006. The top 10 milk companies in our list (Dean, Hood, Kroger, Parmalat Canada, Prairie Farms, NDH, AMPI, Foremost Farms, Darigold, and Safeway) rang $27,256 million, up from $23,800 in ’06 (+15%). That’s an extra 3.5 billion clams-like having an extra Hood and an extra Kroger dairy thrown into the top echelon, and then some.

Beyond milk

There are five cheese specialists in the top 10, and nine or 10 in the top 20. The largest ice cream companies typically hover around No. 10 or No. 11, and this year Dreyer’s Grand Ice Cream Co., is indeed No. 10.

There are four captive dairies in the top 40, including Kroger at No. 8., and there are four big yogurt players in the Dairy 100 now with Yoplait at No. 21, Dannon at 26, Stonyfield at 51 and Breyers at 56.

Big news from the big players

There was some shuffling of position, but the top 10 is primarily made up of the same players as last year, with one exception-DFA dropped out, from No. 8 to No. 11 and Nestle-Dreyers jumped in from the 11th spot.

Dean Foods remains No. 1 and has surpassed the $11 billion milestone, coming in just shy of $12 billion, in fact.

But Dean’s quarterly and annual reports are indicative of what so many others in the industry are going through-high input prices, high revenues, but nothing in the way of windfall earnings. Dean reported net income of $131 million compared to $225 million in FY 2006.

The nation’s largest dairy processor-the product of a 2001 merger of Dean Food Co. and Suiza Foods-has experienced another year of changes in the corner offices.

In September, former Coca-Cola v.p. Rick Zuroweste joined the Dean Dairy Group in a newly created position of Chief Marketing officer.

More recently, the company announced the departures of Suiza veterans Alan Bernon and Michelle Goolsby. News of Bernon’s resignation came in late May, Goolsby’s was announced in July.

Less than two years prior to these resignations, Bernon was chosen to succeed Pete Schenkel as President of the Dean Dairy Group. Bernon came to Suiza when it acquired Garelick Farms, based in Franklin, Mass. He was the third generation to work in that family business.

Goolsby, executive v.p. of development, sustainability and corporate affairs, was to leave her position, August 1, but continue working with Dean in an advisory role.

Goolsby joined the company in 1998 and has been responsible for Dean Foods corporate development activities, government relations, corporate affairs, legal activities and sustainable business initiatives. Goolsby was also chair-elect of The Organic Center.

Goolsby’s corporate development responsibilities will be assumed by Jack Callahan, CFO. The company intends to conduct a search for a new executive officer to head public affairs, including its sustainability initiatives.

With Goolsby’s departure, Steven Kemps, has been promoted to executive vice president, general counsel and corporate secretary, and will report directly to Gregg Engles, chairman and CEO.

Kemps joined Dean Foods as deputy general counsel in February 2006 after a stint in the legal department at Kimberly-Clark.

Meanwhile Dean has been busy integrating some recently acquired holdings including Friendship Dairy in New York and the Le Mars Iowa dairy facility it bought last year from Wells’ Dairy. The New York operation has allowed Dean to expand its cultured product offerings, and the Iowa facility will help Dean serve the middle of the country with a full line of fresh dairy products.

Dean is not the only large national milk processor to fatten its portfolio recently. In May 2007 HP Hood, Lynnfield, Mass., acquired Sacramento-based Crystal Cream & Butter. It allowed Hood to take a great leap toward establishing a western manufacturing base, augmenting Hood’s purchase of New York-based Crowley Foods and Minnesota’s Kemps (formerly Marigold Foods) from National Dairy Holdings in 2004.

In the cheese arena, No. 7, Leprino Foods, Denver, recently settled on Greeley, Colo., as the site for a new facility. It will join the nine plants the pizza cheese specialist currently operated in several states across the country.

Dreyers completed major expansions of two of its facilities a couple years ago. It is now focused on expanding its innovative products lines including the ever-broadening Slow Churned line and its on-the-go Dibs.

Midwest merger

In May of last year, No. 18 Associated Milk Producers Inc., New Ulm, Minn., announced that it would acquire Cass-Clay, Fargo, N.D. That acquisition is now partially on the books. AMPI jumped from No. 22 in our ranking this year, as it recorded record sales. While the Cass-Clay merger helped, much of its growth is organic and some can be attributed to higher prices. Cass-Clay is now operated as a division of AMPI, producing mostly the same line of products under the same brands.

The cooperative announced in late March that Mark Furth, president and CEO will retire at the end of the year. Furth began his career at AMPI in 1970, shortly after the cooperative was formed. He held positions in accounting, marketing and membership.

Meanwhile, in neighboring Wis., No. 19 Foremost Farms had sales of nearly $1.6 billion in 2007 up from $1.2 billion last year, when it ranked 20.

In May Foremost was one of several companies honored by the state with Export Achievement Award. In 2007, whey ingredients accounted for nearly $79 million in sales to 41 countries around the world.

Sidebar: International Companies Continue to Grow U.S. Business

Near the end of June, New Zealand-based Fonterra Cooperative Group threw a party in Chicago to celebrate the establishment of a new U.S. division headquarters. The spacious new offices are conveniently located a stone’s throw from the offices of Dairy Management Inc., in nearby Rosemont, Ill.

The company’s chairman, Henry van der Heyden, was on hand to say a few words and he was greeted by leaders from most of the dairy trade organizations in the U.S. and from partner companies.

“This move puts Fonterra closer to key customers, suppliers and centers of dairy research in an area that is one of the heartlands of dairying in the U.S.,” van der Heyden said.

The company has said that the new Chicago Development Centre will make it simpler and more effective to commercialize scientific innovations from Fonterra’s research and development hubs in Palmerston North, New Zealand, and Melbourne, Australia.

The location of the center will allow more innovations to be tailored specifically to the needs of Fonterra’s customers operating within the U.S. and Canadian markets. That should help with the division’s ambitious plans to double its U.S. business in the coming years.

Previously, Fonterra U.S. had been located in Pennsylvania. Fonterra’s move was assisted by a $1.14 million investment package from the Illinois Department of Commerce and Economic Opportunity.

Fonterra, No. 24 in our Dairy 100, is one of a number of overseas companies that have been very successful in recent decades in establishing U.S. operations.

Others include Glanbia Foods at No. 23, and No. 31 Lactalis, based in upstate N.Y.

Glanbia Foods, the U.S. division of the Irish dairy giant has become a $1.3 billion operation of its own, as it sees opportunities continuing to grow here and abroad. Well known in recent years as a partner in the giant Southwest Cheese operation in Clovis, N.M., Glanbia is preparing to open a sales office in Shanghai, China, the first such location to represent Glanbia’s U.S.-made products in the Far East.