YoCream International, Inc. and Danone have entered a definitive merger agreement under which a subsidiary of Danone will merge with YoCream.  

YoCream, Danone Enter Merger Agreement

YoCream International, Inc. and Danone have entered a definitive merger agreement under which a subsidiary of Danone will merge with YoCream.  

Danone, based in Paris, is a Fortune 500 company. Its U.S. subsidiary, The Dannon Co., ranks 24th on Dairy Foods’ Dairy 100 list of the country’s largest dairy processors, and YoCream ranks 98th, with sales of $50.7 million in 2009.

In separate news, The Dannon Co. agreed in December to stop claiming that one daily serving of its Activia yogurt  relieves irregularity, and that its DanActive dairy drink helps people avoid catching colds or the flu. The action was in response to a complaint by the Federal Trade Commission.

John Hanna will remain chief executive officer and a director of YoCream following the closing of the transaction. The company’s senior management team will also remain intact. They, along with one former board member, will retain an ownership interest of approximately 5% in the company following the closing. In addition, the name of the company will remain YoCream International following the closing.

YoCream’s business is manufacturing mixes for soft-serve frozen yogurt to foodservice operators. Its customers include Costco, quick-serve restaurants, convenience stores and independent yogurt shops. YoCream developed a smoothie product for the Jack In The Box restaurant chain. Besides making yogurt products, YoCream expanded into frozen carbonated beverages marketed under the Jolly Rancher and Jarritos brands.

The company is known for its high-quality product. Yogurt has culture counts of 100 million per gram or higher (the National Yogurt Association requires only 10 million.) YoCream’s main yogurt line encompasses 40 flavors in non-fat, premium and no-sugar-added varieties. YoCream Select features flavors inspired by Hershey candy brands, including Kisses, Reese’s and York Peppermint Patties.

All of the company’s frozen yogurt contain high levels of beneficial live and active yogurt cultures, including S. thermophilius, L. bulgaricus, L. lactis and L. acidophilius. Other dairy offerings are frozen custard, ice cream and shake mixes.

“The company has been exploring various opportunities for continued growth for some time,” Hanna says. “This transaction benefits our shareholders by providing them with the opportunity to receive a significant premium for their YoCream shares, and joining the Danone Group represents a natural progression in our corporate achievement to provide healthful live and active cultured frozen yogurt to consumers in the U.S. and abroad. We have continued our strong track record of innovation in this category and appreciate that Danone has recognized our leadership role for frozen yogurt in the foodservice industry.”

YoCream expected the transaction to close before Dec. 28, 2010 (after this issue went to press). Should the closing not occur by the end of the year, YoCream shareholders will receive an additional $0.97 per share if capital gains tax rates are higher on April 15, than they were on Dec. 31, 2010. The transaction is subject to the satisfaction of customary closing conditions, as well as the approval of YoCream’s shareholders.

For more about YoCream, go to “Recession Proof” in the June 2010 issue or online atwww.dairyfoods.com.

Senate Passes Food Safety Bill

The U.S. Senate passed a food safety bill on Nov. 30, 2010 that gives the U.S. Food and Drug Administration more power to police food companies. The bill, supported by the White House, passed 73 to 25. The House of Representatives passed its own version last year.

The Associated Press reported that the bill’s prospects are “unclear” because there is little time remaining for the House and Senate to reconcile different versions before the lame-duck session of Congress expires. AP reported that Sen. Tom Harkin (D-Iowa) said he has agreement from some members in the House to pass the Senate bill, which would send the legislation straight to President Barack Obama’s desk. Harkin sponsored the legislation.

The food industry, public health groups and consumer advocates backed provisions of the bill. The Grocery Manufacturers Association (GMA), in a statement by its president and CEO Pamela G. Bailey, said “We applaud the Senate for passing S. 510, The FDA Food Safety Modernization Act.” Bailey said the “landmark legislation provides FDA with the resources and authorities the agency needs to help strengthen our nation’s food safety system by making prevention the focus of our food safety strategies. We urge the House of Representatives to swiftly follow suit so that the president can sign this important legislation as soon as possible.”

The bill does not apply to meat, poultry or processed eggs, which are regulated by the Agriculture Department. Those foods are subject to more rigorous inspections and oversight than FDA-regulated foods.

USDEC’s 2011 Dairy Outlook: Are Higher Prices Sustainable?

Strong global demand and some supply hiccups helped dairy markets recover in 2010, but panelists at USDEC’s fourth annual “Global Dairy Outlook” webinar Nov. 16, 2010 said the key questions for 2011 are whether demand can be sustained at higher price levels and how strongly milk production responds.

At the event, which drew nearly 300 listeners from 17 countries, moderator Marc Beck, senior vice president of export marketing for the U.S. Dairy Export Council, Arlington, Va., suggested that benchmark commodity whole milk powder prices would trade in a band between $3,500 and $4,500 per ton next year, a price “that’s shown to be sustainable on the demand side and a price that is needed to sustain production growth and production profitability out of the market leader in Oceania.”

While rising food inflation posed a risk to demand in the year ahead, Jon Hauser, editor/publisher of Xcheque.com, suggested that growing wealth in developing countries was enhancing buyers’ ability to pay.

Historically, dairy prices in Asia have been depressed versus the Western world, largely due to export subsidies, says Hauser. With those subsidies removed, “the question is whether we are seeing food inflation or seeing the rest of world more able to afford dairy at prices that the Western world is used to paying.”

Other panelists weren’t ready to concede the notion that a higher price threshold would prevail. “I tend to wonder if that’s really a sustainable price,” said Dalyn Dye, president and CEO of Hoogwegt U.S., Libertyville, Ill. “I wonder whether the amount of milk that might be produced when that kind of price translates back to farmers is really the amount of milk customers around the world can consume.”

Added Phil Plourd, president of Blimling & Associates, based in Cottage Grove, Wis: “I am inherently skeptical of ‘paradigm shifts’ in any overarching sense. Price always matters. And it is easy to underestimate supply-side response. I am intrigued, however, at notions that the developing world is better able to absorb higher prices than the developed world. Countries such as China have cash. They need to keep the people fed. Still, bubbles are bubbles. We are not there yet, in my estimation. But I can see how we get there.”

Continued buying from China would be key to how the 2011 markets unfold, speakers agreed. They’ll also be keeping their eyes on New Zealand weather and how quickly highfeed costs curtail milk production in the United States and Europe. Based on recent supply growth, panelists foresee softer conditions in early 2011 giving way to tighter markets later in the year.

To view an archived version of the presentation, covering issues of price elasticity, global milk supply and currency exchange rates, go to www.usdec.orgor www.webinars.dairyfoods.com.