The United States is dynamic and adaptive to new changes in the marketplace. But transformations in consumer preferences and manufacturing technologies are resulting in new challenges for the dairy industry.

Demand for a wider array of quality dairy products is at an all-time high. Processors are responding to this trend by introducing new flavors, providing ultrapasteurization and organic options, and creating unique packaging. Additionally, U.S. food manufacturers are requesting that processors provide dairy fractions such as milk protein concentrate (MPC) and other ingredients for nutritional products and different formulations.

U.S. dairy production has also been in a rapid phase of expansion for quite some time now. And some of the industry’s most successful regional powerhouses are responsible for producing an abundance of some of the country’s finest dairy products.

There are many factors that contribute to the success of regional processors in this country. For one thing, these companies have done a tremendous amount of work in capital investments in new plants, distribution and marketing. They have also grown in sophistication and power. And by the looks of it, they’ll continue to do so.

Texas Pastures, the first organic milk to be produced and bottled in the state of Texas, is being introduced by Organic Valley Family of Farms, the nation’s leading cooperative of organic farmers.

Texas Pastures is made by a dedicated pool of organic dairy farmers in the Sulphur Springs region of Texas, and bottled locally at SouthWest Dairy in Tyler, Texas.

“Organic Valley is proud to bring our Texas neighbors delicious organic milk made right here in our own home state,” says Harry Lewis, one of the Organic Valley farmers who is pioneering organic dairy in the Lone Star State. Texas Pastures organic milk is traditionally pasteurized and produced without antibiotics, synthetic hormones or pesticides. Animals are raised humanely with access to pasture and certified organic feed; all Organic Valley pastures are certified organic.

Texas Pastures can be found in the dairy aisle at Brookshire Grocery (which owns SouthWest Dairy), Central Market (HEB), Whole Foods Market, United Supermarkets and other leading Texas retailers.

Once known as the “Dairy Capital of Texas,” Hopkins County — where Sulphur Springs is located — has experienced a significant decline in its dairy industry over the past decade. It had 60,000 dairy cows in 1994; only 33,500 remained in 2004, according to the U.S. Department of Agriculture.

Lewis says organic agriculture is providing a stable price and a sustainable living to the members of the Organic Valley cooperative. “It’s a lifeline,” he says. “We can even see the day when our region is known as the ‘Organic Dairy Capital of Texas.’”

Pat Tolson, an Organic Valley farmer who runs a 240-cow organic dairy in Sulphur Springs, agrees. “Bringing organic dairy to Texas is win-win. We’re delivering farm-fresh organic milk to local families who want a quality, local organic milk option, and we’re helping to revitalize the embattled Texas dairy industry. Organic is here in Texas to stay.”

Sulphur Springs Organic Valley dairy farmer Frances Charlton runs a 200-cow dairy farm and raises four children with her husband Barry. “As an organic farmer and parent, I know we’re farming for future generations. We’re protecting the health of our earth, our food and one another,” she says.

Deeply committed to their roots in Texas, the farmers in the Organic Valley Texas dairy pool are members of the Texas Department of Agriculture’s “Go Texan” program. They will be taking part in sampling initiatives at retail and consumer events throughout the state. Additional educational activities are also part of the effort.

The Southern Idaho Economic Development Organization (SIEDO), a joint venture of public and private sectors in the cities of Twin Falls and Jerome, was formed to help diversify and strengthen the local economy by retaining and attracting business to the Southern Idaho region.

According to the organization’s Web site, www.southernidaho.org, SIEDO works closely with each of these communities to promote economic development through expansion of existing business and to implement a focused consistent program to attract new businesses to the region.

It must be working, since Idaho has grown as a major force in the industry, now ranking third behind Wisconsin and California in top production.

SIEDO boasts that Southern Idaho is home to two of the largest cheese processors in the Northwest — Glanbia Foods and Jerome Cheese. It also has the largest population of dairy cows in the state — more than 278,000. Two neighboring counties in southern Idaho — Minidoka and Cassia, collectively known as Mini-Cassia — are uniquely set up to offer land, space, water and wastewater treatment for any dairy or food processor looking to establish a presence in the Intermountain West. Minidoka County includes the cities of Rupert, Paul and Heyburn. Cities in Cassia County include Burley, Albion, Declo and Oakley.

Mini-Cassia is unique in that all the elements required to open a dairy or food processing operation are in place and established. Because of the rural setting, many areas that have numerous large farm parcels are in less populated areas, thereby available for large dairy operations.

Twin Falls, Jerome and Mini-Cassia are in an area known as the Magic Valley. Canals were built to carry water from the Snake River to Milner Dam in 1905. Shortly thereafter, productive farmland and the town of Twin Falls seemed to spring up out of nowhere on the sagebrush-covered southern Idaho desert, giving rise to the “Magic Valley” moniker.

Twin Falls, Jerome and Mini-Cassia have long been agricultural centers with several of the largest employers involved in growing and processing food.

While each county has specific CAFO (concentrated animal feeding operation) rules and regulations in place, the more neighborhood-isolated land areas allow for easier compliance with CAFO regulations. As an added benefit, the land areas are still only 10 miles from town.  And the land parcels are plentiful. In just one local real estate office, for example, they have 10 to 15 farm lots large enough to support 5,000 to 10,000 cows each. The city of Burley has a major wastewater treatment plant strictly for industrial use that will serve large processing operations in the Burley-Heyburn Industrial Park. The wastewater treatment plant can handle the waste of 12 to 15 million pounds of milk every day.

Gossner Foods Inc. will be opening a 90,000-square-foot cheese manufacturing operation in Burley in the fall. “One other cheese manufacturer is close to confirming a move and another is strongly considering a new plant here,” says Jan Rogers, executive director for SIEDO.

As Gossner has discovered, says Rogers, the Mini-Cassia area offers numerous advantages for any dairy or food processing operation. “The area has an experienced workforce, fully developed infrastructure for dairy and processing industries, relatively low-cost electricity, plenty of available natural gas, nearby rail access, most areas are situated just a few miles from a main interstate highway, large parcels of highly productive agricultural land good for growing alfalfa, corn, grains and many other similar crops that would provide feed to the numerous surrounding dairies and numerous land areas are in need of manure fertilization,” she says.

According to Rogers, Southern Idaho is one of the best areas in the country for dairy or food processing operations. “Businesses will find a proactive approach to helping facilitate their relocation or expansion into our region,” she says.

Twin Falls , Idaho-based Glanbia Foods Inc. is the largest cheese producer in the Northwest with two cheese processing sites in Idaho that process 9.8 million pounds of milk every day, generating 360 million pounds of cheese annually. Glanbia’s current and most popular products include cheddar, mozzarella, Monterey jack, colby, colby jack and pepper jack.

The company recently won three gold Best of Class Awards and one silver award at the U.S. Championship Cheese Contest, hosted by the Wisconsin Cheese Makers Association in March. Glanbia cheeses selected as Best of Class were colby, Monterey jack and pepper jack. Pepper Jack also received a second place finish. Glanbia’s cheeses won their categories from over 1,000 entries from 25 states.  

The company has 500 employees working in the Magic Valley. In addition to cheese processing, Glanbia also processes whey and has two plants solely dedicated to this process. “The company’s whey processing facilities in Richfield and Gooding are two of the most technically advanced in the United States,” says Shawn Athay, director of human resources and organizational development. “The Richfield facility addresses a burgeoning global marketplace in nutritionals.”

Glanbia Nutritionals Inc., a sister company to Glanbia Foods, markets the whey products manufactured by Glanbia Foods. “They are the result of Glanbia’s sustained investment in R&D, cutting-edge production facilities and human resources,” says Athay. “They are a world-class supplier to a broad and growing range of nutrition-based industries including functional and processed foods, sports nutrition, infant and adult foods, animal nutrition, health products and nutritional supplements such as whey protein.

“Recently, at the Richfield facility, a whey protein product that is low fat and high in protein has been developed. The product, Provon, will be marketed to nutrition companies for use in sports bars and nutrition drinks. Another product, TruCal, is a powdered milk calcium product that can also be put into capsules, drinks or bars. Glanbia is working to patent a product that combines Provon and TruCal that may revolutionize the diet industry with a highly effective, natural appetite suppressant/weight-loss product.”

Glanbia says its natural and gentle extraction process results in a product with excellent nutritional qualities, extremely high levels of indentured protein and significant levels of biologically active glycomacropeptides. The company adds that CFM® Whey Protein is the purest whey protein isolate available for muscle regeneration and growth.

This past May, Glanbia announced plans to expand its cheese-processing facility in nearby Gooding for the second time in 18 months. A smaller expansion is already underway at the Twin Falls plant to also meet increased demand for its quality cheese, says Athay.  In Gooding, Glanbia will add two new cheesemaking vats, extend its cheese belt system, add barrel-forming cheese towers, extend their cooler section, increase receiving bay space and erect new raw milk storage silos.

“The Gooding facility already processes a staggering 7.1 million pounds of milk daily from over 100,000 local cows each day,” says Athay. “This expansion will increase production an additional 20 percent, requiring milk from 20,000 more cows. Once this expansion is completed, Glanbia’s Gooding cheese factory will manufacture approximately 900,000 pounds of cheese every day.”

The Twin Falls plant is adding an ultrafiltration system to process milk from 1,500 more cows and will produce an additional 100,000 pounds of cheese every week. “There continues to be a tremendous demand for quality-produced barrel cheese from our customer base,” says Jeff Williams, president and chief executive officer of Glanbia Foods. “The expansion at both of these facilities will allow us to work toward meeting this extra demand. Thanks to the outstanding dairy farmers here, as our demand for high quality milk increases, they are able to grow with us and supply premium milk to meet our production needs. We value our long-term relationships with Southern Idaho dairy farmers. We wouldn’t be able to expand without them.”

The $13 million expansion in Gooding is expected to be completed in May 2006. Twin Falls’ $280,000 expansion is under way and is scheduled to be completed in June 2005. Glanbia is also close to completing the construction of a wastewater pre-treatment plant in Gooding, the first ever built by a cheese processor in the state of Idaho. This $13 million project will be initially operational this July and fully operational by November 2005. “Future expansions at our Gooding facility were all designed into the processing capabilities of this wastewater treatment plant,” Williams explains. “It will easily handle any additional waste generated as a result of this expansion.”  

When one thinks of major food processing regions in the country, says Athay, Southern Idaho usually doesn’t come to mind. “Yet this region is one of America’s most diverse food baskets, with food processing a leading industry in the area,” Athay says. “Agriculture and food/cheese processing serve as the economic foundation for southern Idaho. Southern Idaho has a tremendous diversity in the number and types of food processing workers to support this growing economy.”

Numerous area processors can attest to the continued growth in the region to support their growing operations. “Southern Idaho boasts tremendous growth in dairy and is No. 1 in Idaho,” says Athay. “The area also has the largest population of dairy cows in the state at 278,000. As a result, several cheese processors have set up shop here — the largest cheese manufacturer being Glanbia.”    

Athay says Southern Idaho offers numerous advantages for any dairy or food processing operation. For example, the area has an experienced workforce, a fully developed infrastructure for dairy and processing industry, relatively low-cost electricity, plenty of available natural gas, nearby rail access, dairy facilities situated just a few miles from a main interstate highway, large parcels of highly productive agricultural land good for growing alfalfa, corn, grains and many other similar crops that would provide feed to the numerous surrounding dairies, and numerous land areas that are in need of manure for fertilization.

“Southern Idaho is one of the best areas in the country for dairy or food processing operations,” says Athay.

Lifeway Foods Inc., Morton Grove, Ill., develops specialty functional dairy foods for health-conscious consumers, producing a series of distinctive probiotic products based on unique ingredients and proprietary formulations.

The company’s main product is kefir, a milk-based cultured drink Lifeway says is more nutritional than yogurt. Lifeway markets 12 flavors of kefir through U.S. retailers and does a successful business exporting products to Canada. The company also participates in the organic and soy markets with its Lifeway Organic™ brand, the company’s line of organic kefir and kefir cheese, cream cheese and America’s first soy kefir, SoyTreat®.

Lifeway’s kefir is a milk-based beverage that contains 10 types of “friendly,” active probiotic cultures. While normal yogurt only contains two or three of these cultures, Lifeway says its kefir products offer more nutritional benefits and are ideal additions to the diets of pregnant women, nursing mothers, the elderly and children. The company also produces La Fruta Drinkable Yogurt, a line of products marketed in U.S. Hispanic communities.

Lifeway also manufactures a variety of cheese products. Recently, the company introduced a new line of all-natural, certified-organic pudding under the name It’s Pudding! Sold in a variety of flavors such as chocolate, vanilla, rice, tapioca and banana, the company says the pudding is a great addition to its growing product line and is confident it will grow tremendously in both natural foods stores and supermarkets nationwide.

In May, the company’s kefir drink was recognized by the Food Marketing Institute (FMI), receiving the 2005 Retailer Choice Award. The FMI’s retailer and wholesaler attendees chose the company’s Kefir drink as a winner from among a number of different entrants in the New Product beverage category.

“Receiving the FMI’s Retailer Choice Award is a very important event in our company’s history,” says  Julie Smolyansky, president and chief executive officer. “That our kefir received the award from among such stiff competition speaks to the appeal of the product, which is already widely enjoyed by a diverse and growing group of consumers. We are very pleased to have received the Retailer Choice Award, and will continue to serve both our customers and the retailers themselves by providing nutritious, quality products.”

While Lifeway has been producing its kefir beverages for a number of years, the company continuously expands its product line, changing flavors or repackaging its distinctive 32-ounce bottles to make them more appealing to a growing customer base. Lifeway recently reported record first-quarter revenues of $4.66 million. “In the first quarter we rolled out our full line of new packaging, and the results have been great as evident in our sales growth,” says Smolyansky. “We feel very confident of the continued market penetration of Lifeway Kefir, Lifeway La Fruta, and our other products.”

The company appears firmly at the forefront of specialty dairy and functional foods. The distinctiveness of its products and further broadening of product lines have led to rapid market penetration and expanded distribution.

What does it take for a regional company to become a national player? The Yofarm Co., Naugatuck, Conn., knows exactly what it takes.

Yofarm is a leading manufacturer and distributor of refrigerated yogurt products with one of the fastest-growing yogurt brands in the United States. Under its signature YoCrunch® brand, the company produces premium lowfat yogurt with mix-in toppings such all-natural granola, Oreo® cookie pieces, Nestlé Crunch® candy pieces, Reese’s® Mini Pieces and chocolate crunchies.

Yofarm introduced its fourth co-branded YoCrunch product, Vanilla with M&M’s® Minis®, in 2004 and a new Apple Cinnamon YoCrunch product in 2005. The company also manufactures whole milk yogurt, recently re-branded YoSmooth™, which sells in select markets under the Yofarm name.

Driven by the success of the YoCrunch brand, the company has increased net sales from $13.6 million in 1998 to approximately $54.1 million in 2004. “The brand has grown at a compound annual growth rate of 34.6 percent since 1998 with the addition of only four new items,” says Griff Dixcy, president and chief executive officer.

Although Yofarm’s core markets are in the Northeast, YoCrunch is distributed throughout the United States. So just how did this regional company become a major national force to be reckoned with? “When we bought the company, it had many product lines and was oriented on providing a wide range of products to regional customers. We discontinued all but two of the lines to focus on the line that we felt had the most national appeal and equity that we felt we could grow and leverage nationally — YoCrunch,” says Dixcy. “We invested in high-quality packaging and sales presentation materials that were as polished as any of the national brands. Yofarm then hired a seasoned sales team with experience rolling out a product nationally and formed a strong brand.”

As sales grew, Dixcy says  the company augmented the brand with top-flight co-branding efforts which helped gain additional distribution and enhanced consumer trial of the entire Yofarm product  line.  “As the brand grew, we continued to invest in the plant to ensure quality and improve efficiencies,” he says. “To maintain customer support, Yofarm has developed and maintained a culture of the highest level of customer service. We have also utilized our Gold Effie-winning advertising in certain markets where appropriate and have a tremendous sales lift from doing so.”

Although there are no significant SKUs in regional product sales, Dixcy says the company’s Peach yogurt is predictably stronger in southern areas. Strawberry with Granola and Yofarm’s four co-branded flavors are the company’s most popular products, says Dixcy. “Since 2004, the company has introduced three new product lines, YoCrunch Vanilla with M&M’s Minis, YoCrunch with Apple Cinnamon Crunchies and a variety pack that contains six individual cups, each pack featuring two YoCrunch flavors.”

Dixcy says the company’s future goals include growth from existing and new customers, Club Store penetration and other potential line extensions.