This story has been updated to include information from a Tuesday press conference.
[T]he century-old St. Albans Cooperative Creamery has taken a step toward a merger with the much larger Dairy Farmers of America in Kansas City. Now the co-op’s leaders, dairy farmers, customers and others are assessing the impact of moving ownership 1,400 miles to the west.
For the Waterbury-based Ben & Jerry’s, the move has prompted a closer look at how the company obtains its cream. It now buys most of its dairy ingredients from St. Albans Co-op, said Cheryl Pinto, a buyer.
“It’s definitely an interesting time with the change in the dairy landscape here,” said Pinto, whose official title is “values-led sourcing manager.”
“We know there are a lot of pressures in the dairy industry, we can certainly understand what has led to this merger, and Ben & Jerry’s is going to look at all of our options,” Pinto said.
Rumors of the merger had been circulating for several weeks. The co-op’s board voted unanimously on Monday to recommend the merger to the members. The 350 or so members, most of whom are dairy farmers in Vermont, New York and New Hampshire, will vote on the deal at a special meeting in late July; if they approve the move, it will be effective Aug. 1.
The co-op’s leaders said the merger with DFA, which has 14,000 dairy farmers and 46 plants nationwide, will give St. Albans access to more capital, larger markets and economies of scale that the farmers need in order to survive. Specifically, DFA will invest in the co-op’s assets in St. Albans. The co-op will keep its name as a wholly owned subsidiary of DFA, adding the suffix “LLC.”
Co-op leaders said Tuesday that it’s too early to know what the impact will be on Vermont’s dairy landscape, including the size of the check that farmers get for their milk. The objective of the merger is the co-op’s long-term financial security, said Harold Howrigan Jr., a Sheldon dairy farmer who is president of the co-op board.
“We were looking deeper and beyond what the immediate net effect on the milk check would be,” said Howrigan, who milks 300 cows at his Sheldon farm, in a phone call on Tuesday with reporters. “We were looking at protecting our equity, market security and the ability to reinvest in our infrastructure. The things that led us in this direction were long-term market security for our members.”
Dairy farms in Vermont and elsewhere have struggled in recent years, hit by oversupply of milk and a long run of low milk prices. Vermont has lost more than 400 dairy farms in the last decade. More recently, farmers nationwide have been scaling back or closing, which has led the USDA to reduce its milk production forecasts for this year and next.
“It’s obvious at this point that the co-op isn’t competitive with other co-ops,” said Bill Rowell, a St. Albans Co-op member who milks 900 cows with his brother Brian in Sheldon. Rowell is chairman of the Vermont Dairy Producers Alliance.
“We don’t have the members or the market penetration” to compete, said Rowell. The nearest competitor to St. Albans Co-op, Cabot Creamery, is part of the Massachusetts dairy cooperative Agri-Mark and has about 900 members.
“If we’re going to be competitive, we also have to be making new investments in the plant itself, in the trucking, people and equipment,” said Rowell. “For the number of farms we have remaining, we can’t be competitive like we should be and have market penetration.”
On a conference call with reporters Tuesday, St. Albans Co-op CEO Leon Berthiaume said that he expects the co-op to continue to supply cream to Ben & Jerry’s. Co-op leaders spoke with all of their customers as they prepared for the merger vote.
“DFA has a strong relationship with Unilever,” he said of Ben & Jerry’s parent company. “So we continue to plan to provide Ben & Jerry’s with product for both of their facilities here in Vermont, and look to the future with them and their continued growth.”
Asked if Ben & Jerry’s might switch suppliers, Pinto said the answer is “not a simple ‘yes’ or ‘no.’
“I can’t tell you yet; it’s too soon to tell,” she said Tuesday. “We just want to reassess our options and understand what the dynamics are for the Vermont dairy landscape.”
As part of the deal, DFA will take ownership of McDermotts, a hauling company owned and operated by St. Albans Co-op; the St. Albans Co-op store; and the creamery plant. DFA already has 114 member farms in Vermont, said Brad Keating, senior vice president and chief operating officer of DFA’s Northeast area. St. Albans Co-op has worked with DFA in a limited capacity since 2003.
The companies declined to release other financial details of the merger.
“Our goal has been from Day 1 to protect our member equity through this process and get reinvestment in the plant,” Howrigan said. “Some of these details are still a work in progress and some is proprietary at this time.”
The deal is bittersweet, said Howrigan on Tuesday.
“When we started this process, we certainly had to let go of our emotional ties to our cooperative and our autonomy and all the great things we have done here, and the services we have provided to our members and the markets we have served,” he said. But “a lot of that will continue, however, through a new brand and new name. We had to look at our financial position and our coop and do what was best in that regard.”
