Hoard's Dairyman Editorial: Abrupt plant closure highlights a larger problem

Hoard's Dairyman Editorial:
Abrupt plant closure highlights a larger problem

If there was ever an industry-wide wake-up call that the fluid milk sector is in dire need of innovation, it would be the demise of Golden Guernsey. Once the pillar of innovation, the Waukesha, Wis., plant was swept away in the wake of shrinking margins and the commoditization of fluid milk.

Golden Guernsey got its start as a farmer-owned cooperative in 1930, marketing a branded product from Guernsey cows. As its success grew, so did its sales base, reaching some 20,000 customers five years later. To meet growing demand, the cooperative built a new plant in 1955 and with it came a waiting list of those with Guernsey cattle willing to sell milk to the progressive organization.

Cooperative and plant leaders knew that whole milk with higher butterfat and protein content offered more flavor to consumers. So, in an era dominated by high-volume, low-solids milk, the cooperative broke away from the mold and investigated a strategy that involved paying producers for higher protein levels. The 1963 pilot project was so successful that members voted to make it permanent one year after the trial run with 93 percent of patrons qualifying for the protein premium. With that historic vote, Golden Guernsey ushered in a era that began to pay producers for protein in addition to total pounds and butterfat content.

Aside from round, plastic resealable packages, innovation in the fluid milk arena has become stagnant. As a result, total sales from 1975 to the present have been flat . . . even more alarming, on a per capita basis, Class I milk has plummeted nearly 30 percent.

As a result, Golden Guernsey and other bottlers have felt the impact. Through co-op mergers, it eventually was folded into the Foremost Farms Co-op who sold Golden Guernsey, along with its consumer products division, to Dean Foods in 2009. One year later, that set off a U.S. Department of Justice investigation eventually forcing Dean Foods to sell Golden Guernsey to OpenGate Capital. Having no prior experience in food processing, it took only 16 months for financial reality to force OpenGate to file Chapter 7 bankruptcy.

When the U.S. Department of Justice launched its investigation into the sale of Golden Guernsey, it was concerned about reduced market competition and its impact on milk prices. It appears that lack of thoughtful innovation, industry know-how and tight margins within the fluid milk category trumped federal litigation. However, Golden Guernsey’s legacy still offers hope that the beverage category could reinvent itself.

This Hoard's Dairyman editorial appears on page 96 of the February 10, 2013 issue.

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