Industry giants in their respective categories, Dean Foods and independent cooperative CROPP, owner of Organic Valley, are partnering in a joint venture to process and distribute organic milk.
The arrangement will utilize Dean Foods' processing plants and refrigerated direct store delivery (DSD) distribution system to expand Organic Valley’s reach into retail markets. According to USDA’s Dairy Market News, Dean Foods’ distribution system includes 140,000 locations currently not served by Organic Valley.
Organic Valley will provide access to a large organic milk supply, estimated to be about 40 percent of all organic milk sold in the U.S.
"This partnership reinforces Organic Valley's mission to support more organic farmers and grow our business," said George Siemon, CEO of Organic Valley. "Consumers will enjoy the same Organic Valley quality they've come to know and trust: the same farmers will supply the same organic milk. But now more Organic Valley organic milk will be on more grocery shelves across the country."
Distribution of Organic Valley’s high temperature/short time (HTST) pasteurized organic milk is expected in mid-to-late 2017. HTST milk is heated to a required minimum temperature of 161 degrees Fahrenheit for 15 seconds to kill any pathogenic bacteria that may be present. Organic Valley currently offers HTST milk in gallons and half-gallons.
The companies have unique marketing expertise and experience: Dean’s experience in large-format, dollar store and convenience store outlets will be combined with Organic Valley’s expertise in natural, emerging markets and specialty distributors.
"Adding Organic Valley to the current lineup of Dean Foods branded dairy products enables Dean Foods to offer retail customers the largest and most comprehensive dairy offering across multiple segments with national brands that consumers know and trust. It also allows us to further leverage our manufacturing and distribution network," said Gregg Tanner, CEO of Dean Foods.
The arrangement comes at a time organic dairy farm certification, transition and milk production is on the rise, pressuring regional processing capacity in many parts of the U.S. The oversupply situation is resulting in some organic milk being sold into the conventional market in an effort to protect the long-term organic pay price. However, some large organic processors have reduced the Market Adjustment Premium (MAP) by $1-$2 per hundredweight.
In addition to production, demand for organic milk has been growing. USDA’s Agricultural Marketing Service estimated September 2016 total organic milk product sales at 218 million pounds, up 5.3 percent from the previous year. January-September 2016 sales were up 5.5 percent compared with the same period in 2015. Organic fluid sales have been running at about 5.4 percent of total fluid milk product sales.
Dallas-based Dean Foods is the largest processor and direct-to-store distributor of fluid milk and other dairy and dairy case products in the United States. In addition to two national brands, DairyPure and TruMoo, the company has more than 50 local and regional dairy brands and private labels.
Southwest Wisconsin-based Organic Valley represents more than 1,850 farmers in 36 U.S. states, Canada, Australia and the United Kingdom. Products include a full line of organic, grass-fed fluid products, yogurt, butter, cheese and other products. Global sales hit $1.04 billion in 2015.
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