Creamery Family Talks Disaster

Co-op dairy struggles to make payments in midst of financial meltdown

Cecilia Parsons
Capital Press

Blake and Stephanie Alexandre’s EcoDairy Farms is one of the 50 Humboldt Creamery dairies facing tough times due to the financial shake up of the long-time milk processor.

Humboldt Creamery CEO Rich Ghilarducci abruptly resigned Feb. 20, and the revelation that the co-op’s financial statements are inaccurate has shocked North Coast dairy families.

The Fortuna, Calif.-based creamery’s board of directors now says the former CEO overstated the amount of money due to the co-op from sales, meaning it is unable to pay member dairies for milk already supplied and repay banks for loans.

That’s caused a ripple effect in the small community where many businesses depend on the co-op and its suppliers for their livelihoods.

“It was a complete shock when Blake got the call on Sunday afternoon,” Stephanie Alexandre said in a phone interview March 6. Blake Alexandre, whose great-grandfather was one of the founders of the creamery, sits on the cooperative’s board of directors.

“There was no warning. We believed the company was completely healthy. If we had suspected any problem, we would have done things differently,” said Stephanie Alexandre.

The couple and their five children live outside Crescent City in Del Norte County where they graze their 1,600 milk cows on 2,500 acres of pasture. The family also operates a smaller pasture-based dairy near Ferndale in Humboldt County where they milk 700 cows.

Both operations are certified organic, as are all of the dairies that are part of the Humboldt Creamery cooperative. Most milk between 100 and 300 head of cows.

Other dairies in the north coast sell their milk to Horizon Organic or Rumiano Cheese Co.

When the president of the Whole Foods grocery chain visited the area, Stephanie Alexandre recalled, “he called us the rock stars of the organic dairy world” because he thought this valley was the perfect place to have an organic dairy.

With that encouragement in mind and believing the creamery was in sound financial condition, the Alexandres recently added another milk barn and more cows from a dairy that was going out of business.

Now they are faced with operating their dairies with significantly less cash flow because the cooperative’s board voted to defer $2 million in payments to the dairy operators. They received only 45 percent of what they were owed for January’s milk. Alexandre said that meant their monthly milk check was only $200,000 instead of the normal $800,000.

The day after they received the bad news, Alexandre said she began calling their vendors to make arrangement for payments. Of their 40 suppliers for feed, equipment and things like veterinary supplies, nearly all were understanding of the situation. The grain company, an expensive input in an organic dairy, was the only supplier that panicked and asked for first call on any income, Alexandre said.

“We didn’t feed grain for week and we lost production,” she said. “We put the cows out on grass, but it would have been nicer to wait until the ground was drier.”

They also had to lay off employees and are running the dairies with only a skeleton crew.

Alexandre said they believe the cooperative’s financial problems were caused by the CEO who resigned, a person they considered to be a friend.

Ghilarducci has been credited with growing Humboldt Creamery from a local enterprise to the country’s fourth-largest organic milk processor by the middle of this decade and a leading maker of private label ice cream. The cooperative had $130 million in sales last year.

Under Ghilarducci, officials say Humboldt Creamery borrowed money to buy a distribution warehouse in Stockton, acquire Seattle’s Arctic Ice cream label, and add a popsicle line to its plant in Los Angeles.

The cooperative was in the process of selling $400,000 in securities to local residents at the time of his resignation, officials say. That sale has been suspended, but the company has already spent the money.

Despite its current problems, Alexandre believes the creamery will survive the crisis because of it’s good contracts and the quality of its dairy products.

The Associated Press contributed to this report.