Nation’s Largest Corporate Dairy Sues Organic Farmer-Owned Cooperative

July 16th, 2012

Dean Foods/Horizon Alleges Marketplace Misconduct by Organic Valley

Cornucopia, WI – The nation’s two biggest suppliers of organic milk are embroiled in a lawsuit.  An employee responsible for milk procurement with Horizon Organics (a part of WhiteWave Foods, owned by the $13-billion dairy giant Dean Foods) quit his job in May 2012 and took a similar position with Organic Valley less than two weeks later.  Horizon and WhiteWave have brought a lawsuit alleging a breach of contract and the misappropriation of confidential information and trade secrets.

Larry Hansen, the former Horizon employee at the center of the dispute, is also named in the lawsuit.  While employed by Horizon, he covered the West Coast region and the states of Texas and New Mexico.  According to the legal filing, Hansen oversaw 48 farms that supply “over 35% of the organic milk produced for Horizon Organic.”  Hansen negotiated contracts with farmers and, the lawsuit notes, possessed highly confidential business information on operating margins, supply needs, demand projections, and Horizon’s national database of suppliers.

“Quite a few farms shipping milk for their Horizon label, over the last couple of years, have jumped ship and joined the CROPP Co-op [Organic Valley],” said Mark A. Kastel, Senior Farm Policy Analyst at the Wisconsin-based Cornucopia Institute.

Dean Foods has been accused of using strong-arm tactics against their Horizon farmers, forcing a number out of business, and forcing many to renegotiate their contracts, with more advantageous terms, when faced with a milk surplus in 2009.

“The CROPP Cooperative, owned by family farmers, generally treated their suppliers better during the period of oversupply,” Kastel added.

Despite inquiries, Hansen, the lawsuit claims, never told his supervisor what his new employment plans were.  Shortly after joining Organic Valley, Hansen is alleged to have sent an email to many of his former producer contacts alerting them to his new email address and phone number.  The lawsuit also accuses him of separately contacting at least one “large Horizon Organic milk supplier” in his old region as an Organic Valley employee.  Organic Valley “actively participated” in Hansen’s misconduct, the lawsuit charges.

The legal fight is headed towards a jury trial in the federal U.S. District Court of Colorado (case# CV3465).  Horizon is seeking monetary compensation covering actual and compensatory damages and a block on any future revenues traced from Hansen’s alleged misconduct.

CROPP/Organic Valley family farmers, who once supplied 100% of the milk for Horizon label in the early 1990s, have consistently lost market share to Horizon after the largest dairy processor/marketer in organics shifted their purchasing to giant factory farms, including a previous supplier with 10,000 cows.  Dean/Horizon has added family-scale dairies around the country while continuing to invest in large CAFOs producing organic milk.

“This lawsuit is certainly indicative of no love being lost between Dean Foods and the co-op that controls the Organic Valley brand,” according to Kastel.  “As the marketplace has now tightened, and organic milk has been in shorter supply, Dean obviously feels insecure about holding onto their patrons.”

“Just 48 farms, supplying a whopping 35% of the milk supply for their Horizon label, is certainly emblematic of Dean Foods’ reliance on supersized dairies for their organic milk supply,” Kastel added.   Nationwide, it is thought that the average size organic dairy farm milks approximately 60-90 cows.

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