WHITEWAVE WATCH: Former Dean Foods Subsidiary Sells Corporate-Owned Factory Dairy

January 29th, 2014

WhiteWaveWhen Dean Foods, the multinational dairy behemoth, purchased the Horizon brand in 2004 it included two industrial-scale dairy operations.  This was an aberration in the dairy industry (conventional or organic), where virtually all milk is purchased from independent dairy producers.  It took them almost 10 years to accomplish the feat, but this past December WhiteWave (a Dean spinoff) reportedly sold one of the two operations to John Reitsma, a long-time dairy industry operative who lives in Twin Falls, Idaho.

With a history primarily involved in industrial-scale, conventional dairy production, Mr. Reitsma co-owns an additional 1,000-cow organic dairy, also supplying WhiteWave/Horizon with milk, with stepson Sean Mallett.  WhiteWave had announced during its 3rd quarter call with investment analysts that they had recorded a $7.4 million non-cash write-down on its books to reflect the estimated fair value of the corporate-owned dairy.  The actual sale price has not been publicly disclosed.

To recap the history, after the Horizon acquisition Dean immediately tried to sell the larger of the two corporate-owned operations, then milking about 4,400 cows, but was unsuccessful in its efforts.  Dairy industry experts at the time suggested that the milking facility, located in Paul, Idaho, was substandard and of dubious value.

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An aerial view of WhiteWave/Horizon’s former factory dairy in Paul, ID.

Horizon launched its organic brand exclusively using milk from family-scale farmers, members of the CROPP Cooperative (Organic Valley) located in the Midwest.  The company leveraged their initial success by selling organic yogurt as a demonstration project and raised venture capital funds to convert the giant dairy in Paul to “organic” production.

During the early years of Horizon’s growth, the majority of their milk came from its company-owned Idaho operation and a second dairy, milking 10,000 cows, in Pixley, California.

Today Horizon continues to maintain the largest market share in the organic dairy sector.

Neither of the two giant facilities relied upon by Horizon in its early years offered legitimate access to pasture to their animals as the federal organic standards require.  After formal legal complaints were filed by The Cornucopia Institute, the dairy in California, owned by Case Vander Eyk, Jr., lost its organic certification.  With Dean’s clout in Washington, during the Bush administration the investigation of the Idaho facility was closed without ever being visited by USDA staff and continued to produce “organic” milk.

A second legal complaint filed by Cornucopia, after a subsequent site visit, also rendered no substantive investigation by the USDA’s National Organic Program.

Horizon logoAfter enduring market losses (almost every consumer-owned cooperative grocery dropped Horizon products) and extreme public pressure, Dean/Horizon announced construction of a newer facility that would give cows some access to pasture and reduced their Idaho milking herd to about 2,400 cows.

Originally forecasted to cost $10 million, reports from former employees pegged the eventual construction costs of their new milking facility at over $20 million.  This hefty sum included approximately $3 million to retrofit the new facility to resolve structural problems threatening a building collapse and widespread death of livestock.

Besides the two corporate-owned facilities, Dean Foods and (now) WhiteWave have continued to grow their network of independent suppliers.  Although many of them are family-scale farmers with high integrity, WhiteWave’s Horizon brand procures a large percentage of their milk, west of the Mississippi, from industrial-scale operators milking as many as 4,000 cows.

The company, in an attempt to deceive organic consumers, persists in calling all their suppliers, other than corporate-owned dairies, “family farms.”

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