January 28, 2004

Kraft Foods to close 20 plants, reduce workforce .... Dreyer's to launch light line with help of new technology .... BSE investigation continues .... Parmalat audit reveals more debt .... Penn Traffic gains extension .... Supermarket labor dispute update .... Global Marketwatch: Spotlight on Russia .... SmartMarketing 2004 .... Odds-and-Ends ... Stock Market Ticker ... More news at www.idfa.org.

DAIRY BUSINESS BRIEFS

Northfield, Ill.-based Kraft Foods Inc. plans to cut about 6% of its global workforce and will close or divest 20 processing plants over the next three years as part of its sustainable growth plan, the company announced during its fourth quarter earnings report Tuesday. Initial plans call for closing a cheese processing facility in Canton, N.Y., a cottage cheese and sour cream facility in Farmdale, Ohio, and a facility in Central Europe. The 6,000 jobs cut include about 1,300 salaried U.S. positions. Kraft's 2003 fourth quarter net earnings dropped 7% to $869 million from $931 million in 2002's fourth quarter. Sales rose 6.2% to $8.33 billion in the quarter. The increase is largely attributed to the weak dollar, which increased Kraft sales value in other countries; shipment volume rose only 1.1%. For the full year, sales grew 4% to $31 billion from $29.7 billion in 2002; net income was $3.48 billion, up 2% from $3.4 billion in 2002. Kraft projects that its restructuring will result in pre-tax charges of as much as $1.2 billion.

By 2006, Kraft expects to save $400 million from the closures and job cuts; funds will be used to boost promotional efforts to restore growth in key categories and to better reach growing markets, including the U.S. Hispanic community. During this year's first quarter, Kraft plans to launch a series of products targeted toward healthy eating trends, including snack bars with yogurt under its Newtons brand. Earlier this month, Kraft restructured its five key food categories to be supervised on a global (rather than regional) basis; former CEO Betsy Holden is now at the global marketing helm. (Kraft Foods, Reuters, Associated Press)

Dreyer's Grand Ice Cream Holdings Inc. will launch a new Dreyer's/Edy's Grand Light line, which will be processed using a new proprietary slow churned™ method designed to deliver the taste and texture of full-fat ice cream in a light product. By 2005, Oakland, Calif.-based Dreyer's reports that it will have invested $100 million in the new technology. Dreyer's spent five years perfecting the new technology, and eventually plans to utilize it for other product lines. The new line's ingredients match those in the current Dreyer's/Edy's Grand Light line, but the slow churning kneads fat molecules at a colder temperature, then stretches and distributes them widely to give the taste of more butterfat without fat substitutes or artificial sweeteners. Market tests of the product line resulted in a 75% increase in light sales during 2003; a national launch is expected in May. Backed by the largest marketing campaign in Dreyer's history, the new 16-flavor Dreyer's/Edy's Grand Light line will be supported by national print, radio and TV advertising, as well as in-store point-of-sale programs, newspaper inserts, sampling and public relations efforts.

Cows with links to the Canadian-born Holstein with bovine spongiform encephalophathy (BSE or mad cow disease) have been found in Washington, Oregon and Idaho, and more than 600 animals have been destroyed by the U.S. Department of Agriculture thus far. Completed tests on about 150 of those animals have not detected BSE. Meanwhile, the Czech Republic's ninth-ever case of BSE was confirmed last week. (Associated Press; BBC Monitoring)

A court-ordered audit of Parmalat Finanziaria SpA found that the company's debt was about 15.6 billion euros higher than the dairy conglomerate reported last fall, months before the company's public downfall began. The PriceWaterhouse Coopers audit found that Parmalat's net debt stood at 14.3 billion euros ($17.9 billion) for the nine-month period ending Sept. 30, not the 1.8 billion euros Parmalat had reported. In a statement on the audit, Parmalat's new management reported that the latest audit shows liquid assets at the end of 2002 and as of Sept. 30, 2003, were "negligible." The company also reports it is able to make ongoing payments to suppliers including producers, but admits exceptions in its U.S. and Brazilian dairy operations. In New Jersey, milk producers have petitioned the state for protection from Parmalat's scandal. The company's Brazilian operations are struggling, and its finances are under investigation by Brazilian officials. In addition, the division needs $36 million in credit lines for working capital to stay afloat; Brazilian banks cut off credit lines last month. Meanwhile, Parmalat Hungaria accounts have been frozen as the company has accumulated nearly $5 million in debt to producers and investors there. On Jan. 22, Calisto Tanzi, 65, was transferred from prison to a hospital in Milan as a precautionary measure for medical reasons; prosecutors questioned him at the hospital Jan. 23. Tanzi is one of 10 people arrested in the scandal so far. He's admitted to a $10 billion gap in the company's financial statements and that $640 million was diverted from Parmalat to cover losses in his family's tourism businesses. Also last week, longtime Parmalat employee Alessandro Bassi died in an apparent suicide. Bassi had been questioned by investigators and worked closely with the company's top financial figures, Fausto Tonna and Luciano Del Soldato, both of whom are now incarcerated. (Associated Press, BBC Monitoring)

CUSTOMER CLIPS

A federal judge gave Syracuse, N.Y.-based Penn Traffic Co. another three months to emerge from bankruptcy; the food retail chain had initially faced a Jan. 29 deadline for filing its reorganization plan in U.S. Bankruptcy Court in White Plains. The chain is now required to submit the plan by April 29, and creditors will have until June 29 to approve it. Penn Traffic also gained more time to sell its Big Bear chain; it now has until its reorganization plan is confirmed. Last month, Penn Traffic sold several Big Bear stores in Ohio and offered others for auction. The mid-2003 Chapter 11 bankruptcy process is the second for Penn Traffic in five years. (The Herald-Dispatch-Huntington, W.V.)

A grocery clerk, several union officials and several clergy members were among 13 arrested Jan. 21 outside the Vons corporate headquarters in suburban Arcadia, Calif., during a demonstration involving 1,000 protesters. Those arrested marched past barriers into the company's parking lot, sat down and refused to move to show support of 70,000 California workers involved in the ongoing labor dispute with Safeway Inc. (Vons and Pavilions), The Kroger Co. (Ralphs) and Albertsons Inc. Several hundred demonstrators also picketed Saturday at a San Francisco Safeway. About 40 San Francisco police officers were on the scene. The demonstration ended peacefully and with no arrests, though police cited one shopper and one protester. Also last week, the AFL-CIO began coordinating a new national strategy to pressure the supermarket chains; the plan focuses on the chains' stores outside of California, with expected use of informational pickets, town hall meetings, and demonstrations at the homes of company executives. The union may also try to pressure big investors to punish the companies for their stance in the dispute by selling off their shares. (The Daily News of Los Angeles, Associated Press, San Francisco Chronicle)

GLOBAL MARKETWATCH: Spotlight on Russia

Wimm-Bill-Dann (WBD) plans to acquire 60% interest in Uzbekistan's largest dairy plant from the Uzbek state association Uzmyasomolprom. Key terms of the deal for WBD to gain control of the dairy, Tashkent Sut, have been approved; finalization is expected within the month. In mid-2003, WBD became part of Tashkent Sut's privatization, and a new joint venture company Wimm-Bill-Dann Central Asia Tashkent was created. Under that deal, WBD will invest $7 million over five years in the venture's development and upgrade. Tashkent Sut's current milk capacity is 300 tons daily. (Prime-Tass Business Newswire)

Groupe Danone plans to increase production capacity via equipment additions at its two Russian dairies this year. The French company's Chekhov plant is expected to increase its 18,000-ton capacity by 10%; production capacity at its Togliati dairy of 60,000 tons is expected to gain 15%. (Dow Jones)

IDFA NEWS

Register Now for SmartMarketing 2004!
With its huge potential for growing dairy sales, weight loss marketing will be the focus for this year's SmartMarketing Conference, set for March 16-18 in New Orleans, La. Americans are more concerned than ever about the nation's obesity crisis, so it's an excellent time to deliver dairy's good news about how milk, cheese and yogurt can play a role in weight loss. SmartMarketing 2004 will share the latest information on the science, regulatory environment, consumer insights and branded marketing efforts, including the licensing needed to make weight loss claims on dairy products. To find out how to capitalize on this promising opportunity, be sure to attend SmartMarketing 2004. For complete agenda and registration information, click here. http://www.idfa.org/meetings/smartmktg2004_agenda.cfm

ODDS-AND-ENDS

Boulder, Colo.-based Horizon Organic Holding Corp. will shut down operations at its organic farming visitor center in Maryland next January, with educational programs to end this spring. The herd will be moved to another Horizon farm. The 875-acre Horizon Organic Farm and Education Center was leased from the Naval Academy in 2000; the Navy has operated a dairy on the site since 1915. The center was developed three years ago, but apparently did not attract the expected volume of visitors. Following its recent merger with Dallas-based Dean Foods, Horizon Organic's leadership team approached Dean Foods about the change. (The Maryland Gazette) .... The American Dairy Association/National Dairy Council (ADA/NDC) has formalized its longstanding partnership with individual National Football League (NFL) players and coaches to begin a four-year sponsorship program. The ADA/NDC reports that the initiative will communicate the benefits of good nutrition and physical activity to youngsters through a multi-million dollar integrated marketing communications program with retail promotions, advertising, public relations and a national school program with the NFL. The sponsorship also includes a Super Bowl presence, use of league marks, partnerships with team leagues locally and use of player images .... A Wisconsin truck driver hauling cheese and organic milk led a caravan of police on a 25-minute, low-speed chase Sunday through Ohio's Medina County; it ended when police shot out the 80,000-lb. rig's tires before it exited a residential area onto a state highway. The truck driver refused to reveal the contents of his refrigerated trailer at a State Highway Patrol weigh station, and then fled. The 45-year-old Whitewater, Wis., man has offered no explanation for his behavior; he's being held on $500,000 bond on a third-degree felony charge of fleeing and eluding officers. (Akron Beacon Journal-Ohio)

STOCK MARKET TICKER

As of 1/27/04, market close.

Company/Symbol		Last Trade		Change over Previous Close		Change over Last Week's D-brief
ConAgra Foods/CAG Dean Foods/DF Dreyer's/DRYR General Mills/GIS Groupe Danone/DA Hershey Foods/HSY Horizon Organic/HCOW Ingles Markets/IMKTA Kraft Foods/KFT Kroger/KR Ruddick Corp./RDK Safeway/SWY Saputo/SAP.TO SuperValu/SVU Unilever PLC/UL Weis Markets/WMK Wimm Bill Dann/WBD Winn-Dixie/WIN		26.21 32.48 77.90 45.95 33.93 75.35 24.00 10.93 32.13 18.64 19.27 22.73 30.90 28.77 39.11 35.28 17.50 09.33		-0.04 -0.52 -0.06 -0.15 -0.10 +0.01 +0.05 -0.82 -0.35 -0.09 +0.15 -0.37 +0.95 +0.08 -0.22 -0.32 +0.35 +0.06		+0.11 +0.41 +0.07 +0.02 +0.56 +0.35 +0.00 -0.77 +0.30 -0.17 +0.47 -0.13 +0.40 -0.52 -0.27 -1.81 +0.85 -0.07

Click here to view last week's edition of D-brief.
http://www.idfa.org/dbrief/archive.cfm

ABOUT D-BRIEF

D-brief is written by Dairy Field magazine, a Stagnito Communications Inc. publication, www.dairyfield.com. It is provided for the benefit of the industry by the International Dairy Foods Association (IDFA), www.idfa.org.

D-brief is sponsored by Polytainers, a leader in the design, production and printing of thinwall rigid plastic containers for the dairy and food industries. Learn more about our sponsor at www.polytainersinc.com.

For editorial content submissions, contact Cathy Sivak, D-brief editor, at editor@dbrief.org.

To subscribe or unsubscribe to this e-newsletter, send your request -- along with your full name, title, company, phone and email address -- to subscribe@dbrief.org.