February 4, 2004

Land O'Lakes earnings on rise...Santee Dairies to go under Stater Bros. umbrella...BSE-linked cows all test negative... Wal-Mart tops global retailer list...Winn-Dixie to restructure...Supermarket labor dispute...Dairy Accounting...Odds-and-Ends....Stock Market Ticker.... more news at www.idfa.org. More news at www.idfa.org.

DAIRY BUSINESS BRIEFS

Land O'Lakes Inc. reports that 2003 earnings were bolstered by a $150 million legal settlement. Arden Hills-based LOL reports 2003 sales hit $6.3 billion, up 8 percent from $5.8 billion in 2002. LOL reports 2003 earnings of $83.5 million, a drop of nearly 16 percent from 2002's $98.9 million. The dairy foods division had earnings of $5.6 million in 2003, compared to a loss of $32.1 million in 2002. Sales for 2003 in that division were $3 billion, compared to $2.9 billion in 2002. The dairy foods division's areas of strength for 2003 included Butter and Superspreads, Foodservice, and Deli Cheese. Overall improved performance for that division is credited to better markets, effective cost-reduction efforts and strong volumes, particularly in branded and proprietary value-added product lines and businesses, LOL reports. (Company report; Saint Paul Pioneer Press-Minnesota)

Santee Dairies Inc., City of Industry, Calif., is expected to be acquired by grocer Stater Bros. Markets later this week. The Colton, Calif.-based grocery chain has owned a 50 percent share in Santee for 15 years, and it will buy remaining control from the Ralphs Grocery Company division of The Kroger Co.; terms were not disclosed. Santee Dairies will continue to process Knudsen and Foremost Dairy fluid milk and cultured products. Current co-packing for Stater Bros., Ralphs and leading independent grocery chains in southern California will also remain in place, along with Sunkist Orange Juice and Arnold Palmer Tee production. Stater Bros. operates a chain of 157 supermarkets in southern California. (Company report)

BSE update: Seven cows that tested BSE-negative this week included a direct offspring of the BSE-positive Canadian-born Holstein discovered in Washington in December, the U.S. Department of Agriculture reports. The Burley, Idaho, cattle had possible links to the original Canadian herd. Thus far, all offspring of the cow have tested negative and all of the 252 BSE tests from 600-plus culled cows have also resulted in BSE-negative results. (Associated Press)

CUSTOMER CLIPS

Wal-Mart Stores Inc. maintained its top slot on the most recent list of the top 200 global retailers, checking in three times bigger than the No. 2 merchant, France's Carrefour in Deloitte Touche Tohmatsu's seventh annual "Global Powers of Retailing" study released last month. Five other of the 10 largest global retailers are also from the United States: Home Depot Inc. (3), The Kroger Co. (4), Target Corp. (6), Costco Wholesale Corp. (9), and Sears, Roebuck and Co. (10). (Chicago Tribune)

Southern grocery chain Winn-Dixie reported a $79.5 million loss for its fiscal second-quarter and announced plans for sweeping changes. Winn-Dixie's sales fell $225.5 million to $3.6 billion for the quarter ending Jan. 7. It lost 57 cents a share, down from a profit of 65 cents per share in the same quarter last year. The Jacksonville, Fla.-based company had previously forecast a small profit for the quarter; it stopped paying dividends for the first time in more than half a century. The company's turnaround plan to boost sales and market share in core markets is a five-prong strategy: $100 million in cost cutting (including corporate staff reductions), store makeovers, a focus on core markets, centralized purchasing, and brand positioning. Details on changes are expected following an April board meeting. Winn-Dixie plans to continue its $165 million plan to remodel about 700 stores (work is complete at 98 locations). (The Miami Herald; Dow Jones newswire)

Labor leaders unveiled a national campaign to support the 70,000 California workers involved in the ongoing labor dispute with Safeway Inc. (Vons and Pavilions), The Kroger Co. (Ralphs) and Albertsons Inc. The United Food and Commercial Workers Union rally on Saturday in Inglewood, Calif., drew 14,000 union members and supporters outside an empty, heavily guarded Vons supermarket. Part of the national plan includes radio spots in the Portland, Ore.; Philadelphia; Seattle; Washington, D.C.; and Baltimore markets. The commercials urge consumers to join the fight to save affordable health care by shopping elsewhere and by picketing local Safeway stores. (Los Angeles Times, UFCW report)...Last week, some 250 clergy, labor leaders, striking workers and children protested in front of Safeway CEO Steve Burd's home in a gated community. Only six members of the group were allowed inside to give written protests to a Burd representative. On Saturday, a protest with nearly 500 marchers in Oakland, Calif., resulted in the arrest of 13 demonstrators. The next demonstration is planned for Feb. 11 in front of Safeway's corporate headquarters. (Contra Costa Times-California; The Argus-Fremont, Calif.)...California Governor Arnold Schwarzenegger said Monday he will intervene in the nearly four-month long grocery strike if asked, but did not provide details about what his involvement would be. (Associated Press)...Kroger reports that two new four-year labor contracts for 6,500 Tennessee and Mississippi UFCW union members were ratified this week. (Company report)

DAIRY ACCOUNTING

General Mills Inc., its chief executive officer and its chief financial officer each received a "Wells Notice" from the U.S. Securities and Exchange Commission (SEC) Tuesday in connection with an ongoing SEC investigation of the Minneapolis-based food company's sales practices and related accounting. The notice is a preliminary step toward civil action against the company by the SEC. The company reports that it is allowed to respond to the notice prior to any formal recommendation of legal action. (Company report)

Dairy Marketing Services, a Syracuse, N.Y.-based organization that sells 40 percent of the Northeast's raw milk, began to require advance payments from Parmalat U.S.A. on Monday. Separately, citing late payments, a growing number of the 600 Pennsylvania farmers shipping milk to Parmalat's plants in New York City and Wallington, N.J., have begun selling it elsewhere. Parmalat has 1,300 U.S. employees and 36,000 workers worldwide. In addition to Wallington and New York City, it also operates U.S. plants in Grand Rapids, Mich.; Decatur, Ill.; and Atlanta.

The ongoing Parmalat investigation has revealed that double-billing for dairy products netted Parmalat Finanziaria SpA about $5 billion in loans from banks. The Italian company double-billed at least 33 distributors and hundreds of supermarkets in Italy for goods and used the invoices to secure credit from about 40 Italian banks. In addition, Parmalat obtained about $348.9 million in financing from Citigroup backed by supermarket billings. While Citigroup reports it was a victim of fraud, an internal Parmalat accounting staff member told investigators that Citibank employees knew about the double-billing system as early as 1995. Meanwhile, Standard & Poor's Corp. reports that Parmalat's fraudulent balance sheets misled the U.S.-based debt rating service into maintaining an investment grade rating on the company's bonds. Parmalat management reports that the company has $18 billion in debt and virtually no cash. The head of Parmalat's auditors committee is now under investigation. Meanwhile, two key Brazilian Parmalat units with up to $1.8 billion in debt filed for bankruptcy protection last week. The dairy division, Parmalat Brasil Industria de Alimentos SA, holds about $160 million of that debt; it has been struggling to make payments to milk suppliers. (Associated Press; Bloomberg News)

IDFA NEWS

Suppliers: Exhibit Sales Open for SmartMarketing 2004
Suppliers looking to reach hundreds of the top dairy marketers should sign up now for exhibit space in the "Hall of Innovations" at SmartMarketing 2004! SmartMarketing will be held March 16-18 in New Orleans. The conference will examine dairy marketing's latest trends and developments, which are spurring demand for new ingredients, flavoring, packaging, services and technologies. If your company can fill this need, reserve your exhibit space today! For complete details on the program and exhibiting in the "Hall of Innovations", click here. http://www.idfa.org/meetings/smartmktg2004_agenda.cfm

ODDS-AND-ENDS

Friendly's Ice Cream Corp. has switched to a franchise-only strategy in Florida with the sale of 10 restaurants in the Orlando area. In a deal worth $3.15 million, Bradenton, Fla.-based Central Florida Restaurants LLC acquired the restaurants from the Massachusetts-based parent company and negotiated a deal to open 25 more units over the next 11 years. Franchising the Orlando area is a growth strategy for Friendly's, which still owns the majority of the more than 500 branded restaurants nationwide but now not any of the 14 stores in Florida. (Sarasota Herald-Tribune-Florida)...Sodus, N.Y.-based Heluva Good LLC's products gained national exposure on NBC's Today Show last week. Several Heluva Good Dips were included in a special feature on Superbowl snacks co-hosted by NBC weatherman Al Roker and supermarket analyst Phil Lempert. Roker noted that he remembered the products from his college days in New York and Lempert dubbed the line "good." Heluva Good Dinosaur Bar-B-Que Dip, Classic Ranch Dip, Buffalo Wing Dip and Bacon Horseradish Dip were featured. The regional but growing division of Crowley Foods sent samples to the show at a producer's request. (Company report)...In passing: Carl Wilson Acker, 68, a supervisor for Borden Ice Cream Co. for nearly 17 years, died Jan. 29 at his home in Greenville, S.C. (The Greenville News - Greenville, S.C.)

STOCK MARKET TICKER

As of 2/03/04, 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		25.91 32.29 78.03 45.65 34.00 77.74 24.00 10.61 33.15 19.03 18.83 22.95 30.40 28.90 39.30 33.38 16.79 05.81		-0.02 -0.21 +0.00 +0.17 +0.10 +1.21 +0.05 +0.16 +0.60 +0.27 -0.06 +0.59 -0.15 +0.26 +0.46 -0.23 -0.20 -0.44		-0.19 +0.22 +0.20 -0.28 +0.63 +2.74 +0.00 -1.09 +1.32 +0.22 +0.03 +0.09 -0.10 -0.39 -0.08 -3.71 +0.14 -3.59
Source: Yahoo! Finance

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