February 25, 2004

Parmalat USA declares bankruptcy .... Dean-owned Melody Farms streamlines operations .... Schreiber Foods buys controlling stake of Indian dairy .... Court rules that dairy producer checkoff is unconstitutional .... Kemps rolls out promotion .... Giant Eagle opens new Ohio units .... Albertsons restructures .... Supermarket labor negotiations .... New Product Scanner .... IDFA News...Odds-and-Ends...Stock Market Ticker...More news at www.idfa.org.

DAIRY BUSINESS BRIEFS

The U.S. dairy subsidiaries of Parmalat Finanziaria SpA filed for bankruptcy yesterday to protect assets and prepare for their possible sale as part of the beleaguered parent company's restructuring. Parmalat USA Corp., along with its Farmland Dairies and Milk Products of Alabama units, were part of the filing, which was made in the Federal Bankruptcy Court in the Southern District of New York in Manhattan. Parmalat's U.S. dairy group recently secured loans to remain operational. It posted $10.5 billion in 2003 sales, has assets of $414 million and debts of $316.5 million. The Italian parent company has 30 subsidiaries around the world and is $17.8 billion in debt. (The New York Times)

Dean Foods Co. subsidiary Melody Farms has trimmed its workforce by about 18%, with layoffs including drivers, hourly plant employees and management positions. Livonia, Mich.-based Melody Farms' plant management attributes the staff reduction (31 of 170 employees) to overlapping production and distribution capacity with nearby Dean-owned facilities. Dean purchased the company in June 2003 and owns five other Michigan dairy production facilities (in Grand Rapids, Flint, Evart, Detroit and Livonia). Dean's plant in Grand Rapids (Country Fresh) recently closed its ice cream division and plans to shut down yogurt production within weeks. (Lansing State Journal-Michigan)

Green Bay, Wis.-based Schreiber Foods Inc. has entered the Indian dairy market with its acquisition of 51% of India's Dynamix Dairy. Schreiber reports that the purchase is a first step toward increasing its presence in India and Asia. Dynamix is one of the largest dairy companies in India, with a 2.7 million lbs./day fluid line processing facility. Its customers include multinationals Nestle, McDonald's, Pizza Hut and Tropicana. (Financial Express - India)

A federal appeals court in Philadelphia has ruled that the dairy producer checkoff program violates the First Amendment rights of dairy producers who do not agree with the program's marketing message yet make mandatory contributions to the checkoff fund. Yesterday's Third U.S. Circuit Court of Appeals decision reverses a lower court's ruling that had upheld the constitutionality of the dairy producer checkoff. The U.S. Department of Agriculture is considering next steps, saying that it "regards such programs, when properly administered, as effective tools for market enhancement." Various agriculture checkoff programs are also undergoing similar scrutiny, with 2003 federal court decisions finding both pork and beef promotion programs in violation of producers' free speech rights. The U.S. Supreme Court is weighing whether to hear the beef or pork cases. There has been no court challenge to the Milk Processor Education Program (MilkPEP), which runs the National Milk Mustache "got milk?" Campaign. Each program is governed by unique regulations, and different programs have been viewed differently by the courts. (Associated Press, IDFA)

The cow characters that promote Kemps ice cream in the Midwest will star in an Elvis-themed campaign to support the rollout of a new flavor, Las Vegas Fudge Chunk. Packaging graphics feature a Kemps cow wearing a sequined white jumpsuit and trademark Elvis hairstyle. Minneapolis events will include an Elvis impersonator concert and Elvis impersonators wandering the city's downtown. These efforts are part of Kemps' year-long Sound of Moosic promotion, which will debut new music-themed flavors and includes a name-that-flavor contest with a grand prize trip to Vegas. Kemps is a subsidiary of Texas-based National Dairy Holdings. (Star-Tribune-Minneapolis)

CUSTOMER CLIPS

Pittsburgh-based Giant Eagle recently converted and opened eight Big Bear stores in central Ohio. The conversion of the 30,000 to 80,000-sq.-ft. stores took two weeks and kept 800 Big Bear employees onboard. Giant Eagle purchased the stores' leases from Penn Traffic in December, upping its store total to 13 in the region. Penn Traffic has 29 Big Bear stores in central Ohio that are still for sale as part of its bankruptcy restructuring; those stores are expected to close by the end of this month. (Columbus Dispatch-Ohio)

Boise-based Albertsons Inc. has announced it will undergo a corporate restructuring. The supermarket chain will create seven regionally based food divisions and one drug division. The move is expected to reduce layers of management and improve the company's focus on customers. Over the course of the last three years, Albertsons has reduced its operating divisions by more than 60%, has closed or sold more than 400 underperforming stores and eliminated three layers of management above store level. (Associated Press)

After two weeks of federally mediated negotiations between Safeway Inc. (Vons and Pavilions), The Kroger Co. (Ralphs), Albertsons Inc. and the United Food and Commercial Workers Union, an agreement may be close to finalization. The two sides are reportedly working out final details of the long-disputed contract and could make an announcement as early as today. This round of negotiations is the lengthiest since the strike/lockout began on Oct. 11, 2003. (Contra Costa Times-California)

NEW PRODUCT SCANNER

Consumer demand for "low-carb" and other diet products is sparking numerous dairy product introductions, including:

• Defiance, Ohio-based Diehl Specialties launches Lo-carb, a beverage with two grams of carbohydrates, five grams of fat, 12 grams of protein and 365 grams of calcium per serving. (Company report)

• Atlanta-based Carvel Corp. is testing a new "low-carb" ice cream in select East Coast franchises. The carb-diet-friendly product has 22 total carbs in each serving, but contains only five "net carbs" (subtracting fiber and sugar alcohol); "net carbs" are the main reference for "low-carb" diets. (Company report)

• Kemps' Carb Promise ice cream delivers three to four "net carbs" per 4-oz. serving. The six-flavor line rollout includes Vanilla, Butter Pecan, Chocolate Peanut Butter Cup, Vanilla Fudge Nut Sundae, Toffee Fudge Chunk and Caramel Cow Tracks. (Saint Paul Pioneer Press-Minnesota)

• Utica, Ohio-based Velvet Ice Cream Co. expands its no-sugar-added line with three new flavors of lower-carb ice cream: Raspberry Fudge, Oregon Cherry Fudge and Mint Chocolate Chip. The Splenda-sweetened flavors have six to 10 carbohydrates per serving and 33% less fat than Velvet's Natural line. The new flavors hit supermarkets in March. (Company report)

• Orange Julius, Minneapolis, is offering its Strawberry Sensation Fruit Smoothie nationally under its Julius Creations line. The product contains a nonfat vanilla yogurt base, combined with strawberries and tropical fruit juice. Each 20-oz. Strawberry Sensation is fat-free and cholesterol-free and contains both calcium and vitamin C. (Company report)

IDFA NEWS

Subway's "Jared" to Deliver Keynote Address at SmartMarketing 2004
Set for March 16-18 in New Orleans, SmartMarketing 2004 will kick off with an exciting keynote address about Subway's popular and successful "Jared" campaign. Jared Fogel, known to most Americans simply as "Jared," will share the now famous story about how he included Subway sandwiches in his weight loss efforts. Richard Coad, creator of the "Jared" campaign, will then explain how Jared helped Subway become the largest franchiser in the United States, edging out McDonald's last year. Given current growth trends, Subway could move from the seventh largest to the fourth largest quick serve restaurant chain in the next year. The Subway presentation is just one of many invaluable sessions at SmartMarketing 2004. For complete agenda and registration information for the program, click here. http://www.idfa.org/meetings/smartmktg2004_agenda.cfm

ODDS-AND-ENDS

A short supply of Monsanto's recombinant bovine somatotropin (rBST) is expected to impact U.S. dairy milk production and provide a slight lift to milk prices. Starting March 1, St. Louis-based Monsanto will provide only half of its usual rBST shipments to producers. Additionally, rBST's price will jump 9%. The shortage is linked to federal inspector findings of quality control issues at Monsanto's rBST manufacturing facility in Austria. Rationing is expected to last throughout 2004; about 22% of the nation's dairy cattle received rBST in 2002. (Associated Press) .... Friendship Dairies plans a $7 million upgrade -- including a 4,500-sq.-ft. addition -- at its Friendship, N.Y., plant, scheduled for completion by December 2005. Technology upgrades will take place throughout the plant, while the addition will house increased farmer cheese processing capability. The Allegany County Industrial Development Agency approved a "bond inducement" package to help finance the project. Friendship supplies kosher dairy products including cottage cheese, farmer cheese, sour cream and yogurt to the Eastern seaboard. The company plans to expand its marketing reach in tandem with the facility upgrades. (Buffalo News-New York State) .... Roughly $800,000 in dairy products went missing from a Sacramento, Calif., Crystal Cream and Butter Co. facility in a scheme that teamed up a loading dock employee and an independent distributor. The 27-year-old employee apparently diverted undocumented product into the distributor's truck, then the 36-year-old distributor allegedly sold the product; both men were arrested this week on suspicion of grand theft and embezzlement. (Sacramento Bee)

STOCK MARKET TICKER

As of 2/24/04, 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		26.67 35.10 78.28 45.80 34.75 83.40 24.00 11.10 33.25 19.02 19.85 23.24 30.00 28.45 43.10 32.63 18.73 06.67		-0.01 +0.24 -0.07 +0.27 +0.30 -0.30 +0.05 +0.18 +0.04 -0.44 +0.05 -0.24 +0.40 -0.51 +0.25 -0.05 +0.13 +0.10		+0.13 +0.94 -0.11 +0.91 -0.88 +3.75 +0.00 +0.08 -0.44 +0.11 -0.59 +0.76 -1.00 -0.73 +0.39 -0.76 -0.22 -0.09
Source: Yahoo! Finance

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