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July 21, 2004

Kraft earnings take 25% hit... New leader for Farmland under restructuring... Parmalat's international restructuring continues... Dean to consolidate New Orleans facilities... Dairy on the Menu... Northern California grocery negotiations continue... Albertsons rolls out dollar zone, closes distribution center... Odds-and-Ends... Stock Market Ticker... More news at www.idfa.org.

DAIRY BUSINESS BRIEFS

Kraft Foods Inc.'s second-quarter net sales were up 4% to $8.2 billion from $7.84 billion, but the multinational company reports that key commodity cost increases such as cheese (up 70%) and soybean oil (up nearly 40%) prices caused a 25.5% drop in the quarter's earnings. Northfield, Ill.-based Kraft reported $698 million in quarterly earnings, compared to $949 million in the same quarter last year. The company has lowered profit forecasts for the remainder of 2004. Kraft's cheese operations posted increased overall volume, and all key segments gained marketshare; processed slice shares were up 3.4 points, and the naturals and cream cheese segments each rose 2.5 points. To improve the overall balance sheet, Kraft plans to trim back underperforming brand portfolios, while at the same time extending core brands with new product introductions. (Company report, Chicago Tribune)

Wallington, N.J.-based Farmland Dairies LLC will gain new leadership and shed non-core units as part of its Chapter 11 restructuring plan. Marty Margherio is expected to take over as president and COO of the Parmalat USA Farmland unit by month's end. Margherio has held various executive positions at Crowley Foods Dairy Group prior to being named Crowley president and CEO in 1993. He also has served on the board of directors of the Milk Processor Education Program (MilkPEP). In other restructuring news, Farmland plans to sell its 80% ownership of Milk Products of Alabama LLC to National Dairy Holdings LP for $19.7 million in a deal to close this fall. The sale of Farmland's Georgia frozen dessert distribution unit was detailed in last week's D-Brief. (Company reports)

In other Parmalat news, the Italian government has reportedly OK'd the restructuring plan for the dairy conglomerate, with an official announcement likely today. The plan includes a debt-for-equity swap to repay more than $17 billion to creditors. The swap would convert creditor bonds into shares of a new company being created from the scandal-ridden Parmalat. If the plan is approved, creditors will be offered a small percentage of bond values in early 2005 at the same time as the initial public offering for the new Parmalat. (Wall Street Journal, Associated Press)... Parmalat de Mexico will sell off operations to Grupo Industrial Lala of Mexico. Parmalat brands will be licensed to Lala division Prolacteos de Mexico as part of the deal. Terms were not disclosed, but proceeds are expected to pay down the unit's debts to vendors and the Parmalat group (AFX News Ltd.)... Across the pond, French and Italian dairy producers unpaid for 2003 milk deliveries to Parmalat units will receive 1 million euros in aid from their respective governments. Aid is expected to total about 995 euros per beneficiary. (AFX News Ltd.)... In Canada, Parmalat Dairy & Bakery Inc. will receive fortification via $610 million in refinancing of its Canadian operations by the Ontario Teachers' Pension Plan. Financing includes up to $80 million in revolving credit underwritten by the plan and provided by an unidentified major bank. The cash will be utilized for debt repayment, as well as for the general business and operating purposes of the Canadian Parmalat unit. (The Canadian Press)

Dallas-based Dean Foods Co. will consolidate its New Orleans fluid processing capacity at the Brown's Dairy facility, following the closure of Barbe's Dairy, Westwego, La. The combined operation at Brown's will continue to produce milk and juice products under both the Barbe's and Brown's banners. Most of the 93 Barbe's employees will transfer to the Brown's facility to make up a new total workforce of about 300. (The Times-Picayune, New Orleans)

DAIRY ON THE MENU

In a national, chain-wide rollout this week, milk in plastic single-serve packaging debuts for Wendy's International Inc. as a Kids' Meal beverage selection. The shift to plastic packaging from gabletops was prompted by results from a nine-month test of the 8-oz. plastic bottles at 420 Wendy's restaurants in Columbus, Miami, Philadelphia and Raleigh, N.C. Dublin, Ohio-based Wendy's becomes the first quick-service restaurant chain to feature the National Dairy Council's 3-A-Day of Dairy logo on milk packaging. The white reduced-fat (2%) and chocolate lowfat (1%) milks are now available as soft drink substitutes in children's meals as well as a la carte. (Company report)

Dairy will be in demand by the 24,000-plus athletes, coaches and officials on hand for the 2004 Summer Olympic Games and Paralympic Games in Athens, Greece. In a 60-day span, including the 17 days of the Olympic events, those associated with the games are expected to eat literally tons of foods. Stocked dairy foods include 52,000 pounds of cheese in more than two dozen varieties; 18,300 pounds of butter; and 67,000 gallons of milk (both cow and goat). Aramark and its Greek partner, Daskalantonakis Group, will serve more than 2 million meals in the newly constructed Olympic Village Dining Hall, which seats 6,000. (Associated Press)

CUSTOMER CLIPS

Labor contract negotiations between Northern California grocery workers and retailers, including Safeway Inc., Albertsons Inc. and The Kroger Co., will continue following an extension of the original contract, which expired July 17. The 19,000 members of the United Food and Commercial Workers will continue working under terms of the old contract for as long as both sides agree to the extension. The contract covers union employees at 335 stores operated by Safeway, Kroger, Albertsons, Save Mart Supermarkets, some smaller chains and independent stores. (Alameda Times-Star, Alameda, Calif.)

Albertsons Inc. has rolled out a new dollar-zone concept in all 2,500 of its food and drug store units. The Boise, Idaho-based retailer tested the concept for a year in various markets. The merchandising initiative carries a new brand called "10 for 10 Mix and Match"; a wide range of products, including fresh foods, dry grocery and general merchandise, will be part of the concept. In other Albertson's news, the company plans to close its San Leandro, Calif., distribution center within the next 18 months, shifting operations and employees to facilities in Vacaville and Roseville. (Company report; Contra Costa Times, Calif.)

IDFA NEWS

Visit IDFA Members on the BevExpo Show Floor!
Be sure to show your support for IDFA supplier members that are exhibiting in September at BevExpo 2004, a new beverage industry trade show that is being co-sponsored by IDFA. It's now easier than ever to plan a trip to the BevExpo show floor since IDFA has added each member exhibitor's booth number to its online Membership Directory. BevExpo exhibitors will display innovations in equipment, ingredients and other services and supplies to the multi-category beverage industry, including milk, dairy drinks, juices, bottled water, soft drinks, beer, coffee and tea. To see which companies are where on the BevExpo show floor, click here. To register for BevExpo, click here.

ODDS-AND-ENDS

Oakhurst Dairy has started construction on a $6 million cooler in order to boost efficiency and meet growth demands. The 17,000-sq.-ft. refrigerated storage area will house five levels of racks and conveyor equipment to hold up to 46,000 cases of dairy products. The Maine dairy plans to use the additional cooler capacity to help increase distribution of its milk and dairy products to its established markets in four New England states, particularly southwest Massachusetts. (Portland (Maine) Press Herald)... By month's end, Fred A. Cholick will become dean of the College of Agriculture at Kansas State University. He currently serves as dean of South Dakota State University's College of Agriculture and Biological Sciences and spearheaded the planned renovation of that school's dairy plant. (Aberdeen American News, South Dakota)... The Penn State University Creamery unveiled its Sesquicentennial Sundae ice cream flavor at a party kicking off the university's 150th birthday. Sesquicentennial Sundae features a vanilla base with a fudge swirl and inclusions of fudge brownie chunks and chocolate-covered peanuts. The creation was the result of the university's new flavor contest, which received 2,500 entries. A seventh-grader came up with the winning name and recipe combination. The flavor will be available through June 2005 as part of the year-long celebration. (Pennsylvania State University)

STOCK MARKET TICKER

As of 7/20/04, 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 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		27.31 37.22 79.40 46.94 17.08 46.47 10.99 31.80 16.90 21.40 22.84 32.10 28.86 37.88 33.21 14.06 06.90		+0.12 +0.45 +0.04 +1.10 -0.03 -0.43 +0.08 +0.67 +0.08 +0.62 +0.14 +0.00 +0.30 -0.36 -0.01 -0.24 +0.20		-0.04 +0.55 +0.18 +0.54 +0.04 +0.23 -0.19 +0.72 -0.30 -0.11 -0.58 +0.10 -0.43 -0.36 -0.79 +0.01 -0.13
Source: Yahoo! Finance

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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, Curwood and TIC Gums. Polytainers is a leader in the design, production and printing of thinwall rigid plastic containers for the dairy and food industries. Learn more about this sponsor at www.polytainersinc.com. Curwood develops and manufactures high-performance, high-barrier, polymer-based packaging materials. For more information about Curwood products, visit www.curwood.com. TIC Gums is America's oldest supplier of hydrocolloids to food, pharmaceutical, cosmetic and industrial companies worldwide. To learn more about this sponsor, visit www.ticgums.com.

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