October 8, 2003

Saputo to buy Argentinean dairy processor.... CWT plan underway.... National Dairy Holdings buys 50 percent of Sinton Dairy.... Former West Lynn Creamery execs indicted.... Canadian c-store chain expands U.S. holdings.... Shaw's to gain five stores.... Unions and supermarkets at odds.... New Product Scanner.... Odds-and-Ends...Stock Market Ticker...More news at www.idfa.org.

DAIRY BUSINESS BRIEFS

Montreal-based Saputo Inc. reports that it will acquire Molfino Hermanos S.A., the third largest dairy processor in Argentina. The US$50.8 million deal is subject to a final agreement being reached. Molfino has sales of about $90 million annually, with two plants and 850 employees. About 40% of sales come from milk powder and cheese exports to more than 30 countries; Saputo has previously stated its plans to increase its international cheese sales. Products include soft, semi-soft, hard and grated cheeses as well as butter, cream, milk powder, UHT milk, and dulce de leche (caramelized milk).

So far 3% of all U.S. dairy farm operations (2,552 dairy farmers) have submitted bids under the milk reduction and herd buyout portions of the $60 million Cooperatives Working Together (CWT) program, National Milk Producers Federation President Jerry Kozak said at the World Dairy Expo in Madison. The milk reduction portion of the CWT program began last week, with NMPF accepting 77 of 514 bids submitted. The 77 accepted bids will reduce milk supply by 88 million pounds over the next 12 months. In the herd buyout program, 2,038 bids were submitted, with about 300 herds to be removed (about 33,000 cows and 613 million pounds of milk production). CWT's dairy export assistance program has not yet been started. (Milwaukee Journal Sentinel-Wisconsin)

National Dairy Holdings LP has acquired 50 percent interest in Colorado Springs-based Sinton Dairy from Dairy Farmers of America Inc. (DFA). As part of the deal, DFA bought out Sinton partners Larry Losasso and Joel Midkiff to gain 100 percent ownership, then sold 50 percent interest to National Dairy. Losasso has retired, and Midkiff is now general manager under the new ownership. Sinton is Colorado's second-largest dairy plant, with 232 employees. Sinton completed an $8 million expansion in May to increase capacity for cottage cheese, yogurt and other cultured dairy products. Dallas-based National Dairy Holdings was formed in 2001 to acquire 11 dairy plants from Suiza Foods Corp. and now operates 32 plants in 15 states. (The Gazette-Colorado Springs, Colo.)

West Lynn Creamery Inc.'s former executives Arthur Pappathanasi and Nicholas Scangas were charged on September 25 with conspiracy to defraud the U.S. government via the dairy's 1987 through 1998 rebate program that allowed customers, including Dunkin' Donuts franchisees, to evade taxes. According to the indictment, the dairy charged customers an inflated price for milk, and then paid rebates; customers did not report rebates as income and thus avoided taxes. Pappathanasi is the former president and CEO of West Lynn Creamery, Lynn, Mass., while Scangas is the former executive v.p. of sales and marketing. If convicted, each faces a maximum sentence of five years in prison, followed by two years of probation and a $250,000 fine. No customers have been charged. In June 2001, West Lynn Creamery pleaded guilty to the scheme, agreeing to pay a $7.2 million fine. The dairy currently operates as part of Garelick Farms, a subsidiary of Dean Foods. (Associated Press, the Daily Item of Lynn)

CUSTOMER CLIPS

Canada's biggest convenience store operator, Alimentation Couche-Tard Inc., expands its U.S. holdings with the $1.1 billion purchase of Circle K Corp., a division of ConocoPhillips oil company. The deal includes about 2,000 U.S. stores (1,663 corporate stores and 350 franchise units in 16 states, mostly in the south and southwest). With the acquisition, Couche-Tard now has a total of 4,630 U.S. stores and becomes the fourth-largest c-store operator in North America. In September, the company reported that more than 80 percent of its quarterly sales growth came from its recent acquisition of 404 Dairy Mart convenience c-stores in the Midwest. This summer, Couche-Tard also bought 43 stores from Clark Retail Enterprises for $24.5 million. (The Canadian Press)

English retailer J Sainsbury will buy five stores to add to its Shaw's Supermarkets chain in the United States. The five SuperValu stores are owned by GU Markets of Brattleboro, Vt.; stores are in New Hampshire and Vermont. (Financial Times-London, England)

Supermarkets and union battles continue: St. Louis grocery workers are effectively on strike at 22 Shop 'n Save stores, 55 Schnuck Markets and 19 Dierbergs stores in Missouri. Following a Tuesday strike vote with 72 percent approval, St. Louis union supermarket workers immediately started pickets at Shop 'n Save. Schnuck Markets and Dierbergs Markets then locked out remaining union workers. Stores impacted by the strike will remain open with help from temporary replacement workers.... In Southern California, negotiations ended Sunday (one hour before a contract covering 70,000+ grocery clerks expired) when United Food and Commercial Workers union negotiators walked out on Safeway Inc. (Vons and Pavilions), The Kroger Co. (Ralphs) and Albertsons Inc. A union strike vote is underway, with a two-thirds majority needed for strike authorization; as early as Saturday a strike could impact nearly 900 stores.... Meanwhile, a long-running contract dispute with 1,500 Albertsons' Jewel Food Stores union employees in southeast Wisconsin has gone public. Last week, unions rejected Jewel's latest offer and also took out a full-page newspaper ad that criticized the contract proposal and asked readers to call Jewel to urge for a "fair contract." At issue are hiring bonuses, wage scale increases and health insurance. The contract dispute has cost Jewel growth opportunities, including putting an end to its plans to buy 10 Milwaukee-area Kohl's Food Stores last summer due to contract concerns. (Associated Press; Milwaukee Journal Sentinel-Wisconsin)

NEW PRODUCT SCANNER

CoolBrands International Inc., Markham, Ont., is promoting its new Yoplait frozen yogurt breakfast bar as a meal solution. The product -- bars coated with cereal or sandwiched between two cereal wafers -- will be launched in the Washington market in December with extensive advertising support. Inspired by the popularity of cereal bars, the product has as much calcium as a glass of milk as well as fortified cereal, and can be eaten straight from the package. (The Canadian Press).... Horizon Organic Holding Corp., Boulder, Colo., will roll out two new flavored single-serve milks in a National School Lunch Week promotion. Orange cream (a new permanent flavor) and caramel (part of a new rotating flavor program) will join the line's existing chocolate, vanilla, strawberry and 2% reduced-fat flavors. The line is packaged aseptically.... Tillamook County Creamery Association introduces Tilla-Moos®, individually-wrapped 3/4 ounce snack portions of Tillamook® cheese in Colby Jack and Medium Cheddar varieties sold in resealable bags (of 10 snacks) called Pack-it-Pals®. Ore.-based Tillamook is merchandising the product through retailers in the Northwest, northern California and southern California.

IDFA NEWS

All Food Facilities Must Register with FDA by December 12
IDFA Offers Toolbox to Help Industry Comply with Bioterrorism Regulations
Under the Bioterrorism Act of 2002, FDA will release final rules this week for the food and dairy industries regarding the food facility registration and prior notice provisions, and companies must comply by December 12. IDFA is offering four major tools in a fast-track program designed to help the dairy foods industry navigate these impending regulations. In the coming weeks, IDFA will roll out the first two tools: its Hot Topics: Biosecurity Briefing on November 20 in Washington, D.C., and this month's launch of a new online service to help dairy and food companies comply with the challenging facility registration provision. Under the FDA rules, the definition of a "food facility" includes all domestic and foreign food facilities that manufacture, process, pack or hold food for consumption in the United States. The other two tools, a new manual and a second workshop, will be available in early 2004. "With these new rules, the dairy and food industries are faced with making significant changes very quickly, so we're providing several avenues of assistance," said Clay Detlefsen, IDFA vice president of regulatory affairs and counsel. "Each tool will focus on a different aspect of FDA's biosecurity regulations, some of which are quite complex and wide-reaching." For complete information, click here.
http://www.idfa.org/news/releases/2003/pr100303.cfm

ODDS-AND-ENDS

Newark, N.J.-based Triunfo Import & Export Food Corp. recalled one-pound packages of Queijo tipo Mineiro cheese this week due to potential contamination with Listeria monocytogenes. The product was distributed in New Jersey and New York.... Phoenix-based Shamrock Foods will distribute flavored water products to the Arizona school system and commercial markets throughout the state for American Water Star, Las Vegas, Nev. American Water's products include sugar-free, calorie-free, sodium-free flavored waters, as well as vitamin- and mineral-fortified beverages.... Worldwide Food Expo kicks off three weeks from today, bringing dairy industry representatives from around the world to Chicago. A Beverage Bar on the show floor will feature innovative milk drinks and other new beverages. For more information, visit the show's website at www.worldwidefood.com

STOCK MARKET TICKER

As of 10/07/03, 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		22.29 30.38 77.70 46.50 30.56 75.14 23.94 10.22 30.00 19.00 16.41 23.30 26.90 25.05 35.20 35.26 20.68 09.70		+0.04 +0.00 -0.03 -0.29 +0.06 +0.22 -0.01 +0.14 +0.00 +0.10 +0.16 +0.17 -0.35 -0.09 -0.08 +0.03 +0.13 -0.20		+1.05 -0.65 -0.06 -0.57 +0.04 +2.46 +0.03 +0.42 +0.50 +1.13 +0.87 +0.36 +0.35 +1.19 +0.56 +1.25 +1.46 +0.05
Source: Yahoo! Finance

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