To view D-brief online, visit www.dbrief.org

November 17, 2004

Dairy Farmers of America investigation widens .... Kraft set to sell Canton cheese plant .... Lucille Farms, Lifeway Foods report quarterly financials ..... Holiday ice cream promotions .... Sears, Kmart merge in surprise deal ... Penn Traffic asks for extension .... BJ's records quarterly profit increase .... Achieving Excellence Awards .... Odds-and-Ends .... Stock Market Ticker .... More news at www.idfa.org.

DAIRY BUSINESS BRIEFS

The Associated Press is reporting that the U.S. Department of Justice antitrust investigation into Kansas City-based Dairy Farmers of America cooperative has expanded to include more than a dozen states. DOJ has reportedly commissioned Yale University to study the possible breakup of DFA's network of dairy plants, bottlers and marketing agencies, although DOJ has not confirmed that such a study is underway. As reported in D-brief this August, DOJ began investigating the giant co-op after its expansion into the South, possibly stemming from the purchase of Dairy Fresh Corp., Greensboro, Ala., by National Dairy Holdings, a Dallas-based milk processor partially owned by DFA. (Associated Press)

Kraft Foods, Northfield, Ill., and the town of Canton, N.Y., have struck a deal that clears the way for Kraft's sale of a closed cheddar cheese plant there. Kraft will pay $1.2 million over the next 11 years to Canton in order to pay off its share of the cost of a sewage improvement project in the 1990s. Kraft closed the 116,000-sq.-ft., 65-employee plant in July as part of its global restructuring plan. The unnamed buyer of the plant builds and repairs industrial cheese containers. The company will use about 50% of the facility and employ 10 to 15 people. (Watertown Daily Times, Watertown, Wis.)

In other Kraft news, the company sold its LifeSavers candy and Altoids mints brands to chewing-gum maker Wm. Wrigley Jr. Co., Chicago, Ill., for $1.48 billion. Kraft has also put its Bird's Custard property up for auction. Bird's is the top custard brand in England. The moves are part of Kraft's strategy to focus on its trademark supermarket products. (Associated Press; Financial Times)

Lucille Farms, Montville, N.J., a maker of mozzarella and other pizza cheeses, reported a net loss of $300,000 for its quarter ending Sept. 30, down from a net gain of $319,000 for the same period a year ago. Net sales totaled $11.8 million. Lucille Farms attributed the quarterly loss to a drop in the average wholesale price of cheese from June to July that cost the company $382,000 in July. Market prices of cheese in June averaged $1.76 per pound, but dropped to a low of $1.36 per pound the next month without a similar downward adjustment in the cost of milk. (The same quarter in 2003 saw the opposite effect.) August and September saw wholesale cheese prices back up to the mid-$1.50s. (Company report)

Morton Grove, Ill.-based Lifeway Foods, known for its probiotic foods and kefir drinks, announced that its third-quarter sales rose 7.8% to a record $4.14 million, up from $3.83 million the same quarter a year ago. Net income totaled $515,109 in the quarter, compared to $709,196 the previous year; the drop is attributed to increased milk prices, insurance costs and fees associated with regulatory compliance, as well as the recent acquisition of Ilya's Farms. Nine-month sales jumped 10.5%, totaling $12.08 million. The company posted net income of $1.71 million for this period, down from $2.39 million the same period a year ago. The decrease was largely because of the second-quarter spike in milk prices. (Company report)

HOLIDAY PROMOTIONS

Velvet Ice Cream Co., Utica, Ohio, expects to top last year's production of holiday family favorite Peppermint Stick ice cream. In 2003, the company produced 9,900 gallons of the pink ice cream with candy cane chips. In just the first few days of production this year, the company has already produced 3,630 gallons. Velvet expects to use 3,500 pounds of peppermint candy in its total production this year. As part of the promotion for its seasonal flavors, Velvet has released dessert recipes for Peppermint Stick and its other seasonal favorite, Pumpkin Pie. (Company report)

Wells' Dairy, Le Mars, Iowa, is also offering special recipes to promote its products this holiday season. First, consumers can create The Blue Bunny Gingerbread Man Torte, using Blue Bunny Premium Butter Pecan Ice Cream as a spread over gingerbread cookies. Caramel dip is then spread over the treats, which are then frozen and served with apple pie filling. In addition, Blue Bunny is promoting its egg nog products, available in original, reduced-calorie and reduced-fat versions, and Holly Nog, made with lowfat milk fortified with vitamins A and D. Recipes using these products include Egg Nog Cinnamon Swirl Bread and Butter Rum Glazed Egg Nog Cake. (Company report)

CUSTOMER CLIPS

In a surprise $11 billion deal, Chicago-based Sears, Roebuck & Co. will merge with Kmart Holding Corp., Troy, Mich., creating the nation's third-largest retailer. The new company will be called Sears Holdings Corp. and will be headquartered in Hoffman Estates, Ill., the Chicago suburb where Sears is currently headquartered. Kmart and Sears stores will continue to operate under their own brand names. With 2,350 stores, 1,100 specialty retail stores and $55 billion in annual revenues, the new company trails only Wal-Mart Stores and Target Corp. in size and scope among U.S. retailers. Edward Lampert, chairman of Kmart, will serve as chairman of Sears Holdings. Sears CEO Alan Lacy will serve as vice chairman and CEO. The board of directors will be made up of seven members from Kmart and three members from Sears. The merger is expected to close in March 2005 upon approval by shareholders from both companies. Kmart emerged from bankruptcy in May 2003, and registered its first profitable quarter in three years in March 2004. Sears has been slumping for years, but has seen promise in its new Sears Grand stores in three cities; those stores offer milk, groceries and other convenience items alongside Sears' traditional product mix. (Associated Press)

Bankrupt supermarket owner Penn Traffic Co. continues to fight for its right to file its own reorganization plan, requesting a sixth extension of the timeline to do so. Without the extension, on Nov. 26, the Syracuse, N.Y.-based company loses the ability to file its own plan. If the extension is approved, Penn Traffic would have until Jan. 24 to file. A judge in U.S. Bankruptcy Court for the Southern District of New York will hear the extension request on Nov. 18. The company had been looking for $175 million in exit financing, but is now pursuing a sales-leaseback plan for its exit funds. (The Daily Deal)

BJ's Wholesale Club, Natick, Mass., reported a 14% increase in third-quarter profits. The chain totaled $23.2 million in profits, up from $20.4 million the same quarter last year. Profit figures include income from additional bankruptcy recovery from its House2Home home improvement stores. Third-quarter sales also rose to $1.76 billion, up from $1.6 billion in 2003. Same-store sales jumped 6.1% for the quarter. Net income for the first nine months of the year totaled $67.4 million. (Associated Press)

IDFA NEWS

Early Entries for Marketing Awards Due By November 30

The 2005 Achieving Excellence Marketing Awards program is offering a discounted entry fee for submissions received by Tuesday, November 30. Co-sponsored by IDFA and Dairy Field magazine, these prestigious awards honor the dairy industry's best marketing and advertising efforts in more than 60 categories. To have your team's creativity recognized, send in your entry now! For details and an entry form, click here.

ODDS-AND-ENDS

In a study that could eventually help humans allergic to certain foods, scientists have developed a vaccine for dogs that reduces or eliminates allergic reactions to milk, peanuts and wheat. Researchers from Stanford University and University of California schools in San Francisco, Davis and Berkeley published the findings on Nov. 12. The effects of the vaccine lasted a minimum of three months. However, the vaccine is not yet ready for human testing. (Business Wire) .... The U.S. Department of Agriculture (USDA) announced a 90-day extension of a program that donates nonfat dry milk to nonprofit, faith-based and community organizations. The National Nonprofit Humanitarian Initiative, which provides excess inventory of powdered milk to 73 organizations that distribute it, was slated to end Sept. 30. It will now run through Dec. 30. During this extension, the USDA will provide up to 10 million pounds of nonfat dry milk products. Since the program's inception in September 2003, the USDA has distributed nearly 137 million pounds of powdered milk. (USDA) .... The Iowa State University Dairy Science Club is holding an online auction to raise money for the Alison Ciancio Memorial Scholarship. The recipient of the $2,000 scholarship runs the auction the following year. Auction items -- from milk jugs to cow-themed jewelry -- are donated from all over the state. Ciancio was an ISU student killed in an auto accident in 2002. The auction, which ends on Nov. 19, can be found by clicking here. (University Wire) .... Editor's note: In observance of the holiday next week, D-Brief will publish its next issue on Dec. 1. Happy Thanksgiving!

STOCK MARKET TICKER

As of 11/16/04, market close.

Company/Symbol		Last Trade		Change over Previous Close		Change over Last Week's D-brief
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		32.68 80.15 45.14 17.54 52.04 12.25 34.58 16.55 21.65 19.76 34.38 31.89 36.30 38.42 14.70 03.91		-0.32 +0.03 -0.25 -0.16 +0.09 -0.13 -0.10 +0.03 -0.17 -0.19 +0.63 -0.23 -0.05 -0.08 -0.11 -0.04		+0.77 -0.04 +0.00 +0.15 +0.92 +0.00 +0.21 +0.40 -0.05 +0.12 +0.58 -0.06 +1.03 +0.73 +0.03 +0.33
Source: Yahoo! Finance

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 and Curwood. 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.

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.