A2O-Lancaster Farming, Saturday, May 1, 1999
KANSAS CITY, Mo. - In a
message outlining accomplish
ments of 1998, Dairy Farmers of
America (DFA) President and
Chief Executive Officer Gary
Hanman told an audience of
1,700 members and guests that
DFA members can be proud of
what they have accomplished by
working together in 1998.
Noting that 1998 was a year
of record milk prices and a peri
od of restructuring and change
for the cooperative, Hanman
said the year was challenging,
but rewarding for the coopera
tive and its members.
He noted that the year
opened with the Basic Formula
Price (BFP) at $13.25 per hun
dredweight (cwt.) and ended at a
record high BFP of $17.34 per
cwt. The average BFP for 1998
was $14.20 per cwt.
In his report to members
Hanman recounted accomplish
ments.
Achieved targeted earn
ings. “We set a goal of earning
$7O million on total sales of $7
billion in 1998,” said Hanman.
“DFA completed the year with
sales of $7.3 billion and a net
margin of $7O million. DFA’s
joint ventures performed very
well, returning $4l million to
the bottom line. Manufacturing
operations also had a good year,
posting better than anticipated
results.”
Consolidated and restruc
tured manufacturing opera
tions. According to Hanman,
one of the first tasks undertaken
DFA Reviews 1998 Achievements, Activities
by management after the consol
idation was a thorough analysis
of DFA’s total milk supply and
manufacturing operations.
“We concluded that there was
not enough milk to operate all
consolidated facilities efficiently
and economically,” he said. “We
had to make some difficult deci
sions, but based on that analy
sis, we closed 12 plants. Most of
the costs associated with closing
and selling those plants were
expensed to 1998. DFA contin
ues to operate 33 manufacturing
plants, several of which were
identified for growth and expan
sion.”
Merged and restructured
the work force. Another area
that received considerable
attention during the past year,
according to Hanman, was inter
nal operations.
“We restructured to reduce
staff positions by nearly 25 per
cent,” he said. These reductions,
as well as other restructuring
efficiencies within DFA, it is
estimated will save about $6O
million per year. In addition to
reducing the number of employ
ee positions, four corporate
offices were closed and the cor
porate headquarters was located
in leased space in Kansas City,
Missouri.
Created a business
alliance with Leprino Foods.
Finalized in October, an agree
ment with Leprino Foods allows
dairy farmers to join hands with
one of the nation’s largest pizza
cheese suppliers. Included in
this business venture was the
sale to Leprino Foods of five
DFA plants that make
Mozzarella cheese for the fast
food industry (Juda, Wisconsin,
Hartington, Ravenna, Dodge
and Norfolk, Nebraska). “A key
part of the agreement,” says
Hanman, “is a contract for DFA
to supply milk to Leprino
Foods.”
Continued to expand DFA
joint venture bottling opera
tions. An important element in
DFA’s market strategy has been
the acquisition of joint venture
partners in the bottling busi
ness. In 1998, DFA added new
partners to its list of bottling
joint ventures.
“In December, we completed
our joint venture negotiations
with Suiza Foods Corporation,”
explained Hanman. “This new
venture significantly expands
DFA’s participation in the
Northeastern fluid milk market.
In addition, DFA added two
other joint ventures
Washington-based Wilcox Dairy
Farms and Melody Farms of
Michigan. As these ventures
expand in their markets, we
anticipate new opportunities for
DFA members,” said Hanman.
Completed merger with
Cal Gold. In December 1998,
DFA completed its first merger
since the consolidation of four
cooperatives that created the
new organization. “The merger
with California Gold
Cooperative Creamery added
330 members, producing 2.5 bil
lion pounds of milk annually,”
explained Hanman. In addition,
the merger nearly doubled DFA’s
milk volume in California and
Cal Gold’s manufacturing plants
strengthen DFA’s manufactur
ing capacity on the West Coast.
Developed a marketing
strategy for Borden Cheese.
“The nationally recognized and
highly respected Borden brand
allows DFA to broaden its retail
cheese business,” said Hanman.
“In 1998, DFA focused on
strengthening current markets
and initiated a branded market
ing strategy. These new initia
tives will expand product lines
and market penetration for
Borden cheese.”
Successfully pursued
political initiatives. According
to Hanman, DFA played an
active role in securing approval
of legislation enabling extension
of the Northeast Dairy Compact
and Federal Milk Market Order
reform. In addition, DFA active
ly pushed for the $2OO million
dairy market loss payment, as
well as income averaging and
additional allowances for health
insurance tax deductions for all
farmers. “DFA’s success in these
issues was due in large part, to
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our ability to speak with a uni
fied voice,” he said.
Concluding his remarks,
Hanman said DFA had accom
plished most of the goals it set
out at the beginning of the year.
“By forming DFA, dairy farm
ers have an organization of the
size, scale and level of perfor
mance necessary to compete and
win in a market increasingly
dominated by large scale com
petitors and customers,” he said.
“At the end of the first year of
operation DFA has a strong base
of membership supported by a
workforce of dedicated employ
ees. Furthermore, DFA has the
resources to support its cus
tomers with a commitment to
service and quality backed by
years of experience in milk pro
curement and dairy product
manufacturing. All this com
bines to provide opportunities
for dairy farmers to earn a larg
er share of the consumer dollar.
As DFA continues its evolution,”
he added.
“Our goal will continue to be
to build an organization that
will help our 22,000 members in
45 states thrive in a challenging
and constantly changing busi
ness environment.”