Dick Groves
Editor, Cheese Reporter

 

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Internationalization Of US Dairy Industry Continues

Back in the “old days,” it was often observed that the US dairy industry was largely a domestically oriented industry.

To say things have changed in the last decade or two would be a tremendous understatement. Indeed, the US dairy industry continues to become more and more international, in several noteworthy ways.

The first way is through the ownership of US dairy processing companies. For example, as reported on our front page this week, Agropur has made a huge acquisition in the US dairy business, acquiring Davisco Foods International and its three cheese plants and an ingredients plant.

A decade ago, about the only folks who knew anything about Agropur were Canadians. That’s where Agropur is headquartered, that’s where the cooperative got its start back in 1938, and that was where almost all of the company’s business was 10 years ago.

That changed in a major way back in early 2008, when Agropur acquired Wisconsin-based Trega Foods, Inc., and its cheese plants located in Weyauwega, Luxemburg and Little Chute, WI.

Since then, Agropur has continued to acquire US dairy businesses, including Minnesota-based Schroeder Milk, Farmland Dairies’ facility in Grand Rapids, MI, Green Meadows Foods of Hull, IA, Wisconsin-based Main Street Ingredients, and Foremost Farms USA’s dry blending business.

And now, Agropur is acquiring Davisco Foods. Serge Riendeau, Agropur’s president, describes the Davisco acquisition as being “by far the largest transaction” in Agropur’s history. Given the above-noted acquisitions just in the US, that’s saying something.

Agropur is hardly alone among US cheese businesses with international ownership. Another Canadian company, Saputo, first became a major presence in the US cheese business in late 1997 when it acquired the Stella Foods subsidiary of Specialty Foods Corporation.

About a decade later, Saputo acquired the activities of the Land O’Lakes West Coast industrial cheese business. And then, the same week that Agropur announced its acquisition of Trega Foods, Saputo announced its acquisition of Wisconsin-based Alto Dairy.

Beyond those two Canadian companies, the US cheese industry also includes Ireland-based Glanbia, France-based Lactalis, Bongrain and Bel, and Denmark/Sweden-based Arla, among others.

The cheese industry is hardly the only segment of the US dairy industry that’s become more “international” in its ownership in the last decade or two. For example, the yogurt category not only includes long-time leader Dannon, based in France, but also relative newcomers such as Greece-based Fage and Germany-based Muller (which operates, in a joint venture with PepsiCo, the Muller Quaker Dairy).

And just to cite one more example of international ownership in key US dairy categories, the world’s largest food and dairy company, Switzerland’s Nestle, owns the Breyers, Haagen-Dazs, and Nestle ice cream brands.

The point here is that, when US consumers reach for a domestically produced dairy product, they’re increasingly grabbing a product made by a company that’s based in another country.

Another way in which the US dairy industry is becoming more international is in the trade arena. Historically, the US dairy industry has been a net importer of dairy products, and a minor exporter at best. And the US imported far more cheese than it exported.

That’s all changed, dramatically, in recent years. Last year, US dairy exports were valued at $6.72 billion, more than triple the 2009 value, while dairy imports were valued at about $2.6 billion. That meant the US ran a dairy trade surplus of more than $4 billion last year. Just to put that in perspective, back in 2000, the US ran a dairy trade deficit of almost $600 million (exports totaled $980 million, imports totaled $1.55 billion).

Arguably the biggest change in the US dairy trade picture concerns cheese. US cheese imports peaked back in 2002 at about 476 million pounds, and topped 400 million pounds for nine straight years (1999-2007).

Meanwhile, US cheese exports were on the increase, but the US was still running a large cheese trade deficit. That deficit was 311 million pounds in 2000, 357 million pounds in 2002 and still over 200 million pounds as recently as 2007.

Last year, the US ran a cheese trade surplus of around 372 million pounds (exports totaled 696 million pounds, imports totaled about 324 million pounds). The US remains a major cheese importer, but in recent years it’s become a major cheese exporter as well.

The third way in which the US dairy industry has become more international in recent years is in its product line-up. Half a century ago, Cheddar dominated the US cheese market, accounting for close to 60 percent of total US cheese production.

Today, Cheddar accounts for less than 30 percent of US cheese production, and the US now produces a wide variety of cheeses, ranging from Havarti and Feta to Queso Fresco and Gouda, that were barely if at all produced in the US 20 or 30 years ago.

This can be seen in many other dairy categories as well, perhaps most significantly in the yogurt category, where Greek yogurt has become one of the rising stars not just in the dairy category but in the food business as a whole.

Agropur’s acquisition of Davisco marks the end of an era for the Davis family, but the continuation of the trend of rising internationalization in the US dairy industry.


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