Added November 11, 2009: On Monday, November 9, Organic Valley/CROPP Cooperative (OV) announced that it had entered into a perpetual licensing agreement with Stonyfield Farms and a co-processing agreement with HP Hood to effectively take over the Stonyfield milk brand. This will take effect on January 1, 2010. Organic Valley will also be managing HP Hoods private label contracts using milk from the pool of HP Hood producers. This announcement ended weeks of speculation about HP Hood’s future in the organic milk industry.
Over the last nine months, HP Hood has been slimming down its producer base by ending contracts or giving 180 days notice. While their pool of producers is smaller now than before, there are still 270 farms in the northeast and midwest that supply organic milk to HP Hood. As part of Hood’s commitment to honor its existing contracts with their producers, the agreement between Hood and OV transfers financial responsibility for those contracts to OV and in turn, OV will honor the terms of all contracts. All Hood producers who have current contracts that expire after the first of the year will be offered membership in OV’s special category of membership called Stonyfield Supply Group (SSG). Producers will not have to change their milk handlers as OV has relationships with all eight of the milk handlers currently used by Hood producers. By keeping the two pools of milk separate, current OV producers will not be adversely affected by this partnership.
According to an OV spokesperson, their goal “ is to preserve the organic market for as many farmers as possible while still maintaining a sustainable pay price.”
The producers under contract with HP Hood will have the following options:
Producers whose contract with Hood ends before 12/31/09 will not be part of the agreement.
Former Hood producers will be paid based on utilization of their organic milk. In determining the pay-price, the amount of supply produced by the SSG will be compared to the amount of sales under the Stonyfield milk brand (including the private labels); the resulting organic utilization will be the basis for their blended pay price.
OV will impose a cap on production and the “active base” within the SSG will be determined by the previous 12 months production. The OV Board of Directors will determine how long this production cap will remain in place and how long the special SSG group membership will last. If sales of the Stonyfield milk brand drops, OV may be forced to allow the former Hood producers to be terminated at the end of their contracts and/or lower the pay-price to reflect the losses from selling any surplus into the non-organic market.
As the details of this new development are worked out, some producers who sell to HP Hood were surprised by the announcement: “It’s stunning news.” said one New York Hood producer, “The letter I received is confusing; I’m not quite sure what it means to me.”
Kathie Arnold, also a Hood producer from New York had received her packet from OV and had this comment, “We received our notice letter from HP Hood last week that our contract will not be renewed when its term is over. Today we received a packet from Organic Valley explaining the changing business arrangements surrounding Stonyfield fluid milk,… I appreciate the three companies working together to be able to offer these choices so that current Hood shippers aren’t just facing termination. I do thank OV, Stonyfield, and Hood for providing some open doors.”
It will take time for producers to look at their options and determine what they should do best to preserve their family farm and livelihood. Stonyfield and OV are positive about the future of the two brands and have stated that they “are absolutely committed to the marketing of both brands - each brand has different attributes and while they appeal to many of the same consumers, they do have their own individual markets.”
