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Danone Drops 89 Organic Dairies and exits New England and Upstate New York (Updated 9/15/21)

By Ed Maltby, NODPA Executive Director

The many rumors since Danone’s purchase of White Wave, that they would be withdrawing from the procurement of organic milk in the Northeast, has happened. To many, this was no surprise. The bigger question is why they have taken this action now and with so many farms. Having heavily invested in new processing for plant, nut and cereal juices (‘milks’), they have invested nothing in the infrastructure for organic milk. Why drop eighty nine farm families at once? Where are the standards that a B corporation is supposed to hold themselves to? (Certified B Corporations are a new kind of business that balances purpose and profit. Serving a global community of people using businesses as a force for good. Honest. Communal. Responsible. Purpose-Driven. Sustainable. Ethical.) As a self-declared leader in regenerative agriculture why does Danone take these farms out of production?

Nicole Dehne, director of Vermont Organic Farmers, says it perfectly: [if these dairy farms are forced to shut down], “the ripple effect[s] on the local economy would be notable. Producers employ breeders, vets and grain companies, for example. Organic farmers are also required to manage their farms so they’re hospitable to the local ecosystem. They have to improve soil health on their farms. They have to plan and manage for biodiversity. So it’s also kind of devastating to think that we might lose that acreage that’s being managed in that way.”

The formal announcement came at the end of August with letters to producers in Maine, Vermont, New Hampshire and New York effectively ending their relationship with Danone in August 2022. Groupe Danone, multinational corporate owner of Horizon Organic, will have no organic dairy contracts in New England after August 2022. Their new Eastern Region is Pennsylvania, New York and Ohio and all the milk from this region will be taken to the Steuban Foods plant in Elma NY, which is near Buffalo.

Danone is offering a 180-day notice or farms can sign a one-year contract, with no contract option after the end of the year. Apparently, the farms that contract for the year can leave with 30 days’ notice if they find another market. Danone did not immediately return request for comment from State agencies and concerned producers, both those that had received the letter and those that were worried about when they would receive one. The rumors on how many farms were affected spread like wild fire, as one would expect from such an announcement. Many farm families fell victims to the lack of information from Danone and estimates of 150 plus producers’ contracts being cancelled spread quickly through the Northeast. Eventually, NODPA was able to obtain a response from Danone that we immediately shared on ODairy. The email response came from Danone North America, a corporate response that was days’ late.

E-mail statement from Danone North America:

We greatly value our relationships with our farming partners and did not make this decision lightly. Growing transportation and operational challenges in the dairy industry, particularly in the northeast, led to this difficult decision.

Eighty-nine producers across the northeast received this non-renewal notice. To help facilitate a smooth transition, we are offering each producer the opportunity to enter into a new agreement for us to purchase their milk until August 31, 2022 to provide additional time and support.

We will be supporting new partners that better align with our manufacturing footprint. We are committed to continuing to support organic dairy in the east, and in the last 12 months alone, we have on boarded more than 50 producers new to Horizon Organic that better fit our manufacturing footprint. This decision will help us continue providing our consumers with the products they love.

This report from the Portland Press Herald sums up producers’ responses to the impersonal communication:

“Farmers may be forced to sell their herds or leave farming entirely”, said Lauren Webber, 29, who along with her husband, Sam, operates the SamLaurEL Farm of about 50 milk cows on nearly 100 acres in Chesterville, Maine, northeast of Livermore Falls. Most perplexing, Webber said, was that Horizon had recently required that all of its Maine producers go through an extensive audit and documentation process for their operations, only to dump them a few weeks later. “ There’s not a lot of options,” Webber said. “There’s no money in feed, in vegetables. I think cows are going to go down the road (to auction) and you’re going to have to learn to do something else. I think the farming industry is on the way out.”

Danone representatives have said that the only reason they are dropping these contracts is that the cost of trucking raw milk to the plant that they have chosen for processing the milk, Steuban Foods, is too high. Obviously, the expense of trucking milk from Maine to the western side of New York is prohibitive. Did they inquire about co-packing elsewhere, for example Byrne Dairy in Syracuse or the Hood plant in Oneida NY? This is no fault of the farm families. They have not been dropped for high bacteria counts, poor access, bad roads or winter conditions. It’s purely a cost-saving measure to increase their profits. They have not said that they need less milk for their fluid market or that their sales have dropped for their yogurts. Did they ask producers to share some of the trucking costs or add a bulk tank or give incentives for different infrastructure that might solve the problem?

What does this mean to other producers when Danone decides to shift its processing of organic to its own plant in Minster, Ohio or to a plant in Iowa? The protocol for manufacturing milk at the plant in Minster, Ohio is that farms need to be within 100 miles of the plant.

Danone has said it is replacing the 89 farms with 50 new contracts with different farms that are closer to the Steuban plant. They say that these farms are the same size as the ones they are dropping. They say that they have on boarded these new-to-Danone farms in the last year. Quite a task to do to the tight specifications they have for trucking and pay price (all without exciting gossip and opinion). Some of these farms could have been from Maple Hill where a producer has reported that Maple Hill will probably shed 15 farms although Maple Hill is reporting a good year with its products, following the pandemic. Maple Hill’s current base price is $34.25 (but coming up for review in the next few months) making it unlikely that Maple Hill producers would see a contract with Danone at a lower price as beneficial.

The math on how Danone spins its decision doesn’t work. It maintains that the ‘new’ farms are the same size as those it is dumping. In that case, Danone would be short production from 39 farms. Where does the rest of the milk come from? Possibly by purchasing raw milk from larger farms at a cheaper price as we saw last year when Byrne Dairy purchased milk from Texas and the Midwest? Perhaps they will make up the difference with ultra-pasteurized packaged product from processors that source their milk from larger operations “that better fit our (Danone) manufacturing footprint”? On the Federal Milk Market Administrator's report, we see a lot of milk come into Federal Milk Marketing Order 1 (Northeast) from Texas and other states and much of that is organic.

Why dump these producers now when the milk market is very tight, and why so many routes at once? The move has almost certainly been planned for a few years and its implementation might have been tied to a change in leadership at Danone International and at Danone North America, a lack of growth in organic dairy, and a renewed commitment to the growth of other “milks.” Emmanuel Faber was fired as Danone CEO in March 2021 for being too progressive and promoting stakeholder capitalism and centering core business units on Environmental, Social, Governance objectives. Shane Grant was appointed Executive Vice President & CEO, Danone North America and a member of the Danone Executive Committee in May 2020. He assumed the additional role of co-CEO, Danone International in March 2021. He will revert back to his role as CEO, Danone North America when the new Danone International CEO, Antoine de Saint-Affrique, takes over on September 15, 2021. In procurement, Greg Wolf became Director Producer Relation Management, Danone North America in August 2021, after previously serving 9 months as Senior Manager Producer Relations, and 10 years at Ecolab as Agri Corporate Account Manager.

Danone’s emphasis is definitely on plant, nut and cereal-based beverages, with heavy investments in infrastructure, including a sixty million dollar investment in the largest plant-based yogurt, cheese and beverage-ingredient plant in the U.S. at Mount Crawford, Virginia in 2018 and 2019. In 2019, it made a multimillion dollar investment in its plant in DuBois, Pennsylvania. In January 2021, its So Delicious brand expanded into the plant-based cheese space. In February 2021, Danone acquired Follow Your Heart, a pioneer in dairy-free cheeses, spreads and dressings. Danone will soon launch "dairy-like technology" under the Silk NextMilk and So Delicious Wondermilk brands. Danone's venture capital arm, Danone Manifesto Ventures, purchased a majority stake in Harmless Harvest a leader in organic coconut-based products including coconut water and dairy-free coconut yogurt alternatives. Earlier this year, Danone released a line of plant-based creamers called The Honest to Goodness range which uses almond milk and coconut oil to bring coffee drinkers the ‘perfect supplement to traditional creamer.’

Low cost, ultra-pasteurized milk, which is easily transported and warehoused, has become a staple on the organic shelf, and the importance of branded product has diminished while private label and store brands have grown. Horizon hasn’t been the brand leader in retail sales of organic package milk in the last few years. This move to consolidate its supply and maximize the economies of scale in organic dairy, which is produced 365 days of the year compared to non-bovine “milks” that can be produced to a manufacturing schedule, probably makes good bottom line business sense viewed from a narrow lens. If part of their plan was to drop 89 organic farm families at a time when there is little opportunity to find another buyer, they are ignoring their stated mission and the core requirements of a B Corp company. One of their mission areas is: “We will continue to invent pioneering ways to foster inclusive growth for vulnerable partners in our food chain across the world, including family farmers, street vendors and waste pickers.”

In protecting their long term supply from low-cost operations, they must also be expecting a weak Origin of Livestock Rule to be published that will allow the massive loophole of being able to sell or transfer transitioned animals as certified organic. This will effectively allow the owners of large herds to respond to increases in demand quickly – not quite continuous transition but very close to it. Such a regulation, in combination with the continued failure to enforce rules requiring organic livestock to have access to pasture, makes it profitable to produce “organic” milk in industrial confined animal feeding operations (CAFOs), where cows are fed cheap imported “organic” grain instead of pasture. This position of allowing transitioned animal to retain their organic certification for producing organic milk when they are transferred or sold is supported by all the processors, including Danone, and OTA, and opposed by the Organic Farmers Association, the National Organic Coalition and most producer groups.

What can be done immediately?

  1. Advocate directly to your Congressional representatives to ensure that the Origin of Livestock Final Rule is quickly published and implemented. That it is a strong regulation that doesn’t allow transitioned animals to retain their organic certification for milk when they are transferred or sold. While official comment has closed and USDA will not discuss these issues, Members of Congress can still influence the speed of the publication of the Rule and make USDA accountable for its content. Citing the loss of 89 organic dairy family farms because the USDA and certifiers created an un-level playing field with their failure to publish the regulation during the last decade and the inconsistent application of existing regulations will highlight the need for action.
  2. Extend the date of the contract termination to 18 months (rather than the 12 months currently offered). As each individual farm family works on plans for their future they need more lead time to find other markets, seek debt relief or otherwise plan a transition that works for them.
  3. Offer a contract severance package or contract retirement package bonus to the affected Northeast dairies in recognition of their long-time relationship with the company and their willingness to commit to the capital intensive production of high quality organic milk that established the reputation of Horizon Organic. Each organic farm will suffer loss of planned income and each will have expenses outside their normal personal and business budgets as a result of Danone’s actions.
  4. Continue to advocate for enforcement of standards for organic production. Even now some certifiers are still not interpreting or enforcing the access to pasture regulation in their definition of the grazing season.
  5. As an individual consumer, boycott all Danone products informing the retailer in writing that your choice is dictated by Danone’s exploitation of family farms and by using their monopolistic position in cancelling individual contracts and driving organic dairy farms out of business. Be prepared for a full, public boycott of Danone products if they continue to abuse organic family farms.
  6. For those that have influence within CROPP Cooperative and Lactalis/Stonyfield, encourage them to enter into discussion with the Northeast organic dairy community about ways to move forward. A year is a very short time.

Alternatives:

To be blunt there are limited alternatives for those wanting to stay in organic dairy production:

  • CROPP has a moratorium on accepting new members (although they did take on two from Stonyfield, recently).
  • Upstate Niagara is cutting back on volume and price – not replacing members that retire.
  • Maple Hill is letting producers go and producers are anticipating a drop in pay price.
  • It is reported that Byrne Dairy did take some Danone producers over the last winter but I have no reports on their position now.
  • CROPP or other handlers (DFA, DMS, NFO) may be willing to build a pool of milk under a utilization contract but that will be a very challenging situation for pay price unless it can be utilized as Class 1 milk as well as some in organic.
  • If trucking of organic milk is the issue and it always has been, ask the question about why each buyer must truck their milk separately. Organic milk is organic milk (or it should be) and if it is going to be ultra-pasteurized there will be little difference in taste or nutrient between different farming practices.
  • If the choice of a plant that is so far away from most producers is because of its size and ability to balance supply, investigate the possibilities of some production going to other plants to be made into organic powder, cheese or ice cream mix.
  • Conventional dairy has their insurance and base price, plus the FMMO protects producers from being exploited by abuse of individual contracts. Organic dairy has no safety nets that reflect organic dairy production costs or procurement practices.

There are long term answers and ways for small to mid-size organic dairy farms to survive. They do it in Europe and elsewhere with unique infrastructure investment for the specialized needs of small scale agriculture.

There are two issues that the organic community and their loyal consumers need to address. The first is the personal tragedy of those farm families that have had their future ripped away from them. We must give them as much practical assistance as possible. The decisions about their future will be made one farm at a time with the help of the many professional service providers that have come forward to with financial and marketing information plus help to analyze their alternative options based of family strengths and preferences. Each decision will be different for each farm.

The second is to look at the future for all small to mid-size organic dairies that must include the possibility of their buyer taking similar actions in their future plans. Certainly we must continue the fight for regulations that maintain organic integrity not undermine it for the benefit of large operations and milk handlers. We must have strong enforcement and certifiers that understand the regulations and a NOP that can ensure consistent enforcement at all levels of production. We must also look at infrastructure that is scale and market appropriate. If we have regulations that are strongly enforced, the processing, packaging and marketing infrastructure will have a secure base to build on. For organic dairy that will mean having modern processing facilities that are designed to process and package smaller quantities of milk to meet the needs of the value-added products that have a strong market with discriminating consumers. When the next pandemic or weather crises happens will the food supply chain be more protected or more exposed with less processing capacity and a smaller rural population in the Northeast.

Posted: to Industry News on Tue, Sep 14, 2021
Updated: Tue, Sep 14, 2021