Sale of dairy co-op proposed

01.02.2008 02:00 Home - Source: JS Online

Alto Dairy Cooperative, one of the state's oldest farmer-owned cooperatives, would be sold to a Canadian cheesemaker for $160 million, under a proposal that the co-op's board of directors has approved.

It's a big deal for the state's dairy industry, said John Umhoefer, executive director of the Wisconsin Cheesemakers Association.

Saputo Inc., the largest dairy processor in Canada, would acquire Alto, under the plan.

The Montreal company has 15 dairy-processing plants in the United States, including seven cheese plants and one whey plant in Wisconsin. Worldwide, it has 45 plants and 8,900 employees.

Alto has the largest U.S. cheese plant east of the Mississippi River, in Waupun, and a smaller plant in Black Creek. Between them, the plants have 467 employees.

Saputo said it has no plans to reduce employment in Wisconsin or to close either plant.

"Our objective is to integrate these plants into our own operation and to grow the business," Saputo spokeswoman Manon Goudreault said.

"We do not anticipate making any changes in employees because they will be key to the success of the transaction."

The co-op membership is to vote on the sale Feb. 27.

For the sale to proceed, 75% of the current active members must approve it, co-op spokeswoman Karen Endres said.

Sale may close in March

Alto has about 500 active farmer members. Under a sale, they would be treated as shareholders of a company.

Each member would be compensated based on the value of the milk he or she has supplied to the cooperative. Also, Saputo has offered incentives to encourage the members to continue shipping milk to Waupun and Black Creek.

Subject to approvals, the sale could close in March.

Alto, founded in Wisconsin 114 years ago, said the ownership change was in the farmers' best interest.

"It will improve the long-term viability of the business," Endres said.

Alto had $378 million in sales and $19.6 million in earnings in 2007. Like other Wisconsin cheesemaking operations, it has faced intense competition and cost pressures.

"Alto did have a couple of rough years. They are in the tough business of cheddar and mozzarella, which are two of the growth areas for the West Coast cheese industry," Umhoefer said.

It's fortunate that Saputo is interested in Alto, as Saputo already has a strong presence in Wisconsin, according to Umhoefer.

"It's one of Wisconsin's largest cheesemakers buying another one of Wisconsin's largest cheesemakers. I am glad they are investing their money here rather than Texas or California," he said.

Under a new owner, the plants could have more money behind them. The additional resources could make them more competitive, said Bruce Jones, a University of Wisconsin-Madison agricultural economics professor.

Cheese plants need strong earnings to finance technologies that will keep them competitive, but without the latest technologies, they struggle to produce strong earnings.

"It's fiercely competitive," Jones said. "One solution is to consolidate" plants and combine resources.

90% of milk

About 90% of Wisconsin's farm milk goes into making cheese. The dollars that come back to the state through cheese companies are huge, said Shelly Mayer, an Alto cooperative member near Slinger and executive director of the Professional Dairy Producers of Wisconsin.

Whether the sale of Alto is good for farmers depends on what happens afterward, according to Mayer.

It's good if it makes the plants more efficient, adds to their long-term viability and doesn't take services away from farmers. "But if we lose a cheese factory, then everyone in Wisconsin should picket when the plant's doors are closed. It's a big loss for the rural communities and everyone else in the state," Mayer said.

Farmers benefit when they have more places to sell milk.

"Having multiple companies and choices is good," Mayer said. "But if we can leverage the cooperative, be part of a bigger organization and grow market share, I have to trust that management is doing this for the right reasons."

George Crave, whose family has a dairy farm and cheese plant in Dodge County near Waterloo, said it was rare for a farmer-owned cooperative to be sold to a private company.

"I would think that it sends a real wake-up call to cooperatives," Crave said. "Historically, they have become larger by merging with other cooperatives."

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