According toFood Engineering's 1999 "State Of Manufacturing" report (September, '99), food manufacturing mergers and acquisitions reached record highs every year for the past four years, rising from 184 in 1995 to 250 in 1998. Dramatic consolidation of the dairy industry contributed to these figures during the past two years.
Last year, dairy deals accounted for more than 10% (27) of the total 250. During its fiscal '98, Dean acquired eight regional dairies. Suiza acquired six more dairy firms and major interest in a seventh. Southern Foods Group added three plants; DFA gathered two more co-ops into its herd; Land O'Lakes acquired a co-op, a company and additional brands.
The beat goes on. This year, Dean acquired Alta-Dena Dairy on May 5. Three California co-ops merged August 1 to form California Dairies, Inc. Suiza announced September 21 a joint-venture with DFA to acquire Southern Foods Group, forming a $6 billion dairy company to be known as the Suiza Fluid Dairy Group with operations spanning 46 states.
Dairy consolidation is driven by several factors, including the phase-out by next year of federal milk price supports; economies of scale; the need to develop value-added products; and supermarket consolidation.
"There's been an incredible consolidation of the dairy industry in a very short time -- at the producer, processor and retail levels," observes Dr. William C. Haines, vice president of Dairy Management, Inc. (Rosemont, IL), which manages research aimed at boosting demand for dairy products. "It changes the dynamics of everything!"
Consolidation changes marketing dynamics, Haines continues, by allowing dairies to extend distribution of branded fluid-milk products beyond their original regions. This spurs the need for extended shelf life (ESL) products. "Consolidation also allows more innovation," Haines adds. "Because these companies now have more critical mass, they can start talking about new technologies."
Consolidation is thus driving innovative engineering, growing applications of European technologies, and development of new value-added dairy and dairy-based products -- not just among consolidated companies, but among their independent competitors as well.
Major trends include extended shelf life, plastic packaging, and "complementary protein" products. Dean Foods, for example, announced August 23 a minority investment in White Wave, Inc. (Boulder, CO), a manufacturer of soy products including Organic Silk Soymilk.
Plastic boosts milk salesDean Foods, paved the way for plastics with its popular Milk Chugs HDPE bottle in pint and quart sizes, launched two years ago and expanding toward nationwide distribution as Dean acquires more dairies and equips more plants with Chug production lines. According to the 1998 IRI "Cold Door Study," Milk Chugs have reversed declining overall milk category sales in every market where they've been introduced. Dean is also co-packing Nestle NesQuick flavored milks at one plant. These products are ultrapasteurized for extended shelf life and packaged in 16-oz. PET plastic bottles
Industry observers see the convenient single-serve plastic bottle giving regular and flavored milks the marketing boost they need to compete with soft drinks. Longer shelf-life milk products in plastic bottles open opportunities for milk to compete directly with soft drinks in vending machines and convenience-store coolers, notes Jeffrey A. Kellar, vice president for strategic business development at Tetra Pak, Inc. (Vernon Hills, IL). DMI's Bill Haines concurs: "ESL has been a big help in c-stores, where you have rather low sales velocity and dairies get a lot of returns. Once you can go fully aseptic, vending machines come into play."
ESL technologiesFluid milk products can be ultrapasteurized (280?F or higher for at least 2 seconds) for extended refrigerated shelf using indirect (plate or tubular) or direct (steam infusion or steam-injection) heat exchangers. Sources contacted byFood Engineeringconcur that high quality white milk is typically ultrapasteurized or UHT-processed today via direct heat exchange, while flavored milks are typically ultrapasteurized via indirect methods so volatile, heat-sensitive flavors are retained.
Waukesha Cherry-Burrell (Delevan, WI) acquired U.S. marketing rights to unique steam-infusion technology developed in The Netherlands by the engineering firm Den Hollander, and plans to introduce the technology to the U.S. at Worldwide Food Expo '99 October 28 in Chicago. The technology differs from earlier steam-infusion designs by incorporating a patented plastic distribution plate at the top of the Falling Stream Heater (FSH) vessel to ensure a radial, multiple-stream flow pattern which does not degrade during extended production runs. According to Craig Reinhardt, business development manager at Waukesha Cherry-Burrell, the plastic material minimizes product burn-on, prevents thermal degradation caused by contact with hot metal, and better insulates product from steam to maintain an even flow pattern. Burn-on at the bottom of the stainless-steel FSH is inhibited by a mirror finish combined with some condensate created by cooler jacket temperature. The high surface/volume ratio of multiple streams in the FSH allows steam temperatures as low as 2?F above final product temperature.
As reported last month by Food Engineering, DFA and Stork Food & Dairy Systems announced June 28 a joint venture called ASEP-TECH USA to develop aseptic processing and packaging technologies for all types of products and containers. The partnership is installing a pilot plant next to DFA's Technology Center at Springfield, MO for developing in-container sterilization, ESL and aseptic processes. Stork equipment will include a Sterideal tubular UHT system; a pilot-scale linear aseptic filler which fills plastic cups, plastic bottles and glass bottles at rates up to 3,000 per hour for test-market runs; and a lab-scale in-container sterilizer which sterilizes product filled in non-sterile containers with a mild thermal process.
A commercial in-container sterilization system would typically involve UHT processing, filling and sealing glass or plastic bottles on conventional equipment, and mild thermal processing of the filled containers in a Hydromatic continuous sterilizer, says Jan Lucas Kuiper, executive vice president of Stork Food & Dairy Systems, Inc. (Gainesville, GA). This type of system eliminates the need for an aseptic filler and can process ESL products at moderate cost, he adds. "Many Americans don't realize that you can sterilize plastic bottles with an in-container process," says Kuiper. "About 20% of the hydrostats we have supplied around the world are running plastic bottles." For plastic packaging, Stork can supply an integrated line with aseptic blow-molding, aseptic processing, and aseptic filling equipment.
Tetra Pak has partnered with Graham Engineering Corp., (York, PA), to supply the dairy industry with blow-molding equipment for both HDPE and PET bottles, Tetra Pak's Jeff Kellar reports. One system currently blow-molds and aseptically fills UHT-processed whole and semi-skimmed milk into seven-layer HDPE plastic bottles incorporating a silicon dioxide barrier at a Mastellone Dairy plant in Argentina. Bottles are blow-molded outside the plant and conveyed through a "hole in the wall" to the filling room. A non-aseptic version of the system is operating at Robert Wiseman Dairies in the UK. Tetra Pak systems aseptically process and package milk in blow-molded plastic bottles in Thailand, Kellar adds, and are undergoing validation by regulatory authorities elsewhere in the world.
Tetra Pak's Tetra Therm Aseptic VTIS steam-injection module is widely used for UHT treatment of ESL and aseptic dairy products by major dairies such as H. P. Hood and Land O'Lakes. Product is pre-heated in a plate heat exchanger to about 80?C (176?F), instantly heated to sterilization temperature in-line by continuous direct-steam injection, held in the holding tube for a few seconds at about 140?C (284?F) and a pressure above boiling point, then enters the flash vessel where temperature and pressure drop instantly while water added as steam is flashed-off.
In a unique application at Pacific Foods of Oregon (Tualatin, OR), Tetra Pak's VTIS steam-injection system combines with its TBA/21 packaging machine to aseptically process and package soy drinks, milk & soy blends and 100% lactose-free milk in the first U.S. application of Tetra Pak's new "1-liter square" aseptic container with plastic screw cap. For the lactose-free products, heat-sensitive lactase (the enzyme which hydrolyzes lactose into digestible glucose and galactose for lactose-intolerant consumers), is aseptically dosed into the milk after the heating phase via the Tetra Pak Aldose system. Although aseptically processed and packaged for one-year non-refrigerated shelf life, the products are marketed in the supermarket refrigerated dairy case where consumers expect to find milk products, says Ronald N. Martell, vice president of marketing at Pacific Foods. The package is similar in shape to the rectangular gabletop carton to which consumers are conditioned, and colorful graphics create high impact in the dairy case "where the products are exposed to 90-93% of consumer traffic, as opposed to only 8-13% in the nutritional foods section," he adds.
Tetra Pak's Jeff Kellar envisions aseptic processing and packaging combining with the 1-liter square package for long shelf-life milk products which can be distributed without refrigeration to cut costs for dairy processors, yet marketed as refrigerated products in a consumer-accepted package. The Aldose system can aseptically dose heat-sensitive ingredients such as flavors, vitamins and colors after the thermal process to prevent their degradation during sterilization.
Moovers, the first plastic-packaged ESL milk products in the U.S., were unveiled late last year by Smith Dairy Products (Orrville, OH). The products are UHT-processed in an APV steam-infusion system and packaged under HEPA air filtration in PET bottles on a CIP-able Serac rotary weight filler at Smith's Wayne Dairy plant in Richmond, IN. According to William McCabe, marketing director at Smith, "the original 60-day refrigerated shelf life is being extended to 90 days, and the products are now marketed in 40 states. Amber-tinted bottles in 8, 16 and 32-oz. sizes (including half-pint six-packs) combine with stretch-sleeve labels to prevent light from discoloring the products. A new 11-oz. bottle will be introduced this month," he added. Moovers are available in fat-free, 1%, 2% and whole-milk varieties, several in chocolate, strawberry and cappuccino flavors, plus two seasonal egg nogs.
H.P. Hood on May 27 unveiled Simply Smart in two varieties -- a fat-free milk with the taste and mouthfeel of 2%, and a 1% milk that tastes like whole milk. Hood uses ultrafiltration to remove 20% of the liquid, concentrating the calcium and proteins which contribute to milk taste. Five quarts of raw milk produce four quarts of Simply Smart. The products are ultrapasteurized, then filled into half-gallon gabletop cartons on Evergreen ELL (Extended Long Life) packaging machines for refrigerated shelf life of 45 days. Evergreen ELL systems combine autosanitation, HEPA air filtration, UV light and hydrogen-peroxide carton sterilization to achieve refrigerated milk shelf life as high as 90 days, depending on product and process.
Integration neededConsolidation requires integrating acquired facilities with existing operations. Dean Foods, for example, in reporting record sales and earnings for its fiscal 2000 first quarter, noted among the factors contributing to higher first quarter expenses were "costs associated with the company's enterprise-wide information systems initiative."
To take advantage in the marketplace of their acquisitions, dairy companies need to take advantage of information, observes Joseph W. Fillion, director of automation at APV Americas (Rosemont, IL). "This has been a major issue with this industry," says Fillion. "With one plant it's tough enough, but now with multiple plants it's becoming very hard to integrate the business units together." Sales and marketing; production and production planning; inventories and warehousing; cost accounting and human resources; engineering and maintenance -- "all of that information requires integration," he continues. "Raw milk has a short shelf life; you must process it quickly. End products too, except for cheese, have short shelf life. You have very quick inventories which must be integrated with the supply chain. In the dairy industry, cycle times have to be quick!"
Pacific Foods of Oregon recently introduced Soy Drink in plain and vanilla varieties; reduced fat and lowfat Milk & Soy Blends, and 100% Lactose Free Milk in fat-free and 2% reduced-fat varieties, all in the new Tetra Pak 1-liter square aseptic package. (Source: Pacific Foods of Oregon)
The Tetra Pak Tetra Therm Aseptic VTIS steam-injection system, widely used for UHT treatment of ESL and aseptic dairy products, can be equipped with either a plate or tubular heat exchanger as a pre-heater. It can also be combined with a tubular sterilizer for all-tubular processing of more viscous products, or to combine steam injection with tubular pre-heating and cooling. (Source: Tetra Pak)