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November 2, 2006
On ice cream, organic milk a
nd avoiding corporate takeovers
by EMILY
WILSON
Rich Ghilarducci has deep
Humbold roots. Born in Fortuna, the CEO of the Humboldt Creamery
has launched the local dairy co-op into the global market. His
background in finance is an asset to the company -- and now to
the county, as the company has become one of the largest grossing
industries in Humboldt, one that has doubled in size in the last
few years and managed to avoid a corporate takeover. We sat down
with Ghilarducci to talk about transitions in the dairy business.
Is organic milk becoming more important to the
dairy industry here in Humboldt County?
For six years we've been developing an organic
program for our dairymen. By the end of 2006, 60 percent of our
milk that we get from our member-owners, the dairymen, is going
to be certified organic milk. So in six years it's gone from
zero to 60 percent of our milk organic. It's becoming a bigger
and bigger part of the Humboldt/Del Norte County dairy industry.
By the end of 2006, 30 of the families and their ranches around
the area will be certified organic, and so will their livestock.
How does a farm become organic?
It really depends. To certify the land organically
there's two parts you have got to do. You have got to certify
your land, then you have to certify your livestock, your animals.
On the land, you can't use pesticides or commercial
fertilizers on the land for three years. So if somebody has done
that, it is a three-year process. In the worst-case scenario
you'd have to stop fertilizing today and your land could become
organic in three years. But if, say, somebody hasn't been using
commercial fertilizers or pesticides on their land, they could
get certified sooner. It really varies on each dairy, how quickly
they can certify or not. That is on the land side of it.
What it is for livestock is you have to feed them
organic feed for a period of 12 months, and you cannot treat
them with any antibiotics. So the livestock is a little different
to get them transitioned.
Is it an expensive transition?
Yeah, it's real expensive. For that one year they
have to buy organic feed to feed their animals, which costs more
than conventional feed, [but] we can't sell their milk as organic,
so they can't get paid as organic. We have a program to support
the dairymen here within the co-op. We give them an incentive
to help cover that cost with extra feed for that period of time,
a subsidy to help them get over that transition.
Has Humboldt Creamery always been rbST hormone
free? (rbST is an acronym for recombinant bovine somatotropin,
aka bovine growth hormone.)
Yes. That hormone is naturally produced in cows;
Monsanto introduced the artificial hormone that you could substitute
in about 1990. Right when they did that, we took a position as
a co-op to ban the use of that amongst all co-op members. We've
never wavered from that position. You are seeing more and more
people [who] have really taken the position that they don't want
that in their dairy products. It is not really conducive for
the dairy business in Humboldt Country. That is what we believe.
Is there a replacement or alternative?
First of all, it is naturally occurring in animals,
and what you don't want to do is have the additional hormones.
The only reason for it is to boost production. It speeds up the
metabolism, which basically shortens their life. I don't want
to say this, but they are almost like a machine, or a person
on speed. That is what it does. It is not as common in our area.
[None of] the organic dairies use any.
Is organic milk processed here?
The majority of it is. We actually supply some
companies in the Bay Area with tankers of raw organic milk. You
see those 6,000-gallon stainless-steel tankers that go south
on the freeway. But probably 90 percent of it is processed here,
in our facilities here. And then we take that finished product
and it gets sold all over the United States.
Under different labels or all under the Humboldt
Creamery label?
Some different labels, some Humboldt Creamery too.
We do products for Organic Valley, a co-op out of Wisconsin.
They have organic dairy products nationally throughout the United
States, and we represent them on the West Coast. So, we're doing
a lot of work on the West Coast for them. If you went to the
plant here you'd see Organic Valley cartons going down the line.
On the side of the Organic Valley carton there's a storyboard
about the Humboldt Creamery. The two co-ops work together. You
can see that their product out there is actually our milk from
our dairies here.
We're a little bit different from some cooperatives
in the United States. A lot of the dairymen will band together
and then they'll take all their milk and sell it to an independent
private company and then that company is processing it. What
we've done here is, we actually invested in processing equipment
and all the assets, so we take the milk off the dairies and 95
percent of it goes to our plant here. Then it's processed into
fluid milk in the cartons, ice cream or powdered milk. Those
are the three products that we make here.
Is powdered milk the main product you produce?
It used to be. Now ice cream is. Powder is about
25 percent of our business, ice cream is about 70 percent, and
then fluid milk is about 5 percent. That changed with the acquisitions
that we did a couple of years ago.
What acquisitions?
We bought three companies -- Darigold, Arctic Ice
Cream and Vita-Rich Ice Cream -- two years ago and all of that
[production work] has been brought into the processing here,
which has boosted jobs in the area, and also those other labels
have been converted to the Humboldt Creamery label. So, now all
those products are Humboldt Creamery Ice Cream, throughout the
western United States.
Is Costco's Premium Vanilla Ice Cream made by
Humboldt Creamery?
Yes, it's in every one of their stores [in] the
United States, [plus] we ship it into Europe for them and into
Mexico [and] Asia. It all comes out of the plant here at Fernbridge
and not only that, we also supply them the milk and sugar ingredients
mix for the ice cream bars [they sell] at the food court in the
front. They're made at another company, but we supply all the
ice cream mix: the milk and the sugar. We make that here because
they believe the flavor of the milk from Humboldt County is something
very special. They want all their ice cream in any of their product
lines in the United States to come from milk out of Humboldt
County.
How has gaining acquisitions and getting bigger
helped the Creamery remain a co-op?
In the industry there's been a lot of consolidation
[and] not just here -- other people we compete with across the
United States, they're getting bigger and bigger and they gain
efficiencies by doing that, by becoming bigger. We have been
approached by other people outside of the area to say, "Well,
why don't you guys sell out to us, or why don't you merge your
business into ours?" But our dairymen here that own the
co-op are fiercely independent. They said, "No, we want
to be independent."
So we went through a business process to make that
decision, probably five years ago now. We looked at it, and once
we decided we wanted to stay independent, we said, 'How are we
going to do that? How are we going to become independent, or
stay that way?' We had to get bigger, so what we had to do was
start implementing a plan to go out and purchase other companies
outside the area and bring that business into Humboldt County.
Instead of being acquired by somebody else, we did the flip side
of that, and said we want to be the acquirer and bring those
jobs back to Humboldt County. It is a real plus for our region.
It is a great thing for our region.
Is dairy the No. 1 agricultural industry in
the county?
Actually, timber is [still No. 1 in Humboldt].
Dairy is the No. 1 industry in agriculture in California. A big
part of the [state's] dairy industry is in the Central Valley
region, from Modesto down to Bakersfield. What they do in the
Central Valley is like cheese and butter and powder -- that is
where their big markets are. The Humboldt/Del Norte region [only]
produces one percent of California's milk, [but] we are one of
the largest ice cream manufacturers in the western United States
with things we produce out of here.
We knew that if we were going to try and compete
in the future with a small milk supply, we had to go into different
product lines -- more "value added" product lines.
If we would have just competed against block butter or just blocks
of cheese we could never have been as efficient as those big
plants in the Central Valley, which have a large milk share to
draw from.
Are you planning to continue expansion?
What we did a couple years ago is just one step.
We want to continue to grow the business and make it stronger
-- on a national basis -- even though it will still be headquartered
here in Humboldt County.
Emily Wilson is a senior majoring in journalism
at Humboldt State University.
your
Talk of the Table comments, recipes and ideas to Bob Doran.
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