Organic dairy sector takes another big step toward big business
U.S. dairy giant Aurora completes certification of its Colorado facility

By Laura Sayre

Debating big organics

Aurora Dairy's entry into the organic milk market last month has set off another round in the ongoing debate over the mainstreaming of organics. In this issue we bring you two excerpts from that discussion: a reprint from the current issue of The Stockman Grass Farmer, sounding the concerns of at least one smaller organic dairy farmer; and our own overview of the current situation, including assurances from Aurora senior vice president Clark Driftmier that all Aurora Organic cows will have access to pasture and that the dairy will raise all its own replacement heifers.

What do you think? Does the certification of Aurora Organic's dairy and bottling facilities represent a bright new dawn for the U.S. organic dairy sector, bringing organic milk to millions of regular American consumers nationwide and prompting the conversion of thousands of acres of farmland to organic production? Or does it herald a tough new era for small, family-owned organic dairies, in which the premium for organic milk will erode and the difference between organic and conventional foods will become less meaningful? Let us know your views. Click here to send an email to the editor.–NF.org

August 17, 2004: Small organic dairy farmers nationwide are speculating about the long-term impacts of a major new entry into the organic milk market.

Organic dairy list-servs have been buzzing with the news that Aurora Organic Dairy, a subsidiary of Aurora Dairy Group, one of the largest dairies in the country, has recently completed the organic certification process for a farm and bottling facility in Platteville, Colorado, and is ready to start selling organic milk.

Industry experts say Aurora Organic Dairy is positioning itself to become the second largest organic dairy company in the United States, and will focus on providing organic milk for supermarket store-brands. The Platteville dairy is reportedly milking upwards of 4000 cows. Some 30,000 acres in northeast Colorado have been transitioned to provide organic feed for the dairy.

Some of the concern among smaller dairy farmers stems from the fact that Aurora Organic has strong ties to the number one organic milk producer, Horizon Organic Holding Corporation. Aurora Organic's president, Mark Retzloff, was a co-founder and former president and chairman of Horizon Organic, while the CEO and founder of Aurora, Mark Peperzak, is also a major stakeholder in and former chairman of Horizon. In addition, Horizon Organic's main production site, a 4000-acre farm in southern Idaho, used to belong to Aurora Dairy Group.

Horizon's Idaho facility has attracted criticism over the past several years for allegedly probing the lower limits of federal organic standards—by providing only limited access to pasture for its cows, for instance. Almost immediately, Aurora Organic's newly-certified Colorado farm faced similar allegations: that only heifers and dry cows—not milking cows—would have access to pasture, and that the operation was structured to continuously convert conventional heifers to organic instead of raising its own organic calves to replenish the milking herd.

In a recent phone interview with NewFarm.org, however, Aurora Organic senior vice president of marketing Clark Driftmier said that all the dairy's cows would have access to pasture in accordance with national organic standards. In addition, he said that to address concerns within the organic community about the practice of converting conventional replacement heifers, Aurora Organic had moved to "an entirely closed herd" system.

"Demand [for organic milk] is really burgeoning—growth in demand is outstripping supply. We think that will continue." — Clark Driftmier, Senior Vice President of Marketing, Aurora Organic

Driftmier said that despite widespread speculation to the contrary, Aurora Dairy Group has no plans to convert additional dairies to organic at this time. Aurora had a summer intern who was given the assignment of evaluating relative operating costs for organic dairies in different parts of the country, and this may have given rise to the rumors, suggested Driftmier. "Northeast Colorado is an excellent place for organic dairy," he said, because of its high-quality hay production and a climate in which animals can be outdoors year-round.

Driftmier acknowledged the close ties between Aurora and Horizon—he himself, he said, was a former Horizon employee—and emphasized that Mark Peperzak and Mark Retzloff between them had given many years of service to the organic community. Aurora Organic president and Horizon co-founder Mark Retzloff has dedicated his entire career to the organic and natural foods sector. Before starting Horizon, Retzloff co-founded Alfalfa's Markets, later absorbed by Wild Oats. He was recently named treasurer of the Organic Trade Association's Organic Center for Education and Promotion.

The biggest challenge Aurora faced in making the transition to organic, Driftmier said, was in sourcing organic grain, hay, and silage. All dairies are currently facing steep feed prices, he observed. Nevertheless, he was optimistic about the future of organic dairy in the United States. "Demand [for organic milk] is really burgeoning—growth in demand is outstripping supply," he said. "We think that will continue."

Aurora Organic will be focusing entirely on fluid milk sales, Driftmier said. Beyond supplying private-label organic milk for supermarkets, he said, they are considering moving into institutional and food service markets.

It remains to be seen whether hefty investments in corporate organic dairies will pay off. Aurora Organic's transition period was financed with $18.5 million from a private equity fund managed by Charlesbank Capital Partners. Horizon Organic spent $24 million converting its Idaho dairy to organic in the mid-1990s, and raised $50 million with its first public stock offering in July of 1999. Horizon's aggressive expansion included the 1999 acquisition of Vermont-based Organic Cow and UK-based Rachel's Organics, as well as the 2000 purchase of Meadow Farms, a private-label UK milk supplier. But Dean Foods, which completed a phased buy-out of Horizon in January of this year, has recently been struggling to maintain profits. Earlier this week it announced plans to consolidate Horizon Organic with two other divisions, White Wave soy products and Dean National Brand Group, in an effort to improve profitability.

Laura Sayre is senior writer for NewFarm.org.


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