Point Reyes Light- October 22, 1998

West Marin dairymen consider two choices for growing

California Gold Dairy Products, the Petaluma-based cooperative that processes and sells almost all the milk produced in West Marin, is now considering two ways to get bigger - merging with giant Dairy Farmers of America, or pursuing a joint venture with Minnesota-based Land O'Lakes.

Both options would offer better returns to Marin and Sonoma dairymen, especially with federal milk-price supports to be phased out over the next three years, said Richard Sturgeon, chief executive officer of Cal Gold.

Known for its high-quality milk, Cal Gold has more than 330 dairy-ranching members in California and Nevada, and processes about 2.5 billion pounds of milk per year.

Under a merger with Dairy Farmers of America, Cal Gold members would join in the biggest cooperative in the US with 22,000 producers in 42 states, said Cal Gold spokeswoman Patrice Smith.

DFA annually processes about 36 billion pounds of milk. Under the merger, cheddar cheese produced at Cal Gold's Petaluma plant would benefit from being marketed under the Borden label, one of DFA's well-known brands. Other DFA brands include Dairy Maid, Cottage Creamery, and Moo Kooler.

"If the merger with DFA takes place, the business and operations currently conducted by California Gold will be conducted by DFA and the separate corporate existence of California Gold would cease," said Cal Gold financial analyst Grahame Petchey.

"The California Gold brand name would continue to exist as a DFA brand name, and you could expect to see the logo displayed at the Petaluma plant together with the DFA and Borden logos."

Under Land O'Lakes' recent joint-venture proposal, Cal Gold would maintain its own identity, Smith said. "The issue of autonomy is very important to farmers within the North Bay, and this proposal would enable them to leverage that autonomy."

Currently the leader in US butter sales, Land O'Lakes also produces packaged milk, margarine, snack dips, sour cream, and cheese.

Land O'Lakes and Cal Gold directors are considering forming a new business, to which both operations would contribute processing plants, Petchey said.

In this deal, he explained, Cal Gold would provide much of the milk, while Land O'Lakes would be responsible for marketing all of the dairy products.

"What is really important is that we consider the future of our members in light of the growing number of mergers and consolidations in the US dairy industry," he said. "This creates economic pressures. Also, the removal of the federal price supports in the year 2000 will change the way milk is marketed, and bring additional pressures."

After evaluating the merits of each growth option, Cal Gold executives and directors will present their findings to members for a vote, Petchey said, adding that no deadline has been set for the final decision.

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