Swiss Valley Farms Company

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Swiss Valley Farms Company

247 Research Parkway
Davenport, Iowa 52806
U.S.A.
Telephone: (563) 468-6600
Fax: (563) 468-6616
Web site: http://www.swissvalley.com

Cooperative
Founded: 1959 as Mississippi Valley Milk Producers Association
Employees: 700
Sales: $425 million (2006 est.)
NAIC: 424430 Dairy Products (Except Dried or Canned) Merchant Wholesalers; 311513 Cheese Manufacturing

Based in Davenport, Iowa, Swiss Valley Farms Company is a cooperative representing 1,100 dairy producers, mostly small farmers in Iowa, Wisconsin, Minnesota, and Illinois who on average own about 65 cows. The co-op's dairy products include milk, flavored milk, cream, egg nog, and soft serve and milk shake mix. Swiss Valley is a major producer of cheese and also offers butter, and such cultured items as yogurt, cottage cheese, sour cream, and several flavors of snack dip.

Also sold under the Swiss Valley label are several beverages: orange juice, lemonade, five flavors of fruit drink, and bottled water. Swiss Valley operates a milk-bottling plant in Dubuque, Iowa; a Cedar Rapids cultured products plant; cheese manufacturing plants in Lunana, Iowa; and Mindoro and Platteville, Wisconsin, as well as a cheese packaging plant in St. Olaf, Iowa. Subsidiary Rochester Cheese maintains plants in Dalbo and Spring Valley, Minnesota.

CO-OP ESTABLISHED: 1959

Swiss Valley was formed on July 1, 1959, as the Mississippi Valley Milk Producers Association (MVMPA) following the merger of a pair of dairy cooperatives: Iowa Illinois and Quality Milk. With its headquarters in Davenport, Iowa, MVMPA began to process and market the products of its dairy farmer membership. A year later it represented 600 farmers and posted sales of $8.9 million. In the 1960s the organization added to its membership rolls and capabilities through a series of mergers and acquisitions. In October 1962 MVMPA merged with the Dubuque Co-op and acquire the Buckhorn Co-op Creamery in Maquoketa, Iowa, picking up a butter-printing plant. Later the facility was converted to produce nonfat milk and milk protein, and served as a whey drying plant. Several additions followed in 1967: Iowa's Burlington Co-op; the Carnation Plant in Castalia, Iowa; the Petersburg Co-op in Iowa, and the Northeast Iowa Dairy Cooperative based in Luana, Iowa. The Northeast deal was especially important because it brought with it the Luana Swiss brand and cheese production plant, which became one of the coop's keystone facilities. In 1971 the plant was expanded and began to produce Emmenthaler Swiss, a popular specialty cheese. In the final years of the 1970s, MVMPA completed four more mergers and acquisitions, including the Belmont Dairy Cooperative, the Farmers Mutual Co-op Creamery, the Hudson Co-op Dairy Association, and the Hopkinton Co-op Creamery Association. Farmers Mutual and Hopkinton brought with them farm supply businesses, which were combined in 1969 to create MVMPA's Ag Service division.

Expansion continued in the 1970s. Central Dairy Co-op of St. Olaf, Iowa, was added in January 1970, joined later in the year by Farmers Co-op Creamery. A year later the Carnation plant in Waterloo, Iowa, was acquired. Next, in March 1972 MVMPA merged with the Brookside Dairy of Dubuque. Elmwood Dairy Inc. of Clinton, Iowa, and the Eastman Creamery Company of Eastman, Wisconsin, were added in 1974, as were Hilldale Dairy and Downing's Dairy in 1976. The Hilldale plant, located in Dubuque, Iowa, was especially important because it was situated in the heart of the coop's main dairy producing region, a belt that spread from southwest Wisconsin through northeast Iowa. Over the years the facility was remodeled and expanded, becoming one of the most efficient dairy bottling plants in the Upper Midwest. MVMPA completed three further acquisitions in 1977: Wilton Milk Products of Wilton, Iowa; Jones Dairy of Corydon, Iowa; and Potter Cheese Factories Inc., with operations in Hokah, Minnesota, and New Albin, Iowa. In 1978 MVMPA acquired the Land O'Lakes milk bottling plant in Cedar Rapids as well as assets in Clinton, Iowa, and Rock Island, Illinois. The addition of the Center Junction co-op completed the decade. Also of note, MVMPA launched start-up operations in Farley and Cascade, Iowa.

SWISS VALLEY FARMS NAME ADOPTED: 1981

Perhaps the most important development in the 1970s for MVMPA was the creation of the Swiss Valley Farms brand name. It was first applied to packaging in 1977. It proved so successful that in 1981 MVMPA changed its name to Swiss Valley Farms Company. Under its new name, the co-op continued in the 1980s to growth through mergers and acquisitions. In 1981 Ferryville Cheese of Ferryville, Wisconsin, and Mid-Port Co-op Creamery of Mid-Port, Wisconsin, were brought into the fold. Two years later Farmers Butter & Dairy Co-op of Fredericksburg, Iowa; Cedar Rapids Fluid Distribution; and Iowa's Central City Farmers Co-op were added. In 1985 Swiss Valley acquired Houston, Minnesota-based Ridgeway Creamery and Farmers Creamery Company, located in Bangor, Wisconsin. Three more co-ops were added in 1987: Wisconsin's Norwalk Cheese Co-op; a co-op in Manchester, Iowa; and Elgin Cooperative Creamery in Elgin, Minnesota. Finally, in February 1988 Swiss Valley acquired the Gunder Cheese Factory in Gunder, Iowa. Some of the co-op's assets were also closed or divested during the 1980s. Potter Cheese was closed and sold in 1986, as was Mid-Port Co-op Creamery. The Waterloo, Iowa, Carnation plant was sold to the Iowa State Highway Commission a year later, and in 1988 Ferryville Cheese and Farmers Butter & Dairy Co-op were also divested.

COMPANY PERSPECTIVES

Swiss Valley Farms will produce, distribute and sell value-added, quality products for our customers & consumers, owners/members, workforce. Customers & Consumers: We exist to understand, anticipate and exceed the needs of our customers. Owner/Members: We will create more value for our owners, and will continuously fulfill cooperative responsibilities and expectations. Workforce: Our workforce is our most important asset and the source of our competitive advantage.

Swiss Valley became a dairy industry pioneer in the early 1990s. At the start of the decade the co-op decided that it needed to greatly increase the packaging speeds of its 8-ounce yogurt cups. The top speed at the time was 70 cups per minute, but the co-op wanted to more than double that amount to 150 cups per minute. The goal was achieved through the installation of a Fords Holmatic volumetric filler, but case packing continued to be done by hand. With the addition of a new major customer, however, the manual process no longer made sense. A search for an automated system led to Delkor Systems of Minneapolis, Minnesota, which in 1990 acquired the Spot-Pak packaging system from a Canadian developer. Delkor and Swiss Valley worked together to fine-tune Spot-Pak for the U.S. market. Unlike other automated casing systems that merely lowered labor costs, Spot-Pak saved on the cost of materials as well by completely eliminating the traditional corrugated cardboard shipper. Instead, the plastic containers were glued to a chipboard pad and encased in clear shrink wrap. The total cost savings were significant. To fill the smallest corrugated shipper with yogurt, cottage cheese, sour cream, or dip had cost about 17 cents. Using the Spot-Pak system, Swiss Valley was able to lower that amount to 10 cents. There were other advantages as well. Swiss Valley needed less warehouse space by eliminating the corrugated shippers, the system was friendlier to the environment, and stock people in the stores were able to shelve the products quicker with fewer materials to dispose of. Other U.S. companies soon followed suit, and the Spot-Pak system became a dairy industry standard.

Swiss Valley's steady expansion continued in the 1990s. Four additions were made in 1990 alone: the Soldiers Grove Farmers Cooperative and the Town Hall Dairy Cooperative, both located in Wisconsin; the dairy division operations of Certified Grocers Midwest, Inc., in Chicago and Hampshire, Illinois; and Schiller Park, Illinois-based A&B/North Shore Milk Distributors. Several years then passed before Swiss Valley resumed its pattern of external growth. In 1996 Dyersville, Iowa-based C-Store was acquired. A year later Swiss Valley acquired Platteville, Wisconsin-based Old Wisconsin Cheese, picking up a plant that would be modernized to produce Baby Swiss and Emmenthaler Swiss cheese. Also in 1997 Swiss Valley merged with Tri-State Milk Co-op, another major midwest dairy cooperative with operations in West Salem, Chaseburg, and Mindoro, Wisconsin. The Mindoro blue cheese plant was an especially welcome addition. It was expanded to twice in size to produce Gorgonzola, blue cheese, and other special cheeses. Swiss Valley closed the 1990s with the acquisition of Iowa-based H. Halford & Sons. In the meantime, a number of assets were no longer deemed valuable enough to keep. Gunder Cheese Factory was closed and sold in 1991, as was Wisconsin's Livingston Creamery and the Hampshire, Illinois operation acquired from Certified Grocers Midwest. Town Hall Dairy Cooperative was sold in 1993, and in 1997 the Elgin Cooperative Creamery was discarded. The decade also saw the scuttling of what would have been a significant deal. In August 1999 Swiss Valley and Land O'Lakes reached agreement on a joint venture deal that would have combined the two co-op's six milk and juice bottling plants and a pair of cultured products plants. Combined, these units produced about $480 million in sales. Just before the deal was to be consummated, however, it was put on hold for unspecified reasons and never revived.

Greeley, Iowa-based Farmers Co-op Creamery was added in 2000, but a more significant deal followed a year later when Swiss Valley acquired Rochester Cheese LLC. The 26-year-old company did about $100 million in sales, producing private label grated Parmesan and Romano cheese as well as processed cheeses and cheese-based food ingredients. Rochester maintained operations in Rochester, Spring Valley, and Dalbo, Minnesota. The company also housed its International Ingredient Systems division in Springfield, Missouri. Swiss Valley opted to operate Rochester as a stand-alone subsidiary.

NEW HEADQUARTERS OPENS: 2003

With annual sales between Swiss Valley and Rochester reaching the $500 million mark, and anticipating annual growth of 15 percent for the next five years, Swiss Valley in 2002 had outgrown its headquarters. Much of that growth was the result of retail cheese sales, in which the co-op had no business until the late 1990s. A new three-acre site was found in north Davenport at the Iowa Research, Commerce & Technology Park and here the co-op spent about $5 million to construct a new 37,000-square-foot headquarters, which opened in September 2003. The following month the co-op's chief executive officer since 1997, Eugene Quast, resigned in a surprise move. According to the company, he left to pursue other opportunities. When contacted at home by a local newspaper, Quast declined to comment. He was replaced on an interim basis by chief financial officer Donald Boelens and Gordon Toyne, vice-president of membership and procurement. The arrangement proved satisfactory to the Swiss Valley Farms board and the two men became co-CEOs on a permanent basis.

KEY DATES

1959:: Mississippi Valley Milk Producers Association is formed.
1977:: Swiss Valley Farms brand is introduced.
1981:: Co-op changes name to Swiss Valley Farms.
1991:: Spot-Pak packaging system is installed.
1997:: Swiss Valley merges with Tri-State Milk Producers Association.
2001:: Rochester Cheese LLC is acquired.
2006:: Shullsburg Creamery is acquired.

Under new leadership, Swiss Valley undertook a major redesign of the packaging of many of its products in 2004, including fruit drinks that were designed to especially appeal to children. The co-op also began to enlarge its product lines in order to keep pace with changes in the dairy industry. A new convenient size of string cheese was introduced, and milk products were expanded to include strawberry and chocolate malt-flavored milk. In the culture products area Swiss Valley added new snack dips and introduced a new yogurt recipe, which garnered the blueberry yogurt first prize at the 2005 World Dairy Expo Dairy Products Competition. New yogurt flavors included lemon pie, black cherry, and orange crème. At the same time, Swiss Valley did not neglect the quality of its core cheese products. In early 2006 Swiss Valley took top prize at the Annual National Milk Producers Federation cheese contest for Regular Swiss produced in Luana, Iowa. Swiss Valley also took second and third places in the Swiss category for cheeses produced at two other plants.

With demand for Swiss Valley products continuing to grow, the co-op looked to expand it production capabilities. In the autumn of 2007 it acquired the property and facilities of the Shullsburg creamery located in Shullsburg, Wisconsin. The 18-acre site included a dairy foods plant, a cold storage warehouse, and a dry storage facility.

Ed Dinger