Death of a cooperative

Humboldt Creamery, an 80 year-old organic milk producers cooperative, has been bought in a bankruptcy auction, and will now be folded into a major California milk producer. It is the end of an era.

This story first developed last spring, when the co-op’s CEO left town with the books in severe disarray and the business bankrupt. They put up a good fight in trying to keep cooperative ownership, but ultimately ran out of options; a community as small and remote as Ferndale (pop. 1382 in 2000, 260 miles north of San Francisco) just didn’t have sufficient equity to preserve local ownership, especially after a previous drive to increase community investment ended badly (an FBI investigation continues and legal objections have been raised).

Fortunately for them, the organic business is lucrative enough that an outside investor was found. Unfortunately, this continues a trend of consolidation in the industry. The good news is that the employees will still have their jobs and the farmers will still have a nearby creamery to which they can take their milk – at least, they will for now. Once control passes to outside investors, there is nothing stopping the new owners from consolidating operations closer to their center of gravity in central California (350 mostly curvy miles away). The plant in Humboldt is not especially well located, and might also be somewhat obsolete. Worse, Foster Farms has been on an expansion kick lately, which means that they are probably a bit over-extended and might need to cut costs at some point.

I don’t blame the members of Humboldt for any decisions they made. They were up against a wall and probably had no viable choice but to demutualize and liquidate the co-op. However, they may have only bought themselves some time, as past history suggests the Ferndale plant will close.

I hope I’m wrong (and admittedly, I’m just guessing here) but it isn’t far fetched to imagine a scenario like what has happened even in the most lucrative times. Foster Farms certainly has a history of looting their acquisitions: they changed their brand name after absorbing and closing Sacramento’s Crystal Creamery. So there’s nothing stopping Foster from making “Humboldt” milk in Stanislaus County (or Mexico, for that matter). They’ll follow the dollars.

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One Response to Death of a cooperative

  1. gordonzola says:

    just FYI, the creamery wasn’t only organic, though much of their milk/products were.

    This, of course, not only affected the co-op members but also the people they owed money to. For example, Rumiano Cheese Co, (who is who we buy our non-organic, rBGH-free jack, ched, etc. — about 12,000 lbs of each a year) was owed over $1 million. I hate that its not owned by the farmers anymore, but I am also glad it didn’t take out any other dairy folks who are basically on the better side of the industry.

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