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Hanover Co-op Dumps Trustee’s Brand

Engles.JPGIn an article entitled “Co-Op Sacks a Dairy Foods Giant,” the Valley News described the Hanover Food Co-op’s decision to dump products such as Horizon Organic milk, Silk soy products and Land O’ Lakes half-and-half that are made by Dean Foods. The Co-op is a popular local institution and, to my mind, a minor business miracle: a group of four grocery stores that successfully competes against regional supermarket giants.

The grocer seems to have decided that Dean Foods is not keeping its earlier promises regard the healthiness of its products and that Dean is employing sharp business practices:

The Co-op cited deceptive marketing practices on the part of Dean Foods, the $12.1 billion food processor behind those brands, and also the way the company has squeezed independent dairy farmers on milk prices, according to an announcement posted on the Co-op website on Wednesday.

Officials at the 20,000-member cooperative have been looking into Dean Foods’ practices for a while, reading media accounts and also turning to reports from the Cornucopia Institute, an industry watchdog.

Dean Foods controls 70 percent of New England’s milk market and 40 percent of the U.S. market, and has an exclusive contract with the nation’s largest dairy cooperative, Dairy Farmers of America. That meant independent dairy farmers who wanted to sell to regional brands were required to join the Dairy Farmers cooperative and accept the raw milk prices set by Dean.

For years, dairy farmers have complained that Dean Foods had a stranglehold on the market. Last year, Dean Foods settled two separate price-tampering lawsuits brought against it by dairy farmers in New England and the Southeast for a total of $170 million…

The Co-op’s disillusionment with Dean Foods goes back three years, when a customer said that Silk, a soy-based alternative to milk, was not what it seemed.

Silk had always been advertised as “organic,” until one day, Dean Foods replaced the “organic” label with “natural.”

… going from “organic” to “natural” was not a minor issue of semantics. Organic certification in the U.S. comes with strict federal standards for controlling pesticide use and other growing practices. Consumers who buy organic do so trusting that the product, and the company behind it, share their values.

Technically, Dean Foods didn’t do anything illegal. But [the Co-op’s] Fifield said the subtle change to “natural” seemed to be a sneaky, “under the table” attempt to retain the highly valued association with organic without maintaining the standards.

“The trouble with Horizon and Dean Foods is they follow the letter of the law, but not the spirit,” she said.

The article is quite complete, but it omits one important detail: the huge dairy company is run by Chairman of the Board and CEO Gregg Engles ‘79, a Dartmouth Trustee .

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