Baraboo, Wisconsin 53913-0111
Fax: (608) 356-0809
Sales: $516.00 million
SICs: 2023 Dry, Condensed & Evaporated Dairy Products; 2021 Creamery Butter; 2022 Cheese—Natural & Processed
Wisconsin Dairies (WD) is one of the largest dairy cooperatives in the United States, a Fortune 500 company that operates 19 manufacturing plants and conducts $2 million worth of business on any given work day. It produces one third of the cheese consumed in the United States (not under its own brand name, but by selling it to major food processors and marketers) and is the nation’s largest manufacturer and marketer of whey products (a by-product in cheese making) to the food processing and pharmaceutical industries in the United States and abroad. As a result, it is a world leader in the dairy industry. It is also a unique company, owned and run by 4,800 dairy farm families in Wisconsin, Minnesota, Iowa, and Illinois, who as members pay no dues and sign no contracts. In a time of difficult change for farming in the United States, WD has operated continuously in the black.
Farming cooperatives, or associations of farmers who share their resources and divide their profits equally, are as old as agriculture. Old World farmers brought the concept to the New World, and Wisconsin, heavily populated by German immigrants, saw the establishment of its first farming co-ops in the 1840s. Since that time, the success of these groups has closely followed the fortunes of the family dairy farm. As the number of Wisconsin dairy farms grew, so did the number of farming coops. Yet, dairy farming did not escape the general decline of the family farm that began in the 1960s, despite numerous federal price supports. In 1963 there were approximately 90,000 dairy farms in the Wisconsin; by 1985, the number was closer to 35,000. Cooperatives fared no better than the farms.
In 1963, when Wisconsin Dairies was officially established, dairy farming was still in its heyday. While its history commenced in that year, this new co-op was really the product of the merger of two parent co-ops, Wisconsin Creamery Co-op and the Wisconsin Co-op Creamery Association, each of which had been established in 1945. (These two were in turn the product of the merger of numerous other, far older, co-ops.) The decision of the two co-ops to join forces came about as the result of a coincidence. Each had independently found the need for a new dryer for dry milk processing. The boards of directors of the coops agreed to purchase a single dryer that would be shared. While negotiating the purchase, the two co-op directors developed a proposal for a merger. (In the end, the dryer was never purchased.) Later, they put the question of the merger to their respective cooperative members. The vote in March 1963 in favor of merger into a new cooperative entity, Wisconsin Dairies, was overwhelming. Approximately 1,700 farm families became members that day. Melvin Sprecher, who had been president of one of the merging co-ops, became chairman of WD, a position he would maintain until 1974. Vice-chairman for the next ten years would be Clarence Lehman.
At first, butter constituted a major product of WD. However, competition was keen, and reliance on butter for most of the company’s sales (easy to do, since the federal government subsidized butter heavily) would not serve the co-op well in the long run. Instead, the twin themes in WD’s history became diversification and expansion. Yet, until the new company could find its own niche in the marketplace, WD remained for the first several years chiefly a butter and milk producer, barely distinguishable from other dairy co-ops in the heartland. Expansion did not have to wait, though; a year after WD’s official inauguration, 400 members of the Richland Co-op Creamery Company joined WD, followed through the years by 13 other mergers. The largest acquisition occurred in 1979, when 1,600 dairy farmers in Iowa and Minnesota, almost as many as the original WD in 1963, joined the company.
Cheese production gradually emerged as the mainstay of the company, since cheese consumption by the late 1960s was on the rise. By 1977, co-op members approved the construction of the company’s first cheese manufacturing plant at Richland Center, Wisconsin, equipped with the latest facilities. Fifteen years after the Richland Center plant went into operation, WD was producing ten varieties of cheese, with one plant, in Clayton, Wisconsin, exclusively manufacturing mozzarella. Like all of WD’s dairy products, it was not marketed under a WD brand name. (The company’s only foray into retailing its products, a dairy store selling WD milk products and ice cream in Madison, Wisconsin, failed after one year.) Instead, all are sold to major food processing companies such as Kraft USA, Land O’Lakes, Kroger, and Little Caesar’s Pizza.
WD was originally established in large part to eliminate duplicate services and consolidate production by means of automation, and much progress in this regard was made in WD’s first decade. During this time the co-op’s members also built a solid company infrastructure that would produce a cash flow healthy enough to enable the company to diversify. The organization of WD was and remains uncomplicated; “corporate headquarters” became a small two-story building in the heart of Baraboo, in southwest Wisconsin. The co-op members from 4,800 farm families attend annual district meetings where elections to the board of directors are held on a one person, one vote principle. The board of directors, approximately 35 to 45 representatives, select the president as well as chair of the board.
Besides district meetings, there is an annual general convention where major concerns are aired and put to a vote. Young farmers (under 35) are encouraged to become members, while current young members are involved in a special WD program to promote greater involvement in their company.
The only criterion for membership in WD is selling one’s milk to the co-op. There are no contracts, annual dues, or stocks, and consequently, no single major stockholder whose voice predominates over others. However, not all who wish to join are accepted. Part of the company’s efforts for greater efficiency is also its quest for higher quality. Producers of low-quality milk, either contaminated with antibiotics or bacteria, are excluded from membership. Traditionally, dairy farmers were paid for their milk based on the amount of butterfat contained. WD was one of the first co-ops in the nation to introduce cash incentives for high-quality milk in the 1970s (rather than penalizing for low quality). Researchers working with WD discovered that higher quality milk, that is, low in somatic cell counts (bacteria) and without antibiotic residues, produced superior cheese that required less milk to produce and had a longer shelf life. In 1979 only 56 percent of WD members qualified for the incentive bonus; by 1991, over 90 percent did. In 1992 members sent a record 12,000 samples of milk for lab testing before the milk was even shipped to the plant. Assistance in raising the quality of milk as well as equipment inspection are provided to members free of charge. These and other innovative strategies have been imitated widely by other dairy co-ops in the nation.
Efficiency plus a healthy cash flow and a feel for market forces have driven WD toward greater diversity, which has been the secret of the company’s consistent success. Its biggest coup was the acquisition in 1984 of the Foremost whey processing plants in Wisconsin from the McKesson Corporation, based in San Francisco. This occurred just at a time when whey, a watery byproduct of cheese making, was discovered to have many uses. Hundreds of uses have been developed, mainly in food processing, ice cream manufacturing, pharmaceuticals, infant formula, bakery goods, and candy. Every pound of cheese produces at least nine pounds of whey.
Historically, whey had been discarded, usually in the nearest body of water or sewage system. Concern over the environment and stricter state and federal laws in the 1970s and ‘80s put pressure on many businesses to find environmentally sounder means to dispose of “waste.” WD’s researchers began to experiment with uses for the whey. Eventually they were able to separate the valuable protein and lactose ingredients in whey and convinced the members of WD to expand into the whey business at a time when there were virtually no competitors.
With the purchase of the Foremost whey plant for only $20 million, WD gained access to many new markets. Whey and its products have replaced cheese as the mainstay of WD, and the increasing importance of whey in food processing and medicine have given WD a niche in the international market as well. In 1992 alone, WD exported whey products to over 20 countries, and the demand keeps increasing. WD has become the most important producer of whey protein concentrate in the country and is second (12 percent market share) in the production of lactose; at least half of WD’s annual profit is derived from whey. WD plants turn out at least 26 whey and 11 lactose products and blends for the domestic and international markets.
While federal government price supports for agriculture have been in force since the New Deal, wholesale deregulation under the administration of President Ronald Reagan threatened to reduce and even eliminate dairy price supports. Dairy farmers have had to face the reality of continuous erosion of this “minimum wage” standard in farming. Although most of its business and profit are derived from competition on the free market, WD has always been a forceful advocate for the continuation of these critical price supports that help sustain the medium-sized, family-run farm, the bedrock of Wisconsin Dairies.
WD’s efficient management and streamlined, market-oriented manufacturing operations have made the company the envy of many dairy co-ops, but it has not been without its share of problems. In the early 1990s a recession brought a significant drop in profitability, and WD faced its first ever labor dispute, which resulted in a strike in one of its cheese plants. Dozens of mergers over the years enabled WD to enter the ranks of Fortune 500 companies as one of the largest manufacturers in the United States, but bigger did not always spell better. There were signs that some of its farmer members were beginning to object to WD’s growing elite of technicians, market specialists, and researchers. To offset these problems, the co-op took new steps to fine tune its business. WD’s trend toward growth gave way in the early 1990s to expansion of a different sort, “strategic alliances” with non-member co-ops which had the same needs and shared the same goals (such as the agreement among WD and three other co-ops to save money by shipping their milk to the nearest plant).
WD suffered financially during the recession of the 1990s and had its share of headaches typical to a modern company. Even so, it maintained its forward-looking, highly motivated membership, and with international markets providing increasingly large and profitable outlets for its diverse array of products, it was expected to remain a strong force in the world dairy industry.
“Wisconsin Dairies: Its Name Spells Success,” Capital Times (Madison, WI), April 28, 1983; Bergquist, Lee, “State Farm Cooperative Bucks Trend and Grows,” Milwaukee Sentinel, January 8, 1985; Dryer, Jerry, “Cooperative Business Tactics Lead to High Protein Profits,” Corporate Report, 1986; Martin, Chuck, “Milk Firms Feel Urge to Merge,” Wisconsin State Journal, August 23, 1987; “Where There’s a Will, There’s a Whey,” Dairy Foods, January, 1988; “Movers and Shakers: An Exclusive Round-Up of Leading Dairy Companies,” Dairy Foods, April, 1988; “The Beginning of Wisconsin Dairies,” Dairy Express, 1988; “Milk Quality and Customer Satisfaction,” Dairy Illustrated, summer, 1991; Kimbrell, Wendy and Clem Honer, “Efficiency Experts (at Wisconsin Dairies, efficiency that results in top-quality, consistent dairy products and ingredients is the name of the game),” Dairy Field, March, 1992; Smith, Rod, “WD Emphasizes Need for ‘Financial Fitness,’ “ Feedstuff’s, August 3, 1992; Flaherty, Mike, “Whey, Once a Waste, Now Worth Millions,” Wisconsin State Journal, August 16, 1992; Annual Report: Wisconsin Dairies, Baraboo, Wisconsin Dairies, 1992.