A revolt by farmers who supplied Clover Stornetta Farms with most of its organic milk has sparked debate within the North Bay's shrinking dairy industry over the best way to ensure its survival.
Ten of the 15 organic dairies that sold their milk to Clover walked away from the Petaluma company this summer and aligned with rival Organic Valley, an all-organic, farmer-owned cooperative based in Wisconsin.
The news of the breakup, which emerged last spring, signaled the arrival of a newcomer that takes a very different approach to selling organic milk.
In Clover, the state's largest organic dairy and one of Sonoma County's most iconic food companies, the aim is to focus on a local product. That means putting virtually all the milk purchased from farmers into a Clover jug, ice cream carton or other packaging - complete with a "Clo the Cow" image on it.
In Organic Valley, the nation's largest organic farm cooperative, the group sells milk and other products from 1,643 dairies under its own label. But it also sells milk products to other food makers and on the bulk market, an approach its boosters say means fewer production cutbacks for farmers.
Ironically, the co-op currently is selling most of its local milk to Clover. But that is a short-term arrangement as Clover takes on new dairies and encourages its existing ones to expand.
The divorce between Clover and its long-time suppliers exposed intense feelings and differing views on how to help local dairies prosper.
When Tom Scott, general manager of Cotati-based Oliver's Market heard of the farmers' departure last spring, he pulled all eight Organic Valley products that directly competed with Clover off the shelves of his three stores. He emphasized he still sells another 18 Organic Valley products.
"We're not boycotting Organic Valley," Scott said. "We're supporting Clover."
Scott said he did so not only because Clover is a model for giving back to the community. He also shares the company's view that the best way to sustain local dairies is to keep the milk distinctly a North Bay product, not to blend it with shipments from other areas.
In contrast, the farmers who left said they need more stability in the money they earn for their milk. They said Organic Valley is less likely to cut their production levels or prices, and they already are benefiting from the new arrangement.
"Our milk check is going to be considerably more" in August from Organic Valley, said Two Rock dairyman George McClelland. He estimated his payment would be up 15 percent over what he earned in July from Clover.
Moreover, he said, the company is not only paying him more but selling milk to consumers at a lower price. The Rohnert Park Costco is selling two gallons of 2 percent Organic Valley milk from California for $9.99. That's about $2 less per gallon than Clover's organic milk sells for in Santa Rosa supermarkets.
"It will compete on the shelf right alongside Clover," McClelland predicted of his new brand. "And the price will tell the story."
Observers privately say the tight-knit dairy community has been filled with talk of soured relationships and questions over who was to blame for the breakup. Most, if not all, of the 10 dairies had been with Clover for more than 20 years.
The North Bay remains dairy country, where milk is Sonoma County's second-largest agricultural product after wine grapes. But many dairy farmers here have struggled for decades to stay in business.
Clover President Marcus Benedetti noted that when his grandfather, Gene Benedetti, was manager a half century ago at the Petaluma Cooperative Creamery, he worked with 400 dairies. Today Sonoma and Marin counties have roughly 100 dairies.
For the first seven months of the year, combined dairy production for Sonoma and Marin counties fell to 380 million pounds, a 12 percent decline from the same period of 2008, according to the California Department of Agriculture. In contrast, the state's production totals remain unchanged.
The Great Recession hit dairies hard. In 2009, exports dried up, consumers ate out less often and farm milk prices plummeted far below the cost of production. The losses took a huge toll on farmers.
"Most of them lost most of their equity in their operations and borrowed a heck of a lot of money," said UC dairy economist Leslie Butler.
The conventional milk dairies felt the pain first. But the organic segment, which routinely had experienced double-digit annual growth, suddenly saw sales fall 4 percent in 2009. To get rid of excess product, much of the organic milk was sold off at lower prices paid for conventional milk.
To cope, Clover last year imposed a 25 percent cut on the amount of organic milk it would buy from its dairies. The company also cut the organic price it paid dairies by 20 percent.
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