Darigold, Inc. History

Company History:

Darigold, Inc. is the processing and marketing arm for a cooperative of dairy farmers, known as Darigold Farms, in Washington, Oregon, California, and Idaho. Through Darigold, Inc.'s 12 processing facilities and 19 sales and distribution branches, the milk produced by Darigold Farms' 1,300 members is manufactured into over 1,500 dairy and related products. Darigold, Inc. operates as a 99 percent owned subsidiary of Darigold Farms, while Dairy Export Company, Inc., which manages seven retail farm stores in Washington, Oregon, and Idaho, functions as a wholly owned subsidiary of Darigold, Inc. These three components form what is informally known as the Darigold organization. As the second largest privately held company in Washington and the fifth largest dairy cooperative in the United States, the Darigold organization has provided milk, butter, cheese, and other dairy products to generations of Pacific Northwest residents.

The predecessor of Darigold, Inc., the United Dairymen's Association (UDA), was formed in 1918 in an attempt to address some of the difficulties inherent in the industry. One of the challenges facing the dairy industry involved maintaining an equilibrium between supply and demand. Although cows produced milk at a consistent rate, the dairy market was not as predictable. When demand declined, dairy farmers were often saddled with surplus milk. With nowhere to sell the excess milk once the market was sated, the dairy farmer's only option was to wait for demand to increase. Consequently, five dairy cooperatives in the Pacific Northwest banded together to form the UDA.

In the period between the establishment of Washington's first creamery in 1880 and the creation of the UDA, the dairy industry had grown dramatically. By 1909, Washington was the nation's third largest producer of condensed milk and ranked 13th and 15th in the production of butter and cheese, respectively, outpacing the indigenous demand. This overabundance of milk accorded the creameries with an appreciable advantage over the dairy farmers. Able to adjust the amount of milk they purchased to the shifting needs of their customers and generally dictate the price they paid for the milk from the dairy farmers, the creameries control over the fate of independent dairy farmers impelled some of the farmers by the turn of the century to form dairy cooperatives, such as the UDA, to more effectively market their milk. Furthermore, in 1918, the situation was exacerbated by the continuing growth of the dairy industry and the cyclicality of the dairy market.

The UDA, in its effort to serve as a marketing federation for the cooperatives, hired the services of Seattle food broker Umberto M. Dickey to develop distant markets in which UDA members could sell their dairy products. The relationship between Dickey and the UDA would prove to be of great significance in the legacy of the Darigold name. In 1925, at a summer picnic for UDA affiliated members, a prize was offered for the best suggestion of a brand name for the cooperative's dairy products. The name Darigold was selected as the winner and, by the following year, Dickey, who owned Consolidated Dairy Products Company (CDP), had registered his use of the Darigold trademark in the United States and six other countries in Europe, North America, and Asia. In 1930, Dickey sold CDP to his customers, the dairy farmers of the UDA. Established as a wholly owned subsidiary, the addition of CDP, which would continue to be led by Dickey until 1939, provided members with a new processing and marketing operation and extended the Darigold trademark to all UDA affiliates.

A year before Dickey sold his company to the UDA, he had constructed a new processing plant and purchased American Creamery and Bradner & Co and Mutual Creamery Company. Prior to the addition of the two creameries and the completion of the plant, a $300,000 building that could manufacture two million pounds of butter a year, CDP was strictly a jobbing concern, purchasing dairy products from other manufacturers and then selling them to retailers. The addition of the processing plant, however, enabled the company, for the first time, to provide distribution, processing, and marketing services to the 12,500 farms that shipped their products to CDP.

During the decade that followed the acquisition of CDP, the UDA expanded its membership and territory in its perpetual drive to give dairy farmers additional markets to sell their milk and dairy products. While creameries still held a decided advantage against the dairy farmers, the expansion during the 1930s bolstered the farmer's bargaining power. By the beginning of World War II, the UDA represented approximately 40 independent groups of dairy farmers, which included roughly 40,000 small dairy farm members throughout Washington, Oregon, Idaho, and Montana. The development of these ancillary markets would soon be required to support the prodigious increase in dairy production during the war. Washington's total herd during these years rose to an unprecedented high of 331,000, a record that would stand for decades to follow when the average number of cows ranged between 200,000 and 240,000.

Russell J. Waltz, who had been instrumental in CDP's expansion during the 1930s as a sales manger and general manager, succeeded Dickey as president of CDP in 1939, a position he would hold for the next 20 years. Under his stewardship, CDP made significant advances during the 1950s, acquiring companies both in California and abroad. In 1950, a butter packaging and distribution facility was opened in Los Angeles that also distributed cheese and dry milk under the Darigold label. Six years later, CDP solidified its presence in southern California, constructing an office and warehouse building in Los Angeles that provided storage, cutting, and packaging facilities for cheese and butter products. CDP also opened a branch in San Jose, California to sell cheese and butter. During this time, CDP tapped into a growing trend in the dairy industry by making several acquisitions in Washington. After 1950, ice cream and frozen dairy products supplanted butter as the principal use of fluid whole milk in the manufacturing of dairy products. In order to capture this new market, CDP, in 1952, purchased three dairy plants, Alpine Dairy & Ice Cream Co., Apex Dairy, and Issaquah Creamery Co. Financed by member dairy farmers, who now numbered 50,000, the new dairy plants added cottage cheese and ice cream to CDP's product line, representing the first time these two products were sold under the Darigold name. In 1957, CDP entered the international dairy market by acquiring an evaporated and condensed milk production facility in the Philippines.

By the end of the 1950s, the markets in which northwest dairy farmers could sell their milk had broadened considerably through the concerted efforts of the UDA and CDP. No longer confined to supplying local markets or overly dependent upon creameries to purchase their milk, the member dairy farmers now could rely on markets as far away as Asia to sell their dairy products. As the marketing and processing organization for the farmers, CDP also prospered. While in 1928, a year before it constructed its processing plant, CDP had posted sales of $7 million, by 1959, at the end of Waltz's tenure as president, revenues had climbed to $53 million.

E. E. Pedersen, a Darigold employee since 1929, replaced Waltz as president in 1959. While the company headed into the 1960s with new leadership and a solid position in the regional dairy industry, the industry was undergoing several changes that would transform the way in which CDP operated in the future. CDP's regional presence would be called upon to help the dairy farmers keep pace with the changing times, as the dairy industry evolved from a consortium of local organizations to larger, regional organizations. Several factors led to this shift, the first of which was the decline in popularity of home milk delivery. Large supermarkets began to attract more customers, chipping away at home delivery service, and, consequently, the ways in which milk was retailed needed updating. Another significant change occurred in the processing plants themselves, as improvements in processing technology allowed the dairy plants to package and process a greater amount of products in a shorter time. Furthermore, improvements in the interstate highway system quickened the delivery time of dairy products and enabled larger container trucks to increase the size of shipments they hauled. Responding to such changes in the dairy market, CDP enlarged and modernized its fluid milk processing plant in Seattle in 1962, which decades later would still stand as the largest fluid milk plant in the Pacific Northwest.

CDP's new fluid milk plant also served new cooperatives that were being formed in the industry. In 1961, eight UDA cooperatives involved specifically in the Seattle fluid milk market merged to form Northwest Dairymen's Association (NDA), which would years later become Darigold Farms. Associations similar to the NDA were formed throughout the Pacific Northwest during this period; many of these new associations would later join the Darigold organization. In 1966, five dairy cooperatives in Oregon and southern Washington joined Mayflower Farms, which 15 years later would merge with the NDA. In 1968, three cooperatives in southwestern Idaho united to form Dairymen's Creamery Association, which would eventually merge into the Darigold organization.

In 1971, Pedersen's 12 year tenure at CDP came to a close. His replacement, Louis Arrigoni, who would lead CDP for the next 19 years, had figured prominently in CDP's expansion during the 1950s, especially in the establishment of the plants in Los Angeles and Manilla, and had also been a key contributor in the modernization of the fluid milk plant. During Arrigoni's first decade of leadership, UDA cooperatives continued to consolidate, bracing themselves against the deleterious economic conditions of the 1970s. Farm prices plummeted during the early and mid-1970s, prompting Congress to increase the price the government paid for surplus dairy products, which resulted in a dramatic increase in production, particularly in the West. As they had so often done in the past, dairy farmers and the cooperatives to which they belonged reacted to the unsettling conditions by joining together. By the end of the decade, the Pacific Northwest dairy industry was comprised of several large dairy associations, the result of roughly 80 years of cooperatives banding together.

In 1981, Mayflower Farms, representing dairy cooperatives in Oregon, merged with the NDA, making the NDA a genuine, regional cooperative. As such, the NDA began playing a much larger role in the industry, and, consequently, diminishing the role of the UDA as the preeminent cooperative. Three years later, the Darigold name, which had adorned many of the dairy products manufactured in the Pacific Northwest since 1926, was adopted as the official name of CDP. Renamed Darigold, Inc., the processing, sales, and marketing organization continued to work in concert with the NDA. As part of this effort to reinforce the dairy farmer's ownership of the Darigold brand, the NDA, in 1989, changed its name to Darigold Farms, finally bringing the Darigold brand name and the Darigold dairy farmers together officially.

As Darigold, Inc. and Darigold Farms entered the 1990s, they represented the largest agricultural cooperative in Washington. With revenues of $725 million in 1990, Darigold, Inc. processed and marketed dairy products for Darigold Farm's 1,150 dairy farmers. Of these revenues, 40 percent were generated from the sale of packaged milk products sold under the Darigold label, while 20 percent were garnered from bulk sales to other dairy processors.

The remaining 40 percent of the organization's revenues resulted from the sale of dairy commodities, including powdered milk, butter, cheese, and whey. This portion of Darigold's business suffered sluggish sales during the economic recession of the early 1990s, cutting into the organization's earnings. Although sales increased from $642 million in 1989 to $725 million in 1990, earnings dropped from $17.2 million to $11.9 million. To halt this slide in earnings, Darigold's new president Wesley E. Eckert, who had managed the organization's plant in the Philippines during the late 1960s and early 1970s, began to look toward acquisitions to diversify the cooperative's markets.

In 1990, Darigold made an offer to purchase Washington Cheese Co., but the two parties were never able to agree on terms, and the offer was dropped. Later in the year, Darigold began construction of a $22 million milk processing plant, which, when completed, processed over two million pounds of milk a day into various dry milk products. The following year, Idaho's largest dairy cooperative, Dairymen's Creamery Association, created during the consolidation of cooperatives in the 1960s, merged with Darigold Farms, boosting its membership to 1,400 dairy farmers.

As Darigold planned for the future, the 1995 Farm Bill loomed as a significant issue. The Farm Bills of 1985 and 1990 lowered the federal support price of milk, and Darigold expected the 1995 bill to further reduce government assistance. The anticipated removal of federally-funded agricultural programs could forestall the cooperative's recovery from the economic recession of the early 1990s; earnings continued to drop in 1993. Nevertheless, Darigold's longevity in the volatile dairy industry--its decades of experience in responding to change&mdash⁄ould serve the company well should it face further challenges in the future.

Principal Subsidiaries: Dairy Export Company, Inc.

Further Reading:

• "Alpine Dairy Group May Sell to Consolidated," The Seattle Times, May 20, 1952, p. 29.
• Darigold Farms Annual Report, Seattle: Darigold Farms, 1993.
• Denne, Lorianne, "Darigold Plans for Dairy Farming's Unsure Future," Puget Sound Business Journal, November 19, 1990, pp. 9-10, 30.
• "Seattle Dairy Firm to Expand in California," The Seattle Times, June 17, 1956, p. 55.
• Stewart, Betty, "A Factory That Makes 12,500 Farmers Arise at 4 A.M.," The Seattle Times, December 1, 1929, p. 9.
• "U.M. Dickey Business Leader, Dies," The Seattle Times, October 26, 1959, p. 31.
• "Waltz Retires as President of Dairy Firm," The Seattle Times, February 22, 1959, p. 15.

Source: International Directory of Company Histories, Vol. 9. St. James Press, 1994.