State Creams Rivals With Dreyer’s Plant

The 90-degree heat shimmers off the blacktop as Mark McLenithan dons a ski parka, gloves and goggles to go to work.

McLenithan is plant manager for what today becomes the nation’s largest ice cream factory, and he must be able to weather the minus-40 temperature of the “blast freezer” and the comparatively balmy minus-20 five-story warehouse.

Dreyer’s Grand Ice Cream Holdings Inc. has invested $100 million in the Bakersfield plant over the last year, more than doubling its size and adding ice cream lines that will churn out 70 million gallons annually, or about 7% of the nation’s annual ice cream production. The factory also makes 1.2 billion drumsticks, ice cream sandwiches, push-ups and other treats a year.

The giant plant expansion illustrates how California is freezing out the competition in the dairy industry.

In 2004, the state’s 2,100 dairy farmers sold a record $5.4 billion of milk, a 34% increase from a year earlier. California is the top-producing state for fluid milk, butter, ice cream and whey protein concentrate. The Golden State ranks second only in cheese, but is expected to surpass Wisconsin within several years.

“It’s all about the cows and how fresh the milk is,” McLenithan said as he sampled a tub of his favorite vanilla ice cream jetting out of a packaging machine. “There is no better way to eat ice cream than right off the line.”

Indeed, there are plenty of cows nearby: The San Joaquin Valley is the heartland of California’s dairy industry and its 1.74 million cows. And with the cows, come jobs, said Michael Marsh, chief executive of Western United Dairymen, a Modesto-based trade association.

Other large dairy food concerns also are expanding in the area.

Land O’Lakes Inc., for instance, doubled the size of its mozzarella cheese line and hired 120 workers at its Tulare creamery at the end of last year.

And the Arden Hills, Minn.-based firm is mulling over plans to expand a second cheese plant in the area, said Alan Pierson, vice president of milk and strategic planning.

Pierson said he was impressed with the area’s unique combination of cows and road and rail infrastructure.

“There is a 14-million pound-a-day supply of milk within a 50-mile radius of our two plants in Tulare,” Pierson said.

This is all good for dairy farmers and the valley’s economy, Marsh said.

“It enhances competition for milk,” he said, and helps to push the price some farmers get for their milk above the minimum set by state regulators.

The California Department of Food and Agriculture determines the farm and minimum retail prices for milk based on the estimated costs of processing and marketing the commodity. The system was created during the Depression to keep farmers solvent and to ensure a steady year-round supply of milk.

Of course, higher commodity prices eat into producers’ profits. Oakland-based Dreyer’s cited higher costs for cream and other ingredients as one of the reasons its first-quarter loss widened 27% to $101.8 million.

Still, robust sales growth, particularly of lower-calorie products, drove the company to expand, said Dreyer’s Chief Executive T. Gary Rogers.

The factory, which at full production will suck up 250,000 gallons of fluid milk and 350,000 gallons of condensed milk and cream daily, will be the center of West Coast production for three key Dreyer’s products -- Dibs ice cream nuggets, Slow Churned Light ice cream and Haagen-Dazs Light ice cream.

“These are blockbusters for us,” Rogers said. Sales of Dreyer’s light ice cream products, for example, are up 60% this year, and Slow Churned Light’s introduction in March 2004 helped propel Dreyer’s to a 53% share of the light ice cream market, he said.

Overall, prepackaged ice cream sales in U.S. food, drug and convenience stores and mass merchandisers -- excluding Wal-Mart -- topped $4.3 billion for the year ended March 19, up 2.7% from the same period a year earlier, according to AC Nielsen, a Schaumburg, Ill., market research firm.

The industry includes large companies such as Dreyer’s, which posted $1.59 billion in sales last year and claims 23% of the market, and small-volume producers such as tiny Dr. Bob’s HandCrafted IceCreams, a Pomona-based artisan maker of high butterfat products with less than $1 million in sales.

Dreyer’s sold more than 152 million gallons of ice cream last year under the Dreyer’s, Edy’s, Haagen-Dazs, Nestle, Starbucks and Skinny Cow brands. The company is majority controlled by Swiss food giant Nestle, which is slated to begin buying the rest of the outstanding shares in December.

Dreyer’s holds a narrow lead over Unilever, which has 22% of the market and sells the Breyers and Ben & Jerry’s labels. Dreyer’s Bakersfield plant is expected to increase California’s annual ice cream output more than 50% to more than 200 million gallons. Dreyer’s has six other ice cream plants nationwide, including smaller California operations in Tulare and City of Commerce.

“We anticipate that we are going to need the capacity,” said Rogers, adding that he believes Dreyer’s expansion will take market share from other companies.

Adding to the Bakersfield factory created 230 positions, bringing employment at the plant to 730. McLenithan expects to hire an additional 100 workers during the next two years, and several hundred more temporary workers during the busy summer season.

McLenithan, who with the completion of the plant expansion becomes the state’s top ice cream man, said he was eager to ramp up production.

“Where else can you work,” he asked, “where what you do all day puts smiles on people’s faces?”

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(BEGIN TEXT OF INFOBOX)

Making ice cream

An expanded Dreyer’s ice cream factory in Bakersfield is expected to boost California’s production to more than 200 million gallons annually.

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Where the milk goes

How California’s 36.4 billion pounds of milk were used in 2004:

Cheese: 46.2%

Butter, nonfat dry milk : 29.4%

Fluid milk: 15.7%

Ice cream, sherbet: 4.4%

Cottage cheese, yogurt: 4.2%

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California’s ice cream production (in millions of gallons)

2000: 137.5

2001: 143.5

2002: 130.4

2003: 133.5

2004: 130.6

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Sources: U.S. Department of Agriculture, California Dairy Farmers’ Assn.

Los Angeles Times