Maid in the shade: juice is a healthy business for SSI, a captive dairy with lucrative outside activities

Dairy Foods, April, 2008 by James Dudlicek

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Double-digit growth is a great thing for a dairy processor. But perhaps even more interesting is when more than two-thirds of your business is for customers other than your owners.

"In the last three years, we've had double-digit percentage growth outside the partnership," says Jay Simon, president and CEO of Stockton, Calif.-based Super Store Industries. "That drives down costs for the partners and gives us a significant bump."

SSI is the product of a partnership between three major competing grocery chains in northern California--Save Mart, Raley's and Bel Air--and has two manufacturing sites for dairy, an 800,000-square-foot distribution center for frozen foods and dry grocery, and an ice plant that produces more than 200 tons of various retail pack ice on a daily basis. Simon says SSI's sales are "well in excess of a billion dollars a year" overall, including dairy, grocery and frozen foods (DFR estimates dairy sales account for about half of the total).

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SSI manufactures fluid milk, ice cream, cultured products, juices and drinks under private labels including Sunnyside Farms (considered the premier label of its retail partners), Bay View Farms, Cowabunga and Denali--more than 500 SKUs in all for partner stores as well as regional and national customers. About 30 percent of production is for the Sunnyside Farms brand, with the rest for a growing but selective roster of contract manufacturing clients.

Such a brisk co-packing business comes from the reputation for quality enjoyed by SSI's house brands. "We get requests from different people for Sunnyside Farms--retailers and distributors that would like to have that label," Simon says, noting the brand is exclusive and only available to SSI partners. "When we have a situation like that, we'll propose doing something under their label."

That has resulted in SSI manufacturing ice cream for California's Stater Bros. grocery chain and Producers Dairy, along with yogurt for Foster Farms and cultured products for Unified Western Grocers, among others.

And while dairy products are a majority of SSI's output, about 40 percent is juice products, with production dominated by the company's contract to package Minute Maid beverages for West Coast markets. That business grew recently with the addition of a line of enhanced juices with claims such as antioxidants to help the immune system, plant sterols to reduce cholesterol and omega-3/DHA to benefit brain function.

Ron Harris, vice president of dairy operations, says juice sales have really taken off in the last six months after an extended flat period. "Consumers are looking for more and more enhanced juice," Harris says.

Sweet nectar

Juices and other non-dairy beverages have become a reliable money-maker for SSI's Dairy Division. In February, it inaugurated production on its 59-ounce line of Minute Maid enhanced juices, bringing the total to 46 Minute Maid SKUs packaged by SSI.

"We think it's really going to grow," Jeff Woodsmall, operations manager of the Turlock Dairy Division, says of this addition to the brand owned by Coca-Cola. "They're promoting it on a regular basis."

Harris adds: "People are going to higher-end orange juice. Coke has done a great job with Simply Orange. I think the premium orange juices are growing rapidly."

Sharing the lines with Minute Maid are products like Pom Wonderful, the pomegranate juice beverage that SSI has manufactured for several years. SSI bottles some 10,000 cases of Pom weekly for distribution in the United States as well as the United Kingdom. More recently, SSI began manufacturing for Florida-based Juice Works, which markets the Sun Shower line of nectarine-based beverages. With distribution on the West Coast, Florida and some Midwestern markets, Juice Works is looking to take the product national through a major club store chain, Woodsmall says.

Meanwhile, SSI has enhanced its partners' private labels with a pomegranate lemonade, a cherry limeade and three fruit nectars. "They compete very well at retail, at a lower price," Simon says. Further, SSI packages orange juice for Trader Joe's stores on the West Coast.

But with all the juice business, don't think SSI is ready to give up on dairy; cultured and frozen activities abound at its plants. But as long as fluid milk remains stagnant, juice will continue to be a lucrative profit center. "Dairy is flat but it's always going to be here. MilkPEP has done a good job not letting it decline," Harris says. "But we're going to grow our juice."

Milking the profits

In fact, SSI lists dairy foods among its most successful products: cottage cheese, yogurt, sour cream, ice cream and smoothies produced on its small bottle line. Plus, within the past year, the company launched a churn-style ice cream and the Probiotic Plus line of yogurt. SSI manufactures about 18.5 million gallons of ice cream annually among all its brands. And Woodsmall notes that last year SSI ranked first in cultured products and ice cream among members of Quality Chekd Dairies Inc.