Mighty Mid-Am: a voice for the farmer, Mid-American Dairymen is flexing its muscle as a leading cheese company, product innovator and megadeal maker - includes related articles on the company's joint venture and partnership with other cooperatives to form Dairy Farmers of America

Dairy Foods, Dec, 1997 by Sue Markgraf

A voice for the farmer, Mid-America Dairymen is flexing its muscle as a leading cheese company, product innovator and megadeal maker

Beneath a replica 34-lb Northern Pike displayed on his wood-paneled office wall, Gary Hanman, 63, proudly relates a fisherman's tale of catch-and-release.

Seems the blue-gray pike, caught off Canadian waters, put up a bit of a struggle. Hanman reeled it in, then let it go. Listening to him speak, one gets the feeling he doesn't let go too often.

Hanman's office displays the prizes of a man used to winning, from wall plaques to plume-tailed pheasants. Perhaps his most prized trophy - one he's spent nearly an entire career polishing - is Mid-America Dairymen Inc., Springfield, Mo., a $4.1 billion dairy cooperative that makes headlines about as often as it churns out product.

Mid-Am's 12,262 member farms in 30 states nationwide produce about 20 billion lbs of milk annually - about 15% of the nation's supply. Its total revenues make Mid-Am the nation's largest milk marketing cooperative and put it among the top 200 companies of the Fortune 500. It is also the country's second largest cheese company, behind Kraft.

"Partner" is the key word in this organization. Through its network of joint ventures, Mid-Am also is the country's largest milk processor. As a partner with food marketers, Mid-Am produces the wildly popular Frappuccino coffee-milk drink for the North American Coffee Partnership (a Pepsi-Starbucks joint venture of which Mid-Am is a silent partner); powdered cheese and other dairy ingredients for Frito-Lay, McCormick and Pepperidge Farm, and cheese including mozzarella, Cheddar and a host of other varieties in blocks, loaves and shreds for use by leading chains throughout the country.

"We're just a little old dairy in the Ozarks trying to get along," Hanman says.

Mid-Am has 29 plants in 12 states. Counting its network of joint ventures, the co-op is involved in 90 plants in 31 states making fluid products, ice cream, cultured products and extended shelflife products. Mid-Am engineered and funded the recent acquisition of Borden/Meadow Gold Dairies Inc. The co-op also is a significant exporter.

Its sheer size and progressive efforts on behalf of its members and the industry make Mid-America Dairymen Inc. Dairy Foods magazine's choice for 1997 Processor of the Year.

At the end of this month, however, Mid-America Dairymen will cease to exist. On Jan. 1, Mid-Am is to merge with three other dairy cooperatives to form Dairy Farmers of America, a "mega" co-op with 22,000 members in 42 states producing 33 billion lbs of milk - more than 21% of total U.S. milk production. Hanman, Mid-Am's CEO, will become DFA's pres. and CEO, guiding the co-op with estimated sales of $6.9 billion.

"Proactive" is the word Brian Callaci, a Chicago-based Merrill Lynch investment banker, uses to describe Mid-America Dairymen. "Senior management takes a long-term focus at developing not only their affiliate system, but also their capital structure," he says.

In what Callaci calls a "landmark transaction" this past summer, Merrill Lynch raised $175 million of privately placed preferred securities for the co-op.

Hanman's track record perhaps foreshadows what's ahead for DFA. Those who know him say much of Mid-Am's success can be attributed to Hanman's prowess as a quick thinker and dairy strategist.

Hanman began his career with the Federal Milk Market Administrator in 1956, then later became mgr. of the Square Deal Milk Producers Assn., Highland, Ill. Square Deal was one of five dairy coops that consolidated in 1968 to form Mid-America Dairymen. Following the merger, Hanman was named v.p. - fluid marketing. He became executive v.p./general mgr. a few years later, then was named CEO in 1988.

Since that initial consolidation, many other cooperatives and dairy processors have merged with Mid-Am. Five mergers in 1994 and early 1995 nearly doubled the co-op's size. Mid-Am's biggest bite came this past fall with the $435 million acquisition of Borden/Meadow Gold, which was handed off to Mid-Am affiliate Southern Foods Group LP.

Mid-Am's Springfield, Mo., headquarters, deep in the southwestern corner of the state, is reminiscent of a small college campus in this town of approximately 150,000 residents. The co-op's administrative offices take up one building. A product development center is a sidewalk away. Across town, Mid-Am's Springfield plant produces a variety of milk-based products, including Frappuccino.

Mid-Am has structured its manufacturing and marketing efforts into two divisions. The Formulated Dairy Foods Group, led by COO Sam McCroskey, specializes in shelf-stable dairy products. "They refer to us as the 'value-added' group," McCroskey says. "Our core business is canning, dehydrated products and cultured dairy foods."

The second division, the Dairy Foods Group, is responsible for manufacturing cheese and butter, and for marketing nonfat dry milk and whey products. Its customer base includes retailers, restaurants and food manufacturers that require special aging, packaging or specific performance characteristics of their dairy products. Lonnie Spurgeon serves as COO of this group.