The traveler steak

cover Clarence Amulung, Chairman of Dairyworld APRIL 2002 – AGRICULTURAL CO-OPPERATOR One year after the sale of their co-operative, Agrifoods International Cooperative Ltd. to the Saputo Group, how do dairy producers in Western Canada react? The Co-op operator made the update. January 12, 2001 will remain marked in Clarence Amulung's memory, until the end of its days. A date also filled with emotions for the majority of 170 delegates gathered in Calgary.

On that day, 91% of dairy producers approved the sale of their co-operative's processing operations, Agrifoods International Cooperative Ltd., better known as Dairyworld Foods, to the Saputo Group. "We had no more money in our chests to issue the next milk pay to our 1,500 members," says Amulung, a tremolo in the voice. L的Agropur of Western Canada, which held 80% of the Alberta market, 90% of the Saskatchewan market, 80% of British Columbia, is acquired at $407 million.

"Saputo has done a good job, but let's give him the credit, he could have bought us at a cheaper price," says Amulung, who was appointed president a few months before the sale of Dairyworld, at least what's left of it; a fleet of trucks for milk transportation in Alberta, British Columbia and Saskatchewan. "In the latter province, the co-op will continue to issue milk payments, while in Alberta and British Columbia, the task will be a provincial marketing agency as early as August.

How did this cooperative, which was created just nine years ago and whose sales were up to $1.4 billion, go bankrupt? Let's go back to the clock. The start-up of Dairyworld Foods began in 1992 with the merger of three co-operatives, the Fraser Valley Milk Producers Association based in British Columbia, the Northern Alberta Dairy Pool and the Central Alberta Dairy Pool. The objective: "Response to the demand of retailers Safeway, Superstore, Sobeys who control more than 60% of food retail in Canada," says Ben Brenda, one of the directors of the board of directors who are still in office.

He added: "Retailers wanted to buy at a single dairy counter across Canada." It was only in 1996 that the DPCO Dairy Producers Limited of Saskatchewan boarded, in part for the same reason. The crew was full and the managers put sails on the Canadian market, from coast to coast. But the new ship sailed with a torpedo started in its holds. 35 International By Nicolas Mesly* The sinking of Agrifoods Ben Brenda, the director of British Columbia.

"If you want to keep your co-op, leave some of your equity!" His message was not heard. A WORDED TARK "I paid $5 to become a member of my co-op and I received $100,000 for delivering my milk in all these years. My equity shouldn't have been rem - padded.

It should have been used as a financial lever. It was free money!" explains Tom Cliff. A graduate of the Agricultural Business Department at Edmonton University, Cliff worked with the accounting firm Deloitte & Touche in the special investigations and bankruptcy section before establishing a dairy farm in 1982, some 60 kilometres from Edmonton. The producer, also a delegate, gave an analysis to his cooperative's vitriol of l'odyssey.

For Cliff, the board of directors has relied on an overly ambitious business plan: "The directors underestimated the amount of equity needed to build the busi - ness." Between 1992 and 2000, the number of active producers melted like snow in the sun and increased from 7,000 to 1,500."The problem is that two thirds of equity was due to ex-producers," Cliff adds. "In the same period, Dairyworld is giving its members nearly $70 million!

They borrow money from bankers. Brenda tries to defuse the torpedo: "If we want to keep our cooperative, let's leave it fair on board!" But her message is not echoed either among its members in British Columbia or among the board of directors that has full discretion over the amount of discounts. Yet, as early as 1994, Clarence Amulung chaired a restructuring committee that had to solve the circle's quadrature: how to keep fairness in the boat's belly?

The Commission's decision to introduce a new system of tax relief for producers in British Columbia is based on a set of rules that are applicable to the tax system, which are applicable to the tax system.

AGRICULTURAL CO-OPERATOR – APRIL 2002 36 "They managed the cooperative as a mushroom farm, keeping us in the dark and feeding us with bullshit." -Tom Cliff Tom Cliff, the former investigator at Deloitte & Touche believes that the Dairyworld board of directors was "a band of dinosaurs." This producer does not digest, among other things, that the separation bonuses to the management team totaled more than all the profits made during the years of Dairyworld's existence. If Cliff started to rear buffalo c'est, among other things, because he has difficulty finding employees.

In Alberta, agriculture competes with the oil sector for labour. Thanks to the fairness received from its dairy cooperative, it has started to raise bison."I spend seven times less time treating my 400 bison than my 60 cows, and I make as much money!" APRIL 2002 – THE AGRICULTURAL CO-OPPERATOR on cover 37 THE SECOND FUIT, THE PROFITS During its crossing, Dairyworld only earns $1.5 to $3 million in profits per year.

"A company of this size should have generated ten times more!" Cliff said. "The board of directors is focusing on consumer milk, volume, to generate profits. This strategy and the flight of equity are causing tensions with the general manager, David Coe, who is aiming at the production of value-added products. But "for a dairy producer what counts is to sell its volume," says Amulung.

In addition, the milk is awarded!" Far from the conflict in the pilot cabin, Tom Cliff notes that two thirds of the milk deliveries have low profit margins. The deregulating wind - at the same time, is shaking the sea. While the decade - has been a quiet and guaranteed profit, the dairy market has been deregulated in the early 1990s.

Retail and wholesale milk prices are swinging in saw teeth. Only the price of hectolitre paid on the farm remains on the right fixed. "In Alberta alone, deregulation has made us lose $50 million," says Amulung. "The watchdogs are looking at the sea, and the watchdog announces the arrival of powerful ships, Nestlé and Unilever, the multinationals of ice cream.

So far, the Dairyworld administrators have decided to sell their ice cream plant in Nestlé. On the one hand, the manufacturing of ice cream does not absorb large volumes of milk. On the other hand, "we were afraid of this new competition. These two multinationals have financial kidneys much stronger than ours," says Amulung.

Several delegates are amazed to learn the news at their annual meeting, as the sale of the ice cream plant is like getting rid of their only milk cow."Some of us thought it was the beginning of the end," says Albert de Boer, the youngest delegate to sit on the regional advisory committee of the cooperative in Alberta. However, there are two reasons behind this $80 million transaction. It allows for the disposal of an old debt from the Northen Alberta Dairy Pool.

A debt incurred when the Palm Dairies assets were purchased from businessman Peter Pocketton 1, better known for having sold Wayne Gretzgy of the Edmonton Oilers to the Los Angeles Kings. The other reason is that partially bailed-in chests, little timoneers plan for their conquest from the East. By abandoning ice cream, another "profitable" operation is being put on cheese production. In 1998, Dairyworld purchased the McCain cheese mills in Ontario, acquiring technology and market share.

"It was $20 million too expensive," says Cliff, who maintains the same breath as the acquisition was also poorly funded. "The ambition of the Dairyworld's administrators is as far away as Nova Scotia and New Brunswick. They raise their flag there with the acquisition of Baxter, a private company whose plants are turbined with drinking milk. The volume is still high.

The purchase of Baxter, at a cost of $27 million, is a tarabiscot for some co-operators like Albert de Boer. The producer wonders why his co-operative did not merge with one of the two co-operatives in the Maritimes, Scottsburn or Farmers Coop? It is meant to stop Albert de Boer, the youngest member to sit on the regional advisory committee of Dairyworld in Alberta. "I thought my co-operative was my union!" he said very concerned about the concentration of processors and retailers.

"We should have drawn inspiration from European cooperative models to deal with multinationals," he adds. ______________________ 1. Another part of Palm Dairies' assets sold by businessman Peter Pocketton had been purchased by Parmalat. Ask questions and "trust." Clarence Amulung will answer in an interview: "Because, by acquiring Baxter, we thought we would get hold of Scottsburn. Both companies had come to a hair of merging."

Baxter's purchase in 1999 ended the ambitious business plan of Dairyworld: becoming a national player under pressure from retailers, including colossal Wal-Mart. However, one of the bankers of the consortium that financed the expedition was nervous: the debt-to-equity ratio in 1999 was 3:1. A year later, in 2000, the same ratio under the eyes, this banker indicated that he cut food. Others followed him.

The leaders of Dairyworld have until January 2001 to find a partner who wants to bail them out. Otherwise, the ship will be towed in dry dock and liquidated in spare parts. During their journey, the board of directors and the managers of Dairyworld will also have concluded business with three Quebec cooperatives: Agropur, Nutrinor and Agrodor. The course of the 21st century barely crossed, they rushed on the bridge to launch rescue rockets.

The joint venture is seen as a first step towards twinning the two cooperatives. In most of the stalls in the west of the country, this is what the producers wanted most.

Cartier came to our annual meetings and was blaming us about which of our two co-operatives was the biggest? J-a said to our two presidents: stop jokes, merge! So we'll know who's the biggest," says Albert de Boer. The young farmer proudly adds that two dairy co-operatives in the Netherlands, land of his ancestors, Fristland Dairy Foods and Campina are about the same size as Nestlé.

For nine months, from October 1998 to June 1999, discussions on a possible merger between Agropur and Dairyworld were intense. A cooperative development strategy was being sought for the entire country. "We did not want to make it an East versus West debate," says Amulung. The Quebec independence option, which has often been a concern to the players in the rest of Canada, is not a pitfall.

A study is being undertaken to identify the modalities of operation of the new entity: the choice of a director general, the composition and representation of a board of directors, because if Agropur and Dairyworld produce about the same volume of milk, one of 5,000 members, the other 1,700 at the time. At the time of signing the agreement, almost at the time of trinching, milk survives in the cups. "The shock of two cultures," says the outgoing president of Agropur, Jacques Cartier. More than the cultural barrier of language between two unilingual producer groups, it is the cooperative management culture that does not merge: "One focused on the production of images, the other on results".

Among the elements that would have helped to make milk run, is the choice of the director general chosen by the study, David Coe of Dairyworld, who was not unanimous of both parties. Lied by a confidentiality agreement, Jacques Cartier does not want to comment. L'ex-president d'Agropur n átttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttttt

For cover AGRICULTURAL CO-OPERATOR – APRIL 2002 38 Jacques Cartier, outgoing president of Agropur. Albert de Boer, the blow is hard to cash since he is inspired by European models. And that the Arla dairy cooperative is the result of a merger of two cooperatives from different countries, Sweden and Denmark! Discussions with Agropur broken, the leaders of Dairyworld are behind Parmalat.

These talks, around a joint venture specific to consumer milk, also abort. They then launch distress signals at Dairy Farmers of America, the American cooperative of 25,000 producers: without results. Finally, the Saputo Group emerges on the horizon and launches the only lifeline. SALE TO SAPUTO GROUP When delegates come to the annual meeting of Dairyworld at the Calgary Convention Centre, they are shocked to learn about the sale of their cooperative to the Saputo Group by the board of directors.

A month earlier, on December 8, 2000, at a meeting of Alberta delegates, "we were told that everything was fine," says Albert de Boer. AGRICULTURAL CO-OPPERATOR – APRIL 2002 40 Both Cliff and Boer blame the Board of Directors and the Director General for not having better informed producers of the financial status of their co-operative and the status of discussions with Agropur, Parmalat and Saputo. "The negotiations required the utmost discretion," says Amulung. Never, they say, there was a bailout plan discussed internally with the producers.

For example, the possibility of removing the $140 million debt owed to bankers."J has already proposed to use my equity, and even in the extreme event, to draw money from my milk pay to bail out my co-operative," says Albert de Boer. "My only condition was that they stop buying companies." Clarence Amulung rejects this possibility from the back of the hand: "The majority of the 1,500 producers would not have agreed to pay $70,000 each to pay the bankers."

Tom Cliff, who has a well-sung tongue, adds: "They managed the cooperative like a mushroom farm, keeping us in the dark and feeding us with bullshit."At the Fatidic Assembly, producers learn that the situation of their co-operative is so bad that they cannot expect their next milk pay. And, the icing on the cake, there is a $7.5 million contract break penalty if it is not endorsed by the delegates! The sale is approved, but leaves a bitter taste.

"Saputo knew what he was buying, but I never knew what I was selling," said Tom Cliff, an angry man. "The old village was devastated! In January 2002, the new owner, Saputo, announced that the old Dairyworld cheese factory had been closed down for the small town of Bashaw, between Calgary and Edmonton, and had 775 inhabitants. More than the loss of the tax account, about $15,000, caused by the closure of the factory, "88 employees are on the street.

Dairyworld was our main employer!" said the Mayor of Bashaw, Dale Gust, a cereal producer with his assistant, Orlene Wigglesworth. on the survey cover at Deloitte & Touche, claims that Saputo purchased the low-cost co-op cheese inventories."I think Saputo got $140 million in inventory of cheese for $120 million and sold it for $160 million."This quick $40 million profit is reflected in the company's financial statements," he says, adding that the co-op's stocktaking inventories would have been inflated in the last year to attract this buyer.

He claims that three directors are in conflict of interest, and that they would have taken advantage of the privileged information on inventory volumes to buy Saputo shares before the delegates' final approval of the sale on 12 January. THE AGRICULTURAL CO-OPPERATOR – APRIL 2002 42 2001. These directors would have expected a rise in stock prices to make a cash cut. Cliff filed a civil suit for small claims, but he dropped it because the compensation cap was $7.500.

A strategic withdrawal, he said, to better benefit from a claim for damages under the Canada Cooperatives Act . This will allow him to conduct an in-depth internal investigation with greater financial compensation if necessary."I don't want to catch fry, I want to catch sharks."A $9.5-million BOUNDAMENT However, producers have learned that the lifebuoy launched by the new owner costs $9.5 million, deductible from their pay.

Five million dollars will be spent to operate factories of last resort. Once operated by Dairyworld, these plants turn at the moment when processors refuse milk delivery, for example at Christmas when demand falls, while beer and wine replace milk on the consumer table. Milk is then transformed into butter or powder, easier to store."Saputo being first a cheese producer, it is normal that it is compensated for operating these plants," says Cliff.

Dairyworld also transported milk from farm to factory at its own expense regardless of whether the distance was one kilometre or 300 kilometres. Transportation costs are estimated by the new owner at $3 million. Member services are estimated at $1.5 million. Milk quality testing, for example, to detect the presence of d-antibiotics, formerly paid by the co-operative, is now costing $25."It's like the health care system," says Cliff, "Today the costs are Bruce Beatty, president of the Alberta Milk Producers Association.

"The only advantage of the disappearance of Dairyworld is that it has had the effect of strengthening the ranks of Albertan even the most critical producers of the cooperative."The farmer is waiting for the results of a feasibility study of $10,000 to revive a small cooperative in his area, one and a half hours away from Calgary."Politically, how can we tell Alberta and Saskatchewan producers to leave their equity in the cooperative, while British Columbia producers perceive it?" - Clarence Amulung THE AGRICULTURAL CO-OPERATOR – APRIL 2002 44 Dale Gust, also a cereal farmer, saw his Agricore United cooperative close the village's almost new grain elevator.

Our visit to Bashaw coincided with the tour of a federal standing committee in Alberta that is questioning the future of agriculture. on visible cover." "The problem is that we don't know what these costs will be in ten years' time," says Bruce Beatty, president of Alberta's Milk Producers. "The latter is concerned that with the co-op disappearing, the new decision-making centres are now in Milan (Parmalat), California (Lucerne-Safeway) and Montreal (Saputo).

A VOICE THAT WAS NOT PRICED In the Albert de Boer show, a TV ad shows a cow promoting soy milk on the small screen. "It's the peak of irony, no, a cow that boasts soy milk?" says the breeder. The ad is funded by Soyaworld Inc., formerly the property of 50 percent of Dairyworld and now owned by Saputo. "This investment in a soy factory had also raised a great controversy among our members," recalls Clarence Amulung, "but, two years ago, when the company wanted to broadcast this promotion, we said: "NO!"

Today, the announcement is like butter, without a dairy producer having a single word to say. Bruce Beatty raises another concern about the disappearance of his co-operative: "I receive letters from consumers who complain that they can no longer find 2% chocolate milk." One percent of chocolate milk produced by a Canadian processor and available on provincial tablets is no longer made with skimmed milk, but with "dairy ingredients." The question of "dairy ingredients" is a concern for many producers.

Processors have the technology to remove proteins from the diet milk and substitute them with other proteins without affecting their taste. Dairy proteins can be used to produce more lucrative foods such as fro-mage."If we are not vigilant, our quotas may decrease as processors will need less milk," says Albert de Boer. Tom Cliff, allergic to the word "cooperative", who welcomes with open arms the arrival of Saputo, the group's entrepreneurial spirit and especially its marketing team, concedes that a processing market exclusively composed of private giants is not ideal.

"Cooperatives have at least the benefit of reminding other processors to order."But by amputating one hand in the processing sector, 1,500 dairy producers in Western Canada have relegated to the rank of mere suppliers. o *The author is a journalist.