Page 2 - Daviscope - Spring 2015
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DAVISCO POSITIONED FOR NEW OPPORTUNITIES
Davisco Foods founder, Stan Davis, and grandson, Jon Davis.
The sale of the company to Agropur will bring new markets for products, with little impact on employees or day-to-day oper- ations.
A chapter in the history of Davisco Foods International, owned by the Davis family, drew to a close with the sale of the dairy-processing business to Agropur, Canada’s largest dairy cooperative on August 1, 2014. The purchase of Davisco Foods five plants and related operations doubled Agropur’s U.S. pro- cessing operations and increased its global milk intake by 50 percent, making it among the five largest processors of cheese and ingredients in the U.S.
“We didn’t have to sell, by any stretch, but that’s probably the time you should be analyzing the potential of a sale,” says Jon Davis, CEO of Davisco Foods, Inc. “A year ago, I did not think we would sell, I thought the discussions would be an exercise we go through to provoke some thoughts, but that in the end nothing would come of it. As we went through the process and became more familiar with Agropur, I told the board, that if we are going to do this, I think this is the right time, as it relates to who we are dealing with, the market conditions and also the timing from a valuation standpoint.”
“Looking at long and short-term outlooks, I believe our ability to grow and be successful going forward is at a better place now because we’re coming from a bigger platform on all levels.”
Varying Customers, Same Philosophy
The two businesses make and sell cheese and treat their em- ployees the same way, Davis explains. However, the differing customer bases between the two businesses complement each other. Agropur supplies mozzarella cheese to delis and mom- and-pop pizzerias on the East Coast of the U.S. Davisco sells mozzarella to national pizza chains, such as Papa Murphy’s. “To have those synergies and complementary businesses is a good thing. In whey processing, we do similar products, but we’re in different areas with our whey protein. They are in sports nutrition and we’re in nutraceuticals and medicinals, so there’s a natural synergy there.”
During negotiations, Agropur was excited about Davisco Foods’ business model. “They think our people are very talented and that’s well-known throughout the industry. They like our plants and they like our products we’ve invested in,” Davis says.
“We’ve had a casual relationship with the Canadian cooper- ative for 20-30 years,” Davis says. “We had dialogue and a good friendly relationship with them. In 2008, Agropur bought a family dairy processing business in Wisconsin. We’ve had – and still have – a very good relationship with that family busi- ness for 50 years.” Jon asked the Wisconsin business owners many questions over the years, and always received positive feedback about how Agropur handled their employees, their business growth plans, and their integrity in business dealings.
Davis feels confident that employees, producers and customers will be treated fairly with the change in ownership, with few changes in day-to-day operations.
With the sale of Davisco Foods to the Montreal-headquartered cooperative, a new story unfolds, taking positives from both entities to build a stronger business. Taking a look back on history can lend insight into that future.
A Brief History
Davisco Foods was founded in 1943, with Stanley Davis mak- ing butter at the St. Peter Creamery and selling it to the U.S. government during World War II. His son Mark began working for the company as a delivery driver in 1959 and started man- aging its cheese operation a decade later. In 1972, Mark fo- cused the Le Sueur, Minn., headquartered company on making cheese and fractionating whey. Cheese plants in Jerome, Idaho and Lake Norden, South Dakota were added to Davisco Foods holdings. All plants have undergone renovations and changes through the years to position the company to meet and exceed customer demand and industry standards.
Davisco is now a major producer of cheese, whey and other food ingredients, producing more than 375 million pounds of cheese and 180 million pounds of whey ingredients annually with sales in 62 countries. Two food ingredient plants in Le Sueur and Nicollet, Minnesota; sales offices in Eden Prairie, Minnesota; Shanghai, China; Singapore; and Geneva, Switzer- land; as well as distribution centers in Rotterdam, Netherlands and Tianjin, China were included in the sale to Agropur.
In 2012, Jon Davis, Stan’s grandson and Mark’s son, was named CEO of Davisco Foods. Besides managing the Jerome Cheese Plant and supervising other plant updates, he has led Davisco’s accelerated changes to meet the demand for the com- pany’s products in domestic and global markets and to increase efficiencies and standards of safety and quality assurance.
Davisco’s business model has obviously revolved around seek- ing new opportunities. The sale to Agropur continues the trend. “We’re a business size that needed to get bigger. We were al- ready leveraged to a certain degree, and in order to get to the next level, it certainly would have required some more debt to be taken on, taking our leverage to a new level,” says Davis. “Our family has invested in a few non-dairy businesses, as a way of diversifying, and as we have committed capital to those other ventures, the reality of a finite amount of conventional capital available to continue to grow Davisco was a fact of life, and one we had to consider.”
Consolidation is happening in the dairy business from milk producers to the processors, supermarkets and branded cus- tomers – and a consolidated company gives you leverage in business dealings – critical to keep moving forward. “In this business, you need to continually invest, and being a part of a
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