SPECIAL REPORT

IN July 2004 Issue

Of

Dairyfield Magazine

The following is a segment written by Pamela Accetta Smith in the July 2004 Dairyfield publication. The article is titled:

“MIDWESTERN STRONGHOLD, America’s agricultural heartland is home to some of the industry’s most successful independent players”

Berner Foods Inc.

Dakota, Ill.

With corporate offices in Dakota, Ill., and corporate sales office in nearby Roscoe, Berner Foods Inc. is a privately held multi-divisional company whose current product lines include process cheese products; natural cheese products such as Swiss, muenster and havarti; and soymilk. In its process-foods division, the company manufactures approximately 70 percent of all private label cheese sauces and spreads in North America, approximately 85 percent of private label salsa con queso products, 90 percent of private label aerosol canned cheese products and an assortment of portion control cups ranging from 1 to 5 ounces.

Berner Foods operates a natural-cheese facility that processes about 1.5 million pounds of milk a day into Swiss, muenster, havarti and specialty performance low-cholesterol cheeses, plus a food-grade soy solids production platform that manufactures soy concentrates for soymilk. Finally, the company has a sister division - Illinois Protein - where Berner Foods receives about 20 million pounds of whey per week that is concentrated into human food-grade whey concentrates.

The company plans to open its fourth division - a single-serve bottling operation - in early 2005 which will be dedicated to producing healthy, single-serve nutrition drinks, says Steven Fay, senior vice president.

Berner Foods recently completed a 72,000-square-foot expansion of its process-foods facility, says Fay, and a retrofit for increased brining capacity at its natural cheese plant. “A reconfiguration and expansion of our soy facility is planned this year,” he says.

According to Fay, what makes the Midwest unique as a region and a place in which to do business is the availability of high-quality milk. “Obviously, for a company that has made cheese for 61 years, it is the proximity to a very high-quality milk source that has contributed to our success,” he says. “Midwest milk yields more cheese per hundredweight than milk from many other regions. We also have access to a labor force with a good Midwest work ethic. Our centralized location also affords us opportunities to sell coast to coast. This region is a central location for food processing and affords us many opportunities for co-manufacturing.”

Regarding favorite regional flavors and tastes, Fay recalls a funny story about the production of Limburger cheese that was once banned from shipment by the U.S. Postal Service. “The battle raged for months until Midwest cheese makers ultimately prevailed,” he says. “It seems the Limburger cheese was so strong that the postman’s bag would smell for days afterward and most of the mail he delivered would have the wonderful aroma of Limburger saturating it.

“The Midwest is a repository of diversity. We are black, white, Asian, Hispanic and American Indian. We have German bratwurst and beer, we have Scandinavian lefse (a potato-based soft, flat bread) and lutefisk, we have greens and chitlins. Milwaukee has a dozen fests every year, from Polish Fest to Italian Fest.”

Responding to the low-carb craze, Berner Foods has several initiatives in place to make customers more aware of the company’s low-carb product offerings. “Private label products like those we make are often the last to respond to fads,” says Fay.

In terms of current industry issues having an affect on the company, Fay says the consolidation of retailers can be very challenging. “As they grow larger, we have our eggs in fewer baskets. The costs to serve and interface with these giants are sometimes daunting for smaller manufacturers,” he says. “The other issue looming on the horizon is retailers leveraging their size through things like e-bidding and auctions for their business food manufacturing sector and may put some companies that supply them at peril.”