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Maryland & Virginia Milk Producers Cooperative Association, Inc. Business Information, Profile, and History

baltimore college national dairy

1985 Isaac Newton Square
Reston
Virginia
20190
U.S.A.

Company Perspectives

From branded fluid milk to commercial ingredients like cream and high heat powder, Maryland & Virginia products represent an important sector of America's food chain.

History of Maryland & Virginia Milk Producers Cooperative Association, Inc.

With its headquarters in Reston, Virginia, Maryland & Virginia Milk Producers Cooperative Association, Inc. serves the interests of approximately 1,500 dairy farmers located in 11 mid-Atlantic and Southern states, including Pennsylvania, Maryland, Delaware, Virginia, West Virginia, Kentucky, Tennessee, North Carolina, South Carolina, Georgia, and Alabama. Member farms may be smaller than 100 cows or larger than 2,000. Maryland & Virginia markets members' products at competitive prices and pools their collective buying power to purchase agricultural equipment and supplies for them. The Association also employs a field staff to help members with their milk production, offers equipment loans, and lobbies the government on their behalf. Maryland & Virginia markets more than three billion pounds of milk each year, serving such major urban markets as Baltimore, Richmond, Charlotte, Atlanta, and Washington, D.C.

The raw milk is sent to the co-op's four processing plants. Located in Newport News, Virginia, Marva Maid Dairy produces whole, lowfat, and reduced fat milk as well as buttermilk, flavored milk, eggnog, and orange juice. The Maola Milk and Ice Cream unit, based in New Bern, North Carolina, produces fluid milk, ice cream, ice cream novelties, and juice for consumers in North Carolina, South Carolina, and Virginia. Maryland & Virginia also operates a manufacturing plant in Laurel, Maryland, that uses excess milk to produce butter, condensed milk, and nonfat dry milk to be sold to food companies as ingredients for such products as infant formula and baked goods. Finally, the co-op sends some of its milk to Valley Milk Products LLC, a Strasburg, Virginia-based, majority-owned joint venture with Utz Lake Inc., to produce butter, cream, dried milk powder, and condensed milks, which are then sold as ingredients for bread, baby food, ice cream, and frozen dinners. Maryland & Virginia also maintains an equipment warehouse in Frederick, Maryland, offering 1,500 agricultural items in stock. Although orders are shipped throughout the country, co-op trucks are able to make monthly deliveries to member farms in parts of Delaware, Maryland, Virginia, and Pennsylvania.

The co-op is governed by a 23-member board of directors. Each of the organization's 22 districts elects a director, and a public director serves to provide an outsider's perspective.

Rise of Cooperatives Linked to Industrial Revolution

The cooperative concept arose in Europe in the late 1700s and early 1800s, in response to societal changes brought about by the Industrial Revolution. Rural residents who once produced their own food now went to work in city factories and were very much at the mercy of shopkeepers or company stores where prices were high and products often adulterated to squeeze out further profit. In England consumers fought back, as groups began pooling their money to buy groceries from wholesalers. The first to form a lasting co-op was the Rochdale Equitable Pioneers Society, which opened a store in 1844 to serve the needs of striking textile workers in Rochdale, England.

In colonial America, Benjamin Franklin established one of the earliest co-ops in Philadelphia for mutual fire insurance. For the most part, however, American co-ops were formed by farmers, who used them to purchase equipment and supplies, provide storage or processing services, and in some cases market their products at the best price. Most of them were short-lived, however, the victims of poor organization and management.

Not until the 1890s did the cooperative movement in America truly take shape and begin to have an impact on the country's commerce, as farmers rebelled against the power wielded by the railroads, bankers, and manufacturers. Buying power was one advantage, but farmers also began to form co-ops along commodity lines to gain marketing leverage. In 1893, for example, several local associations were united into one organization, the Southern California Fruit Exchange, which established a formula for all cooperatives that followed. To stimulate sales, the Exchange began advertising its lemons and oranges under the "Sunkist" label.

Because of anti-trust legislation, co-operatives operated in a shadowy area of the law, since in theory they could be considered an unreasonable restraint of trade. But the cooperative movement, which enjoyed its most explosive growth from 1919 to 1922, had political allies, the Farm Bloc Members of Congress from Southern and Midwestern states, and in 1919 the National Cooperative Milk Producers' Federation tried to pass legislation that was favorable to co-ops. It was defeated by commercial groups, but was rewritten and introduced by Senators Arthur Capper and Andrew Volstead a year later. The landmark Capper-Volstead Act finally passed in 1922, allowing farmers and ranchers to join marketing co-ops without fear of antitrust litigation.

Switch to Cooperative Status: 1923

Maryland & Virginia was established during this period, adding to the membership of the National Cooperative Milk Producers' Federation. It was organized and incorporated in September 1920 as a nonprofit corporation. Legally an association, it would not become a cooperative until 1923. It immediately hired a manager, who began signing up member dairy farmers. They agreed to pay the new co-op one-fifth of one cent per gallon to market their milk. Unfortunately distributors refused to pay the price the organization wanted and for a time members were no better off than before. In fact, the Association was in debt to the tune of $108,000 by 1924. The passage of Capper-Volstead provided some clout, but more important was a Virginia law, the Milk and Cream Act of 1925, which allowed the state to set the minimum price for milk to save producers from price cutting, which in the long run could endanger supply, and called for the use of an arbitrator to settle differences between producers and dealers. The law was challenged but ultimately upheld by the United States Supreme Court in 1937. The leadership of Maryland & Virginia's second general manager, John McGill, and president Frank Walker also played a key role in the turnaround of the organization, which got out of debt and by the close of the 1920s had built up a surplus of nearly $180,000.

With legal backing, Maryland & Virginia began to enjoy strong growth in the 1920s. It built a pair of processing plants, and also joined forces with a Baltimore association to create a common marketing agency. The foundation established was strong enough to withstand the tribulations of the 1930s, as the stock market crashed in 1929 and America descended into the decade-long Great Depression. It was a difficult period for the Association, which had to go to court in order to sell its products in the Arlington and Alexandria, Virginia area. Maryland & Virginia also had to contend with cheap uninspected, "bootleg" cream that flooded the Washington, D.C., market. The co-op went so far as to hire a private detective agency to keep an eye out for the offenders and offered a $500 reward to anyone with information about the sources of illegal cream. In 1939 the District's Embassy Dairy was caught with 200 cans of Indiana cream by local officials. Although the plant was fined a nominal $10, the event spurred a Congressional investigation into the matter.

The United State's entry into World War II in late 1941 provided the stimulus needed to finally bring the Depression to an end. But for Maryland & Virginia and other milk producers the war did not lead to a boon. To put industry on a war footing and make the best use of resources, the government imposed price controls. Milk producers had hoped to see a price increase but government intervention prevented it and they had to wait to enjoy better economic times. Maryland & Virginia did its part during the war by donating milk to the Stage Door Canteen, a Broadway theatre café that catered to soldiers, sailors, and marines. The Association also donated money to the Red Cross. During the first 20 years of its existence, surplus milk had been a perennial problem, but during the war years the Association had difficulty satisfying contracts--and still had to contend with low milk prices that usually resulted from surpluses. Federal subsidies helped, but they were lifted at the close of the war, forcing Maryland & Virginia to contend with the usual forces of supply and demand in the marketplace.

Following a brief recession at the end of hostilities, the U.S. economy soared in the post-war years, and so did Maryland & Virginia, as returning servicemen married and began raising the baby boom generation, which would drink massive amounts of milk. To support members it opened a pair of equipment operations in Frederick, Maryland, by the end of the 1940s. Expansion continued in the 1950s, spurred to some extent by the introduction of new technology in the dairy industry. For example, the first bulk farm tank came into use in the early 1950s. Prior to this, farmers had to store their milk in cans for transportation to processing facilities. Members took advantage of the new bulk tanks and in the summer of 1951 the Association established two truck routes to service 14 farm tanks, the operations of which ranged in capacity from 200 to 600 gallons. In another important industry development, processors were now also allowed to use chemical sterilization methods on their milking equipment rather than rely solely on steam. The Association also expanded during this period. It acquired Embassy Dairy in 1954 and the plant began to process members' surplus milk. Maryland & Virginia's processing capacity was bolstered even further a year later when Olney Acres' manufacturing plant was purchased in Laurel, Maryland. The addition of these two plants solved the long-time problem of what to do with surplus fluid milk: It could now be converted into storable products, thereby taking fluid milk off the market and supporting prices.

Marva Maid Plant Built in 1962

In 1962 Maryland & Virginia began the construction of the Marva Maid plant in Newport News, Virginia. When milk processing began a year later, Maryland & Virginia was able to extend its marketing reach to Virginia's Tidewater Region. The 1960s was also a period of consolidation in the dairy industry, as a number of cooperatives merged, such as the Middle Atlantic Diary Council. Maryland & Virginia worked with other associations when a drought led to lower milk production. Unable to provide enough milk to its processing plants, Maryland & Virginia worked with other co-ops to process their excess milk. Furthermore, the Association joined forces in 1968 with Inter-State Milk Producers' Cooperative and Maryland Cooperative Milk Producers, forming the Pennmarva Dairyman's Federation to serve as a common marketing agency.

The 1970s saw significant milk production increases across the country. Maryland & Virginia expanded its operations during this time by acquiring Colony Farms Dairy in 1971. It was then merged with Marva Maid. Another important development came in 1976 when Maryland & Virginia became affiliated with the Land O'Lakes butter operation.

Milk production increases and further expansion continued into the 1980s. The Laurel plant added new receiving facilities, and to relieve the problem of surplus milk the Association joined with others to develop a method for freeze-drying milk solids. In addition, members took advantage of two government programs that kept milk supplies in check: the Dairy Diversion program, through which farmers received payments for lowering production in 1984 and 1985; and Whole Herd Buyout (or the Dairy Termination Program), which paid farmers to slaughter their dairy cows and agree to stay out of dairy farming for at least five years. While Maryland & Virginia lost some members in this way, it also added some when Capitol Milk sold its assets to Southland Corporation, the holding company for the 7-Eleven convenience store chain, and its producers became members of the Association. Another important change in the 1980s came in 1983 with the passage of the Dairy and Tobacco Adjustment Act, which opened the door to national advertising and the promotion of dairy products. In 1986 The Middle Atlantic Milk Marketing Agency was formed to handle the co-op's promotional activities, with member farms charged a 15-cent deduction to support the effort.

At the start of the 1990s, Maryland & Virginia's milk production topped the two-billion-pound mark, which resulted from changes at the Laurel Plant in 1992, as the drying, evaporation, and handling facilities were renovated and enlarged. By now the Association's annual revenues were in the neighborhood of $350 million, but despite growth it faced a challenging future. It was losing members in its core territory as dairy farmers had to contend with the rising cost of feed and other essentials while the price their milk fetched remained flat at best. Moreover, the Washington, D.C. suburbs, where dairy farms were once prevalent, had become more valuable for housing developments, and land speculators convinced many farmers to sell their property and their herds and start a new life. As a result, the city's fresh milk supply crept further south and west. The trend continued over the course of the 1990s and by the end of the decade changes were in order for the Association. Maryland & Virginia merged with Carolina Virginia Milk Producers, adding 400 members and increasing the Association's milk production to three billion pounds a year. Later in 1999 the Association also bought Valley Milk Products LLC to handle some of that extra milk.

In January 2000, the Association took another major step by joining forces with Land O'Lakes East and Southeast Milk, Inc. to form the Advantage Dairy Group as an East Coast milk marketing operation. Several months later, two more co-ops, Lone Star Milk Producers and Arkansas Dairy Cooperative Association joined. A year after that, Land O'Lakes looked to take the idea one step further and merge with Maryland & Virginia, Lone Star, and Arkansas Dairy. Essentially Land O'Lakes would be absorbing the three smaller co-ops. The idea did not sit well with Maryland & Virginia members, who immediately circulated a petition to force a special session. In a matter of weeks the merger was scrapped. Nevertheless, the milk industry continued to consolidate.

Maryland & Virginia took its own steps to keep growing. In 2003 it acquired North Carolina's Maola Milk and Ice Cream Co. At the same time it had to contend with depressed wholesale prices, which were continuing to drive dairy farmers out of business. One idea launched by the National Milk Producers' Federation, was Cooperatives Working Together, a private program to trim cattle herds to reduce production and increase prices. Maryland & Virginia also made efforts to cope with low dairy prices by making its manufacturing operations more productive, to the benefit of its members. In 2005 the Laurel plant added robotic palletizing to more efficiently package butter, an investment that the Association expected to pay off in less than two years. In 2006 Maryland & Virginia also increased its production capabilities by acquiring Giant Food's dairy processing plant in Landover, Maryland, which processed 700,000 pounds of milk each day, supplying nearly 200 grocery stores. For the past 30 years, Maryland & Virginia had been the plant's only milk supplier, so in effect the Association would be reaping further benefits from the milk its members produced.

Principal Subsidiaries

Marva Maid Dairy; Maola Milk and Ice Cream; Valley Milk Products LLC.

Principal Competitors

Dairy Farmers of America, Inc.; Dean Foods Company; Land O'Lakes, Inc.

Chronology

  • Key Dates
  • 1920 Incorporation of Maryland & Virginia Milk Producers Cooperative Association, Inc. as a nonprofit entity.
  • 1923 The association converts to cooperative status.
  • 1955 The Olney Acres manufacturing plant is acquired.
  • 1962 The Marva Maid milk processing plant is opened.
  • 1971 Colony Farms Dairy is acquired.
  • 1999 The association merges with Carolina Virginia Milk Producers.
  • 2003 The Maola Milk and Ice Cream Co. is acquired.
  • 2006 Giant Food's plant is acquired by the association.
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