Shareholders in Dean Foods have, for the second year running, challenged the dairy group over the supply of organic milk for its Horizon Organic brand.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
A shareholder proposal has been filed, asking Dean Foods to report to shareholders how it is responding to widespread concern that industrial-scale organic dairies, supplying milk for its Horizon Organic brand, violate consumer trust and jeopardise share value.
An active boycott by the 700,000-member Organic Consumers Association has resulted in some US natural food retailers dropping all or part of the Horizon Organic product line.
The shareholder proposal is a by-product of a seven-year debate in the organic industry over the introduction of large-scale factory-farms, milking as many as 2,000-10,000 cows each. It has been alleged by some public interest, environmental, and farming pressure groups that some of these farms are violating current USDA regulations by labelling their products as organic.
In 2005 and 2006, The Cornucopia Institute, a Wisconsin-based farm policy group, filed formal complaints with the USDA against a number of industrial dairies, including allegations that these mega-farms, mostly in the arid West, were violating the law by confining their cattle to feedlots and sheds rather than grazing as the federal organic regulations require. The dairy farms in question include two owned by Dean Foods in Idaho and Maryland and another California farm shipping milk for distribution under Dean’s Horizon Organic label. The Cornucopia Institute is now preparing to seek court intervention in order to compel the agency to investigate the alleged improprieties.
“When consumers pay a premium for organic milk, they generally have the expectation that cows have access to pasture and gain a sizeable percentage of their nutrients from grass,” said Steven Heim, director of social research with Boston Common Asset Management, lead investor-sponsor of the resolution representing institutional shareholders in the resolution process. “Besides complying with the law itself, we question whether Dean’s procurement of milk from factory-farms violates consumer trust and jeopardises the value of its organic brands.”
The shareholder proposal asks an independent committee from the company’s board to review its policies and procedures for its organic dairy products, and report to shareholders on their adequacy to protect Dean’s organic dairy brands and its reputation with organic food consumers. The investors also want to know how the company intends to respond to increasing consumer and media criticism.
Dean Foods has appealed to the SEC for the authority to prevent its shareholders from voting on the proposal.
“Even though the proposal is only asking the company, currently engaged in a nationwide advertising campaign touting the greenness of their organic milk business, to report to shareholders concerning this controversy, Dean has opted to ‘lawyer-up’ and aggressively fight the proposal at the US Securities and Exchange Commission,” said Sister Linda Hayes of the Springfield Dominicans, an investor-sponsor of the resolution. “This is not the kind of transparency that consumers have expected in the organic food industry.”
