Horizon Organic Holding Corp., the nation’s leading producer of organic dairy products, announced today the acquisition of Devon, England-based Meadow Farms Ltd., the leading processor and supplier of organic fluid milk in the U.K. The purchase includes a processing and packaging plant.
Meadow Farms, with sales of approximately 16 million British pounds ($24 million at today’s exchange rate) for its fiscal year ended May 31, 2000, produces private label organic milk for leading supermarket chains in the U.K. Meadow Farms sales account for more than 60 percent of total organic fluid milk sales in the U.K. During the past five years, Meadow Farms has enjoyed annual compounded growth of 50 percent, which is expected to continue in the near term.
Meadow Farms has built a strong presence in the U.K. by establishing relationships with leading suppliers and retailers. Horizon Organic will continue to supply private label products under existing multi-year contracts to major grocery chains and, at the same time, will build on these relationships to introduce Horizon Organic™ branded milk in the U.K. Several current customers have expressed interest in branded organic milk to serve as a price reference and premium product.
According to Mark Retzloff, president of Horizon Organic International, the acquisition is synergistic with Horizon Organic’s Wales-based Rachel’s Organic Dairy division, acquired last year. With a larger operating base, the company should ultimately realize lower general and administrative costs due to economies of scale and increased market share.
The acquisition also is consistent with Horizon Organic’s international growth strategy. The combined sales of Rachel’s, Meadow Farms private label business and Horizon Organic U.K. branded business shortly will represent nearly a quarter of Horizon Organic total revenues. The acquisition also provides a platform to propel the company into a leadership role in the U.K., positioning it for further growth in both the U.K. and Europe.
The success that both Meadow Farms and Rachel’s have enjoyed to date is a reflection of growing consumer interest in purchasing organically produced foods. The U.K. organic dairy market is expected to continue rapid growth, outpacing the United States. With excess capacity at the processing plant and the ability to expand quickly and efficiently, Horizon Organic is well positioned to meet growing demand.
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“This acquisition will allow us to establish a strong presence for Horizon Organic branded products in the U.K. where consumer interest in organic food products is well established. The U.K. also is a market where we have a track record of making profits consistent with our long-term goals. While the transaction will have negligible impact on our P&L this year, we are very excited about the impact it is likely to have on our profitability in 2001,” said Chuck Marcy, Horizon Organic president and chief executive officer.
“Furthermore, the acquisition is consistent with the five-point plan we put in place during the first quarter of fiscal 2000. It allows us to expand retail availability, introduce new products, build the Horizon Organic brand, further relationships with key partners, and increase productivity while reducing costs. We will be able to achieve these goals with our already-established U.K. team led by Jeremy Deacon, managing director of Horizon Organic Dairy Ltd. Jeremy, who has extensive marketing experience in the European dairy industry, led our successful acquisition of Rachel’s. He and his team will oversee the integration of Meadow Farms into the Horizon Organic U.K. operation and will manage our international business.
“He will be joined by Don Gaidano, who will assume the new position of vice president of international finance and finance director for our U.K. business. We will be announcing the appointment of a new headquarters-based CFO within the next two weeks. We are excited about these changes as well as the outlook for our international business and the continuous acceptance of organic foods in the U.K.,” concluded Marcy.
Horizon Organic produces and markets the leading brand of certified organic milk and a full line of refrigerated, certified organic dairy products. The company also markets certified organic eggs and certified organic juices under the Horizon Organic™ label as well as The Organic Cow of Vermont® brand of organic dairy products in the northeast region of the United States and organic yogurt under the Rachel’s Organic™ brand in the United Kingdom. In addition to its company-owned farms, Horizon Organic has established a network of organic milk producers, processors and distributors that allows consumers to purchase Horizon Organic products in conventional supermarkets and natural foods stores located across the United States and in the U.K.
Horizon management has scheduled a conference call for Thursday, June 1, 2000 at 11:00 a.m. Eastern Time to discuss the acquisition. To hear the call in a listen-only mode, participants must dial (212) 346-6537 and reference Horizon Organic Dairy, five minutes prior to the call. If unavailable to dial into the call, participants may listen to the live web simulcast by logging on to the Horizon Organic web site at www.horizonorganic.com and clicking on Analysts’ Conference Call Simulcast. The web replay of the call will be available on Thursday, June 1, 2000 at 2:00 p.m. ET and also may be accessed from the Horizon Organic web site.
For more information, please visit the company’s web site at www.horizonorganic.com.
Note on Forward-Looking Statements: This news release contains forward-looking statements that involve risks and uncertainties. Future events may differ materially from those discussed herein, due to a number of factors, including uncertainties related to the company’s ability to continue strong growth, to achieve distribution efficiencies, and to expand domestically and internationally, as well as increased milk costs, inbound and outbound freight and distribution costs, higher costs related to new-product introductions and increased personnel costs. These factors are more fully discussed in the company’s Annual Report on Form 10-K for the year ended December 31,1999.