Monopoly
prompts concerns

The loss of Foremost Dairies will
give Meadow Gold a lock on dairy
processing operations in the islands

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The demise of Foremost Dairies-Hawaii has handed its rival Meadow Gold a monopoly on dairy processing in the state, and that has milk consumers and dairy producers feeling vulnerable.

Though dairy experts said they see no imminent reason for Meadow Gold to hike prices, the absence of its longtime rival also means there is no reason not to.

"That has to raise some concern. With two processors you had some competition and that was, of course, good for consumers," said Chin Lee, dairy specialist at the University of Hawaii-Manoa College of Tropical Agriculture and Human Resources.

"The hope now is that Meadow Gold can show itself to be a good corporate citizen. Sometimes that happens," he said.

Foremost conceded the field on Monday, announcing that it would shut down manufacturing and distribution operations effective Nov. 13, citing deteriorating conditions at its Kalihi manufacturing plant.

The company and representatives from Hawaii Teamsters and Allied Workers Local 996 met briefly yesterday to discuss severance packages for the 120 union workers, but did not reach an agreement.

In a statement last night, the union said Foremost was making attempts to remain in business, perhaps as a non-union shop. But company spokeswoman Lynette Lo Tom said Foremost was trying to keep the brand alive, but would definitely not continue to operate the plant.

"It's sad for everybody involved," Tom said. "If there was any way they could keep going, they would."

Meadow Gold has declined any detailed comment on the matter other than pledging to "do everything feasible" to supply local milk consumers with quality milk at a fair price.

But that's a slim reed for some shoppers already worried about rising price tags on a key household item.

"That can't be good. Monopolies aren't known for being good for consumers," housewife Tanya Wong said while scanning milk prices at a local Foodland store. Wong, who has three milk-loving kids, says she can hardly face the supermarket dairy section these days.

"Prices keep going up and up. It's depressing," she said.

Milk prices have risen nationwide, mainly due to rising costs of livestock feed linked to higher transport costs. Wholesale milk prices in Hawaii rose 18 percent in July from a year earlier, according to the state Department of Agriculture, and a one-gallon jug of "island fresh" locally produced milk now sells for about $7.60 a gallon in local stores.

But prices would likely have risen even further if not for the competition between the two milk processors, said Steve Dulce, economic development specialist in the department's milk control section.

"With that competition gone, who knows? Meadow Gold may face further price pressure in the future, and with Foremost out of the way, more of that may be passed to consumers," he said.

A glance at the supermarket dairy section would seem to indicate tough competition for a processor like Meadow Gold. A number of cheaper dairy brands such as Best Yet, Lucerne and Dairy Glen pack the shelves, often selling for half the price of Meadow Gold's "island fresh" milk.

But those other brands are actually processed mostly by Meadow Gold and placed in the other brands' cartons under agreements "presumably favorable" to Meadow Gold, said UH's Lee.

One of state's largest milk consumers is bracing for a possible higher bill in the future.

The state Department of Education's milk-supply contracts with Foremost and Meadow Gold are due to expire at the end of this year, after which the department will put the contracts out for bid again, this time with only one likely winner.

"If there's only one company out there now, prices may be higher. We have to face that," said Gene Kaneshiro, school food services manager.

"But we doubt Meadow Gold will be so irresponsible as to take our kids to task. We hope to get a fair price."

However, Kaneshiro said Meadow Gold's ability to fill the production and distribution void left by Foremost could be even more critical than pricing.

The Education Department is required under the National School Lunch Program to serve milk to public-school students and it distributes 150,000 half-pint cartons across the state each day.

Since late August, Meadow Gold has been processing milk for its rival, which Foremost then put in its own cartons and distributed to its customers. Kaneshiro said that after a "herky-jerky" beginning, Meadow Gold appears to be handling the load.

But the real test will come in November, when Meadow Gold takes on the added distribution burden as well.

"We're very concerned. We'll see if they can handle it. We hope so," Kaneshiro said.

Foremost's closure also eliminates a major wholesale buyer of locally produced milk, a potential concern for the islands' dwindling number of dairy farmers.

Foremost and Meadow Gold are required to pay a premium for locally produced milk under state price controls designed to sustain Hawaii's dairy industry in the event of a disruption in mainland supplies.

But the high costs plaguing the industry and lower mainland milk prices have winnowed the number of Hawaii dairies.

Last month, the number of Oahu dairies shrunk to two with the closure of Evergreen Hillside Diary in Waianae. Today, about 55 percent of the state's milk is from the mainland, and that percentage is growing.

Robie Ann Dorwelo, manager of Pacific Dairy, also in Waianae, says business is "extremely tough" and could get worse if Meadow Gold opts for more mainland milk in the future.

"That could happen. There is no law saying they have to buy local milk," she said. "We just have to wait and see."

Lee said the problems faced by local dairy producers are more of a concern than the loss of Foremost because Hawaii needs a dairy industry as a buffer against possible mainland supply cut-offs.

"Hawaii still has a company doing processing. That's the bright side. But the local dairy problems are a far greater issue right now," he said.

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