Activists Challenge Dean Foods’ Approach to Organics
Is Dean Foods' Horizon facility in Idaho truly organic? (photo courtesy of Cornucopia Institute)
For the second year in a row socially concerned investors have filed a shareholder proposal asking Dean Foods to report on how it is responding to widespread concern that industrial-scale organic dairies supplying milk for its Horizon Organic brand violate consumer trust and jeopardize share value.
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 is the contention of a growing number of public interest, environmental, and farming groups that some of these farms are violating current U.S. Department of Agriculture regulations by labeling their products as organic.
“When consumers pay a premium for organic milk, they generally have the expectation that cows have access to pasture and gain a sizable percentage of their nutrients from grass,” said Steven Heim, director of social research with Boston Common Asset Management, lead investor-sponsor of the resolution.
In June of 2006 Heim and Mark Kastel, The Cornucopia Institute’s senior farm policy analyst, toured Dean’s Idaho farm at Dean’s invitation. “Although the company is making a $10 million investment in additional facilities in the desert-like conditions, and is attempting to paint their facility ‘green’, serious questions remain as to the legitimacy of milking thousands of cows in these conditions,” Kastel said.
The investors contend that in light of the controversy over its factory-farms, the company’s milk procurement practices could have a negative effect on consumer trust in Dean’s organic label. A boycott by the 700,000-member Organic Consumers Association has resulted natural foods retailers around the country dropping all or part of the Horizon Organic product line.
Last year Dean Foods responded to a shareholder proposal expressing similar concerns by filing a formal protest with the U.S. Securities and Exchange Commission (SEC), asking for permission to omit it from Dean’s 2006 proxy statement. The company maintains that where it purchases or produces its milk is the sole purview of its management, and shareholders have no legal right to raise questions of this nature in a proxy statement. The shareholder proponents withdrew their proposal last year to protect their right to refile if disatisfied with Dean's actions regarding their concerns. With this year’s refiling, Dean Foods has again appealed to the SEC for the authority to prevent its shareholders from voting on the resolution.
Leslie Lowe, director of the Energy and Environment Program at the Interfaith Center on Corporate Responsibility in New York, said, “Dean Foods has an excellent opportunity to return value to its shareholders through its investments in the organic industry. But they must respect the ethical beliefs of their organic customers, a very loyal and sophisticated market segment. Otherwise these investments could end up damaging their brand and costing investors dearly.”
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