Business Monday

From 1929 to 2015 and beyond, McArthur Dairy’s got milk

A milk carton is shown at McArthur Dairy on Thursday, Feb. 19, 2015.
A milk carton is shown at McArthur Dairy on Thursday, Feb. 19, 2015. MIAMI HERALD STAFF

If television ever comes up with a “Corporate Survivor” series, McArthur Dairy — now 86 years old — would be a winner.

The Miami-based company was founded in 1929, just in time for the Great Depression to kill off many established businesses and put potential milk-consumers out of work.

James Neville McArthur, a Mississippi-born World War I veteran and educator-turned-dairyman, started the company in Hollywood that year: He used a $4,000 loan from his father to buy 20 Jersey cows. Not only did milk prices promptly collapse (from 21 to six cents a quart), but McArthur couldn’t afford to hire any help, so he fed and milked the cows himself, cleaned and filled the bottles and made deliveries on a 120-mile route, according to an account published by members of the McArthur family.

As the economy improved and South Florida’s population mushroomed over the years, McArthur and a herd of other dairies — like Waldrep, Sealtest, Ives, Edgemere, Pinewood and Foremost — covered the regional market, making home deliveries and selling products in neighborhood stores.

Today, however, South Floridians can buy only a few brands of milk and dairy products: McArthur, Borden, Walmart, Publix and some private-label and out-of-state brands. The rest are gone.

“As late as the 1960s, towns and cities in Dade and Broward were ringed with dairy farms,” said Paul George, an author, expert on South Florida’s past, and professor of history at the Wolfson Campus of Miami Dade College.

“There were dairies like White Belt, Home Milk, Milam and the list goes on and on,” George said. But while the region’s enormous population growth pushed up demand for dairy products, “the rise in land prices, expansion of new developments and the growth of supermarkets were their demise. It’s an oddity that McArthur exists after all that.”

Bill Bassett, president of the Florida Dairy Products Association in Tallahassee, a trade group that represents about 15 dairy processors and distributors, pointed out that the dairy today is a major force in the Florida dairy processing sector and plays a key role in South Florida.

“McArthur Dairy has been an anchor of dairy processing in southeast Florida while other plants have come and gone,” Bassett said. “They produce top-quality milk,” he said.

Around 1950, McArthur had the largest single dairy herd in the world — 3,200 cows grazing on a tract of land along the Dade-Broward border. He escaped the land squeeze by later moving them to property he bought in Okeechobee, when land prices there were low.

McArthur managed his dairy business well, making it an enormously successful and profitable enterprise. He was one of the South Florida’s biggest philanthropists, donating $1 million to the University of Miami in 1950, and later contributing another $100,000.

In 1980, eight years after McArthur died, his family sold the dairy to Dean Foods, the country’s largest milk processor. But unlike Burdines, which lost its famous name when it was taken over by what is now Macy’s Inc., Dean — which has about 50 regional dairy brands nationwide — kept the McArthur name intact, realizing that it was a valuable brand in a thriving market. In 1980, Dean also acquired another large dairy, T.G. Lee in Orlando.

Today, McArthur Dairy has a modern processing plant covering nearly two entire blocks on Northeast Second Avenue in Miami, but no cows.

“We don’t own any farms,” said Bill Giovanetti, general manager of Dean Foods’ Florida Division, which includes McArthur and T.G. Lee Dairy. “We buy our milk from about a dozen independently owned dairy farms around Lake Okeechobee. They sell their milk to a co-operative, which chills the raw milk, puts it in tanker trucks and ships it to us.”

One of the dairy farms that supplies McArthur Dairy through the co-op, McArthur Farms Inc., is still owned by members of the McArthur family.

“We have 200 employees in Miami and we ship products to an area stretching from Key West and the Caribbean in the south, to Fort Pierce and Sarasota in the north,” said Giovanetti, who started working for Dean Foods in Orlando in 1985 as a truck driver and route salesman.

Giovanetti, who took over the Florida regional job about five years ago, is not quite a Florida native himself — he moved from Cincinnati in 1968 — but he attended primary and secondary school in Orlando, and he studied business at the University of Central Florida. While at UCF, he was a star football player and one of the first to be inducted into the UCF Athletics Hall of Fame.

Now Giovanetti travels often between Miami and Orlando, overseeing both companies and a total work force of 700. McArthur employees average between 10 to 15 years with the company, he said.

Despite the reduced number of South Florida milk producers, McArthur still faces sharp price competition. Publix, for example, has its own processing plant and prices its products below McArthur’s.

“With all the competition we have, people still look for McArthur today because they know our brand and trust our products and quality,” Giovanetti said. “We say that McArthur products have been on the tables of almost everyone who grew up in South Florida, and it’s true.”

HOW IT WORKS

McArthur operates out of what was the family-owned dairy’s plant in Miami, which was for its time one of the most modern in the country. Since taking over the company in 1980, Dean Foods has invested heavily to expand and modernize the facility and broaden McArthur’s market reach.

McArthur’s sprawling processing plant east of I-95 is easy to spot. Its tall, shiny milk storage towers can be seen blocks away.

Tanker trucks arrive at the Miami plant seven days a week, said Robert Megee, McArthur’s plant manager. Most personnel work five days a week on three shifts, but some staff work on weekends to receive milk from the co-op. “Cows produce milk seven days a week, so we have to be here to receive it seven days a week,” said Megee, who has worked at McArthur for 29 years.

The raw milk is chilled to 30 degrees F or less before it leaves the co-op, and is shipped in insulated tankers that keep it cool even under the hot sun.

Standing in the milk reception area, Megee explained that the tanker trucks each carry about 6,000 gallons of raw milk. The milk is pumped out in about 17 minutes and travels to one of four raw milk silos, which can hold a total of 180,000 gallons and keep the milk chilled.

“We usually receive 17 tankers a day, but that number can get up to 20,” Megee said.

The chilled milk is then pumped into pasteurization tanks, which raise the temperature of each batch to 161 degrees F for 15 seconds, then rapidly cool it down. After this, the milk is pumped to a separate unit for homogenization.

Each product made from the raw milk — two percent, one percent, skim, heavy cream — is packaged in separate runs. On a recent day, production lines among the plant’s gleaming stainless steel containers were filling and sealing thousands of half-pint containers with one percent low-fat milk destined for schools, cruise ships and hotels. Another line was filling and capping gallon containers of milk, while at another station, workers were filling five-gallon bulk plastic containers (called “cows”) for restaurants, cruse ships and food service companies.

Machines, containers and floors are constantly cleaned and McArthur sprays disinfectant on the floor at each door connecting different sections of the facility to avoid carrying any contamination from one place to another.

And at McArthur, no one cries over spilled milk — which is a common phenomenon at a dairy. Teams simply clean it up quickly.

Products move from the packing sections on a system of rails to an enormous warehouse kept at 36 degrees.

McArthur runs three shifts each workday so it can build enough inventory of each product to meet normal demand from customers and special orders. Tractor-trailers back into loading bays along one wall of the warehouse to pick up customer orders.

On a recent day, they were loading a range of McArthur milk products, plus McArthur orange juice and McArthur’s Fruit Rush fruit-flavored drinks.

Also waiting to be loaded were stacks of eggs, cartons of Tropicana orange juice and other products not made at the dairy.

“We primarily make milk products and fruit-flavored drinks under our brands, but we also make products under private labels for customers,” Giovanetti said. “And as for the eggs and other items, since we have an extensive distribution system, we help out some customers by supplying them with what they need.”

THE CUSTOMERS

For American dairies, home delivery disappeared by the late 1970s.

“We have over 40 trucks making wholesale deliveries in Miami, plus larger trailer trucks,” Giovanetti said. “And our distributors have another 45 or 50 trucks.

“We have a strong customer mix. Our products reach about 1,500 to 2,000 retail outlets,” he said.

Customers include large and small supermarket chains, drugstore chains, schools, dollar stores, hotels, restaurants, hospitals and cruise lines.

McArthur does not reveal the names of its private label customers, nor does it release financial data. However, Dean Foods, in its annual report, said that Walmart is one of its biggest private label customers in some parts of the U.S.

In the Caribbean, McArthur has a dominant presence, the Dean executive said. Using a key distributor, Cream-O-Land Dairy/Island Dairy, McArthur products reach Aruba, the Cayman Islands, the Bahamas, Bimini, Antigua. Anguilla, St. Kitts and St. Barts, to name a few.

The distributor ships McArthur products to customers each week in refrigerated containers.

“McArthur makes about 70 percent of sales directly, and 30 percent through distributors,” Giovanetti said. “And gallon and half-gallon containers of milk represent the lion’s share of our business,” he added.

SURVIVING CHALLENGES

Since Dean took over McArthur in 1980, the Miami dairy has survived other challenges, among them a fire at its Miami processing plant in 1987 that caused $1 million in damages.

In 1990, T. J.Lee and McArthur agreed to pay a $1 million fine in response to U.S. Justice Department charges that the companies engaged in bid rigging of school milk contracts in eight counties, none of them in South Florida.

Dairies have also had to address health concerns from some consumers. For many years, they have produced low-fat and fat-free products. At the same time, however, milk producers stress that milk remains an excellent and tasty source of nutrition and protein.

McArthur and other dairies throughout the U.S. are battling to maintain steady sales volumes.

McArthur’s parent company, Dean Foods, had net sales of $9.5 billion last year, and warned that it expected a decline in volume this year.

“Over the last 10 years milk consumption has dropped off as consumers have gravitated toward items like Silk, Almond Breeze and similar products,” Giovanetti said.

To combat this, McArthur has promoted its highly popular TruMoo line, launched a new TruMoo protein drink in two flavors, and continues to support its standard milk products as fresh, healthy basics for every family. It also is promoting its line of Fruit Rush brand drinks.

“Our production averages about 35 million to 40 million gallons a year of milk products, juice and Fruit Rush,” Giovanetti said. “For this year, sales will be at parity with 2014.”

THE COMPETITION

McArthur works in a highly competitive market.

Big supermarket chains like Publix produce their own milk, and at small markets, convenience stores and other retail outlets, McArthur fights for cooler space with Borden (Velda Farms) and lesser-known brands.

At Publix, the store brand (made at Publix’s own processing facilities) costs less than similar McArthur products. Still, the chain carries a variety of McArthur products.

Price is important, but is not the sole determining factor.

At a Walmart store in Pompano Beach, a gallon of Walmart’s Great Value brand Vitamin D milk sold for $3.68, while a gallon of McArthur Vitamin D milk on the next cooler shelf was priced at $5.98.

To give customers something extra, McArthur has a sticker saying that its opaque plastic container “Keeps light out and freshness in.” McArthur makes its own large plastic containers in Miami and asserts that the opaque option allows milk to last longer in your refrigerator.

For a half gallon, Walmart charged $2.44, while McArthur was priced at $3.38.

At Publix, a half gallon of Publix fat-free milk cost $2.63 compared to $3.45 for McArthur.

And one quart of Publix fat-free milk was $1.79, while McArthur was priced at $3.09.

Lydie Pierre, a mother of two who works with organ transplant patients at the University of Miami Health System, is well aware of the price difference. “When I need milk, I buy a gallon of McArthur whole milk at Publix,” said Pierre, who lives in Plantation. “I know it’s more expensive, but I like it. I know the brand.”

“McArthur is way more expensive,” said Marjory Ferdinand, a medical assistant who lives in North Lauderdale. “I like the way its tastes. It has a better natural flavor,” said Ferdinand, who usually buys the gallon size of McArthur two percent milk for her family of five.

The owner of a convenience store at a Valero gas station in Broward County said he doesn’t have enough space in his tiny store for regular milk. “But I buy McArthur at CVS and get a $1 coupon good for another purchase.”

McArthur relies on distributors for about 30 percent of its sales, and distributors, in turn, say they rely on McArthur to supply them with the fresh, quality products they need on time.

Tampa-based Sunny Florida Diary has distributed McArthur products in South Florida for 13 years.

“We carry the full line of their products and their private label products,” said Sal Guagliardo, the company’s owner. “We reach about 750 retailers, and supply drug stores, dollar stores and healthcare centers. In the vast majority of these small stores, the distribution costs will be higher so customers know the price will be higher. But they see the value, and they buy it,” Guagliardo said.

“In my experience, McArthur is the No. 1 dairy brand in South Florida.”

Cream-O-Land Dairy in New Jersey is a major U.S. distributor and works through its Florida subsidiary, Miami’s Island Dairy, to reach the Caribbean, a key market for McArthur.

Cream-O-Land ships McArthur products to about 30 islands in the region via refrigerated containers every week, said Jay Schneier, who runs the company with his brother, Robert, and is the fourth generation to manage the family-owned enterprise.

It moves its own products and McArthur’s in South Florida, for example to the Presidente supermarket chain.

“We buy the full gamut of their products,” said Schneier. “They are very careful about quality, and when they offer a discount, the movement is phenomenal. I’ve never seen anything like it.

“McArthur is like a magic name in the region,” said Schneier. “They sell 30 gallons of milk for one gallon sold by Borden.”

A major factor in McArthur’s success has been its long-term market presence and its consistent focus on its core products.

“They had the ‘first mover advantage,’ they got in first, gobbled up the market share, and developed a brand that resonated, that was synonymous with milk,” said Jerry Haar, professor of management and international business at Florida International University’s College of Business.

“A well-managed company, they were acquired by Dean Foods, a big boy that could inject capital, management expertise, IT infrastructure and marketing support to ensure the survivability of McArthur,” Haar said.

“Additionally, McArthur stuck to its knitting — milk.”

McArthur Dairy

Business: Converts raw milk from South Florida farms into a variety of branded milk products, including whole milk, 2 percent, 1 percent and fat free; TruMoo chocolate milk; heavy cream; half & half; buttermilk, eggnog (seasonal) and other milk products. Also makes orange juice, iced tea and juice-flavored drinks.

Headquarters: 6851 NE 2nd Ave., Miami

Founded: in 1929 by James N. McArthur in Hollywood. Acquired by Dean Foods in 1980.

Management: Bill Giovanetti, general manager for the Florida division of Dean Foods, with responsibility for McArthur Dairy and T.G. Lee Dairy in Orlando.

Employees: 200

Customers: Sells directly and through distributors to large and small grocery and drugstore chains, convenience and dollar stores, food service companies, schools, hotels and cruise ships. Also packages milk for private-label customers.

Ownership: McArthur is owned by Texas-based Dean Foods, a publicly traded company.

Website: www.mcarthurdairy.com and www.deanfoods.com

Source: McArthur Dairy

McArthur Dairy and McArthur Farms: a timeline

1929: After eight years as principal at the Dade County Agricultural High School in Miami (now Miami Edison High School), James Neville McArthur saw the booming population growth in Miami and decided to open a dairy business. With a $4,000 loan from his father, McArthur bought 20 Jersey cows and started a farm in Hollywood.

1939: The farm recovered as the economy once again began to grow after the Great Depression, as did the demand for milk. McArthur Farms now had more then 1,000 producing cows.

1945: At the end of World War II, the farm had grown to over 1,000 acres and more than 5,000 cows were producing milk every day. McArthur Farms was merged with McArthur Dairy, set up to process raw milk from the farms and creating a vertically integrated business.

1951: McArthur opened a state-of-the-art dairy plant in Miami. He invested $250,000 in equipment and the new facility was able to process 30,000 gallons of milk per day. It also made a million gallons of ice cream each year, and visitors came to the plant’s dairy bar and observation balcony. McArthur provided housing to his workers and each employee received two quarts of milk a day free of charge. A local newspaper described McArthur Farms as “a business with a heart.”

1950s: Through the J.N. McArthur Foundation, McArthur donated $1 million to the University of Miami for its School of Engineering building. He later donated another $100,000 to equip the building. He also donated funds for the McArthur Hall of Science and Technology at Miami-Dade Junior College (now Miami Dade College). He donated 40 acres of land in Hollywood for what would become McArthur High School and granted a $1,000 scholarship to a graduating student majoring in Latin American studies. (Other donations over the years included gifts to Mississippi State University, where he earned a bachelor’s degree in agriculture; to the University of Florida, where he earned a degree in education; and to Miami Shores Presbyterian Church.)

1958: New McArthur Dairy plant was opened on Southeast Second Avenue in Miami.

1959: McArthur moved his farm to Okeechobee County because of the growing population in the region and attractive land prices in Okeechobee.

1950s and ’60s: Drivers of McArthur Dairy trucks packed them with ice to keep products fresh for home delivery.

1961: The Miami Herald wrote: “A humble person ... he’s always had a deep love of the land. The distinguished gentleman and civic leader, who gave a million dollars to the University of Miami for a School of Engineering and 40 acres for a high school that bears his name, says sincerely, ‘I owed it to the community. And as long as I live, I am going to contribute to its welfare.’”

1963: The Palm Beach Post-Times said that McArthur’s business was the largest privately owned dairy in the nation and one of the largest in the world.

1972: McArthur died at age 79.

1980: McArthur Dairy was acquired by Dean Foods. The McArthur family still owned and managed McArthur Farms and other businesses.

SOURCE: “James Neville McArthur – A Man, a Legacy and 75 years of Business with a Heart,” published by the McArthur family

  Comments