Foremost closing its Kalihi dairy operation
By Sean Hao
Advertiser Staff Writer
Foremost Dairies-Hawaii yesterday said it will lay off 120 people and permanently shutter its Kalihi factory in November, leaving Meadow Gold Dairies as Hawai'i's only major local milk and dairy product producer.
The decision to close the 51-year-old company comes eight months after Foremost was sold by House Foods Corp. for an undisclosed amount to a group of investors, including Big Island dairy owner Bahman Sadeghi.
After pumping nearly $2 million into the factory, those investors can no longer afford to make upgrades needed to keep the facility open, Sadeghi said in a statement yesterday.
"It's very disappointing," he added.
The loss of Foremost should have little impact on retail milk prices or supplies, said Chin Lee, a dairy extension specialist at the University of Hawai'i College of Tropical Agriculture and Human Resources.
Nearly half of the milk consumed in Honolulu is now imported from the Mainland, compared with only 20 percent in 1999, according to the Department of Agriculture.
O'ahu's two remaining dairy farmers will sell their milk to Meadow Gold, and they don't expect that will change their sales volume.
"Not at this point," said Robie Ann Dorwelo, administrative manager of Pacific Dairy. "All our milk just goes to Meadow Gold."
Oahu's two dairies have been selling milk exclusively to Meadow Gold since last month, when Foremost announced it was temporarily halting milk processing so it could assess equipment problems at its plant. Foremost continued to distribute milk and other dairy products processed by Meadow Gold under the Foremost brand.
"Unfortunately we did not realize the extent of the deteriorated condition of the equipment and infrastructure, and lack the estimated capital it will take to reconstruct it," Sadeghi said.
As Foremost announced plans to shut down its facility at 2277 Kamehameha Highway, it held out hope that the brand will survive, but did not provide details of what it might do with Foremost's assets.
"We have appreciated the strong loyalty from local consumers and hope to be able to keep the brand alive in Hawai'i," Sadeghi said.
Foremost contends that some of the current equipment problems in the plant were not disclosed by former owner House Foods. Officials for House were unavailable for comment yesterday.
Meadow Gold is now Hawai'i's only milk processor. In addition to processing milk under its own label, Meadow Gold packages milk under other brands.
In a statement, Meadow Gold president Glenn Muranaka said the company will take steps to prevent Foremost's closure from hurting consumers.
"Although Foremost has been a competitor, we are saddened by the impact this closure will have on its employees," Muranaka said. "As a result of today's announcement by Foremost, we will evaluate the adverse impact of the closure and develop plans to do everything feasible to meet the needs of Hawai'i's milk consumers, including our schools, with the highest-quality, most economical dairy products.
Lee, the UH dairy specialist, said the bigger issue for the state is a continued decline in local milk production by farmers.
Milk production in Hawai'i dropped 23 percent from 1999 to 2003. On O'ahu the number of dairy farmers has dipped from five in 1999 to two today.
"Competition is always better," Lee said. But, "it's more a potential issue of whether we have local supply to buy us time" if a catastrophe were to prevent milk imports.
"To me that's a greater issue than losing a processor."
For Foremost workers, the announcement came as a surprise, said Teamsters president Mel Kahele. The Teamsters and Allied Workers Local 996 represents about 110 of Foremost's 120 workers.
"We didn't know they were talking about a complete shutdown," Kahele said. "It just doesn't make sense," considering they just bought the company.
Kahele said union members are scheduled to meet with Foremost officials today to discuss issues such as severance benefits.
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
