No one thought farmers could work together — then came Land O'Lakes

In June of 1921, 350 farmers meeting in St. Paul voted unanimously to form a dairy cooperative. The name "Land O'Lakes" didn't come along for a few more years, but a quintessential Minnesota brand had been born.

One hundred years later, what started as the Minnesota Cooperative Creameries Association has grown to a $14 billion-a-year business in dairy, animal feed and seed-and-crop products. Now headquartered in Arden Hills, Land O'Lakes sits at No. 219 on the Fortune 500, with nearly 2,500 dairy and ag producers and nearly 1,000 smaller co-ops and independent retailers as members, and a worldwide customer base.

"That cooperative model is our very foundation, the fact that we are owned by our farmer members, by our local retail network, I think it's so powerful," Land O'Lakes president and CEO Beth Ford said in an interview last week on the Arden Hills campus. Its low brick buildings were mostly empty of people, with most of the headquarters workforce working from home.

To kick off the celebration of the company's centennial, Ford is holding an employee town hall on Wednesday, and dedicating a new bronze sculpture of a farmer on the headquarters campus. That aligns with the company's recent moves to refocus its public image on its farmer members; last year, Land O'Lakes quietly removed the image of a Native American woman that graced its dairy products for decades, and elevated the term "Farmer-Owned" on its packaging.

The company will also release its midyear earnings on Wednesday, at a time of booming profits for U.S. corporations. Ford said it will be another solid showing, following a strong performance in 2020 fueled by a pandemic-driven surge in butter sales and animal feeds.

"The numbers will look really good," Ford said. "We've had good top-line growth and we've pulled that to the bottom line, and the bottom line looks really good."

Ford issued a few cautions for the remainder of the year. Sales comparisons are unlikely to measure up to the third-quarter of last year, when butter sales shot up as consumers settled in at home for the worst of the pandemic.

Inflation also is driving up production costs, Ford said, especially in transportation and warehousing. Consumers are seeing price increases because of that, but the company is keeping close tabs on price sensitivity.

Ford is also celebrating an anniversary this week: She took over the top job at Land O'Lakes on Aug. 1, 2018, after a decade with the company in several management positions. The first openly gay woman to serve as a Fortune 500 CEO, Ford has emerged as a high-profile voice for the company, appearing on "60 Minutes" and in the New York Times and other national publications.

Ford has used that platform to call for new investments in rural America, especially emphasizing the need for better broadband connectivity but also pointing to lack of housing options, fewer health care choices and other factors. The pandemic made those needs more apparent than ever, she said.

"Over 90 percent of farms are still family owned, so you have families trying to raise their children and have a life there," Ford said. "It's hard to do that when you feel that your community is deteriorating."

Land O'Lakes has tried to set an example by establishing what it calls the American Connection Project, in which it and partner companies have turned on public Wi-Fi at nearly 3,000 co-op locations in 49 states. Ford said she's been encouraged by signs that federal money to improve rural broadband linkages is likely to be part of an infrastructure package advancing in Congress. The project is also funding 50 fellowships for young people interested in moving to rural communities and working on improving local connectivity.

"We want them to go back and take the baton — now that we've got the funding, what do we do next?" Ford said.

Decades of growing financial success at Land O'Lakes are in contrast to the longstanding struggles of individual dairy farmers in a contracting market.

In 1996, Land O'Lakes marked its 75th anniversary with $3.5 billion in sales, which now represents a mere quarter of last year's receipts. Its $119 million in profits have more than doubled since then.

An analysis by U.S. Farm Bureau economist Michael Nepveux highlighted a steep fall in the number of licensed dairy operations in the U.S. Since 2003, when the U.S. Department of Agriculture first started compiling data, the total number declined from 70,735 to 31,657. The number of dairy farms dropped by 2,550 in 2020 and 3,261 in 2019.

"That's a real tension. It's a consolidating marketplace," Ford said, adding that "it has been accelerating, especially in Wisconsin, and in other areas."

Land O'Lakes works to help small dairy farmers by pushing for policies that help small producers survive, and advises farmers on ways to cope with market forces and manage risks, Ford said. But "in the end, what we want to do is drive that profitability for the portfolio that allows us to have that profit go back to that dairy farmer."

The small group of dairy producers who embarked on the cooperative in 1921 faced widespread skepticism that individualistic farmers were capable of looking past their own bottom line and functioning as a true cooperative, according to a history of Land O'Lakes published in 1998 by the International Directory of Company Histories.

But the following year, Congress passed a law allowing cooperative agencies to market farm products, and "the first year's returns showed a slender profit," according to the published history. The young cooperative pioneered the production and sale of sweet cream butter — made from cream before it turned sour rather than after — which cost more to make but was a hit with the public.

In early 1924, the cooperative launched a contest in which the public was asked to suggest a product name that was catchier than "Minnesota Cooperative Creameries Butter."

Two people separately suggested "Land O'Lakes," and split the first prize: $500 in gold. The butter, conveniently packaged in quarter-pound sticks, became such a success with consumers that by 1926, the company itself adopted the same name.