National dairy co-op to scoop up Kemps

The East Coast dairy company that owns Kemps, maker of Minnesota's most prominent ice cream brand, is selling it to one of the nation's largest dairy cooperatives.

St. Paul-based Kemps said Thursday that its owner, HP Hood, has entered into an agreement with Dairy Farmers of America, but it declined to disclose the price or comment further.

Dairy Farmers of America, a Kansas City-based farmer cooperative, declined to comment on the transaction, which still requires regulatory approval. Massachusetts-based Hood also declined to comment.

The Kemps brand, now known for its slogan "It's the cows," was created in 1914 by a small creamery in southeastern Minnesota owned by the Kemps family. In 1961, Kemps and two other Upper Midwest dairy companies merged to create Marigold Foods. Marigold changed its name to Kemps in 2002, but in 2004 it sold out to HP Hood.

Hood, one of the largest dairy players in the Northeast, bought Kemps to try to expand into a new market, the Upper Midwest, said Harold Waxman, publisher of Ice Cream Reporter, a monthly newsletter. "I wouldn't say Hood is dumping Kemps," he said. "But it may have not reached its targets in the Upper Midwest."

While nationally Kemps is a small player, in Minneapolis-St. Paul it's the leader in the ice cream, frozen yogurt and sherbet and sorbet markets, topping major national brands -- not an easy task for any regional food maker.

In ice cream, the biggest frozen dessert market, Kemps had $13.7 million in sales in the Twin Cities and a market share of 32.9 percent for the 52 weeks ending March 20, according to SymphonyIRI, which tracks supermarket sales excluding Wal-Mart and club stores. Edy's, a national brand owned by consumer products giant Nestlé, was second in the Twin Cities with a 20.35 percent share.

"Kemps is a really great brand that is well-known in its market," Waxman said.

Kemps employs about 900 people in Minnesota and has two milk processing plants in Duluth and Minneapolis; an ice cream and milk operation in Rochester; and a facility in Farmington that makes yogurt, sour cream and cottage cheese.

Dairy Farmers of America is one of the nation's largest agricultural cooperatives with annual revenue of $9.8 billion in 2010 and 16,000 farmer members, including 1,400 in Minnesota. It has two plants in Minnesota, one in Zumbrota that makes cheese and another in Winthrop that produces non-fat dry milk and other milk-based food ingredients.

Still, Dairy Farmers of America is the third-largest dairy co-op in Minnesota behind Arden Hills-based Land O'Lakes and New Ulm-based Associated Milk Producers, said Lee Egerstrom, an economic development fellow and cooperatives expert at Minnesota 2020, a think tank.

'Makes a lot of sense'

"Kemps will overnight give them an enormous presence in Upper Midwest food markets," Egerstrom said.