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June 26, 2012

Say Cheese! The Cabot Labeling Saga Continues

CabotWelcome to Cheesegate: Cabot Creamery's decision to change its logo is still making waves (or should we say wheyves?) in the Green Mountain State.

In case you missed the kerfuffle last week: Cabot dropped the state, and name, of Vermont from some of its packaging. The company says it began quietly making the change about a year ago to better comply with state rules. The rules stipulate that three-quarters of a dairy product's main ingredient must come from Vermont in order for a company to use the state in its marketing.

Now, instead of imposing Cabot's name over an outline of the state of Vermont, the new logo features the silhouette of a green barn and the words, "Owned by our farm families in New England and New York since 1919."

The change ruffled more than a few feathers. As the Burlington Free Press reports today, the logo change churned up a fair share of political debate. Gov. Peter Shumlin is bemoaning the change, saying in a news conference last week, "I believe that when we have the Vermont label on Vermont Cabot, that's a good thing for Vermont farmers and a good thing for Vermont's value-added food products." Meanwhile, challengers for the attorney general's office played the Cabot card in accusing AG Bill Sorrell of pushing too hard on one of Vermont's iconic brands — to which Sorrell responded that Cabot made the label change on its own. 

Adding to the quagmire is this latest accusation, from dairy farmer Karen Shaw of Hardwick: Shaw says the new label is still inaccurate. She claims that, contrary to popular belief, Cabot's parent company isn't really a farmer-owned cooperative. Although Cabot was originally a Vermont dairy cooperative, the beloved cheesemaker hitched its wagon to the multistate Agri-Mark cooperative in 1992. (Agri-Mark is incorporated in Delaware and headquartered in Massachusetts.)

Agri-Mark collects milk from dairy farmers throughout New England and New York. While Cabot still operates processing plants in Vermont, much of the creamery's milk crosses state lines, and some products (such as Cabot butter) are made out of state. 

Shaw was a founding member of the Agri-Mark co-op in 1980 and shipped milk to Agri-Mark for 17 years. But in the early 1990s she began pressing the co-op for more information about how much Agri-Mark's top executives were paid, and asked for access to Agri-Mark's membership rolls. She eventually took the request to court; Rep. Peter Welch was among the lawyers who represented Shaw pro bono.

A Vermont judge initially sided with Shaw, allowing her access to Agri-Mark's records, but the co-op appealed. Because Agri-Mark is incorporated in Delaware, the case eventually landed in the Delaware Supreme Court, which overturned the Vermont ruling and denied Shaw access to the records.

"Agri-Mark’s defense was, 'We are not a cooperative, and she is not an owner, and therefore she is not entitled to this information,'" interprets Bob Gensburg, a St. Johnsbury lawyer who also represented Shaw. 

The court found that because Shaw was not a shareholder — only the board of directors, which is elected by Agri-Mark farmers, hold stock — she did not have the right to review certain financial documents. The court decision reads, in part, that the appellants' argument, that "they should be recognized as 'stockholders' of Agri-Mark since they are the 'real' owners of the cooperative," is unconvincing. ... "Our corporate law has traditionally limited the rights of stockholders to stockholders of record."

The decision did say that Shaw could assert certain rights as an "equity owner" of the corporation, but that those rights didn't extend to those of record stockholders. Gensburg wrote in an email, "In other words, according to the court, Karen and the other Agri-Mark members are not Agri-Mark's 'real owners.'"

Obviously, Agri-Mark interprets the decision differently. Spokesman Doug DiMento says Agri-Mark members "wanted their privacy," which is why the co-op limited Shaw's access to membership records. The co-op is "100 percent owned by dairy farmers," says DiMento. She points out that democratically elected members of the board of directors have access to budgets and other sensitive financial information. He adds that the past five years have been the best ever in the history of the co-op, and Agri-Mark has returned record profits to its members. 

"The co-op is voluntary," DiMento adds. "If you don't want to work with the other farmers, you don't have to."

Shaw's argument hasn't made much headway in the 17 years since the court decision — though the "Agri-Mark isn't farmer-owned" sentiment crops up periodically. Royalton farmer Steven Judge invoked this in 2011 in a letter to the Herald of Randolph. Judge shipped milk to Agri-Mark for three or four years in the late 1980s and early '90s, and remembers an "underlying frustration" growing among some farmers at the time about the "lack of transparency" in the company.

Later, when he began marketing milk for a smaller, independent co-op, he began attending meetings in Boston where Cabot's sales team arrived in the "most expensive suits and most expensive hair-dos." He shrugs off the co-op's assertions of democratically elected board members, who in his opinion are groomed and selected "based upon their willingness to go along with the program."

"Meanwhile, the farmers were going out of business," Judge remembers. "It seemed to me that there was a real lack of justice."

As for the labeling kerfuffle, Judge concedes that it probably doesn't matter much in the long run how Agri-Mark markets itself to consumers — though he thinks shoppers should know who they're supporting when they fork over dough for cheddar. "Personally, I think if Agri-Mark were farmer owned, it would have been run a lot different," he says.

The recent labeling debate isn't the first time Cabot has butted up against allegations of misrepresentation. In 2011 Agri-Mark agreed to pay the state $65,000 to settle claims that the co-op, in emails to customers and on its Facebook page, misrepresented some of its products as rBST-free — assertions that violated the state's consumer-protection law. Agri-Mark also agreed to donate $75,000 worth of dairy products to local food banks. 

It's exactly that issue of misrepresentation that riles up Cambridge lawyer Charlotte Dennett, who represents the group Whey to Go. The group opposes, on environmental grounds, Cabot's practice of spreading dairy wastewater on fields. But in the continuing logo saga, Whey to Go and Cabot seem to be on the same page: Whey to Go is issuing a petition urging Vermont's leaders to support the decision to drop the state from Cabot's label.

"Some of our political leaders are extolling the virtues of Cabot Creamery as this Vermont icon," Dennett says. "What's troubling to me is they're turning a blind eye [on their environmental practices]. We don't want to look at uncomfortable facts that are staring us in the eye."


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