Food, dairy firms supplying state prisons unhappy with cost-cutting

Some Pennsylvania food companies and dairies have lost a major customer: the state’s prisons.

A change in the state’s sourcing method, announced in February, moves food procurement into one $154 million contract awarded to Aramark, the Philadelphia-based food management company. The contract is expected to save nearly $17 million over the three-year term and was touted as an achievement of Gov. Tom Wolf’s ongoing efforts to rid state agencies of unnecessary costs.

But the move has some businesses feeling miffed.

Previously, each of the state’s 26 prisons made short-term food contracts available for bid, and a variety of food and dairy processors found them to be a dependable chunk of their business.

“Everyone should have the opportunity to bid on these,” said Craig Marburger, vice president of Marburger Farm Dairy in Butler County. He estimated the prison contracts made up 5 to 10 percent of his dairy’s business, which milks 50 to 60 cows. “It seems like that

was a more equitable way of doing it.”

According to information provided by the state Department of Corrections, the prior contracts were awarded to 19 Pennsylvaniabased dairies and one based in New Jersey.

Each dairy would bid on contracts covering three to six months to supply any number of prisons, depending on the size of the dairy. Some supplied one, some supplied all 26 prisons.

A review of the state’s contract database showed the Department of Corrections also issued contracts to suppliers of canned goods, meat and produce for a range of terms, from one month to one year.

State prisons made up roughly a third of business at Karetas Foods LLC, a Reading-based food distributor that last year supplied $9 million worth of food. In likely one of its last contracts, Karetas received $14,429 to send margarine, cheese and eggs to SCI Pittsburgh during the month of January.

“A lot of companies in Pennsylvania relied on that,” said John Friedmann, president of Karetas Foods. “More than $100 million in contracts, and everyone was just left out in the cold, period. The profits went to Aramark and their contractor.”

State officials argue that the change will not result in the money leaving Pennsylvania.

Amy Worden, a spokesperson for the Department of Corrections, said that Aramark has committed to purchasing 63 percent of food products from Pennsylvania-based companies. Much of Aramark’s operations, she pointed out, are based within the state.

Aramark is expected to drive down costs by developing a software system that manages the purchase, logistics and food inventory for the prison system.

Karen Cutler, a spokeswoman from Aramark, said the company is “excited about this innovative public-private partnership that will help the DOC better manage quality and nutrition while delivering millions of dollars in savings to the taxpayers of the commonwealth.”

The company is purchasing a “significant amount of products” from local suppliers, she added.

All milk is being purchased through Dean Foods, a Texas-based company that will process and package milk at its four distribution centers in Pennsylvania, Ms. Cutler said. Two are in Western Pennsylvania: Dean’s Milk in Mercer County and Meadow Brook Dairy in Erie.

“I suppose this is good news for those farmers shipping their milk to be processed by Dean’s,” said Carissa Itle Westrick, the director of business development at Vale Wood Farms, a family-owned dairy processor in Cambria County.

But it’s “bad news for other dairies, and the Pennsylvania farmers who ship milk to them, who previously had an opportunity to bid on the business for these institutions,” she said. Vale Wood Farms had won contracts in the past.

“I’m not prepared to share what percent of our milk business that will impact,” she said. “Suffice to say it’s not going to be good for our local family business.”

According to the contract database, other Western Pennsylvania firms have also found a steady customer in the state prison system in the past.

Turner Dairy Farms won the short-term contracts in years past — for example, the Penn Hills dairy brought in $48,614 by sending tens of thousands of milk cartons to SCI Greensburg in the third quarter of 2011. Calls to Turner Dairy were not returned.

Laubscher Cheese Co., based in Mercer, regularly delivered its products to a variety of correctional facilities. In April, it outbid three other companies to send a total of 3,885 pounds of American, mozzarella and cheddar cheeses to SCI Mercer, receiving $7,200.

Laubscher also did not return requests for comment.

Pennsylvania has a rich history of dairy processing, said Stephanie Roscinski, communications and marketing manager for the Center for Dairy Excellence, a Harrisburg-based organization that — partially funded by the state — provides resources for the state’s dairy industry.

She estimated at least 20 Pennsylvania-based dairy processors are large enough to handle a state prison contract.

“We have more regional processors than in other parts of the United States that would be able to supply large enough quantities of milk” for institutions like prisons, Ms. Roscinski said.

Though she did not comment on the contract changes, she pointed out that the new contract will continue to draw on Pennsylvania milk products. “The contract Aramark has with Dean Foods is still supporting Pennsylvania dairy farms.”

Aramark and Dean Foods left open the possibility of partnerships with Pennsylvania distributors left out of the supply chain. Mr. Marburger said he has met with Aramark representatives about forging a business relationship.

“We have a wait-and-see plan for now,” Mr. Marburger said.