Investment in Unconsolidated Affiliate

12 Months Ended

Dec. 31, 2018

Equity Method Investments and Joint Ventures [Abstract]

Investment in Unconsolidated Affiliate

INVESTMENT IN UNCONSOLIDATED AFFILIATE

Organic Valley Fresh Joint Venture — In the third quarter of 2017, we commenced the operations of our 50/50 strategic joint venture with Cooperative Regions of Organic Producer Pools (“CROPP”), an independent farmer cooperative that distributes organic milk and other organic dairy products under the Organic Valley ^® brand. The joint venture, called Organic Valley Fresh, combines our processing plants and refrigerated DSD system with CROPP's portfolio of recognized brands and products, marketing expertise, and access to an organic milk supply from America's largest cooperative of organic dairy farmers to bring the Organic Valley ^® brand to retailers. We and CROPP each made a capital contribution of $2.0 million to the joint venture during the third quarter of 2017. We received cash distributions from the joint venture of $2.8 million for the twelve months ended December 31, 2018. We made purchases from the joint venture of $88.7 million for the twelve months ended December 31, 2018, which are included in cost of sales within our Consolidated Statements of Operations.

We have concluded that Organic Valley Fresh is a variable interest entity, but we have determined that we are not the primary beneficiary of the Organic Valley Fresh joint venture because we do not have the power to direct the activities that most significantly affect the economic performance of the joint venture. We are accounting for this investment under the equity method of accounting. Our equity in the earnings of the joint venture are included as a component of operating income as we have determined that the joint venture's operations are integral to, and an extension of, our business operations. Our equity in earnings of the joint venture was $7.9 million for the year ended December 31, 2018, and was not material for the year ended December 31, 2017.