On December 31, Goldman filed license applications to do business in the remaining four New York boroughs. Just over a year later, this past January, he won the right. This time, he won it in court, as U.S. district judge Leonard D. Wexler declared unconstitutional the decision of the agriculture commissioner to deny Farmland a license. In ruling in Farmland's favor, the judge left to the state legislature the task of amending the antiquated milk licensing laws -- which it finally did in July. The law-makers removed many of the restrictions in the licensing laws; the changes will go into effect over the next few years.
No wonder Goldman, at his victory dinner atop the World Trade Center, saw a prosperous future spread out before him, the countless points of light each a potential customer for Farmland.
But he was soon brought back to earth. The right to sell in New York was one thing. Actually selling was something else again. Goldman rode the crest of public sentiment and watched his first week's sales in New York sharply boost milk production at the plant. He was ready for the sudden jump in demand, having recently modernized the back half of his operations, especially the key processing steps. "Marc wanted to be able to go into New York with a high-quality product, offering an extended shelf life as compared with product found in most markets," says Dale Seiberling, president of Roscoe, Ill.-based Seibering Associates Inc., an engineering, design, and consulting firm, which installs state-of-the-art milk-processing systems.
But other necessary parts of a dramatic and successful entry into New York haven't run quite as smoothly. In part this was because the timing of his hoped-for victory was unpredictable, but also because the bloodied New York dairies have been counterpunching like mad. "He went in like a lion -- too quickly, I'd say," notes one metropolitan-area dairy owner sympathetic with Goldman. "The dairy business is highly service-oriented. You've got to supply a quality product, daily, on time. The industry scuttlebutt is he's lost some accounts he couldn't service." Goldman denies the gossip but does admit he was short of drivers for the first six weeks. Moreover, his marketing efforts were lagging. It was spring, more than four months after the judge's decision, before Farmland started a limited television advertising campaign and inked promotional agreements with the New York Mets and with Phil Simms, the New York Football Giants' quarterback.
Simms suffered a few sacks on the way to last year's Super Bowl, and Goldman was about to be handled just as roughly. He and his drivers must wonder if they are delivering gold bullion rather than milk. Some of the five entrenched dairies (Dellwood Dairy, Sunnydale Farms, Elmhurst Milk & Cream, Queens Farms Dairy, and Dairylea Cooperative) responded with angry picketers protesting the loss of union jobs to an out-of-state processor. Goldman needed injunctions in each county to remove them from outside of supermarkets that accepted his milk. Thugs have beaten up one of his drivers. They've smashed windshields and radiators. It's become so bad that Goldman has hired security guards to ride shotgun on deliveries.
There has been a war of words, too. "Certainly Marc has done a very effective public-relations job in promoting himself as a hero to the consumer," says Robert Crowley, executive director of New York Milk Industry Council, an association of some 90 processors and distributors. "But believe me, he's no white knight." Crowley would like to make a few things known: that Farmland "lives in a very protected market in New Jersey"; that retail prices in Westchester County, which did drop when Farmland entered, are now "some of the highest in southern New York State, with Farmland controlling 40% to 45% of the market"; that Goldman "diverted" low-cost powdered milk from government food-distribution programs; and that in pressing for accounts in New York, Farmland has made illegal gifts of free products worth some $49,000. And, by the way, don't overlook the guilty plea to rigging school bids in New Jersey.
Goldman groans at the barrage. "I would be embarrassed to say some of the things they say," he says. "What I find interesting is they will tell lies, and you have to deal with them. Then, they'll tell another lie, and it doesn't matter that they've already told 10." He denies favored status in his home state and can't help but laugh at the irony of the charge. He claims no more than 20% of the Westchester market, agrees retail prices are a bit higher, but says his pricing in Westchester is similar to that in other regions. As for the "diversion" of government surplus commodities, a misappropriation of some $481,000 of government dairy products was spotlighted in a 1984 federal audit. But Farmland was later "absolved of any wrongdoing," according to an assistant regional inspector general with the U.S. Department of Agriculture who was questioned about the audit. He termed the matter a technical violation of rules that have since been changed, and added that Farmland had substituted products of higher value.
Illegal gifts? Absolutely not, says Goldman, while admitting "we have given some incentives -- advertising and promotional incentives." The school bid rigging? Farmland did, in fact, along with several other New Jersey dairies, plead guilty to a misdemeanor of price-fixing in the 1970s. "Our legal advice at the time was it would be faster and cheaper to plead guilty than fight the charge," says Goldman. "I wasn't running the business then, and as far as I know, we didn't engage in any price-fixing." He points out that the five New York dairies were convicted of price-fixing as recently as 1982.
For all his problems of selling in New York, Goldman probably isn't even making much money: price-cutting by Farmland and the other dairies reportedly has brought a lot of milk to market below cost, possibly illegally. The five dairies complain that current prices are bleeding them dry -- and they may not be crying wolf. New York City's Department of Consumer Affairs reports that in June a gallon of milk cost an average of $2, compared to $2.42 last December.
It's clear that nobody's getting rich selling milk in New York in 1987. At the behest of the New York Milk Industry Council, the state's director of dairy industry services is investigating charges that Farmland is illegally selling milk below cost. Goldman is a little oblique: "In many cases, margins are very thin right now. In some cases, we've walked away from business where they've brought prices down. In others, we've held on, even though the price was not too great. Our intention is to sell at profitable prices. I don't see any future in selling below cost."
Goldman insists Farmland has deep enough pockets to gain and hold on to market share. "We didn't wage an eight-year battle to give up after six months," he says. "We intend to stay in and keep punching." Soothing the bottom line are the fruit juices, ice-cream mix, and cream that accompany his milk into markets.
If it takes deep pockets to win the New York market, all Goldman's efforts could ultimately benefit another new player. John Labatt Ltd., a Canadian company best known for its beer, has been assembling a powerful milk empire in the Northeast. According to some estimates, it now controls some 40% of the market in New York City, 65% to 70% in northern New Jersey, and 90% to 95% in Philadelphia. It recently bought Tuscan Dairy Farms, Farmland's largest competitor in northern New Jersey. And it has acquired two of the five entrenched New York dairies, Dairylea and Queens Farms Dairy.
Predicts Pete Hardin of The Milkweed: "Farmland's battle to get into New York may prove to be only spring training compared to what lies ahead."
