Perhaps the greatest guarantee of VFF's better taste, says Judge, will be that, unlike traditional milk, VFF will never be mixed with potentially inferior milks. Most milk is collected by truckers, called handlers, who travel along a route from farm to farm, loading milk into their bulk tanks. While some farms might produce a premium milk with exceptionally good flavor, that milk might very well be mixed on the route with a not-so-exceptional milk. At the end of the trip, the counts for each bulk tank are taken, and as long as those numbers even out to an acceptable level, the milk goes through. "That means you can have a superior milk being sullied by a borderline milk," Judge points out. "In our system, that can't happen."
Beyond the taste difference, Judge thinks his milk offers an environmental choice. VMP's farmers will consciously work to prevent soil erosion and water pollution and to increase the soil's health. And Judge and his cofarmers have set strict guidelines about the treatment of their cows, covering everything from providing clean, comfortable bedding, to requiring that they be exercised regularly.
Judge will visit the farms monthly. The rollout started with only 10 farmers producing 25,000 pounds of milk weekly for VMP. All of them live within 10 miles of one another, so Judge doesn't see the visits as arduous treks. Plus, most of the screening will be done on the front end. "The farmers we take on will already be meeting our standards," he says.
To ensure that the higher prices VMP pays don't tempt farmers to increase production, Judge will contract to buy only as much milk as the farmer currently produces. As for the size of the farms, Judge wants to make sure that he's reaching out only to farmers who need help. That's why he'll try to take on small farms with a maximum of 200 cows. Not that his rule is hard and fast. He cites a case in which one farm has 500 cows but is supporting three families. "We don't want to penalize a family for milking as many cows as it needs to support itself," he notes.
VMP itself isn't on a money-making mission. Yes, 9¢ per half gallon will be collected from the farmer to cover marketing costs, but once those costs have been met, profits will pass on to the farmer in the form of dividends. All the farmers will be owners of VMP -- on a 100-shares-per-farm basis. VMP keeps a lid on capital costs by "piggybacking on an already-existing system," explains Judge.
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With producers waiting in the wings, it was time for Judge to talk to the consumer. For that he hired Peter Lovis in February 1992. A salesman and marketer, Lovis has logged 15 years in the specialty-food business, most recently for Crystal Foods, a high-end cheese importer. Judge couldn't afford Lovis full-time, so the marketer works nights, weekends, and odd weekdays. Judge liked Lovis's background, particularly his lack of background in the dairy industry. "I wanted someone who wasn't tied to the old ways," he explains.
Lovis's first tactic was to set up a booth at the New England Dairy Deli Show in April 1992. Armed with only a color flier about VFF, Lovis raked in 100 qualified leads -- most of them wholesale dairy buyers. Many buyers expressed an eagerness for change. "I'm sure willing to give this premium milk a try," says the dairy buyer for one grocery chain. "We need a new product. The dairy case has been dead for years."
Then, in May, Lovis headed directly to the consumer. He stood outside almost 100 supermarkets from New York to Connecticut to Boston, catching shoppers on their way out. What he found confirmed his best hopes. More than 50% still bought whole milk. Fewer than 10% had any idea what label they'd bought -- indicating little brand loyalty. And most shoppers had only a vague notion that milk should cost somewhere over $1 and under $2 a half gallon. Judge and Lovis could now feel comfortable with a retail price of anywhere from $1.79 to $1.99 for their milk.
Lovis next needed to locate a processor to pasteurize and package the milk. It wasn't easy. "We had some special needs," he explains. For one, the processor for VFF milk must agree to treat it separately from all the other milks; for another, the processor would have to be close to the Boston metropolitan market so freshness would be maintained; and finally, that processor needed to have competitive prices.
In October 1992 Lovis found all of that in the processing arm of Crowley Foods Inc. One reason Crowley is willing to gamble on such a little-known operation is that VMP is making it worth the company's while.
The system from farm to dairy case works this way: With generic milk, farmers are paid (based on current prices) 57¢ per half gallon by the processor. The processor then sells that half gallon to the store for $1. The store then passes the milk along to the customer for about $1.40. With VMP milk, farmers receive 77¢ per half gallon from the processor. The processor sells the milk to the store for around $1.50. The store then marks it up to about $1.99. For both generic and VFF milk, the store captures about a 25% gross margin, but because VFF's price is higher, the store's take exceeds what it makes on generic milk. On VFF milk, both the processor and the retailer will make 10¢ more per half gallon than they'd make on generic milk.
