"We need to make sure that the hard work we do at the farm reaches the market," says Judge. "That means paying the processor and the store more." Because VFF milk has to be treated separately, it behooves the processor to move the milk through fast, often within 12 hours; generic milk, on the other hand, can sit for days, waiting to be processed. In the beginning Peter Lovis will oversee this part of the puzzle -- making sure the milk moves through the process smoothly and meets all the freshness requirements and criteria for taste. At the stores, Lovis will do spot checks to make sure the milk doesn't sit on a pallet on the sidewalk while an employee takes a coffee break. Fourteen grocery stores have already agreed to clear shelf space for VFF milk.
Because of money constraints, VMP has no immediate plans to advertise but will depend on less costly point-of-purchase materials: brightly colored stickers on the dairy case; "shelf-talkers" telling buyers why it's necessary to preserve the family farm; and supermarket-parking-lot demonstrations -- showing children how to milk a cow, for example.
Judge does worry that he's lost some marketing clout by using a cardboard container for VFF rather than glass. "Glass has undeniable pull . . . a reminder of the old days," he admits. But in the end he opted for cardboard because of its lower shipping costs and its ability to guard the milk from the dairy case's lighting.
After a couple of months, depending on sales, VMP plans to launch radio spots. The total advertising and promotion budget for year one: $137,000.
VMP's most nettlesome problem has been, and continues to be, money. Judge and his fellow farmers lack any capital reserves. Only a handful have been able to invest funds, and for most it was a couple thousand dollars.
Judge, who is closed off from traditional sources of money because of his less-than-impressive cash-flow picture, has found an alternative financial lifeline, a Boston-based foundation willing to lend $75,000 to VMP as well as cosign a loan of $50,000 from a local bank. But the foundation attached one caveat. For the first year, the dairy farmers should invest in VMP by reducing their price for the milk from $17 per hundredweight to $16.
Despite Judge's eagerness to pay the farmers substantially more from the get-go, he agreed to the pay drop. The $16 per hundredweight is still better than the $12 price the farmers are currently getting. And once the company is operationally sound, the price will jump back to $17.
* * *
After more than two years of planning, Judge is tired. Rubbing his red eyes, speaking gravely, he explains the difficulty of building one company while running another. Meetings are held on the fly -- a quick sandwich with truckers to talk over milk routes; pinning down marketing plans with Lovis while milking the cows. But despite the unconventional air of VMP, local businesspeople and lawyers have stepped up to offer free help. For example, one Time Inc. executive, now retired to Vermont, acts as VMP's finance chief, free of charge, because he "believes in the idea."
But perhaps the most vexing question of all is how a group of farmers with no business background plan to pull all this off. "At this point, to make this thing go, what we need is focus, intensity, and stubbornness beyond all reason," Judge says. What's happened here, he insists, is a far cry from professionals churning out spreadsheets: "This is like the guys on the assembly line at GM turning to marketing and saying, 'Hey, wait a minute, something isn't right here, and we can't wait around for you to figure it out. We're taking over.' "
EXECUTIVE SUMMARY
Vermont Milk Producers Inc., in Shoreham, Vt.
Concept: To band together a group of in-state dairy farmers to produce a premium milk that will not only taste better but also return more money to small family farms -- a group that's finding it increasingly difficult to stay profitable, because of the low price of milk
Projections: Expand to include 75 farms in six years, paying those farmers at least $4 more per hundred pounds of milk than they now get. Sales of $268,000 in the first year and a pretax loss of $47,000; by year two, sales will jump to $666,000, with pretax income of $348,000
Hurdles: Creating brand awareness. Convincing consumers that premium milk is worth a higher price. Successfully launching a business when the founders are farmers with little marketing or business background
THE FOUNDER
Steven A. Judge
Age: 43
Family: Married, with four children
Personal funds invested: $20,000
Equity held: Each of the 10 farms involved -- including Judge's -- has 100 shares
Salary: None to date
Education: Two years at Ohio Wesleyan University
Other companies: Owns a dairy farm
Last job held: Strategic land-use planner for Franklin County in Massachusetts
FINANCIALS
Vermont Milk Producers Inc. Income Projections
1994 1995
