Revenues $268,000 $666,000
Operating expenses $315,000 $318,000
Pretax income ($47,000) $348,000
WHAT THE EXPERTS SAY
CUSTOMER
John Rowan, director of dairy and frozen foods for Mel Markets-Foodtown, a 16-store chain in Long Island, N.Y.
I recently turned down a premium milk like VFF for our chain. Based on my 30 years of experience in the retail business, I think VFF milk will be accepted only in large cities where high prices are the norm and upscale consumers seek out newer, trendy items. Some wealthy suburban areas may provide additional sources. But the majority of the suburban trade will refuse to pay more for an item that is generally consumed as an ingredient in other food products.
VFF will not be purchased for children's consumption because of the price and the fat content, since many consumers in our market are going out of their way to avoid fat. And without additional financial resources, it would seem that the advertising needed to reach potential customers will be sorely lacking. Word of mouth is not enough to make sales jump 150% in one year, and further, it's risky to think that operating expenses will remain basically the same as they were the first year. To create a currently nonexistent category and cultivate demand is a costly endeavor at best.
OBSERVER
Richard Bennett, dairy adviser for 15 years with the University of California in Santa Rosa
VMP's biggest challenge is convincing the customer that its product really is different. The milk quality in this country is good, and most people can't differentiate between milk tastes. Producers have tried to keep milk tasting fairly bland, and most milk drinkers grew up with that taste and like it. VMP is going to have to educate its customers. Maybe one panel on the carton could include a narrative about milk taste and some instructions on how best to handle milk.
On the other hand, I know of only a few people in the country who are trying to do this. Creating a product that has a quality difference and comes from the bucolic family farm has an appeal. Our society has matured to the point where getting enough food is not a question for most of us. Now the consumer can apply some external values to food purchases, like whether food comes from family farms versus multinationals or is environmentally friendly versus environmentally harmful. Those are selling points that agriculture has not yet exploited, but certainly a lot of other product developers have, to great benefit.
OBSERVER
Mack Graves, president and CEO of Coleman Natural Meats, a $30-million producer of all-natural meats based in Denver. Graves previously assisted Frank Perdue in creating a brand
name in poultry
To create a brand, the product has got to be better, and it's got to be different. In any food product the preeminent difference is taste. VMP is on the right track because it says its milk tastes better. That's exciting, and for that reason alone VMP may have a viable business. But it can't create a business just to return more money to farmers. First, the product has to be better for the ultimate judge -- the consumer.
I question whether there's a match between the customer VMP is going after and whole milk. I have a feeling the environmentally conscious consumer VMP targets is drinking more skim and low-fat milk. Now if VMP could find a way to make skim milk taste better, it would have a double benefit and a much larger market.
Where is VMP vulnerable to competition? Price. Although consumers may have only a vague notion of what their milk should cost, they will surely know when a more costly milk sits right beside the cheaper generic label. Milk is scrutinized by the shopper for shelf life and price. That means VMP has to document its product's difference so clearly that the consumer doesn't even have to think about the price difference. Maybe it should say on each carton, "This milk was packaged on June 2, at 10 a.m.," so the consumer knows exactly, in terms of hours, how fresh it is. All in all, exciting, but VMP still has lots of details to work out. My only advice -- ready, fire, aim.
POTENTIAL COMPETITOR
Hilary Glantz, president of Vermont Country Milk, based in Shelburne, Vt., a one-year-old processor of premium milk distributed to supermarkets, small groceries, and cooperatives throughout Vermont
It's risky to premiere with whole milk alone. We don't find whole milk is the best seller. We sell 10% more 2% milk than we do whole, and the same amount of skim as whole. I think people are looking to reduce fat in their diets.
VMP needs to do a lot to make sure that the product it's taken such care to make reaches the customer that way. I question whether Crowley, a plant set up to produce milk as a commodity, can process premium-quality milk, given all the systems and quality controls VMP will impose on its product. And can drivers, used to delivering commodity milk, handle VFF's special requirements? Drivers will have to oversee everything from special temperatures maintained on the trucks to rotating the product in the grocery cooler to reporting back if an account is mishandling the milk.
Last, I think VMP's pricing strategy is bold -- asking almost 50¢ more of the consumer. We sell our premium milk for only 20¢ more for a half gallon, and we've found that can be a hard sell at times.
