Delivery man | Stan Bennett's strategic thinking and attention to detail keeps Oakhurst Dairy growing in the rapidly consolidating dairy industry

Though it seems like a bad joke for a dairy man, Stan Bennett's problem on a recent Thursday morning is spilled milk ˆ— leaky milk jugs, to be exact. It's early March at the Portland headquarters of Oakhurst Dairy, and Bennett is under siege by workers looking for help with the problem. One staffer estimates that 10% of Oakhurst's skim milk gallons have sprung leaks around the cap; others say the total might be considerably higher.
Bennett snaps into action: He asks Joe Hyatt, Oakhurst's vice president of human resources, to call a temp agency. More hands are needed to help pull the leaky jugs and get the milk back into the pasteurization process. "It's going to be a very long process," Bennett says.

The next morning, Bennett brushes aside the issue, chalking it up to just another hiccup in his daily routine at Oakhurst Dairy, the three-generation, family-owned company that's churned out milk and other dairy products from the same Portland location since 1921. Some days he's contending with leaky milk jugs; other days he's adjusting inventory on the fly after pouring a batch of spoiled milk down the drain.

But running a small, family-owned dairy requires more than mopping up spills. Bennett's job as president and CEO of Oakhurst means taking a long-term view of the 85-year-old company in hopes of navigating a market where margins are low and competition is fierce. In the process, he's also expected to continue growing the business ˆ— no small feat in an industry that's seen many family-owned dairies like Oakhurst either close shop or be absorbed by national companies. "There are fewer and fewer relatively smallish, Oakhurst-like dairies out there," says Bennett. "We're now the fourth largest dairy in New England, but we're also probably the fourth smallest."

Despite that industry trend, Stan Bennett's tenure at Oakhurst ˆ— he's been on staff full-time since 1973 and replaced his father, Donald, as president 10 years later ˆ— has been marked by a willingness to stand toe-to-toe with larger operations to protect Oakhurst's position as one of the leading dairy processors in northern New England. And by all accounts, Bennett's competitive strategies have paid off. The company has pushed into the Massachusetts market and has steadily been building its market share in northern New
England during the past decade. All the while, Oakhurst continues to turn a profit every year.

Julie-Marie Bickford, executive director of the Maine Dairy Industry Association, says Oakhurst has established a deep niche for itself in the northern New England market on the strength of its marketing efforts, which played up the company's commitment to quality products, a clean environment and its close relationships with Maine family farms. "Farmers are working to provide the best quality product that they can for consumers, and consumers pay attention to that," says Bickford. "All the advertising that Oakhurst has done has helped make that connection."

What that adds up to is a Maine institution that sees itself inextricably linked to the health of its community. In that role, Oakhurst devotes at least 10% of its profits annually to charitable organizations and nonprofits in the greater Portland area and beyond. But Bennett says it became clear a few years ago that in order to maintain that position Oakhurst had to take some risks to survive in the fast-changing dairy industry.

In response, he made a big bet two years ago, leveraging the company to spearhead a $10 million expansion of Oakhurst's Portland processing plant. The milestone project, completed in 2005, included new garage bays to handle larger tanker trucks, upgraded filling equipment to boost the plant's capacity, and a $7 million cold-storage facility. "We weren't running efficiently because we just didn't have the room to store the product or the number of bays to load everything out in a 24-hour cycle," Bennett says.

While Bennett's day could be well filled with that type of strategic planning, he's equally focused on the minutiae of the business. It would have been simple, for example, to delegate the handling the leaky-jug incident, but after spending time with Stan Bennett, one gets the sense that even those leaky jugs are in his purview as top manager at Oakhurst. He touches every part of the business, whether it's keeping order in the processing room or ensuring the family farms Oakhurst works with are comfortable with the company's marketing messages. That double-minded devotion to the business has helped the company continue to grow in a market that's stacked against small, family-owned dairy processors such as Oakhurst.

From home delivery to regional distribution
In 1976, Oakhurst stopped making home deliveries and sold its fleet of roughly 30 delivery trucks. It was a watershed moment for the dairy, which had built up a customer base that ranged from Portland to Fryeburg, according to a recently compiled history of the company. At the time, consolidation had begun changing the industry. The number of family dairy farms in the United States was falling, as was the number of small, independent processors that worked with those farmers.

Rather than be bought out by a bigger competitor, Donald Bennett opted to fuel Oakhurst's growth in the 70s and 80s by acquiring a handful of local dairy producers from Saco to Skowhegan. That strategy resonated with his son Stan. "If you wanted to stay in business, you had to take advantage of the fellows who wanted to get out of the business," says Bennett. (Bill Bennett, Stan's brother, remembers that Stan was a driving force in making those acquisitions.)

But big companies with more financial heft, like H.P. Hood, a dairy company that started in New Hampshire and had grown to regional and national prominence, also were on the acquisition path. These days, the industry gulf has widened dramatically. The top five U.S. dairy companies in 2004 tallied combined sales of more than $24.5 billion, according to Dairy Foods magazine, more than the combined total of the bottom 75 companies in the magazine's top 100 rankings. (Oakhurst was listed as the 85th largest U.S. dairy, with $95 million in sales in 2004.)

In New England, Oakhurst counts Dean Foods Co. and Hood as its main competitors. Dean Foods, a $10 billion Dallas, Texas-based company that's ranked as the largest dairy processor in the country, sells the Garelick Farms brand in New England and operates a processing facility in Bangor. Chelsea, Mass.-based H.P. Hood in 2004 rang up sales of $2.2 billion and runs a processing facility in Portland.

It's a tough business, the dairy racket. In a good year, says Bennett, Oakhurst turns a profit of around three percent. A spectacular year would be four percent. Last year, he says, Oakhurst turned a profit, but only barely. Earning $3 million on sales of $95 million is certainly a tidy profit, but it's not enough to fund significant growth at a capital-intensive business like Oakhurst, where adding a new product line like shelf-stable milk might cost tens of millions of dollars.

Meanwhile, companies like Dean Foods and Hood can invest millions in new production equipment and mount large marketing campaigns, meaning that Oakhurst can be left behind if those companies can serve the changing tastes of the consumer market more rapidly. "You have to spend money to get on retailers' shelves, and retailers can be pretty nasty people," says Jerry Dryer, publisher of Dairy Market Analyst, an industry newsletter. "For these smaller operations, you almost have to be there at the invitation of the retailer rather than inviting yourself to the party."

The Catch-22 faced by smaller companies in the dairy business is that failure to expand is a death sentence, but expansion takes lots of money and resources. Stan Bennett knows this challenge well. He says that Oakhurst in the early 90s had grown about as much as it could through acquisitions of smaller dairy companies in Maine. Technology was getting more critical and more expensive, and pricing pressures were mounting. In that environment, Bennett realized that geographic expansion was the logical next step. "The philosophy of small is beautiful just doesn't apply to food processing," says Bennett.

So in the mid 90s, Oakhurst developed relationships with four Massachusetts-based independent distributors, which had gotten Oakhurst-brand milk into roughly a dozen institutions like schools, universities and hospitals. These distributors now handle about 15% of the company's sales. (Half of Oakhurst's total sales are to retailers such as Wal-Mart, Hannaford Bros. and Shaw's, while the rest is divided by sales to convenience stores and distributors, including Associated Grocers of Maine.)

When fresh isn't enough
Bennett is convinced the push into Massachusetts wouldn't have gone as smoothly if he were peddling a product that lacked the folksy attributes of Oakhurst's milk. And maintaining that image, he says, takes a lot more than just slapping the word "Maine" on each bottle. It's a full-time quality-control job, from making sure the processing plant's equipment is up to hygiene codes ˆ— the company had a four-year streak of perfect cleanliness and sanitation ratings from the U.S. Food and Drug Administration through 2001, before the agency moved to a pass/fail system ˆ— to methodically testing and tasting each batch of raw milk that gets delivered to Oakhurst's Portland processing plant.

Bennett, whose quiet demeanor is paired with a fierce attention to detail, says there's no way to cut corners and stay successful in the dairy business. He'd know if there was, because in his 30-plus years at the business he's logged time in nearly every section of Oakhurst's operation, from loading trucks for delivery to working directly with the family-owned dairy farms from which the company contracts its milk.

In short, old-fashioned quality control is Bennett's bid to keep the Oakhurst image as pastoral as the small Maine dairy farms from which the company buys its milk. The company's tagline, "The natural goodness of Maine," is one that Bennett and others believe resonates with consumers and helps differentiate Oakhurst in the market. "It's very effective marketing for a northern New England company," says Meredith Strang Burgess, CEO of Portland-based Burgess Advertising & Associates, Oakhurst's marketing company. "People have sort of a renewed interest in where their food comes from, and in fact they'd prefer to have it come from a local place."

Add Oakhurst's role as a standard bearer of environmental awareness among Maine companies, and that marketing message gets strengthened. The company is currently in the process of replacing its fleet of sales vehicles with fuel-efficient hybrid cars, and 10 years ago switched its roughly 70 delivery trucks to use environmentally friendly refrigerants. In addition, Oakhurst a few years ago also decided to convert its industrial boilers to use a cleaner-burning fuel oil than the No. 6 heavy fuel it had been burning. "What do we have to sell that H.P. Hood or Dean Foods doesn't have to sell? The only thing we have to sell is that it's a Maine product with a Maine family behind it," Bennett says. "Our business is very closely related to the environment of Maine. Our cows literally eat, drink and breathe the Maine environment."

The dairy association's Bickford says Oakhurst's aggressive marketing has translated into consumers who are willing to pay a premium for the company's milk. Bennett estimates that Oakhurst brand milk carries a price tag 10-20 cents higher than that of national brands. And because of the premium Oakhurst commands on store shelves, Bennett says the company pays its farmers more than the minimum price set by the Maine Milk Commission to persuade those farmers to continue producing high-quality milk.

Betsy Bullard, a ninth-generation dairy farmer who runs Brigeen Farm in Turner with her husband, Bill, last year sent Oakhurst roughly five million pounds of milk from the farm's more than 200 cows. The farm, which has been in Betsy's family since the late 1700s, covers nearly 700 acres of pasture and also grows crops such as corn and grass. But with 85% of the farm's receipts coming from milk and 100% of its milk headed to Oakhurst's Portland facility, every extra penny counts. "If it wasn't for Oakhurst, some sort of [dairy cooperative] would be the next step," she says. "But I don't think it would be a real positive step. It's certainly a benefit to have an independent processor like Oakhurst."

Sustaining the traditional home base
Oakhurst's strategy of marketing the Natural Goodness of Maine also has gotten the company in trouble. In 2002, Oakhurst was sued by Monsanto Co., a St. Louis, Mo.-based agricultural product manufacturer that makes Posilac, a bovine growth hormone used by farmers to increase milk production in their cows. Monsanto took offense to Oakhurst's labels that declare its farmers' pledge to use no artificial hormones, saying it implied that Oakhurst's milk was safer than milk from cows treated with growth hormones. And since the U.S. Food and Drug Administration had deemed that there was no "significant difference" between milk from treated or untreated cows, Monsanto took Oakhurst to federal court in Boston to have that claim wiped off the company's products.

After initially vowing to fight the case, Oakhurst agreed to a settlement with Monsanto in 2003. Although Bennett declined to discuss the details surrounding that settlement, Oakhurst that year began adding a line beneath its farmers' pledge that stated the FDA's position on growth hormones. "The result of the agreement is that we continued with our program of purchasing milk from farms that pledge not to use growth hormones, paying a premium for that milk and promoting it in our advertisements and on our labels," he says. "I'm very frustrated that we had to go through this."

Bennett says he had to make other tough decisions to keep Oakhurst healthy, particularly when it came to capital investments. The upgrade started in 2004 to increase the Portland facility's capacity was projected to cost in excess of $10 million. Oakhurst at the time had no debt on its books, but Bennett says it's now $6 million-$8 million in debt after completing the last stage of the project ˆ— the new 55,000-square-foot cold storage space. "Necessity is the mother of invention, and you get to the point where you say, 'I know we want to stay in business and remain independent,'" says Bennett. "But in order to have that happen, you have to make that happen."

While it would have made good business sense to scrap Oakhurst's Forest Avenue facility ˆ— where the storage freezers are on opposite ends of the property and 18-wheelers have to fight traffic before pulling into the loading docks ˆ— Bennett says the decision to upgrade the plant was based on other economic considerations. Moving production to a new location from the "hodgepodge lodge," as Bennett calls the Forest Avenue plant, would have meant shutting down for an extended period of time. And you can't shut down the cows at the 80 Maine farms and the Vermont-based agricultural cooperative from which Oakhurst buys milk. "This is a business with a deadline six days a week. You don't have the luxury to shut down and make a move for more than about 24 hours," says Bennett. "One consultant likened it to doing double heart transplant surgery between two people playing tennis against each other."

But in addition to the cost and difficulty of moving, it's clear that Bennett has at least some sentimental appreciation for the Forest Avenue headquarters. Decades of character ooze from the interior of the Portland offices. Entering through the chrome-and-glass doors in the portion of the building added in the 50s, a set of stairs takes visitors past a glass window at the corner of the plant where milk is pasteurized and processed. Bennett's office is on the second floor, where a wide, angled wooden desk is bare except for the date book in which Bennett constantly jots notes down with a bright blue felt-tip pen.

In fact, the office itself is almost completely empty. There's no computer on the desk ˆ— Bennett is an admitted technophobe, preferring to handle communication through phone calls, personal visits and scraps of paper tucked into his pocket. The walls are sparely decorated, just Bennett's diplomas from Tufts University, where he earned his undergraduate degree, and Boston University, where he earned a law degree. (He says he's a "lawyer in remission," and realized after graduating in 1972 that he had no interest in practicing law.) At one end of a simply upholstered, standard-issue college dorm couch sits an engraved piece of glass from the Downtown Portland Corp., recognizing Oakhurst as the 2005 Business of the Year. At the other end sits a solitary framed photo, a colorful summertime shot of Bennett's three children ˆ— 20-year-old Ted, 14-year-old Colby and 11-year-old Sarah Jane ˆ— whom he calls his first loves outside of the dairy business.

The only place in Bennett's office that's not ordered and tidy is a set of recessed shelves that hold a history of Oakhurst ephemera ˆ— pictures, plaques and the like. Old Oakhurst bottles dot the shelves, tucked behind scale models of Oakhurst delivery trucks and a joke-shop pint bottle of Oakhurst milk suspended in mid-air, spilling its contents into a shiny, shellacked white puddle.

The road ahead
Whether it's tucked away in his office or hung on the walls throughout Oakhurst's headquarters, all this history makes it difficult for Bennett to even consider letting the company out of his family's control. Bennett says Oakhurst fields calls "on an ongoing basis" from suitors looking to add the company's brand to its national portfolio. But Bennett, who has held a steady job at Oakhurst since graduating from law school, has told every one of those companies that the dairy simply isn't for sale.

Fact is, Bennett and the rest of his family ˆ— his six brothers and sisters all work at the dairy or sit on its board of directors ˆ— stand to make a pretty penny on any sale. But Bennett says the main reason they haven't sold out is because they still enjoy running the business. "We still operate the business profitably each year, we pay ourselves, we employ 250 people here in the state, and we supply a market for 80 family dairy farms here in Maine," he says. "We like to think that we're at least partially responsible for keeping quite a few thousand acres open as productive land here in Maine that otherwise might lay fallow or have that one-time crop of houses built on it."

As much as Maine is a part of Oakhurst's brand, so too is Oakhurst a part of Maine. Bennett says his father imbued in his family a sense of civic duty to contribute to their local communities, and Oakhurst and Bennett have become significant philanthropic presences in greater Portland and beyond. A corporate mandate earmarks 10% of all Oakhurst profits for donation to charities and nonprofit groups that serve children and the environment ˆ— a donation of hundreds of thousands of dollars in a good year. In the late 90s, for example, Oakhurst donated a globe to every fourth grade classroom in Maine and New Hampshire ˆ— nearly 2,000 in all.

But as important as the past has been for Oakhurst, the moves Bennett makes in the next few years stand to impact Oakhurst for the next generation. The number of family-owned farms ˆ— the lifeblood of Oakhurst's business ˆ— is shrinking at a rapid rate as a result of development pressure and the economic realities of small-scale farming. Julie-Marie Bickford says that 800 or so dairy farms operated in Maine in the early 90s. Today, she says that number is down to about 368.

The challenge for Stan Bennett is to continue growing Oakhurst without being forced to compromise its independence. The answer, he says, is to keep rolling the dice: When the dairy pays off its recent plant renovation, then it's time to invest again. If the emerging trend in the industry of manufacturing long-shelf-life milks takes off, then Oakhurst will have to scrape up the $10 million-$20 million to build a new processing facility to make it, he says. And if the dairy's supply of milk is threatened by the shrinking population of Maine dairy farmers, then he can see Oakhurst starting one or two large-scale dairy operations in northern Maine that will ensure a steady flow of raw milk to the company's plant.
"Unfortunately, you can never stand stagnant," says Bennett. "If we're not striving to increase sales, if we just stay put, we can't be successful. It never ends, but that's what makes it interesting and exciting."