MOOMilk gets backing, sales boost
Photo/Courtesy MOOMilk
MOOMilk, a company representing nine Maine organic dairy farms, got an unexpected boost recently from Hannaford Bros. Co., which, in mid-May, erased 30 cents from the retail price of the cooperative’s half-gallon containers.
“We’re already seeing sales pick up,” says David Bright, an organic farmer and secretary of MOOMilk, short for Maine’s Own Organic Milk. “We had to overcome price point barriers and Hannaford’s help will make a difference.”
The difference means more than just the decrease in price from $4.29 to $3.99 per half gallon, which puts MOOMilk in line with the cost of other branded organic milk in Hannaford stores. Borne of desperation when HP Hood Co. dropped the farms from its stable of organic milk producers last fall, MOOMilk is jockeying to keep its young operation afloat. The company began selling its line of organic dairy products at the end of January, but to date has
seen only about half of its production result in sales.
“Our weekly supply averages about 10,000 gallons of product, about half of which is sold,” says Bill Eldridge, manager of MOOMilk. “We’d like to see 100% sold of course, but we’re a startup, and from a startup perspective, we’re doing fairly well.”
The company’s line of whole and reduced-fat milk appears on the shelves of 74 Hannaford stores in Maine and New Hampshire, as well as about 140 independent grocers, Whole Food and Walmart stores. Mike Norton, spokesman for the Scarborough-based Hannaford, says the company’s decision to drop its margin on MOOMilk was an attempt to help buoy the fledgling company’s sales and reflects Hannaford’s commitment to buying from local farms whenever possible.
“It’s a mutual relationship,” he says of the arrangement. “We benefit when their products are moving, as well.”
A different route to market
The supermarket’s support is the latest in a series of corporate and nonprofit help MOOMilk has received since its founding in October, when Massachusetts–based Hood decided to cut 10 Maine organic dairy farms from its supply chain. The farms, mostly in northern Maine, were unable to find another dairy company to process and distribute their products, says Bright. Rather than close their farms, the owners banded together to form their own company in a novel model that focuses on social purpose rather than profit.
“Basically, we decided to create an environment where farmers can make a living farming,” says Bright. Farmers are paid a guaranteed $24 per hundredweight of milk — the average price for organic milk producers — regardless of how much is sold. That guarantee allows the farmer to maintain the farm, sustaining an agricultural way of life that benefits the farmer, the planet and contributes to Maine’s often lauded quality of place, says Bright.
Key to that business model is MOOMilk’s L3C status, a corporate designation that blends a traditional LLC with a nonprofit. The company is allowed to make a profit, 90% of which goes back to the nine farmers who are all co-owners of MOOMilk (the 10th farm dropped by Hood opted out of the company to focus on cheese making, says Bright).
The Maine Legislature failed to pass a bill in 2009 that would have allowed L3Cs, or low-profit companies, to form here. “So we had to incorporate in Vermont, which has the L3C, but everything else about MOOMilk is Maine,” says Bright. “The farms are here, the milk is processed and distributed here, the profits stay here.”
The distribution network arose through Portland’s Oakhurst Dairy, which doesn’t have its own brand of organic milk and stepped up to distribute MOOMilk at the company’s onset. The environmentally minded company also helped MOOMilk acquire equipment and has made its sales force available to manager Eldridge. Smiling Hill Farms, an organic dairy processor in Westbrook, also signed on early to support MOOMilk, processing all its products here in Maine.
“Both companies have been incredibly generous. We wouldn’t have made it without their early and strong support,” says Bright.
A $50,000 investment from Stonyfield Farms in New Hampshire provided startup capital for MOOMilk and the Maine Organic Farmers and Gardeners Association, Maine Farm Bureau and Maine Department of Agriculture provided assistance and expertise in setting up the corporate structure, says Bright. MOFGA and the farm bureau each own 0.5% of MOOMilk. The farms own 45% of the company; investors 45%; a three-person development team owns 4%; and the final 5% is held in reserve for future employee performance incentives.
The L3C status allows the company to appeal for grant and foundation funding, which Eldridge is in the midst of pursuing. “We have almost all the private equity lined up, but I’m just starting on the foundation sources,” he says. He hopes to raise $500,000 from each.
In the meantime, cash flow is pinched. Bright says a few vendors are owed money and farmers are anxious about having enough money to plant feed corn. Patience is the key to seeing the first year through, and seems to be in abundance among the private investors who know they won’t see double-digit returns on their investments anytime soon, according to Eldridge.
“These people are not thinking like classic venture capitalists or investors,” he says. “Our recognized social purpose will take longer (to produce a return) than, say, investing in Microsoft in 1981.”
The company has drawn a lot of interest from other farmers, intrigued by the possibilities of a low-profit corporate structure. Most of Maine’s 70 organic dairy farms send their milk to Stonyfield or the Organic Valley Co-op, a national cooperative of more than 1,600 organic farms, says Russell Libby, executive director of MOFGA. A meeting is planned in July to talk about different investment models that can sustain organic farming.
Bright and Eldridge say MOOMilk desperately needs more marketing to get the word out about its products to help sales, but there’s no money for a campaign now. Eldridge says MOOMilk hopes to break into the eastern Massachusetts market soon, a well-heeled market that generally supports organic food products and doesn’t flinch at the higher price.
“We already have the means for implementing distribution,” he says. “We’d love to be there. It would do wonders for our volume."
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