Cutting out the middle man

03 Aug, 2018 04:00 AM
Comments
0
 
Big River Milk employees Lynda Sutherland, partner of head dairyman Barry Paff, and his assistant Kevin Bell feeding Jersey heifers. The farm is currently in re-build mode, increasing cow numbers, to meet demand.
Three years on and we might start to make money...
Big River Milk employees Lynda Sutherland, partner of head dairyman Barry Paff, and his assistant Kevin Bell feeding Jersey heifers. The farm is currently in re-build mode, increasing cow numbers, to meet demand.

Fed up with the farm-gate milk price? Sick of the middleman taking all the coin? One option is to bottle farm produced milk and sell direct.

But be warned. The uphill battle to reach profit is long and arduous.

“Three years on and we might start to make money,” says North Coast businessman Peter Watt. “But I wouldn’t wish what we went through on my worst enemy.”

Southern Queensland milk producer Greg Dennis also went alone and sells direct, and like Mr Watt he is capitalising on a niche difference and brand marketing.

But he, too, recalls a hard slog to get anywhere near breaking even.

In fact, “Farmer Gregie” as he likes to be known, believes the break-even point on all the substantial investment is more like a decade.

Mr Watt, a former information technology entrepreneur, now markets farm fresh packs direct to his customers, based in Coffs Harbour, NSW, with creamy milk perfect with coffee making up about a quarter of the pack’s total value.

So he went searching for a dairy to supply and approached Big River Milk on the Clarence at Lawrence, just downriver from Grafton.

When the old owner mentioned he was interested in selling Mr Watt collaborated with experts in the industry, raised funds and bought the place.

Full-time farmer Barry Paff runs the dairy, which is rewarded by the company at the rate of 60c/litre – two cents dearer than the best price available this season.

These days business is selling three times the volume of milk that it was three years ago, and new customers – from Tweed Heads to Urunga on the Kalang – tend to stay loyal.

Going alone in dairy requires commitment and patience.

“You need to give the consumer what they want,” Mr Watt said. “It must be as fresh as possible, convenient, and come at a reasonable price.”

Is the rather expensive venture making money? Not yet.

The capital outlay to set up the bottling plant was from $500,000 to $750,000, but break-even is just around the corner.

“Would I wish this journey on my worst enemy? No. It has been three years of hard work, and stressful nights,” he said.

Big River Dairy targets the boutique coffee milk market, where some of its biggest competitors are selling nothing like milk, from nuts and seeds, although they call it something that sounds reminiscent of dairy.

To satisfy that end of the market Big River runs a mix of 300 Jersey and Friesian cows in milk to deliver 4500 litres a day with higher fat and protein than product solely from black-and-white herds.

They are fortunate in that frozen cream and butter processor Richmond Dairies at Casino is happy to take the excess product – at a spot price.

“The relationship works ok,” says Mr Watt. “They are good supporters of us and we get a reasonable price, considering we can’t guarantee volume.”

Coles is another big supporter and they find easier access to shelf space because they are a boutique item that captures just three to four per cent of market share.

“We don’t price our product too high and we don’t sell it too low,” he said. “We supply a good product and it is something the consumer can afford.”

The dairy brands its milk as single-farm source, which works well as a marketing point-of-difference and there are no plans to franchise out to other farms.

“We can tell exactly how our milk was produced. The use of social media is a big one,” he says. “But this venture is not for everybody. It is a hard slog to get there.”

Point of difference

Near Beaudesert, in the Gold Coast hinterland of Queensland, Farmer Gregie is creating a name for himself, as an agricultural advocate. He is also busy branding non-homogenised milk to customers who value the rich dollop of cream at the top of each and every bottle.

However, the Gold Coast, so close, has proven to be a poor market.

“We have half a million people almost on our doorstep but they are a fickle bunch,”’ he says. “They don’t have a care factor.”

Brisbane, which is more like a big country town with a population that still has connections to the land, has proven more receptive to the independent label.

“In this age, there are multi-generational city dwellers who have a disconnect with growers of food. Unlike in the past when everyone had a relative on a farm and often went there on holidays, now there are people who have an expectation that food will just turn up in the shops. That attitude doesn’t sell niche product milk.”

Mr Dennis invested heavily in the third-generation family farm 10 years ago to save it from extinction. He installed a robotic dairy, which has proven itself in that cows can milk three times a day, putting less stress on udders. The herd averages 9000 litres a lactation.

Mr Dennis installed a bottling plant and printed labels that said Scenic Rim 4Real Milk. He cut all ties with the big processing companies, but was forced to sell all his production – an onerous requirement at times.

“Facebook kept us alive for the first couple of years but not much beyond that,” he said. “The domestic market in Australia is just too small for niche products. We really need to export to Asia.”

Of Coles and Woolworths he says the big supermarkets indeed listen to their customers.

“People power is alive and well,” he says. “If people choose to buy $1 a litre milk then supermarkets will supply and that is called people power. But, of course, it can work both ways.”

In fact, Woolies sells Scenic Rim 4Real milk in its local stores. Mr Dennis deals direct, transports his own product and dictates price – which is fair and realistic. The return back to the farm is 65c/l.

“However, considering the cost of feed,” he says, “and the impact of sub-tropical climate on dairy production, dairies here need to be receiving 70c/l.

“The big challenge for all dairies now is sustainability. If you are being paid below the cost of production that won’t return you to profit.”

Page:
2
TheLand

POST A COMMENT


Screen name *
Email address *
Remember me?
Comment *
 
Shredlage is a patented and branded harvesting process that produces long chopped highly processed silage.11 Oct 18 Shredlage is a patented and branded harvesting process that produces long chopped highly processed silage.
While conditions are variable across the country, spring grazing management and silage are top of mind for dairy farmers as they work to conserve as much quality feed and fibre as possible. 
13 Sep 18 While conditions are variable across the country, spring grazing management and silage are top of mind for dairy...
light grey arrow
The processors don’t realize what’s about to hit them with regards milk supply and security.
light grey arrow
A mastitis vaccine will be a great help to women. I hope this study achieve its goal. Anyways, I
light grey arrow
you are behind the 8 ball guys. Industry at the leading edge- 50 farms is already there. The
The Australian dairy industry is committed to supporting investment and successful operation of Automatic Milking Systems (AMS).24 Sep 18  1 The Australian dairy industry is committed to supporting investment and successful operation of Automatic Milking...
The Australian Dairy Conference is on the hunt to find the smartest farm apps being used on Australian dairy farms and it wants farmers' help.11 Sep 18 The Australian Dairy Conference is on the hunt to find the smartest farm apps being used on Australian dairy farms...
Australian farm chemical manufacturer Nufarm has repaired its balance sheet and is now hunting for acquisition opportunities.25 Sep 16 Australian farm chemical manufacturer Nufarm has repaired its balance sheet and is now hunting for acquisition...
Monopoly market may confront cropping sector under mega-merger proposal.22 Sep 16 Monopoly market may confront cropping sector under mega-merger proposal.