Mid-size dairies win consumers with less-processed milk

By Jane Black
Washington Post Staff Writer
Wednesday, April 7, 2010; E01

"Oh, my God. The cream! You gotta taste the cream!" said Warren Taylor. "It's pale yellow. And it's got this amazing smell. You have to get some."

To say that Taylor, the founder of Snowville Creamery, is excited about dairy products is an understatement: "If you cut me, I bleed white," he likes to say. Taylor wants to elicit that same level of enthusiasm from everyone. It's why his milk comes only from grass-fed cows, which he believes creates a more vibrant flavor. It's why the milk is pasteurized for just 17 seconds at 165 degrees, as low as the law allows, to preserve that taste. And it's why the Pomeroy, Ohio, creamery has 24 part-time workers dedicated to handing out samples in grocery stores in the hopes of proving that all milk is not created equal.

Sparking a new American love affair with milk would be an ambitious enough goal. Per-capita consumption has plummeted 30 percent since 1970, according to government figures. Many American consumers long ago accepted milk as a bland and watery, if nutritious, obligation. But Taylor's evangelism is aimed at not only consumers but also his fellow milk producers. "The big lie is that all milk is the same, and therefore everyone gets paid the same for producing it," he said, referring to the government guidelines that regulate the price most farmers receive for their milk. "That is what is crippling the whole. It keeps the entrepreneurs and the little guys from rising up."

Snowville's solution is to create a premium milk that it controls from cow to carton. The creamery isn't profitable yet. But it is growing fast. The 28-month-old company bottles 9,000 gallons of milk each week. The products are available in eight Whole Foods Market stores in the Washington area.

Other mid-size producers are taking a similar tack, cutting out middlemen and setting prices that keep the business afloat. Trickling Springs Creamery, which sells organic milk in glass bottles, is a favorite of Washington coffeehouses. The Chambersburg, Pa., dairy has seen its revenues grow 60 percent since 2007. South Mountain Creamery, after struggling for years as a traditional dairy farm, began bottling its own milk in Middleton, Md., and delivering to customers' doors. It now has more than 5,000 customers and is profitable.

This growth has occurred during a period that has been all but apocalyptic for the dairy industry. In the first three months of 2009, conventional dairy farmers saw prices plummet by 30 percent, due in large part to falling exports. Organic producers were also hit hard as cost-conscious consumers passed over $7-per-gallon milk for cheaper alternatives.

Taylor, 58, is not a starry-eyed newbie, like so many on the front line of the food revolution. His father was a dairy technologist who judged milk and cheese contests, and young Warren learned to flavor milk before he learned to drive. In 1974, he graduated with his own degree in dairy technology. He says he was a "young Turk" in Safeway's dairy division, designing milk-processing plants and negotiating with regulators. Later, he launched his own dairy consulting business.

As milk consumption declined, however, the demand for new plants waned. Taylor's remaining clients became interested in one thing only, he said: cutting costs.

Taylor began to look for new business opportunities. Organic milk was an obvious option. But Taylor said he was skeptical that federal rules governing organics guaranteed a superior product. Producers are allowed to feed cows organic grain, for example, instead of their natural diet of grass. Taylor wanted his cows to be raised on pasture and to receive no hormones or antibiotics. A pasteurization expert, he also maintained that the key to "milk the way it used to be" -- now Snowville's slogan -- is to keep it as raw as legally possible. (Taylor says high-temperature pasteurization damages the nutritional content and flavor of the milk.) A self-described "old communist hippie," he also didn't want to produce a product too expensive for ordinary consumers.

In 2006, he entered into a partnership with nearby dairy farmers Bill Dix and Stacy Hall, who had 230 cows on pasture. He mortgaged his farm and home to build the $1.5 million dairy processing plant of his dreams. The first Snowville milk -- grass-fed and unhomogenized, so the cream floats to the top -- came off the line in December 2007.

The business was not an instant success. Taylor was able to get his milk into one Kroger grocery store in Ohio. The product sold well, but Taylor said he was turned down by several of the chain's other stores. Complex federal dairy regulations -- in particular, one that requires most milk bottlers to pay into a pool that is distributed among regional dairy farmers -- also constrained the business. "We make premium milk, but we are forced to write a check every month to subsidize big, commodity dairy operations," Taylor said. By the following August, Snowville was on the verge of bankruptcy. In desperation, he turned to Whole Foods, just the kind of high-end grocery Taylor originally had hoped to avoid.

He couldn't argue with the results, though. Within four months, Snowville's milk and cream were in six Ohio stores and accounting for 30 percent of the business. Though he had hoped to keep his milk local, in September 2009, Taylor drove the first truckload of milk 350 miles to Washington. The creamery now has about $2.5 million in annual revenues and is close to breaking even.

"Warren has a real vision for what he wants to do," said Mark "Coach" Smallwood, Whole Foods' mid-Atlantic forager, who first brought Snowville's milk into the grocery chain. "He designed every stainless-steel pipe [in the creamery]. It's all set up so he can double in size and not take up much more footprint than he has. He's always thinking about how to use his operation as a model for other farmers like him."

Other dairies have discovered the Goldilocks formula themselves. Trickling Springs Creamery and South Mountain Creamery are designed to be small enough to control the quality of the milk -- big dairies get milk from many farms and combine it -- and big enough to supply enough customers to turn a profit.

Trickling Springs Creamery buys almost all of its milk from one organic farm, nearby Shankstead EcoFarm. It processes it, using minimal pasteurization, and distributes the milk, cream, butter and yogurt itself. The dairy has had some "pretty bad times" over the years, acknowledges General Manager Fred Rodes. Today, demand is high. Trickling Springs bottles between 8,500 and 9,500 gallons of milk per week. Rodes said he hopes to achieve 20 percent growth in 2010.

At South Mountain Creamery, the owner's decision to build a processing plant was born of economic necessity. After 20 years of dairy farming, Randy Sowers couldn't make ends meet selling his milk to the local cooperative. Sowers persuaded a local bank to lend him the money for a mini-dairy so he could process his milk himself. South Mountain's milk is not organic but all-natural. Sowers, too, uses minimal pasteurization to retain flavor.

Unlike at Snowville and Trickling Springs, however, Sowers decided he would deliver his milk directly to customers, cutting out the middlemen throughout the process. "I knew we had to go straight to the customers," said Sowers, 55. "With wholesalers, you've got to pay them to deliver it, pay the people working in the store. There are too many people with their hands in it."

Getting the business off the ground took time. South Mountain made just 13 deliveries on its first day in May 2001. Sowers tried advertising the old-fashioned milk-to-your-door service on cable TV and on radio, but that didn't do much good. The turning point came about three years ago, he said, when The Washington Post ran an article about the creamery's delivery service. Customers started calling. South Mountain now delivers its milk as well as bread, cheese and even produce to more than 5,000 customers in the Washington area. "Three times, we almost lost it all," Sowers said. "We are diversifying and, what do you call that? Integrated. Start to finish, we are in control of it all."

At Snowville, Taylor's goal is "good milk for all." But none of these mid-size dairies can compete on price. Their milk prices are in line with those of organic milk: between $3 and $3.50 per half-gallon, about the same as the average retail price of a full gallon of conventional milk.

Though demand for organic milk fell during the worst period of the recession, many customers seem willing to pay a premium. Ryan Jensen, owner of Peregrine Espresso on Capitol Hill, said he originally was attracted to Trickling Springs milk because it was local and came in reusable glass bottles. But it was the taste that won over his staff. Baristas used to commodity milk were "blown away" by the quality of the skim milk and the way all the milks frothed when they were steamed, he recalled. "The flavor and texture of the milk is a cut above what a lot of us had used before."

Shoppers also like the taste and are grateful to find good milk at the grocery store. Ellen Fort, who works at the Pappas Group advertising firm in McLean, said she originally picked up Snowville because it was all-natural; the taste made her a fan. "It definitely has a different consistency, even the skim," she said. "It's creamy and good, almost grassy."

Snowville's Taylor is used to such praise. "Whenever I sample milk, people always tell me, 'This is how I remember milk tasting,' " he said. It might happen all the time, but it never fails to excite him.

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