Cream of the Crop
Position yourself for growth in 2017—join us live at the Entrepreneur 360™.
Flash Sale—save up to $200 on registration. Ends Thursday. Secure Your Seat »
On a family farm, perhaps more so than in other types of family businesses, everyone gets involved. That explains why Albert Straus returned home from college in 1977, armed with a degree in dairy science, anxious to help steer the family dairy business through harsh economic times.
Straus and his siblings had grown up on their parents' 660-acre dairy farm in the rolling hills of western Marin County, California, with their share of the chores and a love of the land. Now Straus was prepared to take his involvement in the family business to a whole new level.
The era marked by the well-publicized plight of small-scale farmers across America was beginning to unfold. Once a dairy ranching empire, Marin County was home to 150 dairies in the early 1960s. Over the years, that number dwindled to fewer than 50, as farm after farm succumbed to buyouts by larger farms or withered in the face of competition.
"On a dairy farm, you have no control over your pricing," says Straus. The raw milk the Strauses' cows produced was sold to a co-op at a price mandated by the government, and prices had been stagnant for the previous 20 years. While the wholesale price of milk remained the same, the costs of production were rising.
In order to satisfy additional pollution-control regulations, the Strauses pumped hundreds of thousands of dollars into building a system to prevent waste runoff from entering nearby waterways. As expenses mounted, Straus and his father tried to stay ahead of the game, but with each passing day, it became clearer that they were losing the battle.
Betting The Farm
As a co-owner of the business, Straus refused to give up. "I experimented with quite a few things," says Straus, now 43. "We stopped using herbicides [to control weeds] in 1974. In 1980, we started using a no-till seeder to plant some of our crops. We were the first ones in our area to do that."
Still, the business wasn't profitable. "It was very discouraging, working as hard as you could and not making any progress. Everything I tried to do to save money or increase revenue didn't [produce] results," says Straus. "I was beating my head against a wall."
In 1994, it was time to take a leap of faith. "To survive, we had to get some profitability into [the business]," says Straus. He and his parents, Bill and Ellen, decided to launch Straus Family Creamery and go completely organic. The solution was an exciting one: "I'd always had it in the back of my mind to do something like this," Straus says.
The shift to organic production methods would open a whole new world of possibilities. Instead of selling its raw product to a co-op that, in turn, sold it to private-label companies, Straus Family Creamery would create its own product line and bottle its own milk--with its own pricing strategy. "With your own product and your own label, you can set a price that makes a profit," says Straus.
Converting the operation into an organic dairy farm would also be good for the environment, a commitment the family had honored for years. "We've been very active in the environmental community," says Straus. "[Going organic] was something we believed in."
The transition would take four years and more than $500,000 in expenses and losses, but the enormity of the undertaking didn't deter Straus. When the SBA and the Federal Land Bank refused to finance the conversion without being given everything the family owned as collateral, Straus began to drum up financial backing from friends and family members. "I said, `I don't care if I'm underfunded,' " recalls Straus. " `I'm just going to go for it.' "
Straus leased a nearby building that had been a commercial kitchen and financed the equipment he needed through leases. "I was still undercapitalized, but I went forward and built it from there," says Straus.
It wasn't easy; state and federal requirements for certified organic dairy farms are stringent. "You can't use any antibiotics, hormones or parasiticides," says Straus. "I kept looking into it and figuring out what the regulations meant and how to treat the cows without antibiotics and how to find feed that was certified organic."
Straus was blazing a trail. As the first organic dairy in California, there were few local resources to call on. In his research, Straus discovered veterinary homeopathy, an emerging treatment that has effects similar to those of a vaccine. "But there were only two [homeopathic] veterinarians in the nation working on dairy cows, one in Pennsylvania and one in Wisconsin," he says.
Straus scoured books on the topic, but it wasn't until the Pennsylvania-based veterinarian conducted a homeopathy workshop in California that Straus was able to put it all together. "[As a result of attending the workshop,] it finally clicked," says Straus. "I began experimenting to see which homeopathic medications worked [on which] diseases."
Implementing homeopathic treatment for the dairy's 250 cows meant passing on his newfound knowledge. "I had to train our veterinarian to set aside the conventional methods and look at things differently," says Straus. "It was a hard year because we had to learn things as we went along."
The most difficult part of the transition process still lay ahead: finding organic feed. "It's very difficult to keep a steady supply of different feed," explains Straus. "We were buying close to 60 percent of our feed from others, and the availability of organic feed has never been very good." Feed costs were also a problem, often ranging from 50 to 100 percent more than conventional feed prices.
When organic operations officially began in 1994, a logistical problem arose from the products' supply-and-demand ratio. "Seven days a week, the cows produce a certain amount of milk, and to match it up with actual sales is a difficult thing," says Straus. "We've tried to grow into it, to have our market grow at the same rate as our production." At times, when production exceeded the market demand, Straus had to sell the extra milk as non-organic at a much lower price. "It's a difficult balancing act," he says.
Next, the Straus family had to get the word out about its new business. As the only organic creamery in the area, educating the public about the benefits of drinking organic milk was a priority. Straus' brother, Michael, 31, took a hands-on role, formulating a statewide marketing plan heavy on customer interaction.
"We had a very low budget for marketing and sales," says Straus. "Essentially, our main advertising vehicle has been getting people to try [our product] during store demos." Customers who take part in the taste tests can easily tell the difference in the organic milk, says Straus. They're also drawn to the milk's old-fashioned reusable bottle and the product's positive environmental impact.
After its laborious transition, Straus Family Creamery has successfully turned the corner. The family farm on which Bill, 83, and Ellen, 71, raised their four children is thriving. Though they're geographically spread out, most of the family remains involved to some extent. Ellen is a trailblazer herself, recently gaining national recognition for her years at the forefront of agricultural land conservation in Marin County. Albert's sister, Vivien, 41, has played a part in the creamery's advertising and its Web site, while Michael has moved on to do agricultural consulting outside the United States.
Offering products such as organic cheeses and planning to introduce organic chocolate milk and "cream quality" ice creams in the future, the Strauses have found their niche in upscale health-food stores and supermarkets in 11 states--and expect to see nearly $4 million in sales by year-end.
Although the battle to control feed costs rages on, Straus is up to the challenge. "[The price of organic feed] is still probably 50 percent above conventional prices," he says, "but I'm looking at different ways of doing it. I'm changing how I feed the animals pretty drastically this year, growing more of our own silage and getting away from the feed we have to buy."
Of the early 1990s, when the future of Straus Family Creamery hung in the balance, Straus says, "Everybody was skeptical [as to whether] what I was doing would work, but I don't think we'd be in business today if we hadn't made the change."
And he hasn't looked back. Arriving at work at 4 o'clock each morning, before the first milking of the day, Straus knows his product appeals to America's maturing, health-conscious baby boomers. "We [offer] a guarantee of no antibiotics, hormones, pesticides or commercial fertilizer," says Straus. "I think it's what consumers want."
Straus Family Creamery, http://www.strausmilk.com