A Chat With Stan Bennett

Interview with Stan Bennett, CEO of Oakhurst Dairy August 30, 2006

Jim Dudlicek, DF editor: What has changed since Dairy Field’s last visit five years ago?
Stan Bennett: Since the last time we spoke, the dairy enjoyed unprecedented growth — three, four, five years ago, double-digit growth each year. A lot of that had to do with our strong position on no artificial growth hormones. But also there was some attrition here in the Northeast with smaller dairy companies going out of business. And we enlarged our geographic marketing area to include all of northern New England, as well as eastern Massachusetts. The last couple of years have been flat for a couple of reasons. First, the attrition settled out because nobody’s left except for ourselves in this region, and we’ve made a conscious decision to stay independent. And also, the other major dairy companies here in our region, at least in northern New England, have taken a page out of our book and positioned themselves to promote no artificial growth hormones as well. The past six months, we’ve taken a long, hard look at our business and what we need to do to re-energize ourselves and grow again. Our focus is to strengthen the brand identity and our brand leadership in what, as you know, is perceived to be a commodity industry and position ourselves for growth not only in our present marketing area of northern New England and eastern Massachusetts, but throughout New England. What we’ve focused on is sort of a return to basics, something I think we’ve lost sight of over the past few years as we promoted what WASN’T in our milk. We’ve taken a new look at what the healthful benefits of the product are. My dad used to use the phrase in advertising and marketing, and I don’t think it was original by any means to Oakhurst, but I remember back in the ’50s and ’60’s we used to use the term “Milk — nature’s most nearly perfect food.” I think the industry — and we’re as guilty as others — have been so interested in responding to the negatives of the product that were perceived of, and in some cases perhaps had some basis in fact, that we’ve not done a good enough job at promoting that it is a tremendously healthful product. Our focus going forward will be on the health benefits of the product, that it is a healthy beverage with numerous nutrients, vitamins and minerals, and that there are a lot of positive health stories to talk about with dairy, not just calcium, which is the one that everybody focuses on. Such issues as weight control and blood pressure, teeth and hair. There are dozens of good talking points and stories to be told to consumers about the healthful benefits of milk. In a way, I look at it as a return to basics in promoting this as perhaps the most healthy beverage that people can consume. To that end, a new advertising agency that has a lot of background in just those areas [was hired] — advertising, public relations and promotional activity coming up during the fourth quarter of this year and going forward will be handled by this firm, along with a new television campaign. So that’s where we stand. Also, in response to the growth of three, four and five years ago, we’ve made a serious financial investment in the company. We’re in the $90-95 million sales range. As with everybody else in the industry, margins are paper thin, but we were at a position a year and a half ago at which we were essentially debt-free. With myself as the principal owner of the business — I’ll be 60 years old in January. We were getting a little long in the tooth to roll the dice. But I really saw a lot of opportunities for the industry. I’ve been very optimistic about it, even during that period when our sales were relatively flat. So we’ve invested approximately $10 million over the last 24 months in capital expenditures — new higher-speed filling equipment, a new pasteurizer, a new, much-larger receiving area for our farm milk, and a new 1,200-pallet, state of the art cold storage facility. This has given us the opportunity to grow by as much as 50 percent in the years to come before we need to look at more cap ex or a different site. So, we’ve put our money where our mouth is. We really do have optimism for growth in the industry, not just our company taking more market share, but per capita consumption turning around as the industry in general and brand-name companies like ourselves in particular focus on the real positives of the business; rather than defending ourselves on the perceived negatives, focusing on the positives of the product. I think brand names have to step up to the plate and take a leadership position, and we intend to be one of those brand names.
JD: Oakhurst has done a great job leveraging its hometown brand equity, especially as industry consolidates around it, staying independent. See a future in expanding geographic area, or growing equity within current territory?
SB: A little of both, but I would say more of the focus would be on the geographic area we’re already in. Although we have one of the largest brand-name market shares of anyone anywhere in the country in our core area (Maine and New Hampshire), our distribution area covers much of Massachusetts as well. There’s more people within 10 miles of Boston than there are in all of northern New England. I think the message of a healthful Maine-based company with old-fashioned values — not just a healthy product, but healthy communities, healthy environment — with the tagline “The natural goodness of Maine” sells very well in Massachusetts and southern New England as well. Also, I think there’s a lot of opportunities for more, new, unique health-and-nutrition-based products, variations on the theme of our line that we already have and promote, which is called Nu-Trish. We see those kinds of products being drivers within our existing market penetration: the retailers we already do business with.
JD: How has your nutritionist spokesperson’s role developed?
SB: Her name is Pam Stuppy, and I think having a professional nutritionist who speaks on our behalf adds legitimacy. It’s one thing for us to tell people how good our product is, but an outside party’s statements have been a plus for us. And we’ve learned a lot from her as well. In the process of bringing these people aboard, you think, my goodness, I didn’t realize this is exactly how vitamin D works. A little interesting anecdote: One of my daughters is from China, and when she arrived here, she was 2 years old and suffered terribly from rickets. I always thought of rickets as a calcium problem, but actually it’s a vitamin D problem, because vitamin D helps the body make use of the calcium. Because of diet and that culturally in China kids are swaddled and don’t get a lot of sunlight. She hadn’t gotten much Vitamin D, but within two or three years, with calcium supplements and, of course, a lot of good milk, she was straight as an arrow. She’s 11 years old now and runs like the wind. That’s one of the ways I realized there’s a lot more to milk than meets the eye.
JD: What are the biggest challenges facing Oakhurst and the industry? Other processors say energy, insurance, human capital …
SB: You named them, but one challenge that’s relatively unique to the Northeast that I see is the availability — not just 10 or 20 years out, but the next few years — of good, high-quality, no-artificial-growth-hormone milk. Where there are 5,000-cow farms being developed in the Southwest and Idaho and such, we’re still seeing an attrition of farmers here in New England. We have to create through over-order incentives so as to give the independent dairy farmer a reason to stay in business and hopefully to grow. That’s why we’ve always been in favor of such things as compacts and subsidies of virtually any kind that allow dairy farmers to survive. We think it makes good sense not only for our industry, but secondarily because of the fact that it keeps land open, in use and away from the developers. It does make a difference to the quality of life here in Maine. We think that’s a challenge. We’re addressing it in our small way by doing whatever we can politically to promote what I call over-order pricing. I know we run counter to the industry in that regard. But we feel whatever potential per capita consumption decline that might be suffered with slightly higher milk prices is more than offset by the retention of a quality product for consumers. We feel a stewardship responsibility to stay in business and provide a market for this product that consequently helps keep the quality of Maine where it is. Another challenge is the environmental challenge and the perception of the environment. More than any one thing, the cachet of our product line and the Oakhurst name is based upon not just the reality but the perception of the quality of the environment in Maine. Things from Maine, whether it’s L.L. Bean products or Poland Spring water or Oakhurst Dairy milk, have a wonderful, built-in, natural aura with consumers throughout the Northeast. Why? Because they think of the Maine environment as clean and healthy. We often use the expression that Oakhurst cows literally breathe and eat and drink the Maine environment, so we have a commitment to that environment. Consequently, a large part of what we do in terms of charitable and non-profit contributions is directed toward environmental issues. Whether it’s work by the Nature Conservancy in setting aside lands along the Maine coast, or environmental issues that affect Casco Bay and the rivers here in Maine, we’ve done our best with 10 percent of our profits assigned to charitable and non-profits to support the Northern New England environment. The third change, which you mentioned — you used the term human capital — is a real serious concern for anybody involved in manufacturing and processing, find good quality people whether it’s an entry-level job in the factory or a salesman’s position, route sales, or managers. Consequently, we’ve got an obligation to the economy of Maine and the educational system in Maine so that when I get to retire five or 10 years down the road, there will still be good quality folks applying for jobs here at Oakhurst.
JD: Do you find the human capital issue to be a challenge because people aren’t attracted to the industry or because of Maine’s rate of growth and population changes?
SB: I think it’s an overall demographic issue, and one that’s going to get worse before it gets better. You just look at the population change. As baby boomers — of which I am one — are aging, and the number of people that are coming along in the population mix to support us and also to keep the businesses running is declining, it’s going to be tough. Maine’s unemployment level is under 5 percent. At some point, you get under 4 percent and it’s essentially a full-employment economy. Our business offers exciting things — there are technical positions in QC and plant. There are good, independent sales jobs for people who want to run milk routes, and we still find people who like to do that. Just finding the numbers of people is going to be tough.
JD: Oakhurst is known for having a good relationship with its producers.
SB: By virtue of being a smaller company, and being located where we are in a relatively unpopulated state, we’ve developed what I think to be a strong relationship with our producers over the years. Also, we’re pretty unique in that about 90 percent of our milk comes from independent farmers who deal directly with us rather than through a co-op. We do make use of a co-op up in Vermont that helps us balance product. But about 85 dairy farms in Maine supply us with about 90 percent of our product. In many cases, their grandfathers sold milk to my grandfather, their dads to my dad. It’s all done on a handshake; we don’t have contracts with any of them. Consequently, we get to know them pretty well. We have what we call a producer advisory committee, about eight or 10 farmers who represent the 85, and we get together every fall with them, and then in the spring we have a producer luncheons to keep them updated on what we’re doing to market their product and to listen to them in terms of things we can do. We were one of the first companies — the first in the Northeast that I know of — to introduce a quality incentive program, and later on, incentives not to use artificial growth hormones. So, we’ve maintained our position as the strongest market for a dairy farmer here in New England, in terms of what we call the “mailbox value” of their milk per hundredweight. When push comes to shove, that’s a very big part of it, and one of the reasons we’ve maintained a good relationship with our producers. We’ve also made use of a couple of the farmers to help us in our advertising, and we intend to do more of that as time goes on. There’s no better spokesman for a food product. I think that’s important because more and more people want to know not only what’s in or what’s not in the food products they consume, but also who’s behind it. They want to know there’s a human being standing behind the products they consume. It really is a farmer from Turner, Maine, and it really is a family dairy company right there in Portland. Putting a face and a name with a product is getting more and more rare in this world, and it’s one thing that dairy can do — or at least our dairy can do.
JD: Discuss Oakhurst’s decision to reject milk from cows treated with rBST.
SB: It’s been about 10 years since the advent of this technology. As it was about to enter the marketplace, we got a lot of comments, not just from consumers, but from farmers as well. who didn’t feel it was in the best interest of the health of the animal — and in the case of the consumers, the health of the human animal. To be honest, to begin with, we took the position we did purely for marketing purposes. Being a company that’s driven by the needs and wants of consumers, we said they don’t want it, they shouldn’t have to worry about it, regardless of its efficacy or health concerns. We’ll do what we’re told by the consumers, and we did. As it turns out, I’ve become a believer over the past 10 years, through all the anecdotal information, letters, e-mails and the position taken by the Canadians and the European Union. Why give consumers something unnecessary to worry about? Plus, we also looked at this with regard to the farmers; I mentioned one of the problems we face is the attrition of dairy farmers here in New England. Part of that is because of the price of milk and part of that is because of the oversupply of milk elsewhere in the country, and part of that is because of the use of growth hormones. To artificially inflate the production of cows at a time when the price of milk is $14 a hundredweight is just nuts. For that reason as well, we’ve maintained the position. I know it’s been the right one for us as a company. People are grateful to us for having taken the position. It was not without expense: it costs us on an ongoing basis, quite a few hundred-thousand dollars per year that we pay in premiums to our farmers not to use the artificial growth hormone. Our two largest competitors, each of whom have a plant here in Maine, have followed suit by positioning their dairy plants in northern New England as having no artificial growth hormones. So we know competitively they’ve seen what the value has been to us. It certainly has helped us to maintain our market share. To paraphrase John Kennedy, doing the right thing was most often the right thing politically, and I think that’s true in business — do the right thing, and it’s almost always the right thing to do for your business.
JD: Let’s talk about your family’s ties to Maine and how that influences your business and community activities.
SB: My grandfather started the business 85 years ago. We’re the third generation to be involved in the ownership and management of the business. All seven siblings who are the owners of the business now live in Portland or within 10 miles of the city, and we’re part of the community. As long as we are the stewards of our family’s business, and as long as we’ve got to look our neighbors in the face every day, we’re going to do what we think is the right thing for the community. Our approach to the business in the past and going forward is we really, sincerely believe in a healthy product, a healthy community, and a healthy environment. Ever since my grandfather’s time, the dairy has been doing this — I don’t know if it’s a feeling an obligation; it’s what you do. If you make your money in a community, you put back. At some point, maybe 20 years ago, we codified what we were doing normally every year, and that was to take a position that we would always make contributions to charitables and non-profits in the communities we did business with equal to 10 percent of pre-tax profits.
JD: How do you keep the brand visible in the community?
SB: Again, it’s what you do when you live in a community, just naturally. My sisters and brothers and I are all on various boards of directors and work for various non-profits here in Maine. A lot of it is — it’s good for business to take a high profile, yes, but it’s also what you do naturally. It’s ingrained in us. Portland and northern New England as a whole is still small enough in population that people do know one another well and community means something. I really do think it contributes to the success of our product line. I think the ones we’re most passionate about are environmental organizations. I’m involved with a group called Friends of Casco Bay that just has done wonderful things for the protection of the environment of this beautiful bay here. I get a lot of satisfaction out of that, and contributions that we’ve made to land trusts to protect land from development have been very rewarding.
JD: You’re also active in preserving farmland?
SB: Yes, and that’s been a tough one to do as much as we’d like to, because there’s only so much land and the pressures on it are tremendous now. It’s so difficult, particularly in southern Maine, for somebody to continue to farm with the property tax levels where they are, and the opportunities for selling that land for development for house lots. “Support your local farmer or watch the houses grow” — somebody’s got that bumper sticker. But we’re trying.
JD: I see the same kind of sprawl eating up farmland in the far Chicago suburbs near where I grew up.
SB: I’ve got friends who moved down to north [New] Jersey 10-15 years ago. The old truck farms that fed New York, all tract housing now. Sad.
JD: Where do you see the company five years from now?
SB: I think a continued and reinvigorated focus on healthy environment, healthy communities, but most importantly, healthy products. With the introduction of new products, I see us growing at a modest rate — modest but healthy — in the years to come. Remaining independent. Enlarging our geographic area to some extent but more focus on increasing market penetration in our current geographic area. Continuing to focus on milk but with many health-related beverages added to the product line, and a lot of that is stuff we’re cooking up as we speak. One area in particular that I see growth in is our Nu-Trish line of probiotic milk.
JD: Nu-Trish is an acidophilus product?
SB: That’s right — acidophilus and bifidum. We’ve had that line for many years. I believe we were the first in New England to introduce that product line, and we’ve made changes as time has gone one. We’ll be introducing more products in that line. Right now, we have lowfat and skim.
JD: So it’s sort of a re-introduction to coincide with a new focus on health and wellness?
SB: Exactly.
JD: You intend to stay independent. Do you get frequent offers to sell?
SB: I got one right on my cell phone today. I think about them — maybe 10 years ago I wouldn’t have even thought about them — but I always erase the call within 24 hours. [laughter] It’s nice to be wanted! But we like what we’re doing, we’ll stay at it. As long as we remain modestly profitable and we enjoy what we’re doing. We are so lucky to have this opportunity. Four of the seven siblings are actively involved and employed with the business; a brother-in-law really means that five of the families are supported by working at the business. And we still get up every morning and are fired up about what we’re going to do that day, squabble about how we’re going to do it but all get along terrifically. We really haven’t had a harsh word in 20 years or longer. So, yeah, we do intend to stay independent.
JD: Is the fourth generation of Bennetts showing an interest in the business?
SB: Not yet. There are a few fourth-generation kids that are of an age where they could take an interest and have decided not, but there’s still about 10 more coming along including three of my children, and we shall see.
JD: What’s the most unique aspect of Oakhurst Dairy?
SB: [long pause for thought] The fact that it’s — since we are a small, family-owned business, I think we are unique in that we really are close — we create a very close distance between the product itself at the dairy farm and the consumers. We know everybody throughout that chain personally, and consequently, I think, are able to react as quick as or perhaps quicker than the big boys in responding to what the market would like to see. Related to that: we really do have a passion for selling a healthy, high-quality product. We’re kind of nuts about it — sorry about the pun.