Farm Bureau, MOFGA, get
MOOMilkCo off to a good start
Added November 10, 2009. After many months of organization and planning, Maine’s Own Organic Milk Company (MOOMilkCo) is a reality. The 10 organic dairy farms that were dropped by H.P. Hood have joined with Maine Farm Bureau and the Maine Organic Farmers and Gardeners Association (MOFGA) to form a special type of limited liability corporation.
Maine Farm Bureau and MOFGA put the project together with exceptional support from the Maine Department of Agriculture.
Production is expected to begin in late November. When the company is up and running, the milk will be trucked by Schoppee Milk Transport to Smiling Hill Dairy in Westbrook, where it will be processed on an organic production line now being installed. It will be packaged in half-gallon paper cartons under the MOOMilkCo’s own label, which will include the use of Farm Bureau’s “Maine Produces” logo. The milk will be homogenized and pasteurized, not ultra-pasteurized, and sold in retail grocery stores in Maine and New Hampshire. It will be available in whole, two percent, one percent and skim. Cream, half&half, butter, yogurt, ice cream and other products may become part of the mix in the coming years. In the meantime, these byproducts will be organically certified and sold into the wholesale market.
Oakhurst and Crown O’ Maine Organic Cooperative will distribute the product. Hannaford, Associated Growers and a number of natural food stores have agreed to stock it, and sales negotiations are in process with Shaw’s and Wal-Mart.
The company’s goal is to keep the member farms in business by offering them a fair price for their milk. When fully operational, the farms will be paid an advance price of $24/cwt. a week after they ship the milk. There is no reference to the federal order in the contract, so $24 is the floor level payment. Farms will receive an additional payment the month following shipment after all expenses have been paid. The short-term goal is to have the two payments total $30/cwt, with a long-term goal of $40/cwt. In all, 90 percent of the company profits will go directly to the farms as payment for their milk. The remaining 10 percent will be retained for expansion, maintenance, and balancing cash flow.
What will make this possible is the fact that the farms are part owners of the company – and thus owners of the milk from the time it is produced until the time the consumer buys the product. The farms will self-balance, and will be responsible for returns of unsold product through reductions in the company’s profits. The farms collectively own 45 percent of the voting units of the company and elect three of the seven board members. An additional 45 percent will be owned by investors now being sought to provide half-a-million-dollars in equity. Farm Bureau and MOFGA will each own one half of one percent, four percent will be owned by the three-person team – all Farm Bureau members – who formulated and executed the development plan, and the last five percent is being withheld for future employee performance incentives.
It is a different – but not new -- model than what is common in today’s Maine dairy industry, with the farms taking responsibility not only for the production of the milk, but the processing, marketing and distribution as well. While this model was common in earlier times, when individual farms bottled and sold their own milk, what makes this project different is that 10 farms are working together in all aspects of the company management.
That may sound like MOOMilkCo is a cooperative, but that’s not the case. In a cooperative, the members pool their production and attempt to maximize the profits of the cooperative, sometimes at the expense of the individual members. In MOOMIlkCo’s case, the goal is to provide a stable and profitable market for the individual farms, with the company maintaining only a fraction of the profits. The goal is to use the company to make the farms profitable. (So yes, that means Farm Bureau and MOFGA will see little, if any, return on their half-percent ownership shares in the company, but will see some Farm Bureau/MOFGA members stay in business and profit on their own right. That is, after all, what a membership-based organization should be doing.)
Currently, while final agreements and production renovations are being worked out, the 10 farms are being picked up by Schoppee Milk Transport and trucked to Oakhurst Dairy in Portland, where the milk is being processed with Oakhurst’s conventional production. Oakhurst will pay MOOMilkCo the conventional federal-order-based price for the milk. Using a start-up grant from Stoneyfield Farms, MOOMilkCo will pay the farms the difference between the organic contract price and the conventional price during the interim period.
Technically the company is incorporated as an L3C company — a legal name for a low-profit, limited liability corporation, but one which is eligible to receive grants and endowments in the same way as can a cooperative or non-profit. Because the Maine Legislature has not yet approved L3Cs, the company incorporated in Vermont to obtain L3C status. It then registered in Maine as Maine’s Own Organic Milk Company, L3C, LLC. The three-person development team who put the project together is Agricultural Consultant Bill Eldridge of Bar Harbor, Farm Bureau Aroostook County staffer Rommy Haines and David Bright, a member of the Farm Bureau Marketing Committee.
Serving on the board of directors is Eldridge – in his capacity as Chairman – and farmers Vaughn Chase of Mapleton, Aaron Bell of Edmunds, and Richard Lary of Clinton. Haines, Bright, and Russell Libby, executive director of MOFGA, are serving as interim board members until the investor pool is established. At that point the investors may elect three board members. Once the company is up and running, and operations stabilized, a search for a permanent general manager to replace Bill will commence. Attorney Paul Dillon of Corinth and Accountant George Richardson of Auburn have been retained to provide legal and financial assistance. Both work with many farm clients.
There are still some investment opportunities for limited partners. Investment information may be obtained brom Bill Eldridge by emailing firstname.lastname@example.org.
Maine’s Own Organic Milk Company is an example of what can happen when all members of the Maine agricultural family pull together. The Farm Bureau Marketing Committee believes MOOMilkCo may well serve as a model for other projects in the near future.
For more information, contact David Bright 207-234-4226 or email@example.com