From In Business Magazine
September/October 2000, Page 10
stainable management
From Barn Start-Up To Largest Organic Farm Co-Op
Sales for the year 2000 are projected at $77 million, as Wisconsin-based cooperative grows to 295 farmer members in 15 states.
JoAnne Killeen
The agricultural industry in the U.S. is a cultural disaster for farmers, declares George Siemon, CEO of the Coulee Region Organic Produce Pool (CROPP) based in La Farge, Wisconsin. As one of the original founders of the nation’s first organic farmers cooperative, Siemon stresses that CROPP is all about sustaining America’s family farms and its land. This group is now the largest organic farmers cooperative in North America, with sales of $46.5 million in 1999. Sales for the year 2000 are projected at close to $77 million, which indicates the growth rate for the concept and consumer demand for organic products. Original membership of seven farmers has ballooned to 295 farmer members in 15 states.
BORN IN A BARN
In February of 1988, a group of seven family farmers, including Siemon, met in a Wisconsin barn and formed CROPP. They shared a love of the land and the belief that a new sustainable approach to agriculture was needed if family farms and rural communities were to survive. They proclaimed their intent to replenish the earth, rather than simply extract from it. At first, organic vegetables was their focus, but organic dairy products soon became CROPP’s premier product. Consumer demand for the more natural, nutritious foods encouraged CROPP to launch Organic Valley, its own brand name.
Administrative offices are housed in an old converted creamery. Much of the old structure is being used to create a sense of heritage. Reflecting the relaxed atmosphere during a summer visit, many of the 85 employees at the La Farge building, including Siemon, are dressed in blue jeans and even shorts.
With almost each passing year, Organic Valley launched numerous firsts in the nation: First organic cheese product; First in-house production with its own cut and wrap program; First cultured organic butter; First organic milk supplier for the country’s first national organic yogurt brand (Horizons); First organic cream cheese; First organic Swiss cheese; and First national initiative to certify organic meat. By CROPP’s tenth anniversary, the cooperative had more than $20 million in sales and more than 160 farmers in ten states from Oregon to Maine.
“Part of our pioneering efforts taught us quickly that it wasn’t vegetables that could penetrate the mass market, but dairy products — milk, cheese and butter,” explains Siemon as he pads around his office in his bare feet. Today, dairy products constitute 91 percent of Organic Valley’s sales and almost 78 percent of the cooperative’s membership base.
SUSTAINABLE IS AS SUSTAINABLE DOES
Loyalty to the farming members is the guiding principle for CROPP’s operations. “We plan to stay a cooperative,” says Siemon. “We are not planning for growth so that we can sell to a corporation or for a favorable business valuation; we have no exit strategy.” CROPP is designed to be a sustainable vehicle for the farming community. According to Siemon, the cooperative was founded and continues to grow and attract members because farmers are not satisfied with how farming is being done.
The focus for CROPP is the farmer and the land. Members must be family farmers. Most of the 130 employees are involved in providing education to the farmers about the latest techniques and quality controls, helping them through the organic certification stages, practicing good farm and supply management, and developing markets for their products.
With 295 farmers producing for Organic Valley, there are a variety of farm sizes and types. The average dairy farm has 45 cows; the largest farm has 350. Most of the farmers come from the upper Midwest: Wisconsin (54 percent), Iowa (12.5 percent) and Minnesota (11.5 percent). Pennsylvania farmers recently joined the co-op and now represent five percent of the membership.
The dairy farmer represents 77.6 percent of the types of producers in the cooperative. Egg producers comprise 12 percent, vegetable producers represent 9 percent, beef farmers represent 4.7 percent, pork has a two percent presence in the cooperative and poultry a one percent presence.
SOCIAL EXPERIMENT FOR THE FARM
CROPP is a social experiment, says Siemon. As such, it does not want to get involved in manufacturing, but is focused on promoting organic farming and farm product management and marketing.
Building relationships and partnerships with different manufacturing plants is an outgrowth of this philosophy. CROPP owns only one processing facility, the creamery located in Chaseburg, Wisconsin, where butter is produced from excess cream. Thirty percent of members’ products are sent to manufacturers to be combined with other products such as baby food. According to Siemon, this helps with the balance of supply and demand and also provides for diversity of markets.
CROPP has co-packing arrangements with 45 different plants across the country. “We hire out as much as possible,” says Siemon. “Sustainability relies on not just keeping ourselves in business, but helping other businesses stay in business. We recognize we are part of a larger community.”
THE MORE THINGS CHANGE, THE MORE THEY STAY THE SAME
For CROPP members, the most exciting development in organic farming is not the tried and true farming methods. Farm management hasn’t changed much; crop rotations, integration of livestock with farming, and using natural fertilizer are all practices that feed the soil and not the plants.
What is new, according to Siemon, is the farming machinery that is being manufactured. New machinery is designed around product quality and makes it easier for farmers to plant and harvest their crops. One of the farmers in CROPP has designed what is called a flame weeder, a propane gas flamethrower used to burn weeds. Farmers can burn the weeds off the carrots, for instance, without harming the carrot under the ground.
Also new, and responsible for the explosive growth of Organic Valley since 1998, is the food processing technique called Ultra High Temperature (UHT) pasteurizing. While it didn’t invent the process (it was invented in Europe), Organic Valley was the first to introduce the process to organic milk in America. It involves superheating and cooling milk at extreme speeds. In less than one second, pre-heated milk is steam-injected and flash-chilled. This destroys virtually all bacteria in the fluid and preserves the milk’s original freshness and taste. The result is the extension of the milk’s shelf life from 17 to 45 days. Introducing UHT processed milk opened up many new markets for Organic Valley and consumer acceptance has been very high.
SUSTAINING AN EXPLOSIVE GROWTH RATE
Before introducing the UHT milk in 1998, CROPP enjoyed an industry average growth rate in sales of about 20 percent, sometimes even a little higher than average. With the UHT milk, sales shot up 72 percent, from $27 million in 1998 to $46.5 million in 1999. Sales are projected to be close to $77 million for the year 2000, a 65 percent increase. During the first quarter of 2000, sales were already taking off with a 75 percent growth rate over the first quarter of 1999.
“Is a 75-plus percent annual growth rate sustainable?” Siemon asks. The co-op’s crowded headquarters is a signal that while staffing levels have been increased due to the quick expansion, space is at a premium. Siemon is concerned that the growth has been too fast and is taking steps to ensure that it doesn’t detract from the co-op’s main mission.
CROPP is exploring forming a separate co-op for Organic Valley’s Family meat label. The meat producers of CROPP, about 30 strong, are discussing formation of a separate but closely CROPP-linked meat sister cooperative in Iowa.
Throughout all the changes, CROPP has remained true to its mission to bring a fair price to farmers and support farming methods, which assure a future for generations to come.
As part of this mission, Siemon serves on the U.S. Department of Agriculture (USDA) Advisory Committee on Small Farms. Authorized for two years, the committee will review USDA programs and strategies to implement small farm policy and advise the Secretary on approaches to improve the department’s progress.
The Committee will ensure continued consideration and implementation of the recommendations made by the National Commission on Small Farms in its report, A Time to Act. The report listed 146 recommendations regarding small farming in the U.S., including 12 policy goals.
The openness (by the USDA) to protect and preserve small farms is very healthy to see, points out Siemon. The problem is the agricultural economy, which is destroying family farms.
Asked what others could learn from his experiences, Siemon says the most important factor is to stay true to the farmers. Give the consumers a chance to show their willingness to support them. In terms of farmer production, Siemon says success and price stability are dependent upon supply management. “Good supply management will offer price stability so that our farmers are not tied to the conventional market,” sums up the CEO.
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