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May 2000

Selling a Concept
California Dairy and Creamery Thrive on Organic Principles
by Shannon Linderoth

Albert Straus makes himself at home in the sprawling room overlooking the processing activities at Straus Family Creamery, which sit in the shadows of California's Marin County hills. A wall of windows showcases white-clad employees bustling below on the production floor, sanitizing the stainless steal equipment before wrapping things up for the day.

While the workers may be winding down, Straus is still pushing. He discusses supplies with a distributor, schedules employees, answers the telephone, conducts a facility tour and keeps an ear alert for the fax machine hum -- the business is bidding on supplying Berkley Public Schools with products for its new organic lunch program.

But multitasking is what's taken this business from non-existence in 1993 to its current profitable, award winning diary processor status.

Every week, the creamery's 15 employees crank out organically produced and processed cream-top whole milk, lowfat and nonfat milk, lowfat chocolate milk, whipping cream, nonfat plain yogurt, sweet and lightly salted butter, medium cheddar and Monterey Jack cheese. The milk products are famous for their glass bottling. "Our glass bottles offer us a niche even beyond organic," says Straus.

"As a small company, we introduce new products slowly as we can afford the equipment and the packaging," he explains. "Nothing is rushed and every aspect is thought out so we can be sure we're providing products that come up to our standards in taste, simplicity and responsible packaging."

The business' history reflects steady growth in organic marketing.

Straus had difficulty finding conventional financial backing for his original business plan, especially given the widespread unfamiliarity of organic production nearly 10 years ago. Finally, he amassed startup financing through friends and relatives and opened the doors using leased equipment. Currently, the business operates with a combination of leased and owned equipment, with Straus buying pieces as leases end and the business can afford to own the assets.

"Production through the creamery has grown threefold in the last five years," Straus reveals. "Between 3,000 and 4,000 gallons of milk go through the plant each day, plus what we need for cheese production."

The Straus Family Creamery is the brainchild of Albert Straus, who opened the award-winning business six years ago using funds borrowed from friends and relatives.

Straus' 250 cows and the production of Joe and Kathy Tresch's neighboring farm supply the organic milk. Straus is in partnership with his father, Bill, on the dairy farm and other family members provide business promotion and product development for the creamery business.

"We started out producing quarts of whole and nonfat milk," Straus recalls. "We increased the line to include half-gallons and grew from there. Northern California was our primary market and we had one distributor." That distributor list is up to 12, and services the national scene.

Straus credits timing for a good deal of the success of the creamery and the dairy. "When we came out with our product, consumers were ready for it," Straus insists. "There wasn't anything on the market like it and people were ready for it."

Straus had difficulty finding conventional financial backing for his original business plan, especially given the widespread unfamiliarity of organic production nearly 10 years ago.

The Numbers Game
"The organic dairy industry is growing extremely robustly -- in the high double digits, 50% to 80% annually, Yudi Bahl, natural products research analyst at U.S. Bankcorp Piper Jaffray in Minneapolis, Minn., told "Natural Foods Merchandiser" recently. "The industry is starting from a small base level, though, so that's why we're seeing growth at this scale. Organic yogurts and milks are gaining momentum in the natural and especially the conventional markets."

The trend is reflected in annual receipts. The Organic Trade association reports U.S. organic sales hit $6 billion last year-a remarkable leap from $178 million in sales posted in 1980. European sales account for $7.3 billion a year, with world organic marketing's accounting for $15.6 billion annually.

Products availability and consumer interest area also on the upswing. A Food Marketing Institute study says that organic and natural foods are available at approximately 73% of grocery stores and supermarkets. And, of those shoppers surveyed by FMI, more than 50% said they purchased organic or natural foods at least once a month. Thirty-five percent of respondents said they actively seek out products labeled organic and 63% look for products labeled natural.

But getting into the niche is an expensive proposition requiring intense effort and commitment, it is not for everyone. "It took a $100,000 investment and four years before our farm -- not the creamery as it's a separate entity -- became profitable," says Straus, "We become known for our commitments to organic products."

European Model
Recent food scares and fierce debate over genetically modified organisms (GMOs) have sparked keen interest in organic food production across Europe.

A newly available market research report generated by USADATA.com indicates the markets for organic foods are some of the fastest growing segments in the European food industry, with both production and consumption rising rapidly.

Still, the report continues, major conventional dairies have distinct advantage since they have both financial power and distribution networks to adequately serve supermarkets.

However, organic production and consumer interest keep rising. The following figures, collected by agriculture specialist Nicolas Lampkin from the University of Wales in Aberystwth, Great Britain, show the changing distribution of organic farms.

"It is to a large extent policy driven as most Western European countries now provide financial support for conversion to and continued organic farming," Lampkin reports, "but market growth has been important."

Number of certified organic farms in Europe
	1985	1990	1995	1996	% of total
Austria	500	1,500	18,144	25,000	n/a
Belgium	50	150	203	200	0.28%
Denmark	100	523	950	1000	1.23%
Finland	100	300	1,850	1,900	n/a
France	2,500	2,850	3,500	3,500	0.37%
Germany	1,592	2,685	5,866	6,068	1.05%
Greece	--	25	500	500	0.05%
Ireland	8	97	300	300	0.18%
Italy	600	1,300	8,554	10,000	0.38%
Luxenbourg	10	11	12	12	0.30%
Netherlands	215	399	582	600	0.48%
Portugal	1	34	120	120	0.02%
Spain	264	350	1,000	1,000	0.06%
Sweden	150	1,891	3,000	4,000	n/a
UK	300	620	715	819	0.34%
Total EU	6,390	12,735	45,296	55,019	n/a

n/a = not available
Source: Welsh Institute of Rural Studies

Reprinted with permission from Dairy Producer.