Shatto Milk Co.: Profiting by Differentiation
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Code : COM0064
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Region : USA
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Introduction:In 2004, when Robert Shatto of the Shatto Milk Co. went to meet his accountant, he was a bit surprised. Shatto recalls, "I had to pay taxes. After all those years, I showed a profit for the first time". Five years ago Shatto was in a dilemma regarding his family run dairy business, "Every time I crossed the road to milk the cows, I waswondering, 'Why am I doing this?'" With plummeting milk prices, industry consolidation, and increasing competition from corporatemega-farms, profits from the dairy farm was a distant dream. With both financial and family stake in the company, Shatto refused to sell the business. "I figured the only thing we could do was keep milking the cows", he says, "but we had to find a way to make moneyfor a change". He decided to differentiate his milk from that of those produced by the corporate dairies. The strategy was to sell milk just like the milkman of yesteryear – farm-fresh milk in glass bottles. And now, Shatto Milk Co. could barely keep up with the demand and his revenues have risen by more than 70% since he implemented the new strategy in 2003. But the scenario is not the same for all the dairy farm owners. Unable to recover cost, many farms have been closed down. Ethan Parke of the state Natural Resources Agency says, "Most dairy farms are pretty well in debt, with investments in facilities, equipment and live stock. When themilk price drops, it jeopardizes all the investment". |
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