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Feedback: Experts weigh in on Milk Thistle organic dairy farm
(Reuters) - If Dante Hesse's hunch is on the money, the people he sells his organic milk to will also become the people who fund his growth. What started as a series of "low key" one-on-one conversations with customers at local farmers' markets near his Ghent, New York farm, has escalated into a serious attempt to raise $850,000 - in as little as $1,000 increments - directly from the dairy-loving consumers who buy his milk by the quart.
The following panel of experts critique Hesse's business model and opportunity for growth:
JOSH DORFMAN, FOUNDER & CEO, VIVAVI
Josh Dorfman is an environmental author, media personality, and entrepreneur. He is author of "The Lazy Environmentalist: Your Guide To Easy, Stylish, Green Living" (April, 2007) and "The Lazy Environmentalist on a Budget: Save Money. Save Time. Save The Planet." (April 2009). Josh hosts "The Lazy Environmentalist" television series on Sundance Channel and is a featured commentator on Sundance Channel's original television series "Big Ideas for a Small Planet." Josh first created "The Lazy Environmentalist" as a talk radio show which he produced and hosted on Sirius Satellite Radio from 2006 to 2008. His website, Lazyenvironmentalist.com <www.lazyenvironmentalist.com>, serves as a green consumer hub, offering advice and reviews of today's most innovative eco-friendly products and services. In 2004, Josh founded Vivavi <www.vivavi.com>, a retailer of contemporary, eco-friendly furniture and home furnishings, to demonstrate the possibilities for merging modern design with environmentally responsible materials and manufacturing. His work as CEO has been recognized widely in the media, and Inc. Magazine has named Vivavi one of the top 50 businesses driving today's green revolution. Josh holds an MBA from Thunderbird, The School of Global Management, and a BA from the University of Pennsylvania.
"I think he's in a pretty strong position, because living here in Brooklyn, I've seen over the last four years how demand has grown in farmers' markets and there's more kind of regular people showing up to do their shopping there.
"I think it's a major growth industry and opportunity and from my perspective of running a luxury green furniture company, the luxury of buying organic milk or yogurt, the premium associated with that versus luxury furniture, you're spending more, but you're spending an increment of dollars more; you're not spending an increment of thousands of dollars more. So I think it's actually a market where people who value that say: it costs me a few more dollars a week, but I'm willing to do that even in the down economy. So it's a luxury, but it's a different value proposition than some other green premium value propositions, like a green hybrid for example.
"Honestly I think he's tapping into a real demand that I think this is something that people feel they want to support. My sense is that people who are shopping at the farmers' market and really appreciate the value proposition and live in New York City - per capita income in NYC is one of the highest on the planet - he may very well find people who have the disposable income and whose values are directly aligned with this and it may feel like a good investment in a down economy to support something that is totally aligned with their values and that they might see a return on."
"He could certainly market it better. He's got nothing on his website about it. So that people who support local, even if they're not his customers in New York, maybe they're in California or wherever, say I really like what this guy is doing, I admire his values and yeah I'll give him $1,000 and I hope he succeeds and if I get a 6 percent return on that, that's great."
WOODY TASCH, CHAIRMAN & PRESIDENT, SLOW MONEY ALLIANCE
Tasch recently started the Slow Money Alliance <www.slowmoneyalliance.org/>, a co-operative geared toward preserving and restoring local food systems and local economies. Tasch pioneered the integration of asset management and philanthropic purpose in the 1990s as treasurer of the Jessie Smith Noyes Foundation and founding chairman of the Community Development Venture Capital Alliance. For ten years, through 2008, Tasch was chairman of Investors' Circle, a network of angel investors, family offices, and social purpose funds and foundations that has invested $133 million in 200 early stage sustainability-promoting ventures and venture funds, since 1992. Tasch is the author of Inquiries into the Nature of Slow Money: Investing as if Food, Farms, and Fertility Mattered (Chelsea Green Publishing Company).
"Even the most successful companies in the food sector don't make really attractive targets for the vast majority of venture capital investors."
"If Organic Valley raised $25 million over a decade and they're a $500 million national brand, then raising $800,000 for one onsite processing facility for one farm is a pretty daunting challenge. "When they (Organic Valley) were doing it people were laughing and saying no investors are going to give you what is essentially venture capital for a six-percent return and they had no trouble doing it.
"So the idea is not unprecedented that's all I'm saying. Now for an individual producer to do it himself with his own customers in that neighborhood is way harder, because the pool of investors is smaller and the scale of business is smaller."
"The volatility of global financial markets; the uncertainty is so great now that people are really looking seriously at alternatives and are actually willing to talk about things like our system may be fundamentally broken and the future of our currency may actually be in doubt. People are also scared that the food system may be disrupted. If you add all that up you get a group of people that seem to be eager to put some money to work in local food systems."
"My hat is off to Dante. If Organic Valley raised $25 million over a decade and they're a $500 million national brand, then raising $800,000 for one onsite processing facility for one farm is a pretty daunting challenge."
FAY BENSON, COORDINATOR, NY ORGANIC DAIRY INITIATIVE
Fay is the coordinator of Cornell University's New York Organic Dairy Initiative <www.smallfarms.cornell.edu>. Fay grew up on his family's dairy farm in Lansing, NY. After receiving an Associates Degree from Alfred State in ' 74, he worked in Ghana for two years in the Peace Corps. Upon returning, he spent 3 years trying out 8 different jobs, many of which took place on a year long trip across the states on a motorcycle. Fay returned to work on his family's dairy farm from 1980 - 1983. With his wife Linda, Fay purchased Benterra Farm in W. Groton in 1983. They enjoyed the 45-cow farm and tried many changes to make it sustainable: cropping extra acres, grazing, and finally transitioning to certified organic in 1997. The move to organic was a profitable one, and when their debts were paid off in 2003, Fay felt he was ready for a change. So he sold the cows and took a position coordinating the Graze NY program with CCE Cortland.
"The model that he's got going now is an excellent one. I think he needs to tune it up… There's a lot to do other than increase your production and your business dollars. That's why I always encourage people to know what their cost of production is. What's your plan? Do you really want to be big, or are you doing it just because you want to make more money? If you're trying to do it to make more money, there are probably better ways to do it."
"The organic market has been just tremendous for small dairies. It quadrupled our profits the seven years we were in organic. We were in business for 13 years and making headway on it (debt), but those seven years just paid off our debts."
"I borrowed $250,000 to start my farm in 1983 with 40 cows. The debt ruled our business for many years. I wouldn't advise taking on that much debt; rather make a plan and take small steps toward it every year. We did succeed in paying off the debt, it was the organic market that did it for us."
"(By using farm incubators) you practice getting your products made - getting your techniques down and getting it to taste well - because once you borrow the money you have to start paying on it immediately and so you really want to have your product and marketing in line before you buy the equipment to process it.
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