Homegrown Kimball Brook Farm Confronts Harsh Realities Of The Dairy Business
Kimball Brook Farm is no longer in the milk business. The family-owned organic dairy sold many of its cows and halted production at its bottling plant recently, another sign of the financial pressures affecting Vermont’s signature dairy industry.
But Kimball Brook also faced its own unique challenges as it struggled to survive in a market dominated by larger and larger competitors. The company is now betting on a risky market for hemp-based products.
At the Kimball Brook bottling plant in Hinesburg, CEO Cheryl Devos opened a large refrigerated room that used to hold pallets of products bound for retail markets. The cold and cavernous space is pretty much empty now. Just like the rest of the place.
Devos gave a quick tour, pointing out the equipment for blending and bottling milk.
“This is our mix tank, where we would mix chocolate milk and different flavored milks that we did,” she said. "And then these tanks were all used to do the different fat levels: So, we’d do skim, 1%, 2% and whole.”
More from VPR: For 'Organic' To Remain Strong, Farmers Say They Need More Consistent Enforcement [Sept. 3, 2019]
Each piece of equipment at the plant, from small plumbing components to the gigantic stainless steel milk tanks, carried a yellow auction tag for a planned sale in March. The 15 plant employees and six others at the farm in Vergennes were let go at the end of last year.
“I’ve laid off everybody," Devos said. "Except, I mean, my husband and I are still doing it. And even my daughter is done. Yeah, it’s hard.”
Devos said the decision to get out of the milk business was driven by several harsh financial realities, including the money she and her husband, JD, borrowed to invest $2 million dollars in the milk plant. Their debt load increased even as they faced tough competition from large national organic dairies.
"We were in Whole Food stores. And when you're on the shelves there, you're competing against the national brands. And they just kept lowering their price, and we couldn't." - Cheryl Devos, Kimball Brook Farm
Kimball Brook switched to organic milk production in 2005. They then launched an ambitious plan to create a brand and cut out the middleman by bottling their milk themselves. And it worked for a while. At its peak, Kimball Brook products were in supermarkets in Vermont as well as other parts of New England and New York. But big companies like Colorado-based Horizon Organic took notice.
“We were in Whole Food stores. And when you’re on the shelves there, you’re competing against the national brands," Devos said. "And they just kept lowering their price, and we couldn’t. And then you lose sales basically because of that."
Kimball Brook also recently lost a key sales contract with Stonyfield Farm, a yogurt and dairy producer in New Hampshire. Stonyfield would buy milk that Kimball Brook wasn’t selling at retail. But when the contract wasn't renewed, they lost that revenue as well.
“The Stonyfield thing is a big thing, and you know, just the oversupply of organic milk,” Devos said. “People aren’t drinking milk like they used to drink.”
But industry observers say you can’t draw sweeping conclusions about the state of the organic milk business from the Kimball Brook story. Vermont had 192 organic dairy farms in 2018 compared to 187 last year.
Nicole Dehne is the certification director at the Northeast Organic Farming Association of Vermont, and she said even with the loss of five farms, the organic dairy sector remains relatively strong in Vermont.
“When we’ve talked to Cheryl Devos from Kimball Brook, it doesn’t seem like it was a demand issue, it seems like it was issues particular to their business, and their growing, and the speed at which they’re growing and that sort of thing,” Dehne said. “And some changes that happened that were specific to their business that were a little out of their control as well.”
More from VPR: Out With Cows, In With Hemp: Kimball Brook Farm Announces Change Of Direction [Dec. 26, 2019]
Besides the debt, Kimball Brook’s biggest challenge may have been that they tried to compete with the big players outside Vermont.
Jane Kolodinsky chairs University of Vermont Department of Community Development and Applied Economics. She said while demand is stronger for organic milk than for its conventional counterpart, the organic side is also becoming dominated by larger farmers and larger processors.
“The cachet that organic has had as it increasingly goes mainstream, makes it more of a commodity,” she said. “So we’re seeing this small, higher-end, quote-unquote 'clean product' become a commodity."
And those commodity producers with their economies of scale – as Kimball Brook learned the hard way – can undercut smaller companies.
“So it’s really complicated, and it’s not only about the fact that the demand for organic has gone up,” Kolodinsky said. “You just look at one variable, and you would think, 'Oh, that’s good for our local organic dairy producers.' But you have to think about what competition is coming in, what is their size, are they able to undercut, do they have other advantages that the small local dairy producer doesn’t have?”
"You have to think about what competition is coming in, what is their size, are they able to undercut, do they have other advantages that the small local dairy producer doesn't have?" — Jane Kolodinsky, UVM economist
Kimball Brook will continue to sell teas, lemonades and CBD-infused beverages. Cheryl Devos says CBD and hemp may have great potential for Vermont agriculture, but also come with substantial risk.
“I have a lot of dried hemp on our farm right now that has not sold yet,” she said.
She’s certainly not alone. After a huge jump in hemp production in Vermont, many farmers last fall were stuck with product they couldn’t sell.
Devos said one big problem is that the federal government has not yet clarified whether CBD is legal. In November, the Food and Drug Administration raised safety concerns about CBD and issued warning letters to 15 companies for selling the product.
More from VPR: Vt. Ag Official: USDA's Hemp Rules Less About Farmers, More About Law Enforcement [Oct. 30, 2019]
Until FDA rules definitively that CBD is legal, Devos said the market will struggle. And Kimball Brook saw a direct impact from the regulatory uncertainty. A real estate deal that would have provided much needed cash fell through because the buyer – who wanted to start a hemp farm on the property – dropped out at the last minute.
“We were kind of counting on that money to keep this going. And when they pulled out, we had to say that’s it for this, because, you know, now all these loans really are up,” she said.
So should Vermont farmers continue to bet big on hemp and CBD? Devos is doubtful.
“I don’t know that we’re going to win that bet. Once it’s clarified, I think it will be a good crop for the state,” she said. “But right now, we just don’t know what’s going to happen.”