Chapter 6: Supply Chain Case Studies
6.3 Biodynamic dairy products case study – A dream in progress
Previous to the development of this milk and cheese production syndicate, the farmers involved sold their milk to one of WA’s largest dairy foods manufacturers. Despite being a Demeter certified organic farm, the manufacturer was unable to segregate or pay premiums on this product and it was mixed in with the conventional milk supply. Managed by farmers Kurt and Elaine, this was WA’s only organic (cow) dairy. The farm is located in what is generally considered marginal dairy country between the forests and the wool belt in the South West.
Policies of the dairy manufacturer prohibited the sale of milk to any other milk processor. This meant that in order to sell milk elsewhere, the farmer involved had to leave the company altogether. A supply chain that was able to communicate the environmental and ‘biodynamic’ values of this farm product was established in 2003, primarily driven by Kurt, the instrumentalist of the new company which was formed as a syndicate. Kurt and his partner Elaine’s aims were to look after land and animal as a priority whilst providing a healthy product.
Kurt is also very active in the community, speaking at various events where he can indulge his passion of educating about sustainable farming. Kurt attended the BestFarms EMS training workshops, however he had his own customised system of environmental monitoring and responsive action already in place. Kurt also communicated a spiritual aspect of farming that guides his actions. He felt that the Demeter label adequately promoted the sustainability values of the products and did not support an additional environmental certification or labelling process.
The dairy is a dryland operation that uses biodynamic principles in combination with a stock nutrition supplement program called Annutriculture. This is a nutrient and mineral feed management practice that is fed ad-lib, allowing the animals to meet their nutritional requirements through their own ‘nutritional intelligence’ (Hin-Gee, 1995). There are number of significant differences between Kurt’s dairy farm and conventional dairies, including no grain feeding and no irrigation of pastures. It is a small operation with approximately 100 cows in milking at any time. The cows are trained to manure outside the dairy, thereby eliminating the need for dairy wash-down and associated effluent issues.
There was also less turnovers of cows than in most conventional dairies. The heifers are milked for up to ten lactations, rather than the average of four or five. In the old style, they all had names. They were also allowed significant freedom to range about the property.
In terms of economic sustainability, Kurt has been running the operation along the biodynamic principles for over ten years and supplying milk to the dairy manufacturer mentioned above. He suggested that the company would need 12 more biodynamic milk suppliers, preferably in the South West, to enable long term economic sustainability of the product lines.
Involved in the syndicate were Richard and Margaret, the operators of a small milk and cheese processing factory located 100km south of Perth. Producing fine cheeses and unpastuerised milk, the arrangement between grower and manufacturer enabled the small quantities to be transported and processed using a small milk truck purchased specifically for this role. Products were sold at premium prices, still undercutting interstate organic milk products. Margaret and Richard, who are deeply involved in community development in the area, valued stronger socio- economic values over environmental and organic values. They also recognised the commercial value of organic niche products and were receptive to consumers’ desire for chemical free products. From their interactions with consumers they believe that people are more concerned about organics than environmental values. They have a HACCP system in place but no particular environmental innovations. They are considering recycling water within the plant in the future. Their key focus is on community development in the local community and they feel that by setting up the processing plant and outlet they are supporting this objective. They recognize environmental values as important but they believe the quality of the product is the key priority. They pride themselves on their cheese making ability and want to be the best.
The case study milk and cheese products were distributed throughout Western Australia, both in wholefood shops and small supermarkets. Retailers of the product interviewed generally knew the story and were able to communicate the values of the product. One retailer of the product is the Perth organic food store run by Marian. The milk and cheeses are delivered direct to the store from the manufacturer twice a week. Margaret (representing the manufacturer mentioned above) also comes into the store and is friends with Marian. Marian is pleased to be stocking these products because previously their organic milk came from South Australia and now they can supply organic milk for less. They sell around 60 to 80 litres per week. When the product was first introduced, they lowered the price to encourage people to try it. The product was very well accepted in the local town where the dairy is located and was sold at both the health food shop and the local town supermarket.
Individual consumers from the local town said they supported it primarily because the product was local but they also appreciated the organic, animal welfare and environmental aspects of the product. Kurt was well known in the community and many knew of his unique dairy operation and were keen to support it. Personal issues led to the closure of the biodynamic dairy case study supply chain after 2 years of operation. This was not the result of a lack of market demand, which was reported as extremely high from all retailers interviewed. Some aspects of the operation were taken over by another member of the syndicate at a different organic dairy. This business is still in operation and filling much of the same market niche. Figure 10 below shows the values held by supply chain actors interviewed and the relatively successful transfer of environmental values from farm to consumer. Essentially the environmental concerns do appear to be transferred to the consumer, through common understandings of the benefits of biodynamic agriculture amongst supply chain actors and consumers.
Figure 10: Transfer of environmental and other sustainability values in biodynamic milk case study
Product statistics
Retail price = $3.50 litre adjusted to 2007 prices (200% conventional)