![]() The largest fixed costs in refrigerated plant-based milk (or any refrigerated beverage) are:įormula: cost of the beverage inside the package By the time I left in 2018, the business had sold to large food producer Danone, who could afford the ups/downs in order to have a well-loved brand in their portfolio. That business, Horizon Organic Milk, ended up pushing hard into shelf-stable milk over the coming years and became reliably break-even. ![]() That is a true story about the fires that burn profits in CPG (Consumer Packaged Goods), and those profit variables are as true today as they were then. "Ah, right, we do.because no refrigerated trucks and no spoils because of the full year shelf life - so ⅔ of our variables are always in our favor, not subject to change."ġ0 years later, this is why we launched Tally Kids in a shelf-stable container. "We DO make 30% margin on our shelf-stable milk business, which has never changed." Just as I was leaving out, head spinning. Profit forces are often predicated by events outside of the producer’s control. "Make sense!" I said, picking my jaw up off the floor, for this was the first time it occurred to me (at 25 years old) that business is not only hard, but massively unpredictable. "But out of all those variables, the only one we really control is price, the rest can change as you well know, at the drop of a hat if and change they will! So yes, people are passionate about this business, and after going through years before you came on board of being in the hole -30%+ on gross margin, folks are understandably happy today." We just raised shelf prices, we are picking up just the right amount of organic milk from the farms and demand is strong, so there are minimal spoils and gas prices are moderate, so we are squeaking by." We may drive to a farm, pick it up, and ship it on a heavy refrigerated truck 500 miles away, and if that grocery store doesn’t sell through it, we have to return to pick up all that spoiled product and destroy it on our own dime." "Furthermore, our concrete, our organic milk, spoils, and t spoils QUICKLY. Yes, we must use refrigerated trailers, which use even more energy, fuel and are overall less common, thus pricier to reserve. We ship concrete that must be refrigerated. "So, Kyle if that weren’t bad enough to try and make money shipping concrete around the country, sucking down $5.00 per gallon diesel, it gets worse. Note: Now you know what those scales on the highway are for! Checking to be sure trucks don’t exceed their maximum weight - this is due to wear and tear on the road and reducing stress load on their braking systems. Gillette razors as an example are super light weight, and never weigh out first, they cube out first (can't fit more in). And our trucks are more heavy than they are even full"īasically, our organic milk semi-trailers weighed out (met the National Transportation Safety Board’s maximum weight limit for a trailer weight of 43,000 pounds) before they cubed out (not enough room to fit more pallets of milk inside). "Kyle, we ship liquid concrete around the country. "John, can you please explain to me, in detail, specifically why we lose money on this business? And more importantly, why everyone was just grinning ear-to-ear about continuing to LOSE money?" I am knocking on my supply chain colleague John’s office door after the meeting with a smile on my face because I know I’m about to ask him a sarcastic smart ass question. The big boss was downright JUBILANT and dismissed everyone with an upbeat “GREAT work everyone!” Still NOT break-even, but getting closer. In that particular meeting, the major development was that our organic milk business unit would be moving from a -14% Gross Margin to -2% Gross Margin. Supply chain, marketing, and finance all present in sequential order and the meeting ends with the big boss dismissing everyone, kindly, with an “all right, I got it, thanks everyone for the information”. All-hands meetings are functional monthly meetings intended to fill the big boss in on all aspects of the business. It is 11AM on a workday, October 2013 and our team had just wrapped up the monthly all-hands meeting with our General Manager (big boss).
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