Wheys & Means

The business side of cheese

by Virginia Lindauer Simmon

jasper-hill-farm-tommes_nickhirst0218The Cellars at Jasper Hill photo: photo: Nick Hirst

The U.S. Department of Agriculture says Vermont cheesemakers produced 131,933,000 pounds of cheese in 2016. The Vermont Agency of Agriculture, Food & Markets reports 48 cheesemakers who produce over 150 cheese varieties and, in 2015, the most recent data available, says our cheesemakers won more awards than any other state per capita at the American Cheese Society Conference.

It’s easy (and fun) to get lost in the wonders of cheese: to wax poetic about bloomy rinds or acidity, earthy or nutty aromas, the buttery or tangy or sharp flavors of this miraculous product. But we were curious about the more mundane, yet crucial, activities on the business side. So we contacted four Vermont cheesemakers and asked.

Our interviewees represent a fair cross-section of Vermont cheesemakers from huge to tiny: Nate Formalarie, communications manager, Cabot Creamery Co-operative; Andy Kehler, co-founder and owner with his brother, Mateo, Jasper Hill Farm in Greensboro; Tom Perry, cheese sales manager, Shelburne Farms; and Hannah Sessions, co-owner with Gregory Bernhardt, Blue Ledge Farm in Salisbury.

shelburne_farms_cheesemakerCheesemaker Kate Turcotte, Shelburne Farms photo: Vera Chang

What’s your annual production?

It’s no surprise that Cabot (a co-op with a membership of 1,000-plus independent farms) produces the most cheese at 82 million pounds. “That includes everything,” said Formalarie, “all the flavor cheeses, varieties of cheddar and Jack, the cheese we send out to Jasper Hill for aging. It all goes into retail.”

Jasper Hill? Turns out the Vermont cheese landscape features a lot of partnerships. “That was kind of a two-way street,” said Formalarie. “We helped get their business going, and they helped us develop this cheese that has won every award it can win.”

That’s Cabot’s private label, clothbound cheddar, said Kehler of Jasper Hill Farm, which ages its own cheese and those of several producers in its Cellars at Jasper Hill — seven specially calibrated vaults totaling 22,000 square feet — where they receive customized care until they are perfectly ripe.

“We add value to other people’s products. It’s a co-branded label,” he explained, “with the producer’s name and logo under our brand.” Jasper Hill’s sales for 2017 will be just under 1.5 million pounds. “Of that, about 35 percent is made by Jasper Hill; the rest is other cheesemakers’.” Milk for his own cheese comes from a herd of 40 Ayrshire cows grazing in a pasture right above the Cellars.

Shelburne Farms sells about 164,000 pounds of cheese a year through various outlets, said Perry. This amounts to equal portions between distribution and direct mail order, “and probably a little bit less or equal amount, through direct wholesale customers. It’s probably divided about a third, a third, a third.” Shelburne Farms cheese is produced from the milk of Brown Swiss cows on the property.

Blue Ledge, a maker of award-winning goat’s milk cheeses, produces and sells about 50,000 pounds. Its signature cheese is Lake’s Edge, a dramatic ash-veined goat cheese aged for three weeks. Milk from Ayrshires next door is purchased to make its Middlebury Blue and Camembrie, said Sessions.

Where do you sell your cheeses?

Blue Ledge sells 5 to 10 percent of its cheeses at the Middlebury Farmers’ Market, from the farm directly, and over its website. “Then probably 50 percent of our cheese goes through distributors, both local as well as in Boston and New York,” said Sessions. “And 40 to 45 percent goes direct to stores — all the major co-ops and independent grocery stores, in Vermont (mostly) and surrounding states.”

Cabot’s cheeses are sold mainly on the East Coast. “Some national distribution, through the likes of Walmart, Costco, Whole Foods, is how we get out west,” said Formalarie. “We’re always looking to grow cautiously, but the most dense is along the Eastern Seaboard.”

Asked how far abroad Shelburne Farms markets its cheese, Perry, who, when we spoke, was attending the Fancy Food Show in San Francisco, replied, “I wouldn’t be in San Francisco right now if we didn’t have customers out here that warranted our attention. It’s kind of a once-a-year face time I can provide them.

“We’re primarily concentrated in the Northeast, and that kind of continues all the way down to D.C. Then there are some noticeable gaps, particularly in the Southeast and Midwest, through the mountain states. We have some distributors in the Chicagoland area, central and northern Indiana, and western Michigan. The farthest we go for retail sales is probably San Francisco.”

To go international, Perry said, requires a fair amount of vetting in terms of food safety and trade laws. We would have to be in partnership with a much larger distributor with an export license. Jasper Hill is just now starting their export market.”

Jasper Hill has been exporting to Australia “for about seven to eight years now,” said Kehler, “and we do export into Europe and a tiny little bit into Central America. The idea that we can be selling our cheese in France is pretty exciting to us.”

It does some mail order direct to consumer, but most goes to regional distribution partners it uses to get into high-end specialty cheese shops and white-tablecloth restaurants. “We’ve been shipping across the country from the very beginning. One of our first five customers was in California.”

One of the benefits of Jasper Hill’s relationship with Cabot is shipping. “Cheddar is heavy,” said Kehler, “and it gave us a base weight to have a truck show up in the Northeast Kingdom of Vermont. That really gave us a chance to supply-chain to customers across the country.” Mail order is sold through Dakin Farm.

Do you have a formal succession plan?

We asked the two owners. “We’re working on it,” said Kehler. “The Cellars turned 10 this year, so in a lot of ways, we’re just getting started. It’s like asking a teenager whether they’re saving for retirement yet. They know they should, and might have something in the bank. Over the last couple of years, we’ve been approached by some multinational companies to be purchased. We’ve decided that we don’t want to sell, and that’s really sort of defined the direction we want to go. We have a lot of work to do in building an organizational structure that will give us some flexibility in a succession plan, and it’s not clearly defined, but it’s something Mateo and I are actively working on.”

“We’re still only 41,” said Sessions, but it’s certainly something we think about. As of now, our kids don’t seem interested — they’re 15 and 13. Here’s something we keep in mind when thinking about succession: We want to have a profitable and sustainable business that a regular Vermont person could reasonably finance and purchase, so that means finding a sweet spot.

“Ostensibly our business could support two households, either because our kids could take over or someone else would take over and support two households, but it’s not too big that it’s beyond the reach of a younger Greg and Hannah. We think about ourselves 15 years ago,” she says after a pause. “We would have loved to find a business like this. So we think, ‘Don’t get too big because you’ve limited your pool of potential buyers.”

How do you determine prices?

Every reply to this question began with some version of “It’s complicated.”

“There’s no easy way to put it in a sentence,” said Formalarie with a laugh, adding, “You would need to do a documentary! That’s because we’re actually aging all of our cheese from three months to five years, and it’s about the milk price when you put it up. But the flux in pricing is so volatile, and the price people see on the shelf is the retailer’s margin.”

“That can be challenging,” said Kehler. “Consumers are quite picky about what they want to purchase, and yet there’s also a lot of price pressure on food. We’re not aiming to be the low-cost producer; we’re trying to make world-class products.” He added that there is sometimes tension between not compromising and creating an affordable product.

Blue Ledge starts by looking at what other cheeses cost in the marketplace, for a ballpark figure, said Sessions. “Then we factor in our own specific circumstance. We say, ‘OK, what does the market need, who would we be competing with, even what are the big guys getting for that cheese, and can we make it sustainably and be competitive?’

“It’s a challenge,” she continued. “Years ago, there was a figure thrown out that, in order to support all the capital overhead you need to make cheese, your milk is worth at least $1 a pound. So you need to get at least $1 a pound for your milk if you’re going to process it for cheese. Even our goat cheeses hover at that, and others are higher — your hard cheeses, aged cheeses, are a little more profitable because you hover around $1.50 a pound, and your higher-moisture cheese is a little more profitable, but also more finicky, so you have more risk: It’s very perishable — needs to be sold — so there’s a lot more that can go wrong, in our experience.”

Shelburne Farms recently did a price increase based on actual costs “and what the market can bear,” said Perry. “I think if you ask anybody in the cheese industry, specialty and commodity cheese in particular, nobody is selling cheese for what it’s actually worth — labor, materials, time, marketing — because cheese has become so commodified over the last hundred years or so, there’s not as much of a will on the part of consumers to spend in excess of what they’re used to.

“Sometimes,” he added, “there’s a lot of care that goes into animal husbandry, or diet, or the way they treat the animals, or the manner in which the cheese is made. If we didn’t have modern technology and a self-deprecating way of marketing, it would skyrocket. But we are able to sell it for a little more reasonable price and get close to what it’s worth.” •