CREAM OF THE CROP

Lynne Miller

Milkmen haven't gone the way of dinosaurs. At least not entirely. Though they're no longer driving horse-drawn wagons, modern-day milkmen can be found serving up premium milk and ice cream at small-format dairy stores.

Many of these specialty stores also tout the source of their milk -- cows that have not been treated with artificial growth hormones or antibiotics. In a throwback to a bygone era, some stores still offer milk in glass bottles and home delivery.

"For some reason, glass has a lot of appeal," said Jerry Dryer, a dairy market analyst and consultant based in Delray Beach, Fla. "People will tell you it's because of the taste."

North Aurora, Ill.-based Oberweis Dairy delivers milk in half-gallon glass bottles, along with other products, to 40,000 homes in the company's home state, as well as the St. Louis, Milwaukee and Indianapolis markets. Operating 35 retail stores of its own, Oberweis has sold 31 franchises, with plans to sell up to 500 franchises by 2009. The stores, which average 2,800 square feet, are the company's main channel of growth.

"Our long-term growth is focused on retail stores," said Joe Oberweis, president and chief executive officer of Oberweis Franchise Systems, and the fourth generation of his family to work at the company. "We'll continue to grow home delivery. I wouldn't say it's stagnant, but it's a little more difficult to grow service to homes than open up retail stores."

The dairy sells more than $58 million worth of ice cream and milk a year, producing 30,000 gallons of milk a day at the plant in North Aurora. The company supplies area supermarkets, including Jewel-Osco and Dominick's stores.

"I think customers recognize Oberweis brand is associated with a better-tasting product," Joe Oberweis said, when asked why customers prefer his company's brand. "We focus on having the best-tasting products available."

For some, perceived health benefits associated with the milk are more important than flavor. Oberweis pays its farmers a premium in exchange for their pledge not to treat their cows with synthetic recombinant Bovine Growth Hormone, used to increase milk production. Though there is no known test to distinguish milk from treated and untreated cows -- "if the cows produce sudden spikes [in milk production], that's a good indicator," Oberweis said. "We have close relationships with our farmers. There's a disincentive for them to use that hormone."

Toni and John Shattuck started buying Oberweis' 2% milk 10 years ago after their son, Joe, then 2, was diagnosed with leukemia. The Frankfort, Ill., family wanted to keep Joe away from foods with added hormones.

"The main reason we buy it is because the farmers they go to promise not to give their cows steroids," Toni Shattuck said. "The best part of it is, it tastes so much better than other milk. Whenever people come to our house and they need a glass of milk, people have said, 'wow, this is great milk."'

Dairy products, milk in particular, are a destination at Stew Leonard's stores in the Northeast. Featured on the retailer's new commercial, which airs on cable TV, one customer talks about how she purchased a new freezer to store the 36 half-gallon paperboard cartons of milk she buys every month at the store. Customers literally watch the milk being processed at the Norwalk, Conn.-based dairy plant, housed in the retailer's flagship store. From there, trucks deliver milk to the retailer's other two stores by 8 o'clock each morning.

The milk comes directly from the cows on Stew Leonard's 2,000 acre dairy farm in Ellington, Conn. The animals are fed an all-natural diet of corn, hay and grains, and are not treated with growth hormones or antibiotics, an important attribute for the company's customers, said Meghan Flynn, the retailer's vice president of public relations.

Stew Leonard's claims to have the largest in-store dairy plant in the country, packaging 90 half-gallon cartons per minute and more than 10 million half-gallon cartons per year. The retailer also makes its own ice cream -- -each store has its own ice cream parlor. As part of an ongoing promotion, the retailer offers a free a cup of coffee or ice cream cone to customers who spend at least $100. Over the course of a year, Stew Leonard's gives away about 200,000 cones at its three stores, Flynn said.

Milk accounts for 5% of the retailer's overall sales and makes up 50% of all beverage sales, which include water, soda and juice, Flynn said.

"People will make special trips just to get our milk," Flynn said. "You can literally taste the difference. I've had people taste Stew Leonard's milk and say, 'oh, there's no comparison."'

Indeed, the flavor of the milk is what makes Denver-based Farm Crest Milk Stores stand out. The 17-store chain specializes in farm-fresh milk from cows not treated with synthetic growth hormones. The retailer's parent company, Royal Crest, claims to be the largest home-delivery dairy in the country. In addition to milk, the company delivers 25 other grocery products to Colorado homes, starting deliveries at midnight.

"We take it from the cow to the doorstep in 48 hours," said Grady Cleckler, vice president of retail sales and marketing. "The milk's not sitting in a cooler for a week. It's extremely fresh. The No. 1 reason people buy our milk is because of the freshness and taste. The second reason is because it's an all-natural product."

In some ways, the stores resemble convenience stores, with gasoline pumps outside and typical convenience store merchandise inside. However, Farm Crest stores have five doors of milk, compared with the one door typically found at c-stores, Cleckler said. Milk is the top-selling category, responsible for more than 40% of inside sales volume. Gallons of 2% white milk are top sellers among the milk products.

Loyal customers and enthusiastic employees help the company thrive, Cleckler said. "You tell any employee milk is milk, and you'll get a whole dissertation on why it's not," he said. "All you have to do is taste the product. Business is terrific because we're milk stores. We're destination-driven, not impulse-driven."