Revolutionizing Milk Distribution
Veterinarian Kung Chien-chia witnessed the problems of Taiwan’s dairy industry first-hand on his daily visits to rural dairy farms. Realizing that the farmers are at the mercy of the island’s three major milk brands, Kung decided to rewrite the rules of milk distribution.
Revolutionizing Milk DistributionBy Kai-yuan Teng
From CommonWealth Magazine (vol. 625 )
Two years ago, Kung Chien-chia, founder of a milk-marketing business called Milk House, still worked full-time as a veterinary doctor, touring dairy farms around the island in his car. One of his routine jobs was to reach his arm inside a cow’s rectum to check its digestion of the feed or its condition after giving birth to a calf.
“Because I had close contact with the cows, I knew the health status of every single cow on each dairy farm I visited,” Kung says.
Kung has since gotten himself a second job. He still looks after the health of the dairy cows under his care, but he now also spends part of his time marketing fresh milk through Milk House.
The story of the milk-selling vet began two years ago with a crowdfunding campaign.
Back then, dairy farmers were hard hit by a consumer boycott against Wei Chuan Foods Corp., which buys raw milk from farmers under contract and sells it under the brand Linfengying. Consumer protection groups had mobilized against Wei Chuan after its mother company was found to have sold problematic cooking oil.
Having worked closely with the dairy farmers, Kung felt the situation was unbearable given that nothing was wrong with their milk. "The dairy farmers begin to feed their cows before daybreak; they do this 365 days per year without ever taking a break. The milk in Taiwan is very good, but the farmers suffered collateral damage because of a big brand’s food safety problem,” says Kung.
Kung thought to himself, "What other options do consumers have if they do not want to buy milk from a big brand? And what other options do dairy farmers have if they don’t want to sell their milk to the big brands?"
Taking Matters into One’s Own Hands
His answer was “direct delivery upon online order." Kung launched a crowdfunding campaign for his “farm-to-home" direct delivery scheme. Within just two months, he had raised more than NT$6 million.
Two years after the crowdfunding on the Internet, Milk House has established stable distribution channels.
In the retail sector, the Family Mart convenience store chain, Jasons Market Place, Hogan Bakery and the Louisa Coffee coffeehouse chain have become Milk House’s customers, and some 20,000 private households have booked regular home deliveries. A David-versus-Goliath scenario is currently playing out in Taiwan’s dairy industry.
What is special about the milk from Milk House?
First, a vet helps consumers control the product at the source.
The dairy farms that collaborate with Milk House have all worked with Kung for a long time. On top of that, Milk House and these farms have hired two extra veterinarians who are stationed at the farms. Last year, they began to offer internships to 40 veterinary medicine students from four universities during the summer and winter breaks.
Single Source, Transparent Information
Milk House uses co-branding to market milk from individual dairy farms. This means that consumers can identify on the packaging from which farm a bottle of milk comes.
This is the major difference from the established milk brands. The big milk processing companies use large milk tankers that collect raw milk from several farms. Since milk from different farms ends up in the same tank, the milk that consumers buy in the store cannot be traced back to a specific farm.
Kung points out that the intention of the co-branding is to provide information transparency and also help the dairy farms establish trustworthy brands. Information about the farms cooperating with Milk House can also be found on its website.
Kung stresses that Milk House only sells “fresh milk”, not “milk with an extended shelf life” or “flavored milk.”
He explains that many “cow’s milk” products sold in the Taiwanese market are not fresh milk but milk with an extended shelf life that has been processed at ultra-high temperatures, also known as UHT milk, or flavored milk with a complex mix of added ingredients. Since these highly processed milk products are sold on the same store shelves as fresh milk, consumers often find it difficult to tell them apart.
Hogan Bakery has switched to using fresh milk from Milk House in many of its products. Joyce Yang, vice president of the bakery chain, points out that Milk House’s milk is very pure and therefore very suitable for products with a high milk content, such as puddings, cakes with orange/cocoa/roselle or tea beverages. Though it is more expensive, customers can taste the authentic flavor of fresh milk.
With an expanding distribution network of their own, Kung hopes to be able to better protect the rights of the dairy farmers.
In the past, the dairy farmers had little say in their relationship with the big milk factories. The dairy farmers were only tending their cattle, while marketing and distribution were firmly controlled by the three large dairy companies, which made for an unequal relationship. As a result, the government and the big dairy companies were able to dictate the milk purchase price.
Milk House therefore renegotiated the milk price with the dairy farmers and now pays the farmers a price that is higher than before but is still acceptable to consumers. Milk House has also established regulations, stipulating that any surplus should be partially paid back to the dairy farmers. Last year, the company paid out bonuses for the first time.
Kung believes such encouragement will bear fruit, since only if the dairy farmers have a good income will they be willing to invest in new equipment. Livestock farming is a capital-intensive industry. Buying pasture sweepers, expanding cow sheds, installing ventilation and cooling equipment, and changing the rubber matting in stalls and walking areas start at a million New Taiwan dollars, but animal comfort translates directly into better quality. “As long as you improve the overall comfort of the animals at the farm, you’ll get a good milk yield and good quality,” says Kung.
Kung observes that, after two years of his efforts to educate consumers, more and more people are now able to tell “fresh milk" from “UHT milk” or “flavored milk.” He believes that the entire dairy product industry needs to rethink what kind of products it would like to provide consumers with in the future.
Control at the source is the key – the large animal vet not only treats sick cows, he is also helping the dairy industry diagnose and remedy its own ills.
Translated from the Chinese article by Susanne Ganz