For the makers of Shatto Milk, success is cold and tasty
A woman at Whole Foods Market on 119th Street in Overland Park asks Leroy and Barbara Shatto about the boiler at their dairy that burst into flames.
“I worry about you and your cows,” she says.
The fire, extinguished without injury to man or beast, was reported in a Shatto Milk Company newsletter. The monthly “moosletter” debuted in 2005, two years after the Shattos began bottling and selling the milk they collect from cows on their farm in Osborn, Missouri.
On this Saturday afternoon, Whole Foods has invited local producers to show off their goods. The Shattos have set up a table in the rear of the store, next to the dairy case. Barbara pours samples from glass bottles kept on ice and extends warm greetings to shoppers who pause at the table.
“We’re Shatto Milk Company, a local family farm,” she says.
A mother helps the young boy perched in her cart swig chocolate milk from a small paper cup. She says the child has known only her milk and the Shattos’. “We came today just because we knew you were here,” she says. Touched, Barbara gives the boy a small stuffed animal. It’s a cow, of course.
Before starting Shatto Milk Company, the couple sold their raw milk to an agricultural cooperative. But they had trouble getting a price that covered their costs. At one point, the farm was losing 45 cents on every 100 pounds of milk it sold. “That wasn’t working,” Leroy says.
Shatto Milk Company began five years ago out of desperation. Today, the Shattos give tours five days a week, sell milk soap online and visit upscale grocery stores to meet city folk who worry about their cows. Shatto milk has emerged as a local brand in a league with Boulevard beer and Roasterie coffee.
The product has considerable appeal. It comes from cows that haven’t been treated with artificial growth hormones. The animals live on a dairy 45 miles outside the city, a significant factor for those who try to mind their carbon footprints.
And the bottles, in addition to being reusable, are cool as hell.
In 2006, Ally Letsky ordered 200 Shatto pints to give as gifts (with cookies) to guests for her wedding reception at the Rockhill Tennis Club. “Wedding favors are kind of generic and boring,” she says. Letsky thought the Shatto pints “were just gorgeous,” and they evoked her roots in tiny Harrisburg, Missouri.
Alas, Letsky’s marriage to Benjamin Altschul was not made to last. But both bride and groom remember the Shattos fondly.
When Letsky sent Altschul an e-mail to ask him if it was OK to talk about the wedding in print, he replied: “I don’t know how you feel about them, but I think that they are probably the best company I’ve ever done business with.”
Gray clouds smother northwest Missouri. It’s midmorning on a Thursday in August. A dozen adults and children are standing in the country store at Shatto Farms, surrounded by Puffer Balls and $40 hoodies. A woman behind the cash register is speaking on the phone with a Sedalia resident who wants to know when Shatto milk will be available in her area.
Paper hats are distributed in preparation for a tour of the bottling room. Our guide, Leroy Shatto, enters the room wearing jeans, a white polo shirt and a white baseball cap. Cowboy boots accentuate his height (he’s 6 feet 4); Prada eyewear indicates a familiarity with urban style.
Shatto can count on two hands the number of tours that he’s missed since 2003, the year he started bottling his milk and inviting people to watch. “We have all these people from Kansas City coming up who want to see what a cow looks like,” he tells today’s guests, who have come from near (Gladstone) and far (Illinois).
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Stainless-steel machinery and plastic milk crates fill the bottling room. A pasteurizer sits in the back corner. A man carries a sack of sugar on his shoulder to the section of the floor where chocolate, strawberry and other flavors of milk are created. The ice-cream maker looks not much bigger than the yogurt machine at a smoothie store.
A worker flips a switch. Milk begins to pour into half-gallon jugs that travel on a mechanized line. Shatto pulls out a bottle to let his guests feel how cold it is to the touch. Skim milk, Shatto explains, is the most popular white variety “because of all the healthy people in town.”
His tour personality is that of a country fellow with just enough common sense to get by. The dairy, he says, is a way to support the cows. “My wife still hopes I can make some money before I die.”
The harsh math of modern agriculture has forced a lot of dairy farmers to find new lines of work. Their numbers have dwindled by 40 percent in the past 10 years, according to the U.S. Department of Agriculture. “All my friends who used to milk got smart and quit,” Shatto says.
Shatto, who is 54, wasn’t ready to give up his cows. So he applied for a grant to study ways to keep dairies in Missouri. He spent time in supermarkets to learn more about consumer preferences. He visited small dairies in the East that processed their own milk.
Shatto’s research taught him that he needed to be different. It wasn’t enough that he didn’t use growth hormones; plenty of dairy farmers don’t shoot up their cows. No, Shatto needed something else if he was going to get into stores and compete with Belfonte and Roberts Dairy, the two big processors in Kansas City. (Omaha-based Roberts employs more than 700 people and generates annual sales of more than $250 million.)
He found his answer in the past. Shatto decided to package his milk in glass.
The glass serves many purposes: It’s nostalgic. (Home delivery went away in the 1960s.) It keeps the milk colder than plastic and doesn’t impart any taste. It also looks great on the shelf. “The glass, it just jumps out at you,” Shatto says.
Grocers agreed. When Shatto Milk Company was still an idea, Shatto visited supermarkets toting a glass bottle filled with sugar. Managers’ eyes widened when they saw it. He went to seven stores and got a positive response at each.
He buys the bottles from a company in Canada. He says they cost more than the $1.50 deposit he charges.
When the bottles return to the farm, they are washed in a machine built in 1951. Shatto bought the bottle washer from a retired farmer in New York. It cleans and sanitizes 9,000 bottles a day.
During the bottle-washer portion of the tour, Shatto talks about visiting the White House in 2006, the year he was named Missouri Small Business Person of the Year. (He had received loans backed by the Small Business Administration.) Shatto lugged chocolate milk in a cooler on the plane to Washington, D.C. He later received a photo of George W. Bush enjoying a glass in the Oval Office.
The tour group returns to the store for free samples. “Wait till you see the cow this comes from,” Shatto says as he passes around a tray of root-beer milk. (The root-beer variety has surpassed strawberry in sales among flavored milks.) Next are wooden-spoon servings of vanilla and chocolate ice cream, which recently became available in stores.
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On the way to the milking shed, we pass a white Ford pickup. “Do you want to hear the horn in my truck?” Shatto asks a girl on the tour. “Please say yes.” After getting the right response, Shatto opens the truck door and presses on the horn. The truck emits a Moo! His iPhone does the same thing.
Shatto’s workers begin arriving at the milking shed after 3 a.m. It takes them between four and five hours to milk 200 cows. The cows — 95 percent are Holsteins — are led into the shed in groups of 12. The workers connect the cows’ udders to milking machines. The tubes pop off the teats when the flow of milk slows.
From the milking shed, the tour proceeds to an adjoining barn. A cow stands on some hay, willing to be milked by unsure hands. Most children and adults gravitate instead toward the heifers and baby bulls in a nearby pen. It’s hard not to be fascinated by something born Tuesday.
The tour ends, but Shatto still has pieces of the farm he wants to show off. Last year, he built a 220-foot-long barn to protect the cows against harsh weather. In the summer, sprinklers and large fans (sold under the brand name Big Ass Fans) lower the temperature inside the barn by as much as 20 degrees. A hot cow eats less, and a cow that eats less produces less milk. “If the cows love it, I love it,” Shatto says.
Sawdust covers the floor for added bovine comfort. “Most cows on factory farms stand on concrete all day long,” Shatto says.
The herd has grown from 80 to 300 since Shatto Milk Company incorporated. Before, Shatto worried about being able to afford the alfalfa bill. Now he has 26 employees working in two shifts.
Vertical integration paid for the pickup truck, but it didn’t cure Shatto’s anxiety. He sometimes wakes at 2 a.m., gets out of bed, walks across the highway from his house to the dairy and checks on the cows or the equipment.
He’s fatalistic by nature. “I’m not used to things working right,” he says.
One mistake can drive a farmer into bankruptcy. For added pressure, the milk that leaves Shatto’s dairy goes out in bottles with his name on it.
“Every day, I’m scared,” he says.
Autumn and Spring, two week-old calves, are lying on some straw in a makeshift petting zoo at the City Market in downtown Kansas City. Leroy and Barbara loaded the calves and 60 cases of milk into a truck early this overcast Saturday morning.
The calves draw a crowd. Small children climb onto hay bales so they can reach over the fence to touch the animals. “Can I have a little pet?” a girl asks Leroy.
“Yes, or a big pet,” he says.
As Leroy minds the animals, Barbara and their son, Matt, and his wife, Jill, do brisk business at the sales table. They wear canvas hardware belts to handle the cash they receive for their milk.
Matt Shatto, 30, works as an assistant city administrator in Lenexa. The Shattos’ only child, he helps his parents run the business side of the operation as much as he can. Matt credits his father’s work ethic for the company’s success. “He works harder than anybody I’ve ever met.”
The farm has been in Barbara’s family for 100 years. Growing up, Barbara envisioned a day when she would not live among cows. “It was not my intent to stay on the farm,” she says.
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One of three sisters, Barbara studied to become a nurse. She works at the VA hospital in Kansas City. She’s eligible for retirement, but she loves the job (she’s now in administration), so she keeps making the drive.
Leroy grew up in Plattsburg. His father worked as a mechanic for TWA and farmed on the side. Leroy took classes in dairy farming at Central Missouri. He and Barbara dated in high school; after marrying, Leroy became partners with her father, who died in 1992.
There were difficult times. Leroy says that, without Barbara’s salary, he doubts the family could have kept the farm.
As a kid, Barbara used to feel embarrassed that her chores included milking cows. Saying that she was married to a dairyman brought back the same feelings. But being a part of Shatto Milk Company changed Barbara’s opinion. Now, Leroy says, she’s eager to share her family history. She proudly refers to him as “the milkman.”
Leroy, too, derives more satisfaction from the farm. Before he started bottling, he was a commodities dealer. “Nobody ever told me my milk tasted good,” he says. Today, he says, people are always telling him how much they love his milk.
The “juice”-free cows and glass bottles were just two parts of the equation. A Kansas City ad agency helped the Shattos tell a story.
The Shattos had been bottling their milk for about a year when they hooked up with the Sullivan Higdon & Sink advertising agency, which has offices in the Crossroads, Wichita and Washington, D.C. One of Matt Shatto’s college friends works at the agency. She suggested that Shatto become a client.
The Shattos didn’t have much money for advertising, but they were open to new ideas. In early meetings with SHS, Leroy Shatto said he wanted to make milk fun again, not just something people buy, says John January, the agency’s executive creative director.
SHS felt free to be creative. But the ideas didn’t come from left field. “There’s this great misnomer that you’re always supposed to think outside of the box,” January says. “But the truth is, very seldom can you. There’s always a box.”
The box, in this instance, was made of glass. Paul Diamond, a former SHS art director, recalls gazing at a Shatto bottle and thinking, This has to be the vehicle.
SHS came up with the idea of putting “headlines” on each bottle: Fresh. Icy Cold. Yummy. Family.
The bottles take a risk in that the headlines are larger and bolder than the Shatto name. SHS was going for what January calls “shelf presence.” Lined up, the bottles convey much of what Shatto is about. “You’re actually getting quite a bit of information about the brand,” January says. “It’s all through the bottle.”
The sans-serif font on the bottles, Futura, was created in the 1920s. Nostalgia isn’t the only concept at work, however. The bottles show a playful side. Their backs tell short, wised-up tales. One says: This milk is so fresh. There’s a good chance that you passed the cow on your way to the store. Diamond says the voice on the back of the bottle is “the brand talking like a cow might talk.”
Meeting the Shattos freed up SHS to be more experimental. January says they’re fun, genuine, outgoing people; they get excited when SHS comes up with something interesting. “That was really gratifying,” January says, “because we knew from them that this is their livelihood. This is everything to them.”
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People at SHS ask to work on the account, in part because the Shattos are so friendly and receptive. “It’s not like you created this work for some mean person and then you go on your merry way,” says Diamond, who left SHS 18 months ago and formed a new agency, Diamond Merckens Hogan.
If a prospective client is based in Kansas City, the SHS principals always show off the work they’ve done for Shatto. “People talk about this milk,” January says.
Leroy says the relationship with SHS “clicked.” Since redesigning the bottles, SHS has helped Shatto Milk Company roll out butter, milk soap and ice cream. “Every time we make something, people want it,” Leroy says.
January was shopping for groceries in Brookside one day when he saw Shatto milk being mishandled — but in a way that made him feel good about the job SHS had done. He watched a stock boy arrange the bottles so that the backs faced out from the cooler.
“Hey, I think they’re supposed to go that way,” January told the stock boy, turning a bottle so that the short stories the “cows” told faced the wall.
“No, no,” the stock boy said. “People need to read that.”
Leroy Shatto used to sell his milk to the Dairy Farmers of America, the nation’s largest dairy co-op. As the operator of a relatively small farm, Leroy felt insignificant to the co-op, which picks up milk from 19,500 farmers. “They really don’t need us,” he says.
Few things seem more innocent than a dairy farm. But the dairy industry is something else entirely. The milk business has had an often controversial, sometimes bloody history. A strike of farmers in New York in 1933 prompted The New York Times to report that the state was “closer to martial law than at any time since the Revolutionary War.”
The blockades of FDR’s day eventually gave way to influence buying. Until recently, the DFA was run by a minor figure in the Watergate scandal.
President Richard Nixon met with leaders of the dairy lobby on March 23, 1971. Traditionally aligned with Democrats, the dairy industry sought Nixon’s favor once he became president. In 1969, dairy officials gave $100,000 in cash to Herbert Kalmbach, Nixon’s personal attorney. The following year, a dairy official pledged $2 million to Nixon’s re-election campaign.
Nixon recognized the dairy lobby’s political consciousness when he met with them in the Cabinet Room at the White House. Tapes running, the president said a lot of businesses “don’t do anything about it. And you do, and I appreciate that. And I don’t have to spell it out.”
The dairy officials left the meeting with presidential cuff links. Two days later, they received a much greater gift: Nixon’s secretary of agriculture announced that price supports would increase by 27 cents per 100 pounds of milk.
Gary Hanman, then an executive at Mid-American Dairymen, a co-op in Springfield, Missouri, attended the meeting with Nixon. Hanman would later brag to a member in a letter that the dairy industry’s political activity had “played a major part” in the administration’s decision to raise prices.
The milk producers’ contributions eventually came under the scrutiny of Watergate investigators. Two executives at a Chicago-based co-op went to prison for making illegal donations. Nixon Treasury Secretary John B. Connally was tried and acquitted on perjury and conspiracy charges for his role in the 1971 increase in milk price supports.
Hanman, meanwhile, went on to bigger things. In 1998, Mid-American merged with co-ops based in Colorado, Ohio and Texas to form the Dairy Farmers of America. The merged company set up headquarters in a glass-sheathed office building near Kansas City International Airport.
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Cooperatives are supposed to give farmers the voice and power they lack as individuals. DFA members, however, have accused their $11 billion co-op of not always acting in their best interests.
In 2007, members filed suit, alleging that the co-op conspired to keep down the prices farmers are paid. The suit also accused managers of cheating farmers through a pattern of inappropriate transactions with affiliates. According to court papers filed by the Justice Department, one dairy executive in a venture with the DFA made $70 million on an investment of several hundred thousand dollars.
The Wall Street Journal reported in May that federal regulators were investigating allegations that the DFA manipulated milk prices on the commodities market. The feds are also reportedly looking into a $1 million transfer from Hanman, who retired in 2006, to a former chairman of the board. Hanman’s replacement, Richard P. Smith, has described the payment as an “improper transaction.” (The money was returned.)
Before he started bottling his own milk, Shatto sold it to the DFA. He didn’t have a choice. Industry consolidation has given the DFA and other super-co-ops near-monopolies in some parts of the country. The arrangement puts farmers at a disadvantage.
Being free of the co-op has not relieved Shatto of all pressure from conglomerates. Earlier this year, he traveled to Topeka and Jefferson City to fight legislation that would have restricted his ability to advertise that his cows are hormone-free.
Using a front called American Farmers for the Advancement and Conservation of Technology, the St. Louis-based Monsanto Company has tried to pressure states to regulate the labels on dairy products that come from untreated cows. Monsanto sells a bovine growth hormone under the brand name Posilac.
The Food and Drug Administration says recombinant bovine growth hormone (also known as rbST or rbGH) is safe. Its use, however, has not been approved in Europe, Canada or Japan. Earlier this year, Wal-Mart Stores announced that its private-label Great Value milk would come from non-rbST cows.
A Monsanto lobbyist testified in Jefferson City in favor of a bill requiring milk labeled as hormone-free to carry equally prominent disclaimers about the FDA not seeing a difference between milk from treated and untreated cows. The backs of Shatto bottles already bear this type of disclaimer. Still, Shatto was ticked off by what he saw as an encroachment on his freedom of speech. “I was afraid they were going to make me pick up all my bottles,” he says.
In the end, the bottles stayed in circulation. The bills died in committee.
At the City Market, an earnest-looking guy in his 20s or early 30s asked Shatto about the amount of milk his cows produced. Shatto said that he gets seven and a half gallons per cow, with a few outliers producing 16 gallons.
The young man said he knew of a dairy farmer whose cows gave 20 gallons. Probably a hormone-inflated number, he concluded.
Shatto smiled. “That makes a difference,” he said.
Paul McDonald and his wife, Kristine, approach the dairy case at Whole Foods. “If only somebody would make a root-beer milk,” Paul says.
He’s playing dumb. The McDonalds know all about Shatto milk and its flavors. Paul tells Barbara and Leroy that he uses their milk to make quick cheese and ice cream. “It’s the only milk we buy,” Kristine says.
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Another couple — both wearing burnt-orange University of Texas T-shirts — stops for samples. The woman asks if the Shattos name all their cows. (They do.) The man says the chocolate milk is the best he’s ever had.
In addition to hearing people tell them how good their milk tastes, the Shattos have found satisfaction in their involvement in causes such as Susan G. Komen for the Cure and the Ronald McDonald House. Leroy wants to refurbish an old Divco milk truck that he can bring to events.
Shatto Milk Company has created opportunities that Leroy could not have imagined five years ago, including an invitation to speak at Hallmark. On his visit, Shatto noticed a few employees keeping betta fish in Shatto bottles on their desks. He received a fish in a bottle as a parting gift. “Fred lasted a couple of years,” he says.
Shatto milk is now delivered as far as Belton. Sales in August were up 65 percent from a year ago. Of course, there are limits to what the Shattos and their cows can do. Leroy says he’d rather stay small and run the business well. “I don’t want to get too big to where I screw up,” he says.
For now, though, the fatalist stops to savor the moment.
“I’ve had more fun in the last three years than I’ve had in my entire lifetime,” he says.
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