For Steve Schmid, president of Smith Dairy Products Co., Orrville is a land flowing with milk and Chocolate Moose Tracks. Smith Dairy, founded by Schmid’s grandfather and great-uncle in 1909, has grown into one of the largest independent dairies in Ohio.
This family business, which also has a production facility in Indiana, is a strong competitor in the dairy industry, despite competition from Texas-based Dean Foods, which has acquired several smaller dairies, and Cincinnati’s Kroger Co. Smith Dairy, which makes three brands — Smith’s dairy products, Moovers single-serve milk and Ruggles ice cream — acquired New Philadelphia-based Goshen Dairy in early 2002 and the traditional ice cream business from Canton’s Superior Dairy in January 2005. The company is expanding its 35-degree refrigerated warehouse by 34,000 square feet to provide for consistent product rotation and minimal out-of-stocks.
“We’re tight on space, and that’s limiting production efficiencies and ability to serve customers quite as well as we want to,” Schmid says. “It’ll allow us to have bigger inventories and to take care of volume a little better. It should (also) help speed up how fast we can load up trucks and get them through the system. Just by having more room to work around, we should be able do things faster.”
The expansion project, which began last October, is targeted for completion in July. As of press time, it was costing the company a little more than $6 million and “hasn’t been going on long enough to be off-budget yet,” Schmid says.
Smart Business spoke with Schmid about the company’s expansion, its community impact and milk as the new lifestyle beverage.
As the president of Smith Dairy, what steps are you taking to manage the company during this expansion project?
I just have a lot of good people who are helping to make things happen. Fortunately, we have a lot of really good leaders and other people who are working and committed to serving customers.
There are a few people who are spending a whole lot of time on the new project but for many people, it’s not much of an interruption. There’s a contractor overseeing (the project), and we have somebody internally who is working close to full time with the contractor to keep things going.
How do you expect your company’s expansion to affect the Orville economy?
It’s helping us be stronger for the future. If we’re stronger, that helps the Orrville economy — just being able to serve the changing needs of the customers, meeting the changing competition and things of that nature. This will help us take on other challenges in the future. So in that way, it’s going to be positive for Orrville and Wayne County, and it should help us make us stronger.
The competition has gotten more intense because over the last five years or so, there have been a lot of acquisitions in the dairy industry by Dean Foods. Where we used to compete with a whole lot of independent dairies, we’re now competing with one big dairy plus a few independents.They can do things in some ways better than we can, and this will help us compete in other ways because that segment has changed.
Our customer base is changing. Big supermarket chains are getting bigger, which means there’s always a real change in the supermarket business, and not only in supermarket but retail business as well as food service. Food service distributors are getting better, and we’re working hard at serving them better, too.
There’s just constant change in the things your customers want and need, and this will get more products packed differently. We should be able to work with them better.
What is the biggest lesson that you’ve learned during this expansion project?
Something we knew beforehand. We wanted to start it two months earlier so that we’d be out of the mud now and under roof. But right now, the construction project is going slowly because the monsoon season we’ve had for the last two months has just made the contractors push mud around, and it’s just hard for them to work in there.
They’re making progress but they will have to work twice as hard (to complete the project by July.)
We’ve learned that China has made a big impact on the U.S. in many ways. The growth happening in China has made the cost of steel in the U.S. more expensive. If anything’s challenged our budget, it’s the steel.
If we could have built a year ago or two years ago, the steel would have been probably half as expensive. I shouldn’t say ‘half’ because I don’t know what it would have been but there’s a huge increase in steel.
As the third generation to manage Smith Dairy, how do you balance your company’s traditional values and the modern innovation it takes to compete?
(A Smith Dairy tradition is to) give the customer the best, not only in products but in service. Those concepts are still there. Having the commitment to quality is still there. Just the way of doing it keeps changing. Many years ago, til now, there’s just a huge change in quality and service and the demands of customers and keeping that focus on the customer.
We’ve seen customers for a while saying, ‘Cut back on service to give us a better price,’ and now (they’re saying), ‘We want better service but we don’t want to pay more.’ The good end product is a combination of the quality of that gallon of milk or pound of cottage cheese or half-gallon of ice cream, plus it’s the service that you provide to the customer, be it a food service place or the retailer.
They like being delivered on time; they like getting all of what they wanted; they like us to do more of the work and them to do less.
America’s milk processors have been running an aggressive advertising campaign. How has that affected your company’s sales?
It’s at least positive news about drinking milk. There’s been a lot of negative news. It’s easy to take shots at milk but there’s some good news on milk and dairy products that says a lot of skim milk and 1-percent reduced-fat milk in your diet is actually good for losing weight.
The research has shown that there’s some truth to that, and so that’s good. We have had some promotions or campaigns built around that concept. The one slogan is ’24/24′, and that’s 24 ounces of milk in 24 hours helps the diet. We’ve done some things with that, and we’ve really seen some increases in the skim milk and low fat milk sales.
It’s good news, and we just have to work hard as an industry to communicate that well to the population.
HOW TO REACH: Smith Dairy Products Co., (800) 776-7076 or www.smithdairy.com
