Going Once, Twice: VT Milk Company Auctions Off Assets
In November 2006, the Vermont Milk Company set out to improve the way farmers are paid for their milk, by creating Vermont-made dairy products.
This week, the company is going down a road that has become painfully familiar to many local dairy operations: auctioning off its property and equipment to pay back its creditors.
In 2006, VMC put up $650,000 for an abandoned cheese-making factory in a small industrial park in Hardwick. At the time, VMC founder Anthony Pollina predicted the company would spend more than $1 million to fit up the space.
Though Hardwick has been celebrated for its food industry (See Suzanne Podhaizer’s “Harder Look at Hardwick,”), VMC didn’t prove to be as profitable as Vermont Soy and others located in the “eco-industrial” park.
When the company launched, it promised to pay farmers no less than $15 per hundredweight for their milk as a matter of principle, compared to the going rate of $11 per hundredweight. VMC was also picking up the cost of trucking the milk, which added $1 to $3 per hundredweight to the company’s costs.
Then milk and fuel prices skyrocketed, and VMC had to pay at least 50 percent more than it had anticipated for milk in order to compete with other dairies, and nearly twice as much at the pump to move its milk.
At its peak, VMC sold cheese curds, a mild cheddar cheese and yogurt as well as an ice cream to restaurants, schools and supermarkets — but never enough to break even. In early 2008 it was already racking up monthly five-figure losses, according to Dennis Myrick, a St. Johnsbury-based consultant who was hired to turn the company around. He told Seven Days at the time of his arrival the company didn’t have a good handle on its exact sales figures or its true fixed costs.
He resigned his post, in 2009, after being diagnosed with ALS.
After closing its doors and laying off its five workers, VMC looked for ways to settle its debts, either through a sale or bankruptcy, said Chantale Nadeau, a founding board member.
“I can’t tell you how heavy my heart is that this did not work out.” said Nadeau.
In recent months, VMC did enter into talks with a group of investors who wanted to buy its building and equipment and use the facility to make high-end ice cream, said Dexter Randall, a farmer and VMC founding board member. The sale, which Randall worked on with Pollina, never materialized.
“If this deal had gone through, we would have been able to pay off our creditors and then some,” said Randall. “Now, I’m not sure what’s going to happen.”
It’s unclear how much VMC owes its creditors, investors and vendors. Calls to Pollina went unanswered.
On Thursday in Hardwick, two separate auctions will be held to pay off VMC’s debts to Union Bank and the Vermont Economic Development Authority.
The Vermont-based Thomas Hirchak Company has been hired by Union Bank to sell the 10,290-square-foot building on nearly 3 acres of land. David Silverman, Union Bank’s senior vice president, would not say how much VMC owes the bank or discuss the recent talks with outside investors to purchase VMC.
Harry Davis & Company of Pittsburgh, Penn., has been hired by VEDA to sell off VMC’s equipment as well as its 2350-gallon milk truck. VEDA is trying to recoup a total of $413,424 from the sale, said chief executive director Jo Bradley.
VEDA hired Harry Davis, Bradley said, because the Authority has had good luck with the firm at similar dairy auctions.
“Unfortunately, we’ve had to have more of these auctions than we’d like to see,” said Bradley.
Despite its hopes, VMC ended up falling victim to the vagaries of the fluid milk market, just like many of the farmers it set out to help.
“To me, it’s about empowering farmers and giving them a way to have some power over their milk,” Pollina said back in 2006 at a news conference launching VMC. “We’re starting with a handful of farmers, but if we can become a model for other people, I do think it does have the potential to reshape the dairy industry in Vermont.”
VMC may have given up, but others haven’t. With the help of a $350,000 federal grant, the state’s food venture center is moving from Fairfax to Hardwick. It breaks ground in May.