Yeo Valley: Milk producer and top organic brand

Fifty years ago, Mary Mead and husband Roger moved onto a 150-acre dairy farm in Somerset with 35 cows. That farm is now part of a £225m turnover farming and dairy processing business that has become the UK’s best-known organic brand.


Although already well-established at the time, Somerset’s Yeo Valley shot into the limelight when its rapping farmers first appeared in prime time TV ads in autumn 2010.


They were followed by a second campaign run during The X Factor this year, costing £2.5m – a relatively small sum compared with what Yeo Valley’s multinational competitors spend on a campaign. However, brand awareness has doubled, helped by more than 2.5 million views of the two adverts on YouTube and a staggering 10 million tweets.


Like most farming entrepreneurs, the Mead family is passionate about its business and its products. But in this case that passion extends far beyond building their Yeo Valley brand and its sales.












Yeo Valley factfile



• UK’s biggest organic brand with about 65% of the organic market and 5% of the total yogurt market
• Family-owned company based at Holt Farm, Blagdon, Somerset
• Current year turnover £225m
• Growth trebled in past 10 years
• Owed £30m at any time by UK supermarkets
• Pre-tax profit to May 2010 is £5.7m
• Borrowings £10m
• Dairy and arable farm on 1,200 organic acres
• Dairies at Blagdon and Cannington, organic milk bottling at Crewkerne, luxury desserts and ice cream manufacture in Newton Abbot, Devon
• Produces a range of conventional retailer-branded products for most UK supermarkets
• Logistics centres at Highbridge and Axbridge
• 1,400 employees
• Three Queen’s Awards for Enterprise for Sustainable Development – many other awards, including Dairy Industry Award (Tim), BBC Radio 4 Farmer of the Year Award (Mary), one of UK’s top 100 grocery brands, welfare and marketing awards

 


Tim Mead and his mother Mary are marketing the Yeo Valley itself – its landscape and heritage, their organic principles and the sustainability that is key to the ethos and image of the business.


These are important messages to get across to consumers, alongside the impression that although they take farming and food production very seriously, the Yeo Valley family does not take itself too seriously.


The TV ads were a first for a company of this type, but managing director Tim Mead does not consider they were a big risk. Sales have benefitted, although it’s hard to say by how much as there was a lot of other promotional activity going on across the same period, he says.


Building the brand has been a slow and steady job, says Mr Mead. He took on running the business in 1990 when his father Roger was killed in a tractor accident. Turnover has increased by roughly £10m a year for more than 20 years to the current £225m and is on target to reach £250m next year.


“My father realised 50 years ago that with a 100-cow dairy farm, unless we did something, we might not be dairy farmers in future.” That foresight has led to the current aim. “We want to have a close relationship with the five million people who choose Yeo Valley products as the brand of choice for their families.”


Customers are encouraged to become part of the Yeo Valley community through advertising, newsletters, competitions, a website and social media.


Educational visits are part of this and an organic garden and tea room opens to the public and for private bookings. The tea room is also used for study days, workshops, lectures and exhibitions.


The farm is still the heart of the business and Yeo Valley also buys in milk from almost 100 other organic producers through organic co-op OMSCo, taking about 50% of OMSCo members’ production in the south of England.


Production is split between the organic Yeo Valley brand, which accounts for 40% of sales volume, and own-label products for major supermarkets, which represent the other 60% and are produced from conventional milk.


Managing the expansion of a family business that is growing in relatively large steps can be stressful, which makes it important to assess what you are good at and acknowledge what skills you need to buy in, says Mr Mead. In Yeo Valley’s case, it was commercial and marketing skills that were needed.






 





Organic milk



While Yeo Valley’s own brand is 100% organic, the firm also processes conventional milk for supermarket own label products.


Would Mr Mead advise a milk producer to go organic now? That would depend on many factors, he says, including herd size, location and land type. “We’ve got 440 British Friesians producing 8,000 litres a cow – it works for us.”


Organic milk has been through a painful supply and demand cycle, which saw many begin conversion in 2007, at a time of high organic milk prices, only to find that demand had fallen by 2010 once their conversion was complete.


It would be a brave move but now might be the time to swim against the tide, suggests Mr Mead. “If you can see a trend, you’re often too late. But there’s no doubt that if petroleum costs continue to go in the same direction, the gap between organic and conventional milk production costs will narrow.”


Having spent time away from the family business and trained as an accountant has brought clear benefits, he believes. The practical approach born from farming experience has also been invaluable, especially in the early days when the plant was being developed.


Managing capital is one of the biggest challenges, says Mr Mead. Borrowings, at £10m, are modest for a company of this size. “We are very cautious as borrowers. There are companies our size that borrow 20 times what we do.”


Retailers owe the company £30m at any time and it is constantly funding £6m worth of stock.


Yeo Valley also supports several smaller local organic businesses by helping with distribution through Yeo Valley channels.


The follow-on to this may be to set up a separate division that could help those businesses to benefit from expertise and experience in areas such as HR, production, distribution and purchasing.



Yeo Valley’s mantra



The guiding mantra at Yeo Valley is SQSPPP – safety, quality, service, people, plant and profit.


“If you get that right and in that order, and if the world is fair, you should be making a decent return,” says Mr Mead.



Safety



Safety really is top priority here, to the extent Mr Mead is confident that if a staff member is not following protocol, another will tell them so and set them on the right track. The firm has a RoSPA level 5 accreditation – the highest level of any food company of its size.



Quality and service



Yeo Valley’s ability to consistently produce and deliver top-quality products is reflected in a 99.89% Tesco service score. “If you can deliver to the retailers what their customers want, they love you. I would say our relationship with our retailer customers is fair,” says Mr Mead.



People



“We are blessed with a lot of very dedicated and skilled people,” says Mr Mead.


At 12%, the staff turnover rate is less than half the industry average of 26%. Yeo Valley employs 1,400 people across six sites and recently held an event to mark long service, with 42 employees having served more than 20 years with the firm and 18 of those more than 25 years. Recruiting is not a problem, but was more difficult at the Blagdon site in the past as it is not near any large population centres.



Plant



“It’s about wanting to be here forever, doing things properly,” says Mr Mead. “Our dairies are well invested with equipment at the highest level, everything is built to last.”



Profit



Things are tight at the moment. “The costs of the products we make have gone up £14m in the past six months, and we aspire to make £5m profit a year.”


Cost inflation makes it very difficult to decide when is the right time to try to achieve a price rise, says Mr Mead.












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