Shatto Milk Co. – Startups: Made in Kansas City

♪ Hello. Welcome, my name’s Leroy Shatto of Shatto Milk Company. I’ve been a dairy farmer for going on 38 years. We used to milk our cows and sell to a dairy co-op, got to where we couldn’t make much money, so we–we either had to sell the cows or do something different, so we started bottling our own milk in glass bottles, actually. We’ve come a long way since we started this business. We’re just about 45 minutes north of Kansas City. We had 80 cows’ worth of milk to get rid of, and we didn’t know whether this was gonna work or not. We didn’t know if we had the location. We didn’t know if the Kansas City people was gonna take on to our milk, but I tell you what, it has been unbelievable. We started nine years ago doing this with 80 cows, and now we’re up to about 400 cows. We do different kinds of milk, like silly things, some people say it’s silly, but we do root beer milk, orange dream, and banana. We have about nine different flavors, which it seems like a lot of people are all about the flavors. About a year before we started bottling milk, I went around talkin’ to grocery stores, asking ’em if they would be favor of carrying our milk if we got started. At that time we didn’t know whether we was gonna get lending. We didn’t know anything. Matter of fact, I had a letter of intent if they would sign that letter that they would maybe have a chance of using our milk in their store. It wasn’t legal binding or anything, it was just to make me feel better that these stores would sign it, thinkin’ they might carry our milk in their stores. The first day I went, I went to eight stores, and I got eight signatures from all eight stores. Matter of fact, I felt so good about that day I went out the next day and actually found out that some of these stores, they can make their own choice of what they carry and what they don’t, so I went to Price Chopper– matter of fact, it was a Cosentino’s, and Victor Cosentino actually the day I was at his place said, “What if we made you an exclusive to all of our stores?” Well, at that time, I was trying to figure out what I was gonna do with 80 cows’ worth of milk, and now after Mr. Cosentino said an exclusive to all of his stores, I was wondering where I was gonna come up with enough milk to do that. So not only did I have– made myself a problem the second day I went out, but it also made us feel proud that there might be a–a place for our product. ♪   What sets us apart from other dairies, I think, is people know where their milk comes from, and they can actually come here and do tours and see the cows and see how we operate. They can watch us bottle milk, they can taste the milk here at the farm. When we bottle milk, we bottle about 2,200 gallons of milk a day, and that’s about 14,000 bottles usually every time we bottle milk. So it kind of keeps everybody busy in there. And see, most of our milk is in town the next day after it’s out of the cow. You know, so our milk should be the freshest milk in town, and that’s what we strive for. This is where the milk ends up after we process it. First it comes in over here through the wall. Those are raw milk tanks to where we make it into different products. ‘Course we have the separator over there. Well, all the city people in Kansas City drink skim milk, so we got to separate the cream. So once it gets made over there, we send it over to the pasteurizer, and then homogenize it, and then once we get that done, ‘course, when we pasteurize it, it heats it up to 172 degrees, then we cool it back down to 36 degrees, it comes over here to the finish tanks, and then we pump it to the bottle filler, in the bottle, in the cooler, you know, as quick as we can. So this milk will go on the trucks tomorrow. Our milk is in glass bottles, and I think that is the number-one thing that sets us apart from the other dairies. Our glass bottles actually make the milk, I think, taste better. You don’t get the plastic taste. The glass bottle makes our milk stay colder. It’s a better insulator than plastic is, and, of course, we–we have won awards for recycling, and a lot of people are buying our milk because they know that every time they take that bottle back to town that keeps a plastic jug from going to the landfill. So when we started doing this nine years ago, I knew we had to do as much different as the big guys in town. At that time, one thing was no growth hormones, and we could always say our cows was not treated with growth hormones, which most of the other dairies could not say that. When we started on our new adventure, we was just worried about fluid milk, and then when we got started with that, then people started comin’ to us. They wanted butter, they wanted–they wanted cheese, they wanted yogurt, they wanted ice cream, they want everything. And that’s a good thing because the like our product enough they think we could maybe make that best. So, you know, we started doing cheese, we started doing all those– like ice cream and butter, and, you know, that’s a good thing, because we can branch our brand out. You know, we can sell the artisan cheese at specialty stores, and it just makes our name go more over Kansas City, right? So–so that’s what we done. We’ve got started in other projects. We go through new adventures every day. The weather causes a lot of ’em. Employees cause a lot of ’em. You know, I’ve–I’ve never had too many employees until we started this venture, but I found out I can get my cows to do what I want ’em to. These employees are a different deal, all right? But we–we are getting a pretty good group of people here, since the last nine years. We definitely learn every day from our mistakes, and–and we don’t know what’s coming tomorrow.   We’re gonna have to drag your tractor over to get him straight again or we’re gonna be in trouble. ♪ What you’re seeing on the road out there was the–the driver tried to–after our big blizzard yesterday, tried to cross too far south from what he should have and what he always does for some reason, I don’t know. But he–he’s got 10 ton of feed on that wagon, and that wagon will not go over a big hump, especially when the tractor’s slipping on–on the ice on the highway. So we had to work to figure out a way to get it off the road, but we did keep working. We got it off, so everything’s okay, and I bet you a dollar he don’t cross there anymore. So that’s–that’s a good thing. So we learn by our mistakes. it’s just sometimes we hate to see the mistakes, right? What I would advise people that want to start their own business is never give up. Fight for what you want. If–if–if you’re totally into what you think might work, it’ll probably work. If you have reservations, it probably won’t work. You’ve got–you’ve got to go with it. I mean, when we started this, I was over here every morning at three o’clock, didn’t usually get home ’til nine or ten o’clock, and that was every day, seven days a week. I started going around, trying to find money to do this–this deal, and I had about two choices left, ’cause I was turned down by so many people, so many banks. At that time, farming was not good. Agriculture was not good, any of it, and dairy was even the worst. So for me to go in and ask these people to loan me money to do this venture, I mean, it was–it was crazy. But this local bank, actually he looked through our business plan, and–and he looked at me and he said, “Yeah, I think this will–I think this will work.” He said, “I think it’s time for something like this.” So he believed in us, and we started this, and now he’s kind of our best friend. I mean, I’ve been to banks before–before this venture where you had to bow to bankers before you went in their office, and they made you feel guilty because you– ’cause of the markets, and– and, you know, there’s so many things we cannot control out here in the dairy, whether it be the weather, the milk prices, or anything like that. So we’re kind of at the mercy of everything, and for this banker to believe in us and take us on, that made me feel very proud. What really helped us out is–is our e-mail. People telling us how much they like what we do, and–and, you know, I’m not used to making any money, so that wasn’t any big deal, ’cause, you know, it took us awhile to do that. But just for somebody to–for you to get pride back in what you do. I mean, I’ve milked cows for 30, going on 38 years, but nobody ever told me I done a good job or they liked what I do. But nine years ago when we started bottling our milk and people found out what we do and how much they like our milk, every time I go to town with a Shatto milk shirt or in my truck that said “Shatto” on it, people would come up to me and tell me how much they love what we do, and–and I would get goose bumps 20 times every time I went to Kansas City. This is a 1954 Divco, which is what they used to home-deliver milk to the houses. So we show her off. We–we’ve taken it to parades before, ride around the plaza, and–and that kind of thing, and it also has a horn that I always have to show the kids, and– and tall people, right?   So they get a kick out of that. When we ride around the plaza, then people get a kick out of it, too. And I tell you what, don’t tell Barb, but that–that’s worth more than any money I could ever make. I mean, just getting pride back in what you do. A lot of this stuff we had to learn. You know, with not only associating with–with stores, and the retail and wholesale market, because I’d never done that before, but we found out that branding is–is something big. When we first started nine years ago, we done–we had our own logo fixed up. We designed our bottle the way we thought would–would look good. But we had this company called SHS, Sullivan Higdon & Sink, come to us with– with other ideas, and I tell you what, they have won awards on about everything they’ve done for us, and they have helped our–our–our bottle look better in the grocery store. I never thought about branding or the package selling so well with the right stuff on the package. But we have learned that. We’re in about 80 stores now throughout Kansas City. We do not go further than 100 miles from the farm, and most of our milk goes to Kansas City. I don’t see us going further than what we are. I think we should just take care of business here where we are, and–and–and not mess anything up. I mean, that–that’s the thing with us. I mean, if people get bad milk a time or two, they’re not gonna keep buying our milk. So we’ve got to do a good job. We’ve got to take care of the cows, and we’ve got to take care of business. Our customers have actually driven us to 400 cows. I never dreamt of being at 400 cows. We–when we started, we was thinking if we could get rid of 80 cows’ worth of milk that would be great, but, you know, we keep getting more stores wanting our product, more customers wanting more of our product. We have 25,000 friends on Facebook, and what a way to communicate to people. And not only communicate to them, but listen to what they want and what they think we oughta do, and some of the–some of the flavors we hear from those people, you know, we’re all–we’re all for it. We–we love hearing what the customers say, and you’ve got to listen to the customers. Sometimes they think, “Where in the world these guys come up with this stuff?” but we get bored out here on the farm, and we like to play, so–so it’s always fun, and I’ve always told people I wouldn’t mind to be known as the milkman that made milk fun, because we’ve got people drinking our milk that gave up on drinking milk. Actually, not only young people, but tall people, so it’s been–it’s been quite a journey through the last nine years.   Kansas City has a great environment for banking. We take our strength from our community and we put our resources back into our community. And when banks look to lend money, there are generally five things we look at. And those five things we call the five C’s of credit. It’s actually pretty simple. First is cash flow. Is the business cash-flow positive? That’s very important for us to make sure that we can get paid back for the money that we extend. Second is capital. Is there an adequate capital base for the organization to grow on? The third are conditions. The terms and conditions by which we’ll make the loan available to you. The fourth one is collateral. We have to have something, some basis upon which we’re gonna lend. That collateral can be personal collateral or it can be business collateral. And the last one, and by far, the most important, is character. I learned a long time ago that you actually don’t lend money to companies, you lend money to individuals. And so getting to know you, getting to understand your plan and getting to really understand who you are as a person, is equally as important probably more important than the other four. And so keep that in mind. Talk to your banker, and there’s one rule in banking I would also want to impress upon you: don’t ever let us be surprised. So to the extent that we do extend credit, keep us informed. That’s part of building character and it’s part of building a long-term relationship.   All right, guys, welcome to the Weston Brewing Company, my name is Mike. We’re kind of a small group today, so questions, comments, concerns, raise your hand, throw something at me. If I don’t know the answer, I’ll make it up. That’s about half the tour anyway, so money well spent. Man, I’m kidding, you guys are rough, jeez. We’re gonna start with this panorama here, this is the brewery about 1910, 1911. The town of Weston went through several fires, as did the brewery, so this is kind of a rebuild, kind of a hodgepodge of structures to keep the facility up and running.   ♪ And we are at the, uh– we’re in the lowest cellar of the Weston Brewing Company. We purchased the brewery May of ’05. We had initially had a plan to– my partner and I am co-owner– We initially had a plan to start a smaller boutique microbrewery that would service Kansas City’s higher end restaurants, we were gonna do custom signature beers specific to a particular high-end restaurant. About the time we were firming that up, my current partner called me and said, “Hey, by the way, O’Malley’s is for sale,” which O’Malley’s is on the site of the original Weston Brewing Company. I told him he was nuts, I probably added a few expletives, but eight months after that phone call, we were in the works of, uh– in the process of putting together the finances to make this happen, and here we are today, almost eight years later. The brewery hadn’t been used for six years. The guys that had all the money for the project kind of took his toys and went home, they locked the doors, and it was literally as if a virus had come to the brewery and taken out all the people. There was still beer in the tanks, it looked like it was in process, so six-year-old beer in the tanks when we got here. I did taste it, it was not good. It took us almost a year to refurbish the brewing system. Anything that was rubber, any gaskets, any seals, lots of the motors, all sorts of things had to be completely taken apart and rebuilt from scratch, so a little over a year to get the brewery back up and running. All right, so this is the brew house. The back wall here, that’s the original back of the brewery, so that’s 1842. That runs through the back of the brewery into the restaurant and connects to the lagering cellars downstairs which is where we house the Irish pub today. So a little bit about the brewing process… It might sound kind of silly, but I think one of the things that’s made us successful is we were just dumb enough to take the plunge. And it’s been constant work. You know, it’s sweat equity, it’s blood, sweat, and tears to keep the place running and we made a lot of progress. We’ve increased our revenue double digits every year since we’ve started. You know, more than anything, it’s just tenacity, it’s just work, you know, you got to believe in what you’re doing, and, uh– and push, push, push, push, push, and you’re gonna make mistakes, you know, we’re smarter now than we were eight years ago and in some ways, I think that we don’t know anything. The more you know, the less you know. It’s gonna feel like– it’s gonna feel like you’re failing a lot of the time, especially when you’re becoming successful, it gets more expensive to do what you do, so tenacity, I think, just gotta push, just gotta drive. To our left here, these are two brand-new 45-barrel fermenters that we purchased. Delivered yesterday, we set them up last night. These are– these are pretty monumental in terms of– in terms of investment, in terms of where we’re trying to go. It’s kind of, uh– business like this, that gets–bit of a gamble, it’s a bit of a risk in that if we waited until we really needed this expansion, it’d be too late. You’d be behind the curve, so part of it’s kind of trying to predict when you’re gonna need this stuff, when to pull the trigger, and a lot of times it feels like you’re putting yourself out there, not really knowing– knowing where you’re going, but, uh– you gotta stay ahead of the curve. There was a real disconnect between the restaurant and the pub, you know, people knew O’Malley’s Pub. They didn’t know the America Bowman Restaurant. Or people who knew the restaurant didn’t know the pub, so you had two different collections of clientele. We’ve tried to put the whole facility under the moniker of the Weston Brewing Company. We’ve also added, uh, the Inn at Weston Landing, which is the bed and breakfast next door to the brewery. We purchased that because below it is one of the four original lagering cellars and when that came on the market, we felt like we had to make a push to grab that to put the whole facility back together again. We’ve also purchased the Saint George Hotel on Main Street. It’s about a two-minute walk from the pub, and that’s beneficial for some obvious reasons. So that was the upper pub. Down the stairs, that’s the lower pub, this room we call the middle pub. I would explain that but it takes a very long time. Man, nothing on that, you guys are rough. Jeez. Believe it or not, under the stairs, that is the secret cellar and that’s where we’re going next. We’ve got really great artwork for our beer. We work with a company called Blacktop. David Terrill is the artist that’s done the artwork for us. He’s done a great job of taking certain qualities of each brand and spreading it across the spectrum of brands, so there’s a connection between all the products. It’s so important when there’s so many beers on the shelves, anything that can differentiate us, that can tie us together– You know, you put five beers together, you’re gonna obviously have more visual presence than a beer here, a beer here, a beer here, and everything looks different. So branding in terms of visuals, it is huge. We have visual elements in each of our brands that kind of tie them together. Some of the ways we treat text, some of our colors, some of our antiquing techniques, so visually, you can see the stuff on a shelf and you’re gonna know that, “Hey, that looks like it comes from Weston,” you’re probably right. So hopefully, people are making that connection.   ♪   And you make Steve do all the labor, I see. Absolutely. Steve knows what’s goin’ on. See, Steve’s gonna shut this behind us and guard the stairs, so– All right, a couple things to be mindful of down here, if it’s marked orange, watch your head. If it’s not marked orange– Watch your head. Exactly. Watch your feet, as well, it’s the original dirt floor, so one eye up, one eye down. That’ll serve you the best.   ♪ Are there any ghosts here? We’ve seen some strange things, yeah. We’ve seen some odd things. Craft beer in general has really, really grown year after year. Most craft breweries are almost collaborative, you know, we realize that it’s not necessarily us against each other. It’s really a fight for shelf space against your large domestics.   ♪   So we believe– we believe in hyper-local, it’s a term we’ve coined that describe the market area we want to participate in. We’re not trying to conquer the world, there’s enough market share in about a 200-mile radius to, uh, to keep us as busy as we could possibly be, to really push us to the max. We originally had distributor contracts in Iowa, Nebraska, Wisconsin, Minnesota. We kind of changed our philosophy on that. Other breweries are shipping as far as the coasts, and that’s great, but you run the risk of having a local retailer not be able to get the product. We don’t want to do that. We want to dance with the people that brought us, basically. So hyper-local, that’s where that comes from. Way more than enough market share to keep us busy. These tours really drive our business. The vast majority of people that show up for these tours haven’t been here before, so this is their first exposure, it’s their first time. There are so many “wow” moments in the facility itself, you know, people walk through that tunnel to the first cellar, you hear “wow” all the time. They come down to the lower cellar for the first time. We’re a bit too well-hidden to the secrets, so hopefully, when we have people that come that have never been here before, but come back, they’ll bring friends. These tasting are free advertising, really. The more people we can get to come to the tours, the more beer we can get into mouths, the more they go out to supermarkets, liquor stores, other bars, the more they purchase our product, so these tastings really– really push our business forward. Better get the beer over there. All right.   ♪   A co-production of KCPT. And Outpost Worldwide, at home in Kansas City.   ♪   Captioned by  

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14 thoughts on “Shatto Milk Co. – Startups: Made in Kansas City

  1. I live in Winnipeg, Canada.

    I never had the option of buying milk in a glass bottle. It would be nice to buy like that because I feel it keeps the milk more fresh tasting.

  2. Thats where I get my milk from is a Cosentinos Price Choppe. Their flavored milk, or at least the ones Ive tried, actually do taste like what they put in.

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