Small Business

Retailers Get Caught Up in the Raw-Milk War


The owners of small food stores worry that an ongoing government investigation and crackdown on dairy farmers could seriously hurt their business

Tommy York, an owner of the landmark Morgan & York food and wine store in Ann Arbor, is a big Michigan booster. "I love Michigan. I love the people. I love the countryside," he says.

Now, though, the basic beliefs of York and other food retailers are being called into question as they feel the ripples of an attack by Michigan authorities on a three-farm cooperative that supplies them with grass-fed beef, organic eggs, and other high-quality food products, to the extent they fear it could overwhelm their well-established small businesses.

The farm cooperative also supplies its members—who have no connection with the store—with raw milk, which is at the center of the state's investigation.

On Oct. 13, the Michigan Agriculture Dept., together with state police, completed a sting operation by confiscating an estimated $7,000 worth of the cooperative's food products and executing search warrants on the home of the cooperative's manager, Richard Hebron, in Vandalia, along with a warehouse owned by Morgan & York in Ann Arbor (see BusinessWeek.com, 10/19/06, "States Target Raw-Milk Farmers").

Cease and Desist

While no charges have yet been filed, the investigation has expanded. The federal Food & Drug Administration, along with the Indiana Board of Animal Health, have twice sent investigators to the northern Indiana dairy of the Amish farmer who supplies the cooperative's raw milk.

According to the farmer, who has asked not to be identified, and a lawyer representing the cooperative, the investigators are exploring possible violations of a federal prohibition on selling raw milk via interstate commerce. The agencies decline to comment on grounds that the investigation is still open.

Meanwhile, the investigation has twice targeted Ann Arbor retailer Morgan & York. The first time the authorities completed the sting operation and served Tommy York with a search warrant, he didn't feel especially threatened. He's accustomed to dealing with Michigan's Agriculture Dept., which licenses him and other food retailers, and it periodically inspects his facilities, including the warehouse out back that he has made available for the last two years to the Family Farms Cooperative. The co-op uses it for weekly distribution of raw milk and other food to a couple hundred Ann Arbor-area members.

The second time was different. Last Thursday, MDA inspector Beth Howell—"Inspector Beth" as she's known to York—walked in with a five-paragraph "cease-and-desist order", and told York to sign it. While the technical language orders the store "to cease and desist in the delivery, holding, or offering for sale of adulterated or misbranded food," the real purpose was to prevent the store from allowing the cooperative to distribute its products from the store's storage area, as it has done for the last two years.

"Good Neighbors"

Getting nervous by this time, York didn't hesitate to obey the order, knowing that if he didn't, he would likely lose his food license. "I'm wise enough to know when to sign," he says. Food accounts for about one-third of the store's $3 million annual sales, and, equally important, it's growing at 10% annually and has higher margins than his wine and liquor sales, which are flat.

He describes Richard Hebron, the owner of one of the three farms in the cooperative and its manager, as "the nicest guy in the world. I've gotten to know him well over the last two years."

York had offered his store's storage area as a distribution outlet for the co-op at no charge because "We were trying to be enlightened good neighbors," he says. He figured that if a couple hundred people who obviously are committed to consuming high-quality food came to his store for co-op pickups each week, "Maybe they'll come over and buy from us. And they did."

But, he adds, "I have to toe the line or I lose my livelihood… I'll never get my father paid back" on the loan he and some of his friends made for Tommy and his partner to buy the store in 2001. How much is that? "I don't even want to say."

Have Milk, Will Travel

"As a citizen, I want to fight, but as a businessman, I can't," York says. He's especially upset with Michigan, the state he so loves. "I feel like my own people have turned on me. I want the Agriculture Dept. to help me. Their tactics are so heavy-handed. They could have just rang us up and told us they want to meet with us. They could have said, 'We have some concerns,' and we could make some adjustments in how this is handled. This whole sting thing is ridiculous."

In the meantime, the co-op members who congregated in back of his store every week are no longer there, which has cost the store business. There was talk among co-op members of erecting a tent in an adjoining parking lot where they could pick up their produce, but York says his lawyer advised him to back away. "Our attorney said we shouldn't have Richard there until they finish their investigation and we see what their actions are." So Hebron and the cooperative are still searching for an alternative site from which to distribute the weekly goods to members, unless or until Michigan authorities come up with specific charges.

Meanwhile, 250 miles to the west, in Chicago, Paula Companio is feeling the heat from the investigation as well, even though, unlike York, she hasn't been specifically targeted. For six years, she has been the owner of True Nature Health Foods, a 3,000-square-foot store in an upscale North Side neighborhood. Richard Hebron has been distributing goods to 100 or so co-op members every couple of weeks from her store, and she has allowed him to do so for the same reasons as York.

Intimidation Tactics

Last Monday, she told Hebron not to use her store out of fear of having raw milk on the premises. So he kept his refrigerated truck running for a few hours and serviced customers directly from the vehicle.

Companio is passionate about "my belief in the utmost of [agricultural] sustainability. We need to support our Illinois, Michigan, and Wisconsin farmers." While she says she has been too busy to consult with a lawyer about her specific rights, she has decided, "Now that the government is cracking down, I can't take the risk" of allowing Hebron to use her store.

So Hebron continues working with the distribution outlets and stores that will work with him, as the investigation continues. But York worries that the government's intimidation tactics against the farms and small businesses will take their toll eventually in the form of business casualties. "It's death by a thousand cuts," he says.

(David E. Gumpert continues to follow the specifics of the investigation at his blog, www.thecompletepatient.com.)


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus