Oberweis Dairy lets go of its farmer patrons

NORTH AURORA, Ill. – After more than 25 years of shipping his milk to Oberweis Dairy, Phil Diedrich received notice in September that starting Oct. 1, his product would be going elsewhere. The move meant a significant price cut for the dairy farmer who milks 130 cows near Twin Lakes, Wisconsin.
“We’ve taken a pretty big hit financially,” Diedrich said. “We’ve probably lost over $2.50 per hundredweight. It’s like a 10% pay cut. You can only adjust your bottom line so much.
Oberweis Dairy announced it is no longer buying its milk direct from the family farm. Closing that chapter in its history, the milk processor in North Aurora is instead purchasing milk from the cooperative that took on Oberweis Dairy’s long-standing patrons.
“It was a very painful decision,” said Joe Oberweis, CEO of Oberweis Dairy. “We loved having direct farm relationships. My great-grandfather was a dairy farmer. But when looking at the business, we had to identify the things we’re really good at along with the things that are taking us away from what we’re good at.”
Oberweis Dairy’s remaining patrons included nine farms in southern Wisconsin owned by eight dairy producers who were informed of the decision via an online Zoom call Sept. 9.
Through the years, Diedrich said Oberweis Dairy treated its farmers well.
“Oberweis was a good company that focused on quality and paid farmers for that quality,” Diedrich said. “That’s why we were with them. They produced a good product, and all of us farmers worked real hard to produce high-quality milk to meet their standards.”
John Ransom, who milks 32 cows near Avalon, Wisconsin, was a patron of Oberweis Dairy for 20 years. Ransom said he refused to attend the Zoom meeting.
“Doing this over a Zoom call was spineless and gutless,” he said. “There are only eight of us, and we’re all within about 20 miles of each other. They could’ve drove around to each farm, shook our hand and said, times change. It would’ve taken about half a day.”
Diedrich agreed.
“Instead of a Zoom meeting, they should’ve come out and personally told us,” he said.
Oberweis said the company desired the personal nature of a face-to-face conversation but wanted to get the information to farmers as quickly as possible.
Oberweis said their business is complicated, and the company was looking for ways to simplify.
“We’re a very small processor in scale to other processors, and it adds tremendous complexity to have direct farm relationships,” Oberweis said.
Oberweis, who became president of Oberweis Dairy in 2007, said times have changed and so has his staff.
“In the past, we had members of our team who had deep knowledge of running a dairy farm,” he said. “That’s an important component of buying milk directly from farms, but we don’t have that skillset anymore.”
Before letting them go, Oberweis said the company set its patrons up with another cooperative that would offer resources to these family farms that Oberweis Dairy no longer could.
Ransom said he noticed Oberweis Dairy’s service receding.
“They had a lot of turnover,” he said. “We had people who didn’t know anything about farming coming out here.”
Therefore, Ransom said he was not shocked when he heard that Oberweis Dairy was dropping him and the other farms.
“I knew this was going to happen eventually,” he said. “They used to give us free ice cream and awards for our milk. But they stopped giving us ice cream, and we had no field man anymore. Instead, the milk man came out to take our water sample. There were 39 farms when I signed up, and they kept whittling down over the years.”
Ransom said he made an extra $1,000 per month, or $1.30 cwt, with Oberweis Dairy for his herd’s high components.
“It was a good incentive,” Ransom said. “It made you want to do a good job. Shipping your milk with Oberweis was big money. They offered $5 or $6 more per hundredweight than my previous co-op. They were the Cadillac, the top dog. It was a status thing, and I was proud to have that Oberweis sign by the road.”
The Oberweis Dairy story began in 1927 when Peter J. Oberweis, a dairy farmer in Aurora, began selling extra milk to his neighbors from the back of a horse-drawn wagon. He became co-owner of Big Woods Dairy that same year, and in 1930, he purchased the remaining interest in the dairy and renamed it Oberweis Dairy.
The Oberweis family built an elusive brand that was attractive to farmers. The dairy offered perks too good to pass up, including paying 100% of the trucking fees at one point and offering premiums that awarded their patrons for quality milk.
Shane Koehl milks 56 cows near Darien, Wisconsin, and has been a patron of Oberweis Dairy since 2000. The farm enjoyed a premium for low somatic cell count of nearly $2 cwt.
“The nice thing was (Oberweis) had a market set up for us,” Koehl said. “But having another co-op pick up our milk and drive it straight to Oberweis (Dairy) rubbed me the wrong way.”
Koehl said the announcement made him question if he wants to keep trying to make it as a family farm.
“Farming is stressful to begin with, and then they took more joy out of it,” he said. “We’re struggling with input costs, and the co-op Oberweis set us up with announced a price cut as soon as we signed up.”  
Dave Funk, who milks 140 cows near Janesville, Wisconsin, was a patron of Oberweis Dairy for 22 years.
“The premiums Oberweis paid were just crazy good,” Funk said. “The price difference between them and our former milk plant was amazing. The field man we had when we started at Oberweis was very particular about milk quality and took good care of us. He always had our back. When he left, things kind of fell apart. Other field people didn’t have that same initiative to take care of us.”
Funk began shipping to an alternative co-op from the one Oberweis Dairy arranged Oct. 1, which is the same co-op Ransom and Koehl joined.
Oberweis Dairy’s website continues to say its milk comes from small family farms, and Oberweis said it is a claim he can rightfully make.
“The overwhelming majority of farms in Wisconsin are still small family farms,” he said. “We buy from small organic farms for our organic line, and the majority of our non-organic milk we’re receiving today is coming from the exact same farms as before.”
But this claim does not sit well with Oberweis Dairy’s former patrons, including Koehl.
“Oberweis’ family farm image is hard to swallow now that they’re buying milk on the open market,” Koehl said.
Oberweis said he does not feel the arrangement contradicts the company’s brand in any way.
“We’re still getting quality milk,” he said.