Presented by the Institute for Entrepreneurship and Innovation at UMKC and Polsinelli Shalton Flanigan Suelthaus PC

Milk Money

“I can’t believe that so many people come to hear a dairy farmer,” opened Leroy Shatto, founder of the Shatto Milk Company and milkman supreme.

Shatto charmed a crowd of nearly 70 at February’s Entrepreneur Speakers Program, sponsored by Polsinelli Shalton Flanigan Suelthaus PC and the Bloch School’s Institute for Entrepreneurship and Innovation at UMKC.

Shatto is the first of several high-profile, local entrepreneurs who will make up the series’ 2008 slate.

But to hear him tell it, he wasn’t always this popular.

Humble and Shaky Beginnings

In the early 1990s, Shatto and his wife Barbara, his junior high school sweetheart, bought the Osborn, Missouri, farm from Barbara’s father, Ivan Cox. But before the decade was over, the 100-year-old dairy farm was in trouble. Milk prices were declining, the overhead to produce milk was growing, and the diary co-op to which Shatto sold his milk wasn’t cutting a good deal.

“They paid me $10.80 for 100 pounds of milk. But it was costing me $11.00 to $11.25 to produce it,” explained Shatto. “Now, I’m not very smart, but that don’t work.”

The Shattos were faced with a tough choice: sell the herd or rethink the family business. For Shatto, who had milked cows twice a day for the past 30 years, there was really only one choice.

“We wanted to keep the cows,” he said, and then added, half joking, but “my wife would like me to make some money before I die.”

From Floundering Farm to Dream Business

In 2003, Shatto took the leap. With just 80 cows to his herd, he stopped selling milk to the co-op and began to process it himself.

That solved part of his problem. But Shatto needed to find a way to make his milk memorable.

Calling on the powers of nostalgia and local farm-freshness, he decided to package his milk the old-fashioned way, in glass bottles. He took a sample to grocery stores in Kansas City and northern Missouri, and even though they were dazzled by dreams of shiny milk bottles beckoning from the diary shelves, his business plan urged him to be more cautious.

“My business plan actually said we wouldn’t sell all the milk from our 80 cows for the first seven to eight months,” he remembered. “And that kind of scared me.”

Shatto would lie awake at night with visions of milk being poured down the drain because people weren’t buying it. Luckily, that wasn’t case.

“We sold all the milk we could get from the 80 cows and two months later added 80 more cows.”

Making Milk Fun

Today, the once floundering farm claims 300 cows and numerous awards, including the Missouri Small Business of the Year by the Small Business Administration, runner up for the National Small Business Person of the Year, and one of the top producers in the world of agribusiness by Top Producer magazine.

And Shatto has added to his nostalgic flare. He has introduced new flavors—banana, rootbeer, and on special occasions, cotton candy milk. He invited customers to tour the farm. He and his wife opened a country store on site. And they’ve been talking about expanding their wares into dairy products, butter, cheese, and just maybe, ice cream.

Shatto doesn’t mind being known as the dairy farmer who made milk fun.

“I still hope to make my wife some money before I die, but I tell you, there’s nothing like getting pride back in what you do,” said Shatto. “I’ve had more fun in the last four years than I’ve had in my whole lifetime.”

About ESP

The Entrepreneur Speakers Program, held monthly throughout the year, brings the region’s most innovative business leaders to UMKC to discuss ideas and opportunities. The series highlights experiences, lessons learned and unique issues and challenges faced by entrepreneurs in the creation of a new enterprise.