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Prompt: Review the case entitled “Chapter 10 Case: Oakhurst Dairy: Operations Management and Sustainability” in the

Sustainable Business Case Book

. Analyze the case responding to the following questions:

What challenges face Oakhurst in 2011 and beyond? How do Oakhurst’s efforts to reduce carbon emissions through operation changes help address the challenges?

The Natural Resources Defense Council’s November 2007


stated, “Although there are some exceptions, in most cases, locally produced food proves the best choice for minimizing global warming and other pollutants. In fact, another study showed that when you combined all locally grown food, it still produced less carbon dioxide emissions in transport than any one imported product. The effects all this pollution can have on our health may be reflected in high rates of asthma and other respiratory symptoms, as well as increased school absence days for children.” How does Oakhurst’s sustainable business model help to support the Natural Resources Defense Council’s findings that buying local not only helps Maine farmers but also helps the environment?

What can people do to reduce their own carbon emissions? Could this reduce their own costs and help them to save money? How?

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Daresh, J. C. (2004). Beginning the assistant principalship: A practical guide for new school
administrators. Thousand Oaks, CA: Corwin.
Herbst-Damm, K. L., & Kulik, J. A. (2005). Volunteer support, marital status, and the survival
times of terminally ill patients. Health Psychology, 24, 225-229. doi:10.1037/02786133.24.2.225
U.S. Department of Health and Human Services, National Institutes of Health, National Heart,
Lung, and Blood Institute. (2003). Managing asthma: A guide for schools (NIH
Publication No. 02-2650). Retrieved from http://www.nhlbi.nih.gov/
Chapter 10
Case: Oakhurst Dairy: Operations Management and
Figure 10.1 Oakhurst Logo
The linked image cannot be displayed. The file may have been moved, renamed, or deleted. Verify that the link points to the correct file and location.
Source: Wreaths Across America, http://www.wreathsacrossamerica.org/logo/.
Oakhurst Dairy is setting the standard for business and organizations in our state and throughout the
Maine US Senator Olympia Snow, quoted regarding Oakhurst Dairy’s commitment to improving the
10.1 Overview
Understand how operations management that incorporates sustainability principles can reduce costs
and improve profits.
Describe how sustainable operations management practice can contribute to cost reduction and
enhance a company’s competitive position.
Highlight best practices for reducing greenhouse gas (GHG) emissions in an industry.
Show how lean manufacturing principles can contribute to sustainable, effective, and efficient
management of a company’s carbon footprint.
Oakhurst Dairy’s profitability has benefitted from the company taking a leadership role in addressing
greenhouse gas (GHG) emissions in the US dairy industry. [1] In the process of
its carbon footprint mapping the company identified how to reduce its GHG emissions and also
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identified innovative ways to improve operational efficiencies, reduce operational costs (mostly
energy costs), and enhance profits.
Oakhurst Dairy has changed over time. The long established northern New England dairy company
no longer owns any dairy farms. It makes its money by processing milk bought from dairy farms. It
owns no cows. It buys its raw milk from local dairy farmers and sells its processed milk to grocery
stores and retailers such as Walmart and 7-Eleven.
The company, under the Bennett family ownership, has become one of northern New England’s
largest independent milk processors. Oakhurst’s approach is to build brand equity and increase
profits over time. This has been supported by investing in operation management practices that
reduce costs and increase brand awareness and loyalty with the dissemination of information about
the company’s practices that reduce its carbon footprint.
Oakhurst’s sustainable business approach includes (a) senior management commitment to
sustainable business practices in its operations and its supply chain, (b) integration of sustainable
goals and practices in the company’s business systems, (c) use of operating and financial reports and
communications, and (d) monitoring of environmental results and implementation of continuous
This case will highlight how the company, by adopting sustainable business practices throughout its
operations, saved more than $620,000 in annual fuel costs. These are savings that have contributed
directly to Oakhurst’s financial bottom line. This includes savings from a $343,000 investment in
solar panels at two of its facilities, resulting in annual savings of $52,500 (at a fuel cost of $3.50 per
gallon) and representing a 6.5 year payback period on their investment. With an estimated life of
thirty years, the solar panel investment alone will save Oakhurst $1.2 million over the life of the solar
panels and lower its carbon emissions by 176 metric tons annually.
[1] The authors wish to thank Clean Air Cool Planet (CA–CP) and Bob Sheppard, chief financial officer and vice
president of the corporate program, for assistance and permission to use the Oakhurst Dairy Case Study, “Taking
All the Right Steps: A Maine Dairy Reduces Its Carbon Footprint,” as partial source material for this case. Oakhurst
Dairy is a featured CA–CP Co-op Planet Corporate Partner. See http://www.cleanaircoolplanet.org/about/partners.php.
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10.2 Introduction
Describe how the company was founded and how it operates as a family-operated enterprise.
Define how the dairy industry is organized and its larger context.
Understand that sustainability efforts have to be considered in the context of company organization
and ownership and industry dynamics and conditions.
The founding family of Oakhurst, the Bennett family, has managed a successful dairy business based
out of Portland, Maine, for ninety years. This is not a simple accomplishment. The dairy industry is
dynamic and fiercely competitive, and Oakhurst has become the largest independent dairy processor
in northern New England. The company is privately owned and as such its financial information is
not publically available. Much of the information from this case is garnered from company
interviews and a study of the company by Clean Air–Cool Planet (CA–CP). [1]
Instead of succumbing to the external economic and political forces that have reduced many family
businesses to nostalgic memories of bucolic America, the Bennett family found ways to keep the
dairy industry a part of the Maine economy. Oakhurst’s success can be attributed in part to the
company’s strategy, built on the following:
Lean manufacturing and operational efficiency
Creation of business value through environmental stewardship
Psychographic-centered marketing and brand equity
According to Oakhurst President William “Bill” Bennett, “We have been able to stave off being
bought by maintaining a strong brand identity. People know what we do and what we stand for.” [2]
Co-owner of Oakhurst with his brother Stanley, Bill Bennett took on the role of president when
Stanley was diagnosed with pancreatic cancer in the summer of 2010. Stanley had led Oakhurst
Dairy since 1983 when he was named president after his father’s retirement. [3]
The Bennett family firmly believed that the well-being of their company and the US dairy industry
were dependent on environmental stewardship. Oakhurst’s proactive and interactive approach to
reducing emissions has set the standard for best practices in the dairy industry. They have
collaborated with interest groups, government agencies, industry competitors, and others in their
sustainability efforts. [4]
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Stanley T. Bennett II was one of five third-generation Bennett siblings who were keeping their great
grandfather Stanley Bennett’s business alive by being a preferred supplier of natural, healthy dairy
products. Before his passing, Stanley T. Bennett II noted, “The cows that supply us with our product
literally eat and drink and breathe the Maine environment. We have a natural self-interest in keeping
that environment pure. It’s something we can market that our competitors can’t.” [5]
Under Bill’s leadership, Oakhurst has focused on ways to boost operational efficiency in the highly
competitive dairy industry. With price pressure intense in the industry, success at reducing costs
without sacrificing product quality and integrity could contribute to increased profitability. Finding
ways to reduce energy, electricity, water, and sewage costs could enhance company profits at the
same time it reduced the company’s environmental impact and could enhance its favorable
reputation with significant numbers of consumers.
On his brother’s passing, Bill stated in the company’s news release, “Oakhurst is where it is today
because of Stan’s leadership and foresight; he always kept an eye on the future. For a number of
years, we’ve put a lot of thought into making sure we have a caring, experienced, and committed
team in place; and this team will continue to lead us well into the future.” [6]
Bill’s brother John joined the company in 2004 as vice president of sales and marketing after owning
and operating a successful wholesale seafood business on Portland’s waterfront. Other members of
the senior management team with years of service included their sister Althea Bennett-McGirr,
director of customer service and consumer affairs (thirty years); Tom Brigham, executive vice
president and chief financial officer (fifteen years); Paul Connolly, vice president of logistics and
chief information officer (ten years); and Joe Hyatt, vice president of human resources and
administration (thirteen years). [7]
Bill Bennett, reflecting on his brother’s life and contribution to Oakhurst, stated, “The main reason
we’ve been so successful over the years is because of him.” Bill added that many of the recent steps
the company had taken to decrease its carbon footprint, including purchasing biofuels from a local
company that turns restaurant fry oil into biofuel and installing solar panels on the roofs of the
company’s various buildings, were because of Stanley Bennett II’s leadership.[8]
The challenge for Oakhurst management was to buck the industry trend toward large-scale dairy
farming, processing, and distribution through consolidation of dairies while maintaining
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profitability. According to Bill Bennett II, “Twenty-five or thirty years ago, we were a big dairy in a
sea of little dairies. Now we are a small dairy [processor].” [9]
Like its counterparts across the country, Maine dairy farmers were finding it difficult to make a profit
let alone stay in business. However, compared to its northern New England neighbors, Maine was
losing its dairy farms at a lower rate as a result of Maine’s innovative dairy stabilization program (see
sidebar “The State of Maine’s Dairy Industry”).
The State of Maine’s Dairy Industry
In 2009, Maine’s dairy industry generated more than $570 million annually for the state’s economy, paid
$25 million in state and municipal local taxes, and provided more than four thousand jobs. In the 1950s,
Maine had 51,000 herds of dairy cattle. By 2009 it was down to 32,000 cows making 590 million pounds
of milk per year (69 million gallons). By 2009 there were 315 dairy farms in Maine ranging in size from 10
to 1,700 cows. In the period from 2000 to 2004, Maine lost 106 farms. Maine has more than sixty milk
processors. Six processors package fluid milk for drinking: Oakhurst Dairy, H. P. Hood, Houlton Farms
Dairy, Garelick Farms of Maine, Kate’s Butter, and Smiling Hill Farm Dairy. By far the largest was H. P.
Hood with $2.4 billion in revenue and 3,000 employees in 2010. Dean’s Foods, a National food and
beverage company had revenues of $12.9 billion and lost $1.5 billion (2010). Oakhurst Dairy was the
largest privately owned Maine dairy processor with 2010 revenues of $110 million and 250 employees.
Since 2004 the US dairy industry has been marked by two significant factors. The western United States
has seen unimagined and unprecedented growth in total milk and average size of each dairy operation.
This shift was the result of state and federal government policies that offer financial incentives in the form
of tax breaks and subsidies to take unproductive land and convert it to animal agriculture, or convert land
from one type of production to dairy production. Secondly, the cyclical “boom-and-bust” dynamic of dairy
pricing has continued on a national scale and has become more erratic and extreme. Maine has continued
to lose farms, but at a much slower rate than the rest of the Northeast. Some farms have gone out of
business because of the age of the farmer or the fact there was no one to take over the farm. Most
importantly, the economic impact of the remaining farms has not lost its influence on the state’s economy.
Many states have looked to Maine as an innovative leader in the dairy industry, first with the Northeast
Dairy Compact and now with the Maine Dairy Stabilization “Tier” Program. Established in 2004, the
“Tier” program provides a safety net during periods of historically low national milk prices. In contrast to
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the overall picture of New England dairy farming, Maine stands out and is considered a success story
because of the 2004 dairy stabilization program. Since the start of the program, Maine lost 75 dairy farms,
or 19 percent of the industry, in contrast to extreme losses in Vermont (52 percent) and New Hampshire
(46 percent). The dairy stabilization program provides a payment from the Maine’s General Fund directly
to farmers when the amount that they receive from the marketplace for their milk falls below their cost of
production. In Maine, the cost of production is estimated at $25 per hundred weight of milk, while the
farmer can receive between $11 and $23 per hundred weight from the marketplace. If the price of milk is
high, no payments are made. When it drops, the program assists the farmers. Since 2007, $30 million has
been paid to Maine’s dairy farmers through the tier program. According to Julie Marie Bickford of the
Maine Dairy Industry Association compared to states without a milk commission, Maine is a relatively
healthy dairy state.
Galen Larrabee, a dairy farmer from Knox, Maine noted that even with the tier program it hasn’t been
easy for Maine farmers. He noted, feed costs have gone through the barn roof—up by a third over last year
at this time. Fuel costs could be doubled by the end of the year. Energy bills—mostly electricity—have
been running $6,000 a month. “We spent $730,000 on grain last year. This year it will be close to a
million. Fuel for the first 10 months of 2011 has been $103,000. Last year it was $72,000. We’re paying
our bills but there is not a lot left over.” Larrabee with 490 cows is considered one of Maine’s larger
dairymen, but he certainly isn’t unique. “Most dairy farms, about 50 percent I think, are just about
breaking even,” he said. “The other 50 percent are behind the eight ball.” With the cost of equipment,
taxes, feed, veterinary services and infrastructure all jumping higher and higher, Larrabee said, it isn’t
right to use the word “profit” when discussing Maine farms. “Most are just holding on.” Bickford said
dairy-pricing policy is a hot topic these days in the congressional halls in Washington, DC. “Maine is
finally getting some traction and the USDA is listening to the idea that milk should be priced at market
value. It should reflect the going rate in competitive regions,” Bickford said. But as long as Maine’s tier
program remains in place, there is a future for dairy farming in Maine. Larrabee was encouraged by the
support received from Maine consumers. “People in Maine have always spent more on dairy than other
parts of the country,” he said. “They want farms. They want the countryside to remain intact. They actively
support us.”
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Source: Sharon Kiley Mack, “Maine’s Innovative Dairy Program Keeping Industry Alive,” Bangor Daily
News, October 29, 2011.
A strong commitment to sustainability requires visionary leadership, organization-wide action and
commitment, and alignment of sustainability efforts to profitability and competitive advantage.
Sustainable business practices can improve operational efficiencies and company performance.
Sustainability efforts have to be considered in the context of market conditions and, in the case of
Oakhurst, in the context of highly competitive and challenging diary industry conditions.
Go to YouTube and find videos on Oakhurst Dairy.
What market segment(s) are targeted in the videos?
What message(s) is Oakhurst delivering in their advertisements?
Why do customers buy Oakhurst Dairy products?
Does Oakhurst use endorsement in their advertising? If so, who is featured?
In one hundred words or less, describe the Oakhurst sustainable business model and perceived
competitive advantage for doing business in the dairy industry.
[1] “Outreach and Education/Resources,” Clean Air–Cool Planet, http://www.cleanaircoolplanet.org/climate_preparedness/outreach_ed.php.
[2] J. Hemmerdinger, “Maine in a Bottle: Oakhurst Dairy Homogenizes Its Marketing Message,” Portland (ME) Press
Herald, January 9, 2011, accessed January 20, 2011, http://www.pressherald.com/business/maine-in-abottle_2011-01-09.html; the story was revised on January 10, 2011, to correct a reference to milk prices. According
to the Maine Milk Commission, dairy farmers were paid a minimum of roughly $18 per 100 pounds of milk in
[3] John Richardson, “Oakhurst CEO Stanley Bennett Dies,” Portland (ME) Press Herald, February 25, 2011,
accessed March 5, 2011, http://www.pressherald.com/news/oakhurst-ceo-stanley-bennett-dies_2011-02-25.html.
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