18th July, 2018

What would you do with a second chance?

What would you do if your business had a second chance? What if you could do things differently from day one?

It’s a question that’s been turning over in NZ farmer Glen Herud’s mind for a while now. He’s venturing forth with the second iteration of Happy Cow Milk Company – a company shaped more like a B2C startup rather than a traditional dairy.

About six years ago Herud started the milk business, aiming to run an ethically-conscious dairy operation.

Herud used a mobile milking shed, which allowed the company to do two things:

  • the cow didn’t need to be separated from the calf while milking
  • leased land could be used for grazing instead of buying the land outright

But it was the last piece of the puzzle that created the company’s real headaches – distribution.

It wanted to set up a reusable bottle system to cut down on single-use plastic waste. This meant working with supermarkets and retailers on a system for consumers to return bottles to the point of purchase – an entirely new way of getting milk to people.

“Stores and supermarkets aren’t set up for it – they’re worried about convenience. If they set up this return system, it makes it less convenient and they couldn’t see the upside,” Herud told The Pulse.

“Their invoicing systems also weren’t set up to take reusable bottles. That was a big problem.”

READ: How ERP allowed this NZ brewery to take the next step

Before long, Herud was left with a great brand, but a distribution problem. With losses mounting and loans to pay back, he decided to pull up stumps.

“It was definitely a hard thing to do, to admit that it wasn’t working. But I just couldn’t make it work,” said Herud.

Once he took to Facebook to announce the closure of the business, he was inundated with messages of support and public cries to just keep going a little bit longer.

Herud knew the demand for the product existed, but this was the first time it had become real.

It brought him to tears.

“I did know how many people thought it was a good idea. That’s why I kept on going for as long as I did. I knew consumers wanted it, but seeing it is something else,” said Herud.

With the demonstration of support and encouragement, Herud started to think about his business in a whole new way – starting with a Patreon campaign.

Crowdfunding and content

With public support, Herud nutted out how to harness this support in a tangible way.

He created a Patreon campaign, allowing people to donate a small amount each month to a cause they’re passionate about, which he says is just about “keeping the lights on”.

Crucially, the income from the campaign has given him the time and space to work on the next version of Happy Cow Milk.

“I had always been a little bit suspicious of crowdfunding because it was so unpredictable, but I went to the crowd and said I have two options,” said Herud.

“If you want me to keep on building this, I need you to fund me or else I need to go get a job. The Patreon account went up and it’s what’s given me the opportunity to rebuild the business.”

The campaign has helped Herud get people much more involved in the business through the release of regular campaign videos that document what the company is working on.

Want to create content but have no time? Read this.

Herud said it improves transparency for the people providing money to the campaign and gives them an almost emotional attachment to the company.

“I think modern brands now are really about authenticity,” said Herud. “They can see it’s me. There’s no production value there – it’s just me and my camera. The purity of it appeals.”

“People want to know you’re authentic and you’re not just bulls***ting them. We want them to know that we are legit and modern technology is allowing us to do that.”

Building out content and the relationship with backers is more than warm and fuzzies. It has a hard-headed business purpose.

New distribution model

Taking cues from US companies such as Casper Mattresses and Warby Parker, Herud has been hard at work devising a new direct-to-consumer model.

It’s a model embraced by consumer-oriented startups in the past, which bypass supermarkets and retail stores to go straight to the customer.

Given distribution was Happy Cow Milk 1.0’s key weakness, Herud says this is an opportunity to re-think how dairy is done in New Zealand.

“The thing that interests me about them [Casper] is that they’ve said our distribution model is going to be direct to consumer – so how do we get a mattress direct to consumer,” said Herud.

“They’ve created the product based on the distribution challenge and cut out the middle man – so the question is can that be done with dairy here?”

Already there are green shoots.

In the UK, the old-fashioned milkman is making a comeback as environmentally-conscious consumers ditch plastic for glass.

By creating a relationship with Patreons through content, Herud is also cultivating the first wave of potential customers.

He’s also had some help from an unlikely source – the NZ startup community.

Co-working with games designers

After Herud announced that Happy Cow Milk would re-imagine its model, he got a message from BizDojo in Christchurch.

Previously he had delivered milk to them a couple of times per week and they offered to give him some co-working space to figure out his next move.

All of a sudden, Herud found himself away from the farm and working next to games designers and startups.

“It’s been almost life-changing here, to be honest,” said Herud.

“I’m sitting right next to a games developer here, so that’s awesome. We’ve got sales people, graphic designers, web designers, entrepreneurs with multimillion dollar exits.”

He said by simply being in the co-working space, he had been exposed to new ways of thinking about his business and agribusinesses in general.

“Honestly, I would urge a lot more agribusinesses to do this. Get out of the agribusiness side of things and go work with other people,” said Herud.

READ: How co-working spaces are redefining how we work

He also said meeting serial entrepreneurs gave him a healthier perspective on the fate of Happy Cow Milk 1.0.

“These guys are basically saying ‘oh yeah, we’ve lost money for five or six years before turning it around’ and it’s no huge deal to them. You need someone like that to say ‘don’t give up yet – it’s just going to take a little bit longer’,” said Herud.

“Particularly in the agribusiness, people tend to be a bit negative when you’re losing money for three years.”

“But if you’re going to do something different, you can’t make money from day one.”

Herud and Happy Cow Milk are still putting pieces of the puzzle together, but it’s getting a second chance a lot of businesses don’t get.

“I’m really grateful to everybody. Not often do you get to have another crack in agribusiness and completely re-think the way you do things,” said Herud.