Inflation causes creamery to scrutinize American Farm Publications’ business model

Richlands Creamery’s Coley Jones Drinkwater says high inflation, a rising minimum wage and supply and labor issues have all contributed to her considering a new business model for the future. Downstairs, customers enjoy sandwiches and ice cream in the creamery’s dining area. (Photo by Rocky Womack)

BLACKSTONE, Va. Inflation. It’s the elephant in the room.
So much so that Coley Jones Drinking Water of Richlands Dairy and Creamery in Dinwiddie County, Virginia, is planning possible changes to its retail and wholesale business.
At the beginning of the year, we would take a serious look at our business model and look at closing some stores that have become less profitable because diesel fuel has risen so much; labor has gone up that much, Drinkwater said. If there’s no point in delivering there anymore, we’d take a closer look at those numbers and see what makes sense.
The creamery is separate from Richlands Dairy, which milks more than 200 cows. Richland Creamery buys milk from the farm, then the creamery bottles the milk and supplies it to supermarkets or sells at the creamery.
Inflation hurt the creamery. Everything from input costs has skyrocketed, she said, so our prices had to go up enough that fewer people buy it. Our milk is already priced far above what you would buy in the supermarket. Food Lion costs, I think, $6 a gallon, so we weren’t cost competitive to begin with. Now it has become a real battle because our milk is so much more expensive than all the others.
But we are a small company, she continued. We were now in the same boat as all small businesses. Everything costs more than it did. It hurts us. My cost to bottle that milk has gone up because the bottles have gone up. Diesel fuel has gone up to get those bottles here to get the milk out to make deliveries. Caps have gone up. Labor has risen. You name it, it’s gone up.
Drinkwater, who serves as creamery manager and sales and marketing manager, says diesel has doubled in price. In fact, the American Automobile Association indicates that the average price of diesel is $5,438 per gallon, as of November 12, 2022.
A year ago, the average price of diesel was as low as $3,561 per gallon.
To help with the increased costs, the creamery started charging a $5.00 delivery fee. It doesn’t cover the cost of our diesel fuel, but at least tries to offset it, she says. Entrepreneurs didn’t appreciate the delivery costs, but she explained to them that she was in the same inflationary boat as they were, because she didn’t pay less for diesel than they did.
Fuel isn’t the only rate going up. Virginia’s minimum wage continues to rise. According to Virginia’s Legislative Information System, from May 1, 2021 through January 1, 2022, employers were required to pay wages of at least $9.50 per hour or the federal minimum wage. From January 1, 2022 through January 1, 2023, employers were directed to pay a wage of at least $11.00 per hour or the federal minimum wage.
From January 1, 2023 through January 1, 2025, the minimum wage in Virginia will increase to $12.00 per hour, and from January 1, 2025 through January 1, 2026, the rate will increase to $13.50 per hour. In addition, the minimum wage increases again from January 1, 2026 through January 1, 2027 to $15.00 per hour.
Drinking Water suggested that labor costs and availability are definitely obstacles. It is more difficult for her and many companies to find skilled workers or even people to work with.
As for the labor shortage theories, she predicted that younger people and some adults use social media to make a living as influencers. In other cases, younger couples move in with their parents and only one of the persons goes to work.
I do not know. It’s probably a combination of many things, Drinkwater said. I just know the end result is hard to find people to work with.
Supply problems also played a negative role in the creamery. For example, a year ago she ordered a single-phase motor for a butter churn that took several months to arrive.
As for what we want to do here and do differently, at the beginning of the year we would be reviewing our current business model, and somewhere we have to make a twist if we want to see long-term success here, she said.
As the business model switches, she can put out some feelers to customers and staff to see if product drop sights would make more sense. That way she could bring in more of the retail dollar instead of that wholesale dollar. Then the creamery could achieve a greater return on investment.
For us, it helps offset the diesel fuel cost of getting to stores in that area, Drinkwater said, and then saves on labor because with the van, it can take him two hours to cover five stores. Maybe he’s just there [the drop sight] for an hour while people collect their milk.
She says drop visors can work in a variety of ways. The creamery might contact a business owner to see if they can use the owner’s fridge space as a drop sight. In turn, the customer might also buy something the entrepreneur has for sale to go with the creamerys product.
Or a creamery employee can set up a real drop-sight where the customer, who pre-orders, comes to a designated location to pick up the product.
What else has she planned? Richlands Creamery and its 13,392 square foot building is open on Mondays, Tuesdays and Wednesdays during the winter. Drinkwater said she sees an opportunity to transition into more of an event or corporate meeting space to attract a different clientele who may want to hold team building or team development sessions among its employees. The creamery can provide lunch, then offer an ice cream and perhaps give a tour of the farm to the business group.
Another future concept could be shipping home-made ice cream to attract a larger audience and earn more of that retail dollar. At the moment, the creamery is not set up to ship ice cream, so Drinkwater is still figuring out the logistics.
Along the food line, she said the creamery, using its churn, will begin producing butter to sell, perhaps in January.
While still in the planning stages, Drinkwater reassuringly said she has managed to turn around amid the COVID pandemic, inflation, supply and labor issues, and a rising minimum wage. However, if she knew what she knows now, Drinkwater said she might have made a completely different decision when she first opened on June 21, 2019.
If I had known then what I know now, I probably wouldn’t have built it, she said. But we did. Hindsight is 20-20, so time will tell. Or we may never know. I don’t have that kind of outlook on life. In hindsight, there are several things I would have done differently, but at the time I wouldn’t have known I would do differently. All I can do is learn, move forward, spin again and try again.
We were a small company, Drinkwater added. People don’t think of us as a small company because they see all this equipment, all these machines. They think we have all this money. We are still a small business and when I talk to other small business owners they are all in the same boat now. Everyone is in pain. I would just like to encourage everyone to get out there and support your small businesses.
I’m an optimist by nature, she said, but I told another small business owner that I keep thinking I see the light at the end of the tunnel. But it feels like something happens every time you start to get your feet under you in recent years. It’s not just us. They are all small businesses. I said I still see the light at the end of the tunnel. I’m just not sure if it’s morning or if a freight train is heading towards me right now.