In the high-stakes world of dairy expansion, the most critical decision a producer makes isn’t which parlor to build or which cows to buy; it’s how they structure the business for the next 50 years.
During a recent panel at the Milk Business Conference, Greg Bethard of High Plains Ponderosa Dairy, TJ Tuls of Tuls Dairy and Hank Hafliger of Cedar Ridge Dairy shared a candid look at the infinite business model and why they are choosing strategic partnerships over private equity.
Partners Versus Investors
As dairies grow in scale, the need for capital often brings outside investors to the table. However, Greg Bethard is wary of the traditional private-equity model. For Bethard, the dairy business is a multigenerational marathon, while private equity is often a sprint toward a five-year exit.
“Our model has been taking on partners as we grow to provide capital, but we’ve elected not to go with private equity,” he explains. “Private equity typically wants to get out in five to seven years. We use an infinite business model; we want to be here in 40 or 50 years. We are looking for partners, not investors.”
This philosophy ensures every stakeholder is aligned with the long-term health of the operation rather than short-term dividends. By seeking out partners who already have successful track records in agribusiness, these producers ensure their backers understand the inherent volatility and biological timelines of the dairy industry.
The Tuition of Failure
Success in the dairy industry is rarely a straight line. Each panelist noted their most valuable insights came from expensive, “hard-knock” lessons — what Tuls’ father famously called “tuition.”
Tuls recalls a pivotal moment as a young manager in Wisconsin when he neglected to closely monitor a new separator building. Four years later, the oversight resulted in a $600,000 refit bill.
“My dad just looked at me and said, ‘That’s the tuition I’m going to have to pay for you. We won’t make that mistake again,’” he says.
Bethard shares a similar sentiment regarding the steep learning curve of expansion. After “getting his tail kicked” during his first expansion in 2018, he realized that persistence is the only way through the struggle. He points to the importance of time spent in the trenches to achieve operational mastery.
“We have our 10,000 hours of experience now,” Bethard says, referencing the mastery concept popularized by Malcolm Gladwell. “We’re going to screw stuff up. There are going to be bad days. There’s going to be stuff that doesn’t work right. But we just keep going at it, and we’ll get it figured out.”
Strategic Location: The New Map
If these producers were to build a brand-new dairy in the next five to 10 years, their criteria for where that would be has fundamentally changed. The days of building a dairy and waiting for a processor to knock on the door are over.
“You have to have a contract before you can even build now,” Bethard notes. Beyond the milk market, his checklist for a new location is focused on risk mitigation: “I’d choose a place with low environmental risk and a place without a lot of people.”
Tuls’ answer is even more direct: “Close to a milk plant.” As transportation costs and regional milk marketing orders become more complex, the proximity to processing is the ultimate hedge against logistics volatility.
The Next Generation
For Hafliger, the infinite nature of the business is personified by his family. With 16 grandchildren, some of whom are already starting to count cows, the focus is on creating a viable structure they can inherit.
Hafliger’s best strategic move was moving to Idaho and partnering with his son and sons-in-law to run three dairies as a single, unified unit.
“By running them as one, we don’t have that ‘my dairy is doing better than yours’ conflict,” Hafliger says. “It’s about maturity, learning to relax and let things happen rather than trying to force them. That makes the business much more rewarding.”
The infinite business model isn’t just about milk production; it’s about the endurance of the ag-entrepreneur. By avoiding the short-term pressures of private equity, embracing the costly “tuition” of their mistakes and strategically positioning themselves near processing hubs, these producers are ensuring that their operations are built to last for the next half-century.
