The Complete Patient

I’m traveling for a few days, visiting my mother in Sarasota. (Her condition has deteriorated significantly since I wrote about her last spring and she’s now in a nursing home.) I’m staying at a hotel, so I headed to a supermarket for a few things—some fruit, trail mix, kefir. In looking over the dairy case, I come across something called DanActive.

It’s not identified as either a kefir or a yogurt, but rather as a “probiotic dairy drink.” It’s made by Dannon, the people known for yogurt.

It seems DanActive has been around for a year-and-a-half or two years, so my apologies if what I say about it seems like old news. I realized as I looked through products that, because I've been drinking raw milk and making my own kefir, I haven’t spent as much time around the dairy counter over the last year-and-a-half as I used to.

But what struck me about its packaging (aside from the fact that it makes a frightfully small-portion product, 3.3 ounces, for an extremely high price of $2.49 for a package of four), was this prominently-stated claim: “About 70% of your immune system is in your digestive tract. This is where DanActive goes to work with the exclusive L.casei Immunitas cultures” (plus sugar, dextrose, and modified corn starch). And being in a place where there were no comparable substitutes, I bought some.

According to its web site, the notion that 70% of our immune system resides in our digestive tract is “a little known fact.” As for the intriguing scientific name, “L. casei Immunitas,” the FAQs (#4) have this explanation: “There are many L. casei culture strains, some already present in human intestinal flora. First identified in 1919, L. casei strains are used in a number of dairy products worldwide. The L. casei Immunitas™ culture in DanActive is a proprietary strain that can only be found in Dannon's DanActive. L. casei Immunitas™ is the ‘fanciful’ trademarked name for the L. casei culture that is only found in DanActive...Multiple clinical studies have proven that DanActive with L. casei Immunitas™ can help strengthen your body's defenses.”

DanActive is owned by Group Danone, a European company with something on the order of $15 billion-plus in annual sales. Probiotics is a huge business in Europe. So if a $15 billion company is saying it’s all about strengthening our gut flora, well, it must now be official.

Yet the people who make this product really have little interest in health or sustainable agriculture. Their only interest is in making a lot of money. So when they come across an opportunity in something as old as beneficial bacteria, they don’t just package up and sell it; rather, they come up with a "fanciful" name, attach a trademark to it, make it their own, and charge high prices for tiny packages.

They don't want any part of unpasteurized milk, or almonds. They'd much rather make a marginally healthy product with no risk than a much healthier product with even a tiny amount of risk. You see, risk is out, fear is in, as we see in the next item.

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There’s a new outbreak of E.coli 0157:H7, this time from hamburger—some 25 cases already reported. One television report I saw (sorry, couldn’t call it up online) was predictable: a girl who got sick (“I can’t believe I almost died from eating a stupid hamburger”), a woman in a supermarket (“It’s scary”), complaints about a shortage of USDA inspectors (“which keeps us from tracking these pathogens down”), a suit already filed against WalMart (for letting the hamburgers stay on the shelves 90 seconds too long?).

There's no consideration in any of these reports that the farming methods might be contributing to an increase in E.coli problems, in beef and almonds. I’m just waiting for DanActive to begin advertising: “If you want to prevent E.coli infection in your active family, we have the perfect product for you…”

One of the most important sections of any business plan to raise venture capital is the “Sources and Uses of Funds” section. This explains how much you expect to raise from where, and how you will spend the money.

Mark McAfee in his comment on yesterday’s post gives us a summary of the “Uses” section. There is a solar powered creamery, more portable milking stations, more pasture.

But then there is something I’ve never seen in a business plan, and I’ve seen a lot of business plans. “OPDC is taking incoming rounds from the FDA and CDFA and cannot respond. We must be powerful enough to get big and challenge the FDA and others with fulltime legal teams…” In other words, he wants enough hired legal guns to make the FDA and others think twice before going after him. (If you haven't read Mark's comment, I strongly suggest you do.)

That leads into something else that is unusual about Mark as an entrepreneur. Most entrepreneurs, when they reach a leadership position in their industry, tend to become enamored of their success, and suggest that “anyone can do what I’ve done if they’re persistent.” Not Mark. He’s saying that what he’s done, and is doing, and wants to continue doing, is very very difficult. And it is, because he’s fighting Uncle Sam.

In fact, he’s doing more than that: he’s leading a crusade of sorts, trying to rally consumers and farmers alike. I’ve always been nervous about the fact that he already controls 95% of the California raw milk market, but what he’s arguing is that if he can win this “war,” the opportunities for other small farms will inevitably follow.

Not too many businesses have to fight the full power of the U.S. government, which can (and does) print all the money it needs to step on whomever it wants to step on (although it’s getting a little tougher these days--because the government has printed so many dollars, they are rapidly depreciating in value in the world marketplace). And I’m not even talking about the state bureaucracies that march in synch with Washington.

Mark’s message is a reminder not to get ahead of ourselves, as I might have been doing in yesterday’s posting anticipating how the raw milk market might eventually unfold, a la Whole Foods. There are still many battles to be fought, and won. Each time it looks as if progress is being made, the forces of resistance come up with new tactics (witness the sudden findings of raw milk listeria in Pennsylvania, New York, and California).

Yet a number of trends are working in favor of nutritional freedom. One is the financial incentives opening up in farming, which as Steve Bemis notes is discussed in today’s Wall Street Journal. What Mark is essentially saying is, "Trust me. If I'm successful, lots more eager individuals will commit to sustainable farming." I think he's earned the right to give it a go. 

The intriguing thing about the discussion following my previous post is that the discussion is taking place at all. That discussion couldn’t have taken place a year ago, when Organic Pastures was shut down (by state and federal investigators seeking a link to children's illnesses) and Michigan authorities were in the late-planning stages for their Richard Hebron sting.

So now here we are a year later, assessing the best growth strategies for the American raw milk industry. Because, as Don Neeper says, California sets the tone for the entire country. If venture capital flows into Organic Pastures and it revs up production, well, why might there not be capital flowing into other dairies in other states? (By the way, Mark McAfee has said that he has only acquired cream from outside his dairy; no raw milk...yet from Wisconsin, as Steve Bemis speculates.)

All that being said, I share the concerns of those who worry about the potentially corrupting influence of corporate-type money on a raw-milk dairy. The industry, as it were, has only achieved the kind of credibility whereby a venture capital firm would even consider investing, based on building up sufficient confidence with growing numbers of consumers about quality and safety.

The best comparable example I can think of in terms of predicting an idealistic company's future direction once it obtains outside capital is Whole Foods. Its predecessor in the Boston area was a chain known as Bread & Circus. When B&C (as it was known locally) grew during the late 1970s and 1980s, its offerings consisted mainly of organic vegetables and fruits, and the famous grain/nut bins. It wouldn’t stock any foods with caffeine, refined sugar, white flour, corn syrup, or artificial sweeteners, and it didn’t sell alcohol, meat or fish—all in the interests of good health.

Gradually, as it expanded throughout the Northeast in the late 1980s, the prohibitions fell (I don’t remember the exact order). By the time it was acquired by Whole Foods in 1992, it had pretty much done away with everything, except perhaps corn syrup and artificial sweeteners. According to the Whole Foods history page, it was the same story with  Mrs. Gooch's in the Los Angeles area, and presumably other retailers the Austin company acquired in its expansion kick. About the only prohibitions today at Whole Foods, from what I can see, are the artificial sweeteners and mass-market chips, sodas and diet sodas.

Yes, the produce quality and bins are still heads and tails above other chains. But you have to take nearly as much care in the center of a Whole Foods as you do in other major grocery chains. And the CEO is under investigation by the Securities and Exchange Commission for weird stock trading practices.

The reality for Whole Foods has been that no matter how dedicated the founders, the pressure has been on from investors to “expand the market” by offering more products and more convenience. Consumers want choices and discounted pricing. Applying that progression to raw milk, it wouldn’t surprise me if, going down the road, we see similar merchandising and corner cutting--say “pasteurized light” or “partially pasture-fed” or "acidopholus added." You know the accountants will do cost analyses to determine how far they can go in supplementing grain, and perhaps offering discounts for “feedlot fed.”

The real attractions in expanding the market are not only in the benefits dairy farmers would gain, but the improvement in health consumers could see. But if the product isn’t what it should be, then the health benefits could be illusory--and raw milk would be labeled as just so much hype.

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As Don Neeper points out following my previous post, that press release that the Food and Drug Administration asked Mark McAfee to try writing—concerning a recall of 21 pints of raw cream—is getting special play in Kentucky. A variation on the FDA press release quotes the state’s director of the division of public health as follows: “Healthy individuals may suffer from symptoms such as high fevers, severe headaches, stiffness, nausea, abdominal pain and diarrhea,” said Guy Delius, acting director for the division of public health and safety. “Listeriosis can cause miscarriages and stillbirths among pregnant women. Because there have been worldwide phone order sales for this product and possibly some in Kentucky, we wanted to make sure local families were aware of the withdrawal of this product, and that if purchased, it should not be consumed.” If the FDA and Kentucky bureaucrats were reading this blog, they wouldn't be talking about miscarriages and stillbirths, or any listeria illnesses from raw milk-- as reported here, the Centers for Disease Control’s own statistics show no illnesses from listeria in raw milk between 1973 and 2005.

One of the cardinal rules of venture capitalists is to avoid investing in small companies starting up in industries with heavy government regulation. This rule has helped explain in the past why we didn’t see a lot of startup companies in areas like insurance, or see venture capitalists pursuing dairy farms. Investors don’t like to be involved with companies that have to justify price increases or where there are lots of officials rules, which can be changed by legislators who control the regulators.

But, of course, every rule is made to be broken, and when the possibilities for growth are so strong, or the potential profit margins so large…well, exceptions can be made.

All this is preamble to letting you know that Organic Pastures Dairy Co., the nation’s largest raw milk dairy, in California, is negotiating with private investors for a major cash investment.

Mark McAfee, the owner of Organic Pastures, says he is meeting next week with the principals of a $1.5 billion private equity investment firm “that wants to see raw milk change nutrition and illness patterns in the U.S. They also see that a great deal of market growth and smart money can be made.”

He doesn’t want to mention the firm he’s negotiating with, or possible details of a deal, since nothing has yet been finalized. But he says the firm’s principals are well aware of all the regulatory turmoil in the raw milk arena, and aren’t fazed.

Indeed, I take Mark’s openness about his disputes with the Food and Drug Administration and other agencies as evidence that the investors appreciate how FDA invective seems to stimulate sales—free advertising, as it were. Mark even sent along a photo one of his employees took of the license plate of an FDA car—cutely emblazoned with an Organic Pastures promo flyer--when Organic Pastures was visited by an inspector a couple weeks ago in connection with the recall of raw cream possibly containing listeria monocytogenes.

The private investors “see us as a market disrupter,” he says. Yes, I’d say Organic Pastures has been a market disrupter.

Mark views outside investment as a way to grow Organic Pastures much more quickly than it might otherwise--so significantly that there might eventually be a public offering, a sale of stock that he envisions as possibly “the world’s biggest cowshare.” He also sees it “as a way to energize and push the vision of true health forward in a time when this kind of vision is oppressed.

While it’s important to remember that no deal has happened yet, the fact that serious investors are sniffing around in the raw milk arena is significant. I wish there were a pastured-raw-milk commodity market I could invest in.

I may have been overly pessimistic in my previous two posts in anticipating the logistics of the forced testing and tagging of Greg Niewendorp’s cattle by the Michigan Department of Agriculture.

Greg told me this evening he feels confident he will receive three days notice from the county sheriff before officials from the MDA actually show up and attempt to do their deed. That means it may be realistic for a large crowd to gather and have the “big cookout” he’s planning for supporters. I’m sure the beef will be wonderful.

Based on the posts on this blog of people wanting to attend, and reports like that from Ron Klein (following my Sunday post) indicating that farmers increasingly understand the importance of showing their displeasure with government enforcement excesses, there could be a good crowd gathered between MDA officials and Greg’s barn.

“It’s one thing to get a warrant from a judge, it’s another thing to serve it,” says Greg.

In the meantime, Greg is in the process of completing a legal appeal to the search warrant. The fact that it is an “administrative inspection warrant” rather than a criminal search warrant apparently puts it into hazy legal territory. Greg says he hasn’t been able to obtain a copy of the warrant from the state court—he has only seen what Sheriff George Lasater showed him last week. He was first advised by a lawyer to seek a copy via a Freedom of Information Act request, but then advised by a court official that courts aren’t subject to FOIA requests. (Only executive agencies are subject, in this view.) He questions whether he’s being given “due process.”

***

Now, it’s one thing to put the kibosh on my swimming, as Steve Bemis did in nifty fashion with his mouth-watering description of chlorine chemicals (following my previous post). But to suggest that we may be capable of producing our own E.coli 0157:H7? Miguel does as much in his comment on my Friday post. When I summarize it, it sounds like something out of a science fiction movie, but Miguel puts it much more elegantly:

“Why is it easy to believe that cattle on the range can be free of e-coli 0157H7 and become infected when changed to a diet that is mostly grain? Where did the e-coli 0157H7 come from?

”When common e-coli reproduce by dividing into two new cells , they can produce variations on the original cell or a different strain of e-coli.. This the strength of these microbes. They can adapt very quickly to a changing environment. The strain 0157:H7 is more successful in the acid environment of a grain-fed cow. Or in a grain-fed person.”

A few readers were left shaking their heads, but look at it this way: The Centers for Disease Control estimates that 76 million Americans contract a food-borne illness each year, with most of the victims and their pathogens never being identified. Might human-produced E.coli 0157:H7 be the missing link? Does a Nobel Prize lurk here?

I wish I had had Miguel as my high school science teacher. My life might have turned out a lot different.