Transcript:

Michael Palumbos (00:00.142)

So welcome everybody to the Family Biz Show. I'm your host, Michael Palumbos with Family Wealth and Legacy in Rochester, New York. Today, we've got a really cool show for you. So many different facets to the conversation we're about to have with Kevin Ellis, the CEO of Upstate Niagara Cooperative. Welcome, Kevin.

Kevin Ellis:

Glad to be here Michael thanks for having me

Michael:
So Kevin is, I'm not gonna steal his story because nobody's gonna tell it better than you, but it's so interesting. From a family farm to today, running a cooperative with over 300 family farms in it. Kevin, we have a history of talking about, what was your journey? How in the world, how did you go from where you were to where you are today kind of a thing?

Kevin Ellis:

Yeah, thanks for asking, Michael. Well, I grew up in a family farm operation in central New York, just south of Syracuse, little town called Tully. And growing up, you know, I know we went from 100 cows to 200 cows to 300 cows. And that was about the time I was going to college. And I thought.

Well, I was on one or two paths. I was either gonna go back to the family farm and expand it, or I wanted to be a veterinarian, so I went into animal science. And I always wanted to go to Cornell University. I had one backup plan besides Cornell, but I went to Cornell University, I got accepted. About sophomore year, I became really interested in business more than I did cows. So I took a mix of business courses, but I did have a animal science degree when I graduated. 

Kevin Ellis (01:31.532)

And believe it or not, get into nutrition work for dairy cattle. I went to Nebraska and South Dakota, covered three states. did that for a couple of years, came back and I got into banking with the farm credit administration. And you're gonna find this little trend with me. I get bored easily. So then I got a little bit bored on the lending side and they promoted me to become a consultant. So I was doing.

family transfers, business transfers, was consulting on doing taxes, I was doing a lot of different things that surrounded the family farming operations. And then I, you know, I always got tired of being labeled an ag guy, so I decided to go back and get my MBA so I could see what life was like on the other side of the fence. And once the University of Rochester Simon School graduated an MBA and I got into

commercial banking with Key Bank and then real estate finance with Northwest Savings Bank. had an opportunity to start up the Northwest Savings Bank here in Rochester, New York. And I did that and then one day just, was, you know, growing that business here. I got a phone call from one of my old farmer clients that I had when I was at Farm Credit saying that there's a group of farmers that wanted to build a processing plant and they wanted to break away from one of the big co-ops and wanted to know if I had any interest in leading that.

exercise and I said to him, said, give me a week to think about it. And my wife and I talked about it and I said, you know, this is kind of a once in a lifetime opportunity to use an MBA. You know, it's a startup, it's learning how to build a business from scratch. And I said, if I fail at it, I can always go back to banking. mean, there's banker jobs everywhere. So I gave it a roll. We grew a business from zero to $400 million in sales when I took this other position with Upstate Niagara Cooperative.

Michael Palumbos (03:22.254)

So you had a couple of farmers when you started when you were at 400 how many farms were you at that point? or a million rather

previous job before now, we had 33 farms and this one here today, you know, when I started was north of 300, but as the industry consolidates, we're down already around 260 farms today with more milk, more milk, more sales, more revenue, all of that. So I took the opportunity, I guess I'm a lifelong learner, I want to grow.

And I wanted to see if I could run a $1.5 billion manufacturing company with 260 farmers and 1,800 employees and see if I was man enough for it. I guess they want me to sign another year or five-year contract. So I guess I'm doing okay.

What, go back to your roots, you how many generations was the family farm at that point?

Yeah, father broke off from my grandfather so he really truly was a first generation farmer. He grew up on a farm but it was more, my grandfather didn't really press or push and my dad wanted to be more innovative and he did some innovative things that people thought he was crazy for but he really, you know, he set off on his own. So he, for all intents and purposes, I consider him a first generation farmer.

Michael Palumbos (04:40.046)

Okay, so a cooperative is different than a typical corporation. And for those, our listeners who, you what you start talking about this farm co-op have no idea, explain that a little bit.

So here's how I explain it. And I'm not trying to be crass. A cooperative is a socialistic organization that acts and tries to make money. What I mean by that is it's everything that's done in a cooperative is done out of a spirit of fairness. And, you know, we're working on a deal right now. It's probably one of the largest deals that New York state's ever seen. And we're looking at it because only a few of our members are going to be able to service this one particular customer. But in order so that people aren't left out and they aren't able to participate because

just because of their size, they want to participate, but they can't. And we're coming out with an entire co-op wide program that mirrors what this customer wants so that we can have a payment system that keeps everybody, that's fair. So cooperative systems are built so that there's no other way to describe it except it's socialistic. So I call it it's socialistic creature inside a capitalistic organization because we have what we call the commercial side of the business. We run manufacturing plants.

We're very capitalistic. It's all about making making profits. Sure. And then on the co-op side, it's all about how do we distribute those fairly?

So you've got, like you said, 265 farms. Most of those are family-owned farms, right? All family-owned farms that they have their own P &L, they run their own businesses, but then they're all band together inside of the cooperative.

Kevin Ellis (06:08.446)

Yeah, 100%. Okay. And we have a diverse group of members. Some of our members are, you know, 5,000 cows, completely automated and really, and then we have the gamma all the way down to, we have some Amish farms, organic or Amish farms that still do a lot by hand and then then we have fully robotized. Yeah, so it's a real diverse group. But I've always said this, farmers are farmers around the globe. They all typically think

That's interesting.

Kevin Ellis (06:37.505)

similarly.

In terms of like, you're now the CEO of this co-op, what are some of the unique challenges of having all of these different farmers that kind of you report to them, you know, through the board, but that has to pose some very unique challenges.

Yeah, the uniqueness of it is this. A lot of Fortune, I guess, and we're not Fortune 500, but we are a large corporation. I'm spending an exuberant amount time making sure that the farmer, the farmers themselves and the board specifically are educated on how we make money, what we do, the complexity of the business, because they're governing the business. So they need to understand it at a deeper level than I think my predecessor had not done.

a great job letting them know how the business operates and how it ticks. So the biggest challenge that I have is helping them understand so they can make better governance decisions. And truly when you come off a farm and these farms are bigger, right? They're multimillion dollar revenue farms, but they're really overseeing a $1.5 billion business and helping them understand how complex that is and understand.

what it means to run that business and what the business needs is really some of the struggle. But think we're doing a good job.

Michael Palumbos (07:55.362)

I was lucky enough to take a tour of one of these facilities and it just kind of blew me away. What you are doing is providing that place for them to sell their milk. And then you take the milk and you turn it into, through the co-op, all kinds of different products for the... 

people that you serve. to be doing $1.5 billion in revenue, you're serving some very large corporations on the other side who are used to working from a very corporate standpoint. Does that pose some purely unique challenges for the farmers to understand that? Or is that exactly the kind of thing that you're talking about and teaching them?

I think some of the struggle there, our farmers are really good. They've been doing it a long time. They've been in a consumer products based business for a long time. So they understand the customer is number one. I think where the struggle comes in is, know, the average age of a farmer now is 65 plus years old. And what customers are asking for today, some of the older school farmers don't understand why.

what is this and what's driving this? And they don't really understand the Gen Zers and the millennials and their wants and needs. Some of the, have to spend time as a management team bridging that gap. And they're like, what do mean they wanna see how my farm workers live? It's none of their business. I'm like, well, everybody's got a video camera in their pocket now. So they really wanna know where their food comes from. They wanna know where the animals humanely.

treated and all these pro. So we're rolling out all these programs to make sure our customers know that we have oversight over animal welfare. We're going to have ESG goals that are going to be incorporated into our strategy and our worker care programs are top notch. So that's it's new for a lot of our farmers. like, well, what do need that for? I don't want that's invasive. I don't want to do that. But it's I always say this, if you want to make a product and you don't have a customer for it, that's called a hobby. So we've got to align what we make with what the customers want.

Kevin Ellis (09:59.766)

So that's some of what we do as a management team is make sure we marry those up.

And then it's finding the, you know, where, what types of products are you putting to market? I mean, as a kid, you know, we had whole milk and skim milk and, you know, cottage cheese and whatnot. But today, some of the products that you guys are coming out with are pretty unique. The world's changed. you talk about that product mix a little bit.

Yeah, you know, you're right. I do remember as a kid, had very, very few selections for milk. Now you go to the case and I don't know how many selections you have for milk, you can, you probably have 30 different skews for milk alone. Yogurt is one thing that we make and that's, that's really taking off again, but it's high protein. Everything's high protein now. Cottage cheese, skier, yogurt, high protein stirred yogurt. Everything's protein, protein, protein. So we're following that trend. So

We have three cultured plants and they are all full. And we're trying to figure out how to get more capacity out of them. And we're also expanding one of them to make more capacity. And fluid milk is on decline. However, high protein fluid milk is the new, it's the new in thing. I just shared the other day that Fairlife, which was a, it's actually a 17 year old company, but recently became very successful, just sold for seven billion.

Wow. So that's been very recent.

Michael Palumbos (11:24.002)

Look, these individual farms and the needs of the co-op, how do you balance the needs between the small guy? I mean, you talked about it little bit, but can you expand on that a little bit more? The co-op has these big needs, you know, your $1.5 billion business. How many employees are inside of there? Yeah, and then you've got the farm, the smallest farm that is part of the co-op, how many cows would they have?

So just over 1800 right now.

Kevin Ellis (11:51.278)

Oh, 30, 40 cows.

And one or two employees running that or just one farmer? One farmer. Yeah. So how do you balance those needs with, you know, what's going on for the co-op?

Well, I've always maintained a spirit of fairness. as long as I always tell my management team this as well. On the co-op side, there's no winners or losers. We try to do the best possible job of getting them the most money for their milk. A, reducing their transportation costs. B, giving them dividend checks at the end of the year, making sure we run our commercial business profitable so they get a dividend check at the end of the year. And after that, I don't treat the 40 cow dairy any differently than the 5,000 cow dairy.

because the way they run their farm is their decision, their independent business people themselves. And if we've hit all those key areas that I just talked about correctly, they've got to do the math on their side and say, is my business model correct or isn't it? Because what a large dairyman will have that the small dairyman doesn't have is you'll have a lot more labor costs. You'll have a lot more equipment costs. And so his model is different than the 4D cow dairyman who has probably.

no employees except himself or it'll be a husband wife team and they'll probably do a lot of cash crops and they'll do other things that generate money or one of the spouses will work off the farm so it's more of a lifestyle than it is a true business but as long as we're treating everybody fairly getting as much money for the milk as we can reducing their hall costs and we're generating profits on the 13th milk check i find that there is no dissension at end of the day

Kevin Ellis (13:27.202)

The only argument should be is their business model correct or is it not correct?

Thank you. Family businesses are known for having to deal with succession planning and family farms even more so. One of the differences that I've seen through the years is that, you know, with the farmers, you know, the kids get exposed to that business.

early on. And so they either love or hate it, you know, very early on and the ones that love it, it's just very natural. And unlike the dad that has a manufacturing or construction business where the kid may not be involved until, you know, they're much older. But, you know, what are some of the challenges that the co-op faces, you know, in terms of succession for the family farms? Do you guys help them in any ways? Or, you know, how do you support them through those, those processes?

True enough. mean, so there's so many good qualified people that help with family farm transfers that we haven't had to get involved. We don't offer it as a member service. Oftentimes all we get involved in is how do we transfer equity because many of our

Many of our family farms have millions of dollars of equity in our cooperative. So if they retire and they want to move it to another generation, that's the time when we become involved in making sure that we have a good transition plan on the cooperative side for that family farm. But there's so many good qualified people in this trade that we don't feel we need to compete. And I have plenty of referrals that I can give to our farmers if they need assistance or they need help.

Kevin Ellis (15:01.726)

And when we're seeing more and more of it, lot of what we're seeing is massive consolidation in our industry. There hasn't been a pronounced change in the milk price for the last 20 years. So how the farmers make money now is through consolidation, more cows, and higher productivity per cow. So that's where the profits are in the farming industry.

It's MA, it's private equity, mean, kind of thinking inside of the family farm as well.

Yeah, &A hasn't gotten involved yet. Most farmers are very traditional. It's bank debt. It's profits and bank debt, profits and bank debt. So the investment levels now are actually astounding to me. You're nearing about $20,000 in investment per cow. So if you get these guys that have, you know, a thousand cows, do the math, these are real businesses now. Wow.

Okay. Any advice, you know, being somebody who came from a family farm, now working with farmers for the younger generations that are, you know, coming up into the world in the family farm business and the co-op business, any advice that you'd give? Next,

Yeah, I I will because I go back and talk to Cornell kids every year that are going through these fellows programs. And one of the things I tell them is if you grew up like me, my father didn't share much. He expected a lot work work wise. You know, I would work seven days a week and and I'm not even joking. A hundred hours a week helping out that enterprise in summers and work in high school. I worked mornings, nights, weekends, and I never saw the financial side of it.

Kevin Ellis (16:31.694)

And farmers aren't really good at about sharing. So I always thought my dad was one step away from bankruptcy. And then I went to college and I was doing an economics project and I had to get the, I had to get a trend analysis and you know, I talked to the banker. He said, it's fine. And I got his balance sheet and I had some choice words for him because we live like we were bankrupt, but he was a multimillionaire. So that's how a lot of these farmers are. You just don't know. They drive around in old pickup trucks and you know, they're.

I think that's a lot to say for the typical business owner. I was just, I was in Cortland, New York, not far from Tully with one of my, you know, associates just the other day. We're driving past this little, you know, house that looks like Startup USA. And it was one of my top clients 10 years ago. And he's like, he lived there? Really? I'm like, yeah. And he drove a Chevy Camino. I remember the El Camino. Yeah. That was his favorite.

So I always tell these these kids that are coming out if you've got an opportunity to go back to the farm and maybe go out and get a job somewhere else learn learn, know, get some experience on and make some mistakes on somebody else's dime. But don't discount the the family farm because if you want to gain wealth, you may not have all the cash in the world that you want to spend. But if you want to gain wealth, the family farm is a great way to to gain wealth. But never ever take your eye off on how you're going to.

I have a succession plan in place so that you can actually retire out of that business. Otherwise, it becomes a prison because it's so capital intense. You're going have to find a way to find liquidity on the way out.

You talked about the consolidation that's happening and the education that you help your farmers understand what the customers are looking for nowadays. When it comes to the consolidation side of things, do you provide any training or any interaction with that? Or is it the same kind of thing with the succession plan? There's plenty of people out there that could give advice.

Kevin Ellis (18:33.474)

Same thing as plenty of good people. will lend my advice and experience as one of the people that used to do succession planning. However, I've been out of it long enough to know that I'm dangerous. So same thing, lots of good qualified people out there that do this for a living. I have a referral network. If somebody really wants to talk to somebody. And more more of these farmers, mean, yeah, they get labeled dumb farmers, but none of them are dumb. They know how to run a calculator and a pencil very well.

So, you know, what's driving that consolidation is just the cost of things today. It blows me away. A brand new chopper just to cut corn out of a field is now a million dollars or more. So it's just the cost of running these enterprises is driving the consolidation and the growth. yeah, that's a.

Okay. there any, talk about, you know, we talked about innovation, the difference between, you know, the 35, 40 cow farm and the 5,000 cow farm. What are some of the innovations that have happened in the last five, 10 years that farmers are taking advantage of today?

Yeah, the well, so genetically they've been taking advantage of the genetic. I guess in the breeding programs that farms used to have when I was growing up, it was, you you do both selections based on, you know, milk and this and that. And the other thing was happening now on the breeding side is now they're super ovulating the best cows and then breeding them with the best bulls. So the genetic progression in this industry is unlike anything I've ever seen. It's taking off in an exponential fashion.

And then this surprises me a lot because I grew up in a dairy farm. I've been around farming my whole life and I'm looking at the milk components that come into upstate Niagara's plants today. And I'm asking questions like are these Holsteins? these black and white cows? Because the components are so high, the genetic progress is going so fast, it's blowing my mind. You know, what we used to have even five years ago is... It just blows my mind, Michael. As a dairy... 

Kevin Ellis (20:33.102)

kid I was like I just can't believe this genetic progress. The other thing too is

Let me jump in on that for just a second. So I just finished reading a book called The Next Wave and it's talking about AI and robotics and a whole bunch of other things, but genetics being one of them.

And so as you're talking about it, and you just said over the last couple of years, what's happening in the genetic side of this stuff is mind blowing to you. Can you imagine what the next five to 10 years looks like as they're able to start taking and, know, as you said, you know, people say the dumb farmer, but there is no such thing as that. As they take products like AI that can now take the ideas and the things that they're thinking about and make it run that much faster, what the outcome in a genetic world

look like, you know, five, 10, 15 years from now.

Yeah, and the actually the right now the genetic testing, you know, you take just some snippets out of their ears. That testing has become so inexpensive. Now we can start to look for markers in the cows and decide, you know, which cows do we want to breed based on these markers? Because this marker actually leads to a higher cheese yield and that's worth more. So that cow is worth more. we can actually super ovulate that cow and then we'll breed for cheese production. So it's getting very, very

Kevin Ellis (21:51.594)

specific and dialed in. It's amazing. That's just the genetic side. Then you go into the technology side. We've got a 3000 cow dairy farmer that's a member that basically has a lights out parlor. It's completely robotized. So that's robots milking cows on a rotary carousel parlor system. And we have other farms that are going to robotics. So there's different variations of robotics. But I see a future state where

That's amazing.

Kevin Ellis (22:18.392)

There's no human intervention milking cows anymore. It's completely robotized. We have robotics, know, cleaning barns, robotics, pushing feed to cows. There will become a day when there's not a man in a tractor anymore either. Today there is only to turn around at the end of the field. So John Deere's got some incredible technology. They call it my John Deere. It basically, it does a yield grid of every field at the end of the year. So it knows the yield per square foot.

square inch, whatever you want. And then you can do targeted fertilizer application the next year based on the yield data from the harvest data off of my John Deere. The planting rates can change based on grid maps and it's mind blowing.

And I want to make sure that people are hearing what you just said and understanding whatever industry you're in, be looking for those technological advances, be looking for the data, be looking for how to utilize AI at different levels than your competitor. 

That's really, you know, the difference isn't going to be whether I use AI or not use AI. I think everybody's going to be using it. It's the people that learn to utilize all of the technology that's available to us at a different level. And, you know, there's going to be very few industries that won't use and continue to use AI or technology at some level.

100 % and I'm pushing my controls group at Upstate Niagara. Cornell's got a program right now where they're basically teaching people how to use AI to program PLC logic. So I'm pushing that group to say use AI to program the plants so you don't have to wake up at 2 a.m. and do it and have a staff of people doing it. There might be two people in AI programming all of our plants.

Michael Palumbos (24:06.606)

Family farms typically have very deep roots in the community and just join a little bit of history on your co-op. There's some pretty deep roots there as well. Talk about, you know, how do you guys give back to the community, some of the deep roots that you have within the community.

Yeah, I always say this, gotta be careful. Don't ever say anything bad to any farmer about another farmer, because they're all related. And it's true. So the way we give back, I mean, we have a balanced scorecard at Upstate. We try to get back through product donations. We give back cash. We're always trying to get back to the communities that we live and serve in. Many of our farmers are so active. They've been in the community so long. They're on church boards and school boards and, you know, the IDA boards. And they're super.

Super involved, super active, and many of our farmers are just as giving as we are as a corporation. They do product donations in their own schools and wherever they can. Being owned by farmers, we're community minded. We've got to be around a while. If we're going to be around a while, we've got to care about our communities.

Yeah, it makes a big difference. When you look at the dairy farms today, talk about the broader conversation around like food security and sustainable agriculture. You had hit on that a bit before, but can you expand on that, what you see coming in the future? 

Yes, and it may be changing right now, but people are anti-agriculture because there's a belief that animal production agriculture is leading the greenhouse gas and the global warming effect and all that. And I find that very bizarre because I came across a statistic here the other day. If you go back to 1926, we had 26 million cows in America.

Kevin Ellis (25:51.48)

producing one-third of the milk that we produce today. Today we have nine million cows in America. So we've gone from 26 million cows to nine million cows, but we are the problem with global warming. So I find that I take a little offense to that, but I'm not saying that we're not going to do anything. I'm just saying that find it fascinating as a society how we can just jump to conclusions and not really do the hard work of figuring out exactly where global climate change.

changes coming from. But what we're doing as a company is we have to do what the consumers want. So we are in the process of going through a materiality study right now and we're going to do a double materiality study because we're going to start to incorporate the ESG goals for our cooperative based on our stakeholders wants and needs. And we're going to weight the customers' stakes. We're going to weight that a little bit heavier with a stakeholder that

We want to know what are they looking for. So they want us to plant wildflowers that make them feel good and save the honeybees, decrease carbon emissions for sure. That's something we're working on straight away anyway. And what else is it they want to see from dairy farmers? And we're going to incorporate that into our materiality study. So that goes into our strategic plan long-term. want to know about how we treat our workers. They want to know about everything else that we're doing because we want to become an open book.

because the consumers of today want us to be an open book. My long-term goal is to be able to put a scan code on a cup of yogurt and somebody can go to that and they can see the farm it came from and what the farm's doing to, you know, become sustainable from a standpoint of lowering gas, know, carbon emissions and what are they doing as far as, you know, improving waterways and those types of things. that's a longer term role, but that's not...

That's not too far away. Once we have SAP installed, we can do blockchain.

Michael Palumbos (27:48.59)

Nice. Talk about your vision for the future. Not the family farm side of it, but on the co-op side. Co-op's looking down 10 years from now. What do you see? What do you know? What does the future look like?

Yeah, I want to stay lockstep with what consumers want in their dairy products. We are very much shifting from we used to be a very heavily based fresh fluid milk business. I think that into a we're going to be a cultured dairy business. I see just a long term trend of increased

sales and consumption of cultured dairy, yogurts and skiers and drinkable yogurt versus the fresh products. So I want to continue that track, which is why we're doing an expansion right now. Really want to shift the fresh fluid business into more of a long lasting milk business, but based on high protein. And then just have some varied products that speak to different things. We're going to have more product launches. We're going to be targeting different.

types of people so we're not just gonna say yeah here's our half gallon of whole milk you gotta drink it. gonna be targeting customers. We're trying to grow some of our brands right now we're doing brand summits and just looking to grow some of them. We have a brand called Intense that drives me crazy because it's loaded with sugar and you know our purpose statement is we nourish life and I have a hard time offering a product with you know 50 grams of sugar that says we nourish life so

I want to do some extensions off that and do some high protein, no sugar added, different variations, lactose free, and really get on trend. we're going to be focused on getting on consumer trends, staying there, because ultimately that'll lead to the highest returns to our farmer members.

Michael Palumbos (29:37.28)

As the, know, I think what you just said is really important for other CEOs, especially inside of the family businesses. How do you follow the trends? mean, you're taking, to me, who's an outsider in the milk industry, you're taking a product like milk and then...

You talk about protein, you talk about the cultured products. How are you staying in front of what's coming down the road? And I do see, you know, the products have changed dramatically, even, you know, from my perspective as a consumer. How do you stay in front of all that?

Yeah, we use, well, we have our own marketing department. watch trends using cercana data, IRI data that we see what kind of products are moving, the ACVs around those products, just keep an eye on them. Also, farmers pay 15 cents of every hundred pounds of milk that they sell into a trade promotion group. They call it Dairy Management Inc. Dairy Management Inc. does a lot of consumer research to try to help farmers pick up on where the

where the consumer trends are going. I say that that's free, but it's not free. mean, it's 15. Farmers are paying for it. So they provide a lot of great input and insights into where we need to go hunt next. So they're trying to stay at stay ahead of that. So other than that, we're all consumers. I always tell everybody at the company, we're all consumers. If you think there's a great idea, get it floated up and we'll take a look at it. 

are the challenges as the CEO of a co-op with as many, know, 1,800 employees, said? What are the challenges you're facing?

Kevin Ellis (31:12.332)

Well, know, this Michael, the biggest challenge I'm facing right now is that I'm a different leader than the previous leader. So that we're in a transformation phase right now, reversing a top down culture to a bottom up culture. And that has been probably the hardest transition that I've ever had to work through in my entire career. So it's, it's a, it's a struggle. Some days it feels like, you know, one step forward and two steps back, but I feel like we are making progress.

Some of the changes that we're putting in effect are starting to show through with improvements in operations and improvements in profitability. So it seems to be working.

So that scenario sounds an awful lot like potentially. Dad did it this certain way for many, many years. The younger son or the younger daughter comes in to take over and they've got their MBA and they've got some, you know, they've got five years working out, you know, for another competitor in another industry and they can bring back all these great ideas. That's great when you got 50 employees, 100 employees.

You know, so the challenges that you're facing, they're real. And it's a lot of people and it's many, many years. How long had the previous CEO been in place?

I think he was there for 12 or 13 years previously.

Michael Palumbos (32:33.046)

And that's a long time for a lot of people to get ingrained with how we've always done things. yeah. What would you say are some of the bigger successful things that you've initiated that, you know, when you look back today, when you first walked in the door, you weren't sure whether they were going to work or not work within the company, but they're starting to make trends now.

There's so many. So one of the first things I had to do was I had to change this mentality around operations. You know, I guess I had had the benefit of starting a green field project up with people that had never run a dairy plant before. we were, you know, when we started up, I always say this, like a lot of people that become successful get to start in a garage and we didn't have that luxury. We started up day one with 90 employees. So we had to do.

you know, employee handbook and we had to do all the things that people expected that were coming from larger companies that we didn't have. I mean, we had blank slate. One of the things that really was a struggle was we didn't make money for three and a half years. We cash flowed, but we didn't make money because we had heavy, heavy depreciation and heavy interest costs because every we levered it up. Everything was new and it was a, it was a struggle. And as I sat there and I struggled and I struggled and I struggled, was like, what do I go through a layoff? Do I, you know, I can.

know, shave expenses off. But every single time I came back to the only way to make money in this manufacturing business is high output. You're not going to say this. You're not going to cost cut your way to prosperity. So I came into upstate. I almost I almost walked back out the door because they were doing the same thing that I decided not to do in my previous role was that they had

they had just leaned out the entire organization. And then they went too far because then they were leaning out the organization, then COVID hit and they got leaned out another tranche. So when I arrived, we had lines of business that were completely sold out, oversold. And I'd go to the factory and the lines weren't running. And I'd ask questions like, well, why isn't this line running? We can sell as much as possible off that line. Well, we don't have labor to cover breaks and lunches.

Kevin Ellis (34:50.702)

I'm like, so I spent the first year just getting everything staffed properly so we could run the operations. We could actually start to make money on those lines. So that was, that one actually had the biggest impact because people started to finally say, wow, we're finding relief. We can actually run the plants like we should be able to run the plants. The other thing too is we didn't have alignment. We were running, I don't know, four ERP systems, five, if you include our membership division. Nobody had insights into what anybody else was doing.

The plant managers had never met each other when I first got here. They'd seen each other on like a, know, team's call or a Zoom call. So we started to the plant managers together and we started to drive towards alignment of what was important to run our operations. And the other thing that came out was with a balanced scorecard approach. The previous management team cared about profits. So it wasn't balanced. So we came out with a balanced scorecard.

Sure.

Kevin Ellis (35:44.664)

basically covers our communities, our people, our customers, our operations, and then profit is a result. It's never what you're truly esteemed to be. If you do everything else right, I always tell people, if you do everything else right, you're gonna get profits. So that's a scorecard. It's not anything other than that. I think getting that message out and driving that home every day has made progress. And I still have PTSD from the old days. I just can't seem to get their thinking where I need to get their thinking.

It's okay. Slow and steady wins the race. Most CEOs are not known for their patience and putting that stuff together. Understood. Understood. What else? So we've got a, you've got a vision for the future. You have come in and how long have you been there now? So in two and a half years, you've made several areas that you've.

Okay, I remind myself of that.

Kevin Ellis (36:30.99)

It's been two and a half years.

Michael Palumbos (36:37.366)

positively impacted the organization. What are the other things that are, you know, what are the projects that you're about to start aligning ERP, you're talking about SAP, putting, getting those things aligned so you can dive into the data more. What are the other projects?

Yeah, he's gonna be the big one this year and next year. We're gonna go, we're gonna go fast. We're gonna do this in 18 months. The other big projects, you know, we're gonna do some line extensions on what we already do. We're building out one of our factories to do more Greek skewer production plus cottage cheese. We're gonna look at expanding into drinkable yogurts and focused on high protein drinkable yogurts. Looking at really

I've got, there's some new technologies that I've come across that can extend the shelf life on fresh fluid milk substantially. So that is a high priority for me right now because that'll, it'll change our distribution and our production plants dramatically. I call it a disruptor. This one makes me smile. It's a, it is a complete disruptor to our industry. So I'm chasing this one.

very hard. And on top of that, we're looking to expand out some of our ready to drink beverage lines. We've been sold out on those forever. So it's time to expand them out. So the aluminum cans, although we have an aluminum tariff that we're faced with right now. But by the time we get the expansion done, hopefully it'll have worked its way through. Other than that, longer, longer term, the only thing that we don't make as a dairy company that we probably should is cheese.

So we had a cheese plant, but we sold it. I'd like to take a run at some soft specialty cheeses, because we do have about 40 % of the population within a day's drive of where we are right now.

Michael Palumbos (38:20.622)

All right, so we talked about your vision for the future, the projects that you're working on, talk about what's a day in the life of a CEO of a $1.5 billion organization look like.

There is no standard day, Michael. don't know, every day looks different. Yeah, you know, I usually try to start my Mondays by meeting with my team and get my team aligned, talking about all the initiatives that we're working on. We have unionized facilities, so some of what I do is work through.

Union negotiations usually when we get to the final point that needs approval. I'm working on people initiatives and trying to do a better job of communicating. And I just brought in a communications expert. So we've started our own little fighter side chat that we're calling it to keep the people in the organization understanding what we're up to and try to communicate with them on a more regular basis. And then you kind of get dragged down. I always say this, nobody comes in my office with good news. So you usually get dragged in some.

problems that we may be having with a customer, we're not fulfilling customers needs, we've got a breakdown, we've got capital decisions that need to be made. know, I came in here, right before I came in here, I was working through some capital requests that people had asked for. And then it's, you know, I talked to my board chairman and then keeping the board aligned with what's happening on a day-to-day or week-to-week basis. For me, it's fun because I get bored if it's the same thing every day.

So I always say this, I think I found the right role for me because as CEO, I've never really truly been bored. There's always something going on that needs attention. And even if there's not, I'm wired to, you know, if it's not broke, break it, see if we can make it better. So I'm always wired to have new initiatives going on. it's, to me, it's fun. You know, I understand the, I understand this enterprise now from the farm all the way through to the cost.

Michael Palumbos (39:56.558)

always something cool.

Kevin Ellis (40:19.042)

to customers. I can't keep my fingers out sales. I love sales and marketing so I'm always I'm always meeting with customers.

Talk about, where Christina will do some editing work. Talk about life outside of, know, life outside of work. What drives you outside of work?

You know, not a lot right now. This, this new role, you know, one of the things I have to do is to keep my energy levels up. have to go to the gym every day. So I go to the gym every day. I've set personal goals. I have my private pilot's license. So my personal goal is to get back and start flying regularly for business or otherwise recreationally. And I know I spend way too much time in my left brain. I got to get back in my right brain. I've always wanted to play the guitar. I played the piano growing up.

But so I recently bought a guitar. I'm to start taking guitar lessons just to start to mellow out the left side of my brain.

It must be in the water. You're the third person I'm telling you this week that somebody talking to them, they're like, I'm to pick up guitar. One of them just started his lessons and I was like, so it's just kind of, it must be in the water right now. What else do do for any sort of pilots licensed? That's a big one. Would you fly between the different locations?

Kevin Ellis (41:25.646)

It must be. 

Kevin Ellis (41:32.75)

100%. Nice. Yeah, I'd like to get a big enough aircraft. I'd like to get certified in multi-engine so I could go to Florida.

Love it, love it. I at one time thought about doing that, but that was, it just never, never materialized. I've been, I spend most of my time underwater when I have free time. that's, that's okay. I, I, Kevin, I,

That's a nice high-

Michael Palumbos (41:58.394)

I'm killing it today. Scott's gotta be like, Mike, you're never like tied for words. I don't have anything else that I can think of. I know that. So you spend some time talking to Cornell kids. Talk about, you know, the classes that you're talking to. What is the advice that you're giving them today? What are the things that you're talking about with, you the up and coming kids again?

Yeah, it just depends on the class that they're going through. I still remember myself as a Cornell kid, so I try to give them advice. And I really appreciated the people that always came back and took the time to...

come talk to us as students. I try to make that time. You know, I'll talk to them on varied tasks or topics of, you know, milk marketing. You one of the things that I avoided when I was at Cornell is milk marketing. And now what do I do for a living? Milk marketing. So, you know, I'll help them understand that from a practical standpoint, why they should pay attention. I can talk to them about finance and, you know, what it takes to ready yourself to take a position like mine, because they're all...

You know, I always laugh. I could still see myself as one of the kids sitting in the class and then they look at me and just disounded at, you know, what I'm doing. you know, I think people get caught up with the CEO title. So I try to help them understand what do need to do to get into this kind of a role and just give them some fatherly advice because they are still kids.

easily bored and be a constant learner.

Kevin Ellis (43:25.934)

I still chuckle, you know, every time I do that they try to, you know, they'll link up with me on LinkedIn and then I follow them. And that's kind of funny. A couple of them have come to me for advice and I gave them advice to go back to the family farm and they have. And they're back and they seem happy and content.

You just hit on something that I wanna share with people. When I look back at my career, one of the things that I didn't do enough that I wish I had done more of is reach back to people that were in higher positions or had more authority or more knowledge than I did and ask for that help. because every time I did it, every single time somebody was there to reach back out and give me a hand.

and willing to answer a question and that leg up that I got at that moment really helped. But in hindsight, I look back and said, I did not do that enough. So if you're listening to this and you've got a family business that you're working in and you need some advice, find somebody that's already been there, done that, they're happy to help you.

with that.

You said that you're a constant learner.

Michael Palumbos (44:47.598)

All right, what? In the last you know year or two were some of the books that you read that you said my great

I'm trying to remember. I just went through the one with Adam Grant, Think Different. That one, I really liked that. I've really come to really appreciate Adam Grant and the way he looks at things. I like, I really liked, I don't know if you've read that one or not. not read that one. Yeah, Adam, Adam Grant, Think Different was a good one. And then I keep going back through some of the oldies, but goodies. mean, Good to Great was another one. I just took on vacation again. There's so many, I always pick up new nuggets on that one when I...

when I read through it again, so. But yeah, I'm in a lull right now, Michael. I gotta get going again. Good.

Good. Kevin, I would just want to say thank you for joining us and sharing, I mean, just to go from the family farm.

to a $1.5 billion organization, you have to understand when the kids look at you and go, wow, it is wow. And you got a lot to be proud of. And I really appreciate you sharing what you've been going through. It's also interesting from our perspective to know that inside of this $1.5 billion organization, that there's still a lot of things that you've got to work on and that you're trying to clean up. so wherever you are in your business,

Michael Palumbos (46:09.134)

listener. Just know that we're all constantly working to improve and get better at what we're doing, regardless of the size of the organization. There is no perfect. There's always a work in progress.

Yeah, there is no perfect and when you think you've got it licked and the consumer trends will change on you and all of a sudden you're changing again. 

So Kevin Ellis, Upstate Niagara Cooperative, thank you for joining us. Really appreciate it. My name's Michael Palumbos with Family Wealth and Legacy in Rochester, New York, and you've been listening to The Family Biz Show. Thank you everybody and have a great day. Take care.