Alyssa Badger, Director of Global Operations, sits down with HighGround Dairy Founder, Eric Meyer, for a conversation on customer success. The conversation can be heard on our podcast, Let's Chat Markets, along with a written transcript below.
Alyssa:
Welcome, everyone, to our interview with Eric Meyer, the founder of HighGround Dairy. My favorite part about working for this company is the relentless pursuit for customer success. Something that we see each and every day here. In an increasingly digital age, human interactions have lessened and oftentimes customers could feel really out of touch with their service provider--but not here. We’re sitting down to discuss some key elements of HighGround Dairy as a business that has always been driven by putting our customer first. Eric, thanks for taking the time out of your day for this interview. How long have you been in dairy and what part of your career path led you to want to help others manage risk in this industry?
Eric:
Alyssa, thank you so much for having me on this interview today.
Scarily, I've been in the business for now 20 years. Some days it feels like it was a couple years ago and other times it feels like it's been an eternity. My career path was not embedded in the dairy or financial markets. I wanted to be a sports broadcaster when I grew up and so I realized, living in Chicago, that dream was going to be pretty darn difficult to obtain without giving up my other dream in my twenties of living in Chicago and having a great time with friends post-college. If you want to get into the radio business and sports broadcasting, you have to move to very small towns and work your way back to a major market like this. So, my dream was crushed to be a sports broadcaster but I switched that up, went into the marketing, and somehow stumbled back to Chicago and ended up meeting Mike Downes and Joe O'Neil and jumping into the dairy industry. So, it's been a long 20 years. It's been a pretty story working for Sara Lee and the Downes O’Neil Group and FC Stone before starting my own company here eight years ago. As far as helping others manage risk in the industry, I realized early on working for the Downes O’Neil Group that was such an amazing opportunity of a a burgeoning market like dairy--just getting started in the mid-90s, no one knowing what they are really getting themselves into, but realizing at that company, just getting started, we had so many customers that run the books that didn't know how to trade. So, education and teaching people how to use these markets has been such an important thing.
Alyssa:
Let's jump right into what HighGround Dairy was built on: Market intelligence. You saw a need for that education in this industry so you certainly dove head first into making that happen. Aside from what you just spoke to, why was it so important to you to ride this market intelligence and global outlook to the market?
Eric:
I think a couple reasons: one, I really enjoyed being a student of the market and so learning and understanding for selfish reasons for my own understanding of how things work, taking those writing skills and putting them into creating market opinion was important. I think if you could do that in plain English, you could bring more market participants into the complex to have them better understand how things worked. So back 15-20 years ago there weren't a whole lot of people doing that. We were just starting to publish some of that information on the world wide web and we were just starting to leverage email to communicate some of that information. So as my career moved down the path, particularly when I worked at the Sara Lee Corporation as a buyer, the need for having market information, intelligence, data, opinion, strategy, and forecasts that were at your fingertips were incredibly important. So I recognized that there was room in the space for something that looked professional, that had a market opinion, and that there be enough of a spot for a new entrant into the market. So, fast forward eight years from there and we built a really nice business and I think it's been that way because our market intelligence engages people in a way that they weren't used to before.
Alyssa:
Certainly. So as someone that started working for the team near the beginning, I remember there being some pushback on moving to electronic trading. Help us understand why you were such an advocate from the beginning.
Eric:
Well, if we're being candid here, the real business model of HighGround initially was put together great market opinion, analysis, market intelligence, and people will ultimately use our company to to trade--to buy trading futures and options and hedging. So that was truly the business model--if you write it and you send it to enough people they will come. The CME did a really nice job of slowly pushing the market, the market participants, down a path of moving things away from the floor and onto the screen. Originally we use that as a marketing tool. We were just a small business, we were a new player on the block. I had some in a relationship capital that I can get with people in the industry that I'd worked on but we needed to distinguish ourselves. We leveraged with the CME was feeding to the brokerage community to look at moving things on to what I consider a more level playing field, which is electronic trading. Once the CME built the correct tool, which I believe is is DME Direct--their their trading platform--to make it easy, not only for brokers, but also for somewhat informed market participants, to actually trade more exotic options. This was a model that was something that we could we could push forward with. We were just lucky enough to not have had a presence as robust on the floor as other brokers and hadn't been ingrained in different behaviors that we've been doing for many years, that we could try some new things. That electronic model, working really hard with CME and our market-maker partners, as well as our customers, to drive business there has been an incredible success. I think our customers really appreciate the fact that they know that we're working for them, that we're trying to drive more transparency. Not saying that the venue on the floor--incredible amounts of nostalgia, really cool experience to have gone down on the floor from time to time bring customers down and to see that organized chaos. There's there's always going to be something about that that will live in infamy. But when it comes to what we're trying to do for our customers, and 99% of our customer business is hedge business. We are managing risk for business purposes to lock in or create or mitigate uncertainty around dairy prices that if we were providing our customers a venue to do that, where they're getting fair, efficient bills with the liquidity that they need, that the electronic market would be the way of the future. Lo and behold, that venue is certainly played out as the CME is basically kept all of its exchange wars in the dairy complex closed. Now 100% percent of all volume that's traded the exchange, for dairy, is electronic.
Alyssa:
Right, it always comes back to what's best for the customer. It sounds like being nimble was a huge advantage there for HighGround Dairy. As difficult as it has been throughout the pandemic, what's something that you took away this past year that helped you to find the importance of risk management?
Eric:
That's a good question as I think many of us that, regardless of what industry you're, changing and working from home in an environment that is stressful to begin with, was a really big challenge. The volatility was completely unprecedented and so trying to manage not only risk for our customers, trying to give them the best available advice when a market is doing things that it did basically throughout 2020 I think was very difficult. But at the same time, years like 2020 are why we look at managing risk in the first place and creates opportunities to to lock in coverage. I’m reminded come that April-May time frame when cheese prices went to you near all-time lows and we had just just extraordinary fairly steep forward curve. While some customers were freaking out by that fact and dealing with that volatility and trying to explain it up the chain or trying to manage that risk on Farm. You just saw the consistency of our best customers just layering in. Like okay well, markets done this and as a result, we have a plan for this and we are going to take action. While it seemed ridiculous at the time, that these customers, in particular cheese buyers, were locking in prices at such a steep premium to the current cash market, their diligence, they're planning, and all the years that they've invested in prudent risk management paid off when prices 8 weeks later went from all time low's to all-time highs and maintain those levels because mostly of government intervention, it paid off. So, risk management is about the long game and I that's something that we learned most about in 2020--it's not always about what advice were providing based on the market conditions of a specific day or this specific milk production report or GDT, it's about that long-term strategy and those that get that are the most successful in this business.
Alyssa:
Yeah for sure, which brings me to my next question. What advice can you give to someone in the dairy industry right now that's just getting their feet wet on risk management?
Eric:
Well if you just got your feet wet in the dairy markets and mitigating risk in 2020, then there probably won't be a year quite like this for sometime in the future. What I can tell you is, I think it's really important if you're jumping into these markets, is to keep an open mind, take your time to be able to learn as much as you can, to talk to as many people, and meet as many people as you can that have been in the market. I think the difficult part about 2020 is a lot of those interactions to meet and talk and learn from people have been virtual and ultimately that's just not a great way to get acquainted into the marketplace. Visiting with people, going to conferences, seeing what is important to big organizations, learning from industry participants and experts. Even though we love people and want them to be loyal HighGround customers forever, the advice is you got to learn from everybody and find who you've got a good fit with and take all that information in and realize, like I just said, it's about the long game. The dairy markets, unless you're trading to make money, which it can be exciting but adds a ton of stress, this isn't all that exciting of a business to be in. But learning and organizing that plan, based on what we know about these dairy markets, here are good entry points, here are good areas where I need to lever up, here is the history of these markets--I think just let everything sink in, try not to jump into it too quickly. We've seen a lot of people try and get really aggressive with another first risk management plan and implementing within an organization because they don't know the lay of the land they don't know the internal politics or are just wading through that for the first time for their company--they can sometimes get burnt out because the process isn't moving quick enough. This is a slow-moving business, we are in it for years and I think that's the best advice I can give somebody is you are entering into a world where, if you can get good at this, you can become someone who has a relatively good understanding of the dairy markets. We're all still students but if you can get that down, you will have a job in this industry for a long time.
Alyssa:
You know I believe the reason HighGround Dairy has done so well over the years is because of our focus on not just gaining customers but really building those relationships. Has that always been ingrained within your work ethic?
Eric:
It has--a lot of people probably don't know this about me but I was a golf caddy for ten years growing up and I thought that that job is--if you got kids and you have access to a caddy program to have them work--I truly believe that's the best place for someone who's thirteen, fourteen years old, can gain some real life skills. Communication skills are super important and walking one-on-one with somebody that you've never met before that is of a much higher stature than you are as a freshman in high school, being able to carry on a conversation with that person, over time dealing with different personality styles and traits, making money and doing so and aspiring to kind of be someone that's better is such a great experience. So I always go into a tangent when I talk about that but I think that's somewhere where the work ethic and the relationship building has always been super important to me. That's also been a foundation of what we've done at HighGround. I remember Joe O’Neil telling me that the brokerage business is a commodity business--we trade commodities and we are a commodity--the only thing that distinguishes ourselves from one another is service and information. That's truly we we've taken the old Downes O’Neil model that I learned when I started in this business in 2001 and we just put that into overdrive. We've created one of the most comprehensive dairy market intelligence packages that are out there and our subscribers are incredibly loyal and provide us great feedback so that we can continuously improve that. That is part of the relationship side but I think people have enjoyed working with us because we take what they've provided us from a feedback perspective and we put that into practice, whether that's just the futures-options execution, whether that's a small customer that has a data request that we can fulfill, we do a quickly, we’re receptive, responsive, we’re nimble to change, and we're always doing our best to cultivate relationships. We'd love to do that much more and get out and visit with our customers and see them at conferences and travel around but I think our customers over the last eight years realized that fact and that's why we have such a great loyal customer base.
Alyssa:
Absolutely. So the last thing I want to ask you is can you give us an example of a customer success story that would Inspire someone else in the dairy supply chain to start utilizing risk management tools that we offer?
Eric:
The one story that I will always go back to and remember was right before one of the biggest crises in my lifetime--the global financial crisis as it was unfolding. I was sitting on a trade desk with the Downes O’Neil Group, who had been been bought out by FC Stone, and working alongside a longtime business partner of mine Dave Krisowski(?). We're trying to navigate, very similarly did to 2020, we're trying to navigate and keep our customers informed. For the previous three or four years prices have been oscillating up and down. This was that one moment that you could see the writing on the wall that things were starting to unravel. At the same time, dairy market prices were carrying at all-time highs and carrying a relatively flat forward curve for an 18 months time frame. I remember talking to one of our long-time dairy farm customers who was always good at risk management and we just said we think that this is the time to go. We locked in 100%--maybe even a little bit more than that--a little bit speculatively of his milk for the entire 2009 year in the late summer of 2008. Ultimately, over the course of 2009, we saw all-time low's on dairy prices. It was a terrible year and a lot of farmers went out of business and this farmer went on to buy neighbor's property, buy other dairies and really be able to kind of take his business to new heights. I think the important thing to recognize when you're doing hedging and risk management is it's the long game. You are a consistent hedger so that every five or eight or ten years when something ridiculous happens that wouldn't have just crushed your business--if you have hedged you’ve protected yourself against disaster. When you have money in your pocket--no matter if you're a pizza chain that's locking in a price and 2020 provided you with monthly pricing that was closing in on $3 a pound at one point or whether you're a dairy farmer and we’re able to lock in you a $19 milk price for an entire year in 2009, when the average price that year was somewhere in the neighborhood of $12 a hundredweight--you're living for those moments. So, again, it's a long game, but as long as you are very diligent about your planning, you’re planning for those moments. That's the moment that make or break in these markets and if you're not a consistent hedger, you're going to miss out on those opportunities.
Alyssa:
That is great advice. I know I won't forget that year either--it was my first year in commodities. Certainly will go down in the history books. Thank you so much for this--your knowledge has had such an impact on so many people in this industry, including myself, and I look forward to continuing this journey of focusing on helping our customers thrive in dairy. Thank you.
Eric:
Thank you.