Iwig Family Dairy has filed for bankruptcy but, as part of its reorganization plan, will continue to operate its Lawrence and Topeka retail stores.
Increasing sales at the Lawrence store — bemoaned by some for its difficult-to-access location at 1901 Massachusetts St. — is critical to the dairy pulling through the bankruptcy, owner Tim Iwig said.
“We have to drive people to the Lawrence store,” he said. “And if they refuse to go to that store, then we’ve got to find another location that works.”
Iwig, whose multigeneration family dairy is located in Tecumseh, filed for Chapter 12 bankruptcy Thursday in U.S. Bankruptcy Court, district of Kansas. A few days earlier, on Nov. 12, Kaw Valley Bank filed a petition for foreclosure against Iwig, according to Shawnee County court documents.
Iwig’s bankruptcy petition indicates the dairy had $696,000 in assets and $1.17 million in liabilities.
The dairy faced foreclosure in 2010 but rallied, in part by enlisting members of the public to buy shares in the company.
According to the bankruptcy petition, many Lawrence residents are among at least 150 creditors holding “unsecured nonpriority” claims from stock purchases in 2010 and 2011. Those purchases ranged from $500 to several thousand dollars each, according to the petition.
“Our understanding is they’ll still be shareholders after we come through the bankruptcy,” Iwig said. “We should come through the bankruptcy healthier than we are now, so they should be in a better position.”
Chapter 12 is the portion of the U.S. bankruptcy code that provides for adjustments of debts of a family farmer or family fisherman.
A Chapter 12 plan usually lasts three to five years, and must provide for full payment of all priority claims, according to the U.S. Courts description of the law. The debtor is not required to pay unsecured claims in full as long as the plan calls for all disposable income to be committed to payments and for creditors to receive at least as much as they would if the debtor’s nonexempt assets were liquidated under Chapter 7.
The dairy has operated a retail store at 724 SW Gage Boulevard in Topeka since 2010. Lawrence’s Iwig Dairy Store opened this spring, selling milk, butter, ice cream and a number of grocery products from other local sources.
Fans praise the farm-fresh milk and other dairy products, but not enough of them are coming in to buy it, Iwig said. He said the reopening of the Dillons store across the street hasn’t made a difference one way or the other.
Iwig said selling his milk through larger grocery stores was not a viable solution because it involves more time and work to coordinate for a smaller profit margin.
Iwig said one of the main goals of his reorganization plan is marketing the Lawrence store and, if he found a better location that was feasible, possibly moving.
“So far, the Lawrence store is running behind Topeka pretty measurably,” he said. “My store over on Gage does gangbusters. I don’t know if it’s our location or exactly what it is. If anybody has suggestions, I wish they’d make them if they don’t like it where it is.”
Iwig said he will continue to make milk in the old-fashioned method he has, even though it comes at a higher cost to produce — a pinch felt especially sharply during two years of drought, high feed prices and low milk prices.
He feeds his cattle alfalfa hay from an area farmer who does not treat the crop with Roundup, he said. They also eat spent grain from Free State Brewery and apple waste from Louisburg Cider Mill, which are cheaper than corn right now but still costly to haul.
He also uses vat pasteurization. The low-temperature method takes longer and costs more than the quick, high-heat pasteurization that almost all other dairies use, but Iwig believes it results in a product with flavor and nutrients closer to that of raw milk.
Finally, it’s sold in earth-friendly glass bottles.
“Our milk is head and shoulders above any other milk on the market,” he said.
On Wednesday, Iwig said he hoped hard work would help enable his business to emerge from bankruptcy healthier than it is now.
“The bottom line is, we’re going to keep on going stronger than ever and keep right on plugging away,” he said.