Leedstone is more than famed ‘We Do Cows’ slogan
MELROSE, Minn. — The "We Do Cows" billboards make a big impression on Interstate 94 as people travel to and from the Twin Cities.
Ag-savvy motorists often smile at the slogan, but few know Leedstone Inc. is a creative and transformative business in the region's animal health industry.
Leedstone is led by veterinarian brothers, David and Dan Tomsche. David, 61, is Leedstone's president and chief executive officer. Dan, 62, is vice president.
"It was always very natural that Dan and I work together," David says. "We were raised like twins and always best friends. We are very different but offset each other's strengths and weaknesses nearly perfectly."
Daniel says they've helped each other be better and anticipate where the industry is heading.
"It's been a privilege to do business with family and friends," he says, describe his as a support role.
In two decades, the Tomsches have disrupted the region's animal health supply business model, filling prescriptions from some 3,000 veterinarians nationwide. Along the way, they've become a leading dealer of some of the world's most sophisticated and high-tech dairying equipment, including robots.
Leedstone today has about 110 employees throughout the region. They are a pharmacy and retail store, with mail-order and dairy equipment entities. They sell dairy chemicals and supplies, and, lately, pet supplies.
The family's veterinary heritage starts with their grandfather, Emil Joseph Tomsche, a 1929 graduate of Iowa State University veterinary college. In 1929, "E.J." started a practice at Albany, Minn. Their father, Edward Joseph Tomsche, now 86, graduated from the University of Minnesota and joined in 1955, the year Dan was born.
Edward built the practice to a two-town practice and worked with four veterinarian partners. He also worked in dairy farming and had ventures in fleet supply stores, an animal vitamin/premix company, livestock auction market and bottled water.
Dan and David grew up in Melrose and traveled with their father on work trips. Both followed their father at the UMN Veterinary College. Dan joined the Albany practice in 1981 and David joined at Melrose in 1983.
The 1980s were tough for dairy producers. Most dairies then milked 50 to 70 cows. The "on-call" demands on veterinarians were "overwhelming," David says.
In 1989, David and Dan began a route truck business to deliver chemicals for milking system sanitation. Accounts receivable were getting uncomfortably large. Finances became more challenging when the IRS "encouraged" veterinarians to accrual accounting systems — paying taxes based on their inventories and when the services were rendered, not when they were paid as had been traditional.
In 1994 David gained notoriety when he traveled to Japan and saw his first robotic dairies. For several years he consulted for Japanese dairies and Wagyu beef producers. (Today, Leedstone has an export business specializing in dairy/beef business in Japan.)
In 1995, David and Dan went to the five veterinary partners with an idea for a new, separate business — a warehouse-like store that operated on a cash-and-carry basis. They said the warehouse would compete with the veterinary partners' existing business, which also sold products. Two of the five partners joined "Stearns Farm and Feed."
The warehouse had front-loading docks designed for producers to come to town to pick up bags of feed and pre-mix. About 95 percent of their business then came from their veterinary clients.
The Tomsches wanted their warehouse store to look full, but they couldn't spend much to do it. So they bought "semi-loads of sawdust in bags — to use as animal bedding," David says. The sawdust bags cost 25 cents a bag and offered the right ambiance. "I remember unloading the semis myself — by hand," David says.
Next, they waded into dairy's so-called "steel" business — selling, installing and servicing stainless steel milking and milk systems, as producers shifted away from stanchions and toward milking parlors. In about 2003, the Tomsches contracted with a pharmacist and separated Stearns Farm and Feed from the veterinary practice.
Later, they changed the name to Stearns Veterinary Outlet and Pharmacy, and later simply Stearns Vet Outlet.
"I thought it defined what our intention was — low-cost products like an outlet store," David recalls.
They started a catalog and soon were filling orders from all over the country. Cattlemen ordered products on Monday through Wednesday. The products often are perishable and had to be delivered by the weekend. As a counter-cyclical move, they added a pet supply business and later he learned that pet owners often order on the weekend.
Mondays are "tipped-over" busy, he says.
"At the beginning, that overwhelmed us," David recalls.
In about 2007, a large pharmaceutical manufacturer came to David to say that his catalog no longer could advertise prices below certain levels. It was "to protect pricing for the local veterinarian," David says. The Tomsches acquiesced — listing the prescribed pricing in the catalog but implying producers could get better prices face-to-face.
They added eight field staff from New York to North Dakota.
Steel and robots
In 2010, David brought in Brendon van der Hagen as a chief operating officer and chief financial officer. Van der Hagen has been instrumental in tripling the business while maintaining an employee-friendly culture.
In 2013, a Minneapolis marketing consultant urged the Tomsches to change the name — again. They became "Leedstone," named for an early settlement in Stearns County that is now the city of St. Martin, Minn. It was an area where their grandfather often practiced veterinary medicine. Their pet supply company became "Muddy and Inca," named for David's two pet dogs.
The Tomsches have evolved in their sales of stainless steel milking systems. They started with Westfalia, which merged with Surge and eventually became GEA Farm Technologies. In about 2010 they added Lely systems, specializing in robotic box-type milkers.
Leedstone has installed 140 robotic systems in Minnesota and North Dakota on about 60 farms.
A service tech team of more than 25 can remotely monitor any of the more than 130 robots in the two states. The average is two or three robots per farm, but some have eight or nine. In 2017, Leedstone began to handle GEA Farm Technologies systems — a rotary platform with robots in each stall — as producers strive to reduce labor. There are four of the systems in North America. One is under construction in North Dakota and another in central Minnesota. A top GEA official recently predict that 40 or 50 percent of U.S. dairy herds will be milked by robots in the next five to seven years — up from about 2 percent today.
David says he "never meant to declare war" on the bottom line of veterinarians — his family's chosen profession — but "to some people that's how it was viewed."
Veterinary is the last medical area where the "prescriber does most of the dispensing," he says, noting that's not the case for human dental or optometry. "In most states, veterinarians have the right to say, 'I will not write a prescription. You have to buy (the pharmaceuticals) from me.' And we deal with that every single day."
Today, about 90 percent of their business is from outside their immediate area.
As Leedstone expands, Dan is still practicing veterinary medicine with Minnesota Veterinary Associates, based at Melrose, Sauk Centre, Rice and Little Falls. Dan's son, Grant, also is a veterinarian in that practice and is on the board of Leedstone.
"I remind our sales team and employee base that we work for the dairy farmer. They get up at 2 a.m. to check a cow that's having a calf. The beef farmer does the same thing," David says.
"They often work in brutal cold. It's not easy work by any means, and it's not the most financially rewarding profession in the world. We have to pass on as many savings to them as we can."
And economic downturns are an opportunities.
"That's when we grow the most, because then people are reluctantly willing to ask the uncomfortable question from their veterinarian: 'Will you write a prescription for me?'"