This is an interesting challenge in that you are receiving competition from brands that are known actually world-wide. The advice to align your brand to local and ethical issues makes sense and yet ... at what cost to the consumer. I understand that your initial step was the organic milk and the associated price increase did the opposite of what you aimed to achieve.
Of course I don't know what the other recommendations were that you would be considering however, if there's learning from your initial experience I would suggest that you bring your team back to the drawing board to approach your question related to being a responsible and community-based business once again. This time you can come up with creative ideas that distinguish you from the competition ... something the reinforces the concept of "big enough to serve you ... small enough to care. I expect you will find some answers in the way you serve your customers ... a way that lets them realize they only can get this type of service from a 'neighbor'. I believe there are solutions for you that will not require raising prices at the same time accomplish your goal. it's worth a serious shot. What you have going for you is that your loyal customers really want to remain just that. Just give them the reasons and I believe you'll find it won't take that much.
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