Cost conscious

by Steve Krut
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Small and very small meat processors seem to have found a pattern to keep their businesses up and running over many years. It involves constantly redefining their operations, equipment improvements and reaching new market areas. For many, 2014 will pose new challenges, but they intend to still ply that formula that has served them well in the past.

Hewitt’s Meat Processing Inc., of Marshfield, Wis., has been in business for three generations, and company president Tom Tasse sees 2014 as “decision time” continuing.

This month his son-in-law, John Franseen, who has been with the company for three years, completes his Meat Crafter and sausage-making courses at the Univ. of Wisconsin- Madison. Tasse understands that he may have to rethink his business concept to keep it viable and growing.

“We have an older facility in Lindsey and in 2011 added a second retail location in Marshfield to keep the volume where it needed to be to survive,” he notes. “But we are being impacted on many fronts that may cause us to change the way we do things. For example, our game-processing business has been good, but we have increased costs with rendering and deer-bone disposal. A second truck is needed just to pick up the bones and that’s a direct cost of $12 a barrel. We were told last month that we may only have one more week for bone pickup. That means finding a new disposal source for by-products from one of our mainstays. Right now we will need outside help to solve that problem.”

Offering health-insurance coverage for the 11 workers may also pose a problem for Hewitt’s in the coming year.

“A few years ago, we were able to provide medical coverage and as the premiums rose,” he says, “we asked employees to cover 20 percent of the costs.” Many opted to go without company coverage and opted for higher pay instead, Tasse says. “We’re just not sure what our options may be for the future.”

Tasse says he is looking to enhance his company’s website to provide ordering information and not just list pricing. He also would like to expand some of his local gas station and convenience store trade by offering shelf-stable snack sticks.

“We are taking delivery on a new Multivac rollstock machine that will give us that capability,” he adds. “Our older one served us well, but we need to save labor costs and provide better packaging with the new equipment. That should help us market to more local stores. We are also adding a new carcass-splitting saw and recently added new microprocessors in our Alkar smokehouses.”

Unsure about insurance

Joe and Cherilyn Davis believe that finding affordable health insurance coverage for their employees will be one of their biggest challenges in the coming year. Their company, Davis Meat Processing, Jonesburg, Mo., operates under state meat inspection and is expanding for the sixth time in their 30-year business history.

“We are now doing more volume in locally raised meats that are processed under inspection and sold under private labels than we do with our historical custom slaughter and processing business,” Cherilyn explains.

“We do a great deal for our employees and want to keep them,” Joe adds. “When you find someone who is a good worker, you want to keep them and having good medical coverage is key. We offer group activities that the business pays for, such as bonuses, vacations, holiday pay and flexibility to meet family time schedules. We even provide family programs, such as family trips to baseball games and water parks, but it keeps coming back to having an affordable insurance program.”

The Davis family has worked hard to embrace new ideas and products and follows good-sanitation practices to avoid inspection issues, but says time is limited to research and find the best insurance programs. The uncertainty over compliance deadlines and requirements for small businesses has made the situation even more critical for the coming year, Cherilyn adds.

From the AAMP camp

Marty Manion, executive director for the American Association of Meat Processors (AAMP), sees both challenges and opportunities for small processors in the new year.

“Validation of HACCP plans has been on the radar for quite a while and looks to be in place and implemented some time in 2014,” he points out. “AAMP has reviewed the Compliance Guideline, with an eye to what it means to the small and independent processor. When the final guideline is published, small and very-small plants will have nine months to come into compliance. Assisting members to navigate and incorporate them into their day-to-day operations will be crucial this year.”

He feels the Affordable Care Act has huge implications for how smaller operations supply benefits to their employees and contends that increased costs could limit dollars available to hire part-time help and expand many businesses.

“Business choices are to offer a group medical plan, subsidize employees’ plans on the new individual exchanges, or stop coverage altogether and risk seeing employees walk away,” Manion says. “The coming months will change the employment landscape across the nation.”

The AAMP leader believes state regulations, as they relate to federal regulations, will continue to cause confusion among its processor members. He says those regulations tended to line up more closely in past years, but that plants falling under both state and federal inspection will have a more difficult time knowing which standard to follow. It appears to him that Washington and state capitals are walking a different path on many issues.

“Under opportunities for 2014, the farm-to-table trend is showing no signs of slowing down,” Manion points out. “This gives small, local businesses a huge opportunity to market and sell their products in their own area. Better food freshness combined with the economics of lower transportation costs makes this an opportune time for smaller enterprises.

“Finally, the economic turnaround looks to be gaining a foothold. The stock market is hitting record highs and many companies report record profits,” he adds. “This year looks to be a year of good economic growth and increased consumer demand.”

Supplier perspective

For more than 30 years, Rodney Schaffer has worked for the Con Yeager Spice Company and serves accounts from Maine to Florida and as far west as the Rocky Mountains. As director of technical services and regulatory compliance, he sees a trend in much stronger enforcement of FDA Food Code and Hazard Analysis and Critical Control Point (HACCP) requirements by local regulatory agencies in the retail processing area.

“Retail operations are required to have HACCP plans in place in order to produce ready-to-eat and reduced- oxygen packages and enhanced regulatory activity at the local level is now becoming common-place,” he says. “Those retailers operating without continuous state or federal inspection would be prudent to attend HACCP courses and develop and implement their HACCP plans before the local inspector is at the door to enforce food-code rules.”

Schaffer feels it is probably not necessary for small processors to get drawn into the “all natural” or “organic” trends, despite growth in those product categories in the last several years.

“I believe this product category growth is simply a response to the void created when many farmers markets close at the end of the season,” he says. “The farmers markets have been and continue to be a great distribution channel for small farms and processors who could compete with the big-box stores by selling natural and organic products that were previously unavailable at mass retailers.

“Consumers can now find those products in big-box stores year round, but the products don’t come from local farms and people they know and trust,” he adds. “So, was it all the natural and organic products that the consumers wanted or was it knowing and trusting the people that grew and processed their food?”

Schaffer contends that processors should reach out and nurture their relationships with their customers, respond to their needs with innovation, variety and quality and continue to earn their trust.

Some hot product categories Schaffer suggests processors consider include: “everything pumpkin”, such as a pumpkin spiced bratwurst; sweet bourbon, red wine and garlic rubs that go beyond traditional peppered bacons; and good smoked sausage filled with dried cherries and Kalamata olives. He contends that marketing products that go beyond the center of the plate, such as appetizers or snack foods, have great potential. He adds that sweet and hot sopressata, salame and calabrese items in the fermented and dried Italian-sausage category are also a growing category for smaller processors.

Steve Krut, an industry veteran, is a contributing editor writing exclusively for Meat&Poultry, specializing in small business issues. He resides in Marietta, Pa.

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