The sum of the parts
October 11, 2010
by Joel Crews
It’s the rallying cry heard from employees at every level of Agri Beef Co.’s 15 divisions: “We’re big enough to serve ya, but small enough to know ya.”
With deep roots in cattle feeding and production operations that date back to when Robert Rebholtz, Sr. founded Agri Beef Co. in 1968, the methodical growth of the vertically integrated company now spans 15 divisions, across several states and boasts sales of over $700 million. With headquarters in Boise, Idaho, the company maintains a working ranch in Loomis, Wash. (AB Ranching); operates feeding operations in Washington state, Idaho and Kansas (AB Livestock); processes its meat at the Toppenish-based Washington Beef plant (acquired in 2003, establishing AB Processing); and markets and sells its high-quality beef products to specialty retailers and discerning foodservice customers located mostly in the Northwest (AB Foods) and to export partners in 15 countries.
The company has also diversified its offerings under its Snake River Farms brand to include high-end, Kurobuta, Berkshire pork, which is a logical fit to market with its signature Kobe-style, American Wagyu Beef. Among the offerings under the Snake River Farms beef brand are premium steaks, ground-beef patties, hot dogs and whole-muscle cuts. Additionally, the Snake River Farms products are being sold outside the region to online meat shoppers ordering premium products from its increasingly popular Web site. AB Foods also produces a limited amount of Select grade beef for programs that include its Rancho El Oro Beef brand, targeting the growing Hispanic market.Step by step
Achieving what Agri Beef calls its “butter-knife beef” starts well before the farm. The painstaking care initiated even before its cattle are procured is ensured with commitment at each step en route to the fork of consumers. From protecting and maintaining the genetics used to produce its cattle to the meticulous oversight of the 100,000 acres of serene mountain range its cattle quietly graze at Agri Beef’s Double R Ranch, the passion and pride that goes into the health and development of each animal is clearly evident; first when they are moved to one of the company’s three feedlots, and finally, when they arrive at optimum weight and health at the finely tuned Washington Beef processing plant in Toppenish, Wash.
Gazing out on the postcard-worthy mountainous range that teeters about four miles from the Canadian border, Howard Asmussen, who has dedicated his life to raising cattle on that range for most of his 75 years, epitomizes the pride that goes into producing every bite of AB’s products. “I’ve raised cattle all my life,” he says. “And I’ve been involved with several other beef operations. But this is the first time where we are able to raise quality cattle and be assured that they will be quality steaks.” Asmussen speaks proudly about his role and his family’s commitment to Agri Beef Co.’s products. Along with his wife, Marilyn, and now his grandson, Levi, the Asmussen family has ridden on horseback over just about every square foot of the 100,000-acre range where they have shepherded cattle for decades. The level of passion the Asmussens have for their part in delivering a quality product to the plate of consumers is evident at every segment of Agri Beef Co.’s business. Customers, says Howard with a subtle crack in his voice, “are getting the benefit of a lifetime of work.”
The Agri Beef of today is a far cry from what it was in 1968, when Robert Rebholtz, Sr. founded Agri Beef Co. with the purchase of Snake River Cattle company and subsequently incorporated the livestock feeding operation after purchasing El Oro Cattle Co. 10 years later. In the mid-1980s, the feed-supplement and nutrition division was founded and would evolve to what is known today as PerforMix Nutrition Systems. Agri Beef took another step toward integration in 1988 with the purchase of the 1.4-million-acre IL Ranch near Tuscarora, Nev., and it also started one of the nation’s first Wagyu cattle production operations for what would become the company’s Snake River Farms brand. At the age of 59, Robert Rebholtz, Sr. passed away in 1997 after battling cancer. Fortunately, his son, Robert Jr., grew up working in the business, beginning his career scrubbing water tanks in the feedlot . He took the reins in 1997. His father’s legacy lives on in the company today and his vision is at the heart of its diverse operations. The Double R Ranch brand, which features highend Choice and Prime graded beef, was named in honor of Robert Rebholtz, Sr. in 2004, just one year after his company took still another step toward vertical integration with the acquisition of the Washington Beef processing plant. Washington Beef’s St. Helens Beef line remains the company’s main brand for sales in retail, foodservice and exported products, mostly to Asia.
Located within the boundaries of the Yakama Indian Nation, the Washington Beef plant processes approximately 7,300 head of fed cattle per week and employs about 830 workers. At the current daily capacity of about 1,450 head, Brad McDowell, president of AB Foods, the processing division of Agri Beef Co., categorizes the single-shift operation as “relatively small compared to most of the Midwest-based plants, many of which I’ve worked at in years past.”
Cattle delivered to the plant are quietly tended to on most days by two brothers who have worked at the plant for decades. The sibling team masterfully directs small groups of cattle from the holding pen into the plant through a cattle-handling system designed by Dr. Temple Grandin. The company enforces a policy of not allowing hot shots in the handling and stunning areas, where vocalizations (from the workers or the cattle) are almost nonexistent.
Balancing the productivity of the slaughter side of the plant with the fabrication side of the plant is an ongoing goal of the plant personnel, who are led by Jesse Castaneda, director of operations.
With 15 percent more capacity on the slaughter side of the operation, striking the balance is complicated by processing complexities that result from starting and stopping the production of various brands and product lines that require gaps in the fabrication line. Chain speed is cut in half, for example, when the facility is processing its Wagyu cattle, due in part to their larger size and the care required to break down the larger, more valuable carcasses. “Even threeto-five-minute gaps, over the course of a week, add up,” says McDowell.
Other productivity challenges the plant faces daily are related to regulatory compliance and the evolving demand of today’s customers. Accommodating Country-of-Origin-Labeling issues and requests for more cuts that were unheard of a decade ago have become routine. “For example,” says McDowell, “production lines that used to just cut clods are now using that same muscle to produce smaller, specialized cuts, including flat-iron steaks and clod hearts. This is due in large part to the demise of skilled butchers at the retail level.” With about 25 percent of its sales in the foodservice segment, the remainder of the AB Foods’ business comes from products sold to independently operated retail stores and small chains in addition to export customers in Asia and a number of US military bases.
Like most plants of its size, there are four primary fabrication lines, each of which is dedicated to a primal of each carcass (chuck, rib, loin or round). The plant includes a growing value-added processing space, which is largely dedicated to consumerready, sliced, retail-ready products for commissaries as AB Foods is the exclusive beef provider for all of the US military bases in the Pacific Northwest in addition to some overseas US bases. A pending expansion, which will not involve moving any walls, is planned for what is currently the area designated for processing valueadded products. The main goal of the project is to increase production on the fabrication side closer to the rate of slaughtering.
While production has increased from about 1,250 head per day five years ago, to 1,450 head today, the plant is now near its optimal capacity, says McDowell, adding that at the very high end, production might possibly be ratcheted up about 50 more head per day in the current configuration. Too often though, he says, large operations push for the highest-possible production. “It’s easy to mask inefficiencies with big throughput and volumes and I personally think that’s the wrong thing to do,” he adds. Among the efficiencies the expansion would facilitate is handling the overflow on the plant’s chuck line, where a rotary packaging machine with a capacity of 30 pieces of product per minute is the weakest link in a production line capable of producing 40 pieces per minute. “When you can’t accommodate that, you have to hold your chain speed down,” McDowell says.
The plant was last expanded in 2006 to add space to the kill floor to further distinguish between the hideon and hide-off side of the operation.
Processing operations include the pathogen-control methods common in most plants of its size, including steam sanitizing and Sanova carcass treatments as part of an estimated 25 foodsafety interventions used throughout the production process. McDowell points out, however, that adoption of pathogen-control interventions and adherence to strict food-safety practices are only part of a successful inplant program.
“Having worked at some of the other processing companies earlier in my career, the one thing that really sets us apart here is the culture. You can have all the policies in place, and we do,” he says, “but a policy does not define a culture.” He points out that even if there is a potential food-safety issue that arises at the plant, “it is not a qualityassurance function; it is a plant function and the entire plant gets involved and we try to find out what happened. We treat each small event as a potential big event.” In this regard, there is no delineation between QA, food safety and operations, he says. Sacred ground
One unique aspect of the processing plant is its location on land that is part of the Yakama Indian reservation. Fortunately or not, there is a creek that runs right through the plant property that is regarded as a sacred waterway by the Yakamas. Special consideration to the respectful treatment of the waterway is given anytime there is an aspect of the plant’s operation that could impact the environment. “We have a very close relationship with the Yakama Indian Nation,” McDowell says. “They are a sovereign nation and it creates some interesting dynamics when you’re dealing with federal government’s environmental regulations and the Yakama Nation’s environmental concerns. I invest a lot of time with the Yakama Nation; they’re important to our lives.” Recognizing excellence
Employees at the plant are its most coveted asset. Castaneda can rattle off the names of every line worker and how long each one has worked at the company. Castaneda worked his way up through the ranks at the plant, starting many years before it was acquired by Agri Beef. Likewise, over a career that has spanned nearly three decades, McDowell has worked at every position common in most plants, which gives Castaneda and him useful insight as they manage operations at the facility. They regard the workers as extended family and realize the key role they play. During the summer, McDowell’s son works at the plant, too. “As we’re walking around in the plant, you see that I’m not a stranger to the employees and neither is Jesse,” says McDowell. “That comes from constantly interacting with them talking to them about what we see and where there might be opportunities.”
Communicating with workers at the plant about a facility-wide issue or policy is much easier than at a twoshift facility, McDowell points out. Other disadvantages are inherent with two-shift operations, he says. “Your highest turnover is always on the second shift; your least-experienced employees are always on your second shift and therefore your product consistency and quality are always a challenge during the second-shift operations.”
When larger plants have production issues, they are usually related to consistency problems, “which almost always can often be related to the second-shift environments.”
Keeping workers engaged and informed about the importance of their role is critical to success. Washington Beef’s employee-recognition program goes beyond a mention in the company newsletter or a designated parking place for employee of the month. Castaneda initiated a new program that rewards outstanding employees each month by giving them the opportunity to see what goes on throughout the rest of the Agri Beef Co. system, before the animals arrive at their plant and after the meat products are shipped from their docks. The second Friday of each month, exemplary employees from all departments of the plant load into a company van and venture out to see the rest of the operation. The paid field trip first includes a visit and tour of its feedyard in Moses Lake, Wash. From there, they are taken to see the PerforMix liquid feed supplement operation for a show-and-tell and then on to a local retail store that carries Agri Beef products. While there, they meet with the store’s meat department manager who shows the star employees how they use the meat delivered from the Washington Beef facility. The day is concluded with lunch at a local restaurant that serves beef from the plant. “Since rolling out the program in January, the feedback has been fantastic,” Castaneda says.
Showcasing the expertise of its workers is also used to foster relationships with retail and foodservice partners. As part of its regular course of staying in touch with its customers, plant workers are regularly taken into the field to visit and interact with them during special events, food shows and even at their retail stores or restaurants.
“Even though they may be a chuck boner or a tender puller all day, every day, they actually get into the stores and see the end result of their product and talk face-to-face with customers that ask questions,” Castaneda says, and they get feedback from those customers . The resulting sense of pride the employees experience is something easy to see once the workers get back to the plant and share their experience with their coworkers. “They are literally awestruck by what happens downstream, and the sense of pride they experience from seeing it firsthand is what sets us apart,” McDowell says. Strategy matters
Measured and steady growth at AB Foods’ beef processing plant is a reflection of Agri Beef Co.’s growth plans, which don’t include developing to be a juggernaut of the beef industry. Rick Stott, Agri Beef Co.’s executive vice president of business development, says while there is a need for the high-volume, multi-billion dollar companies in the market to feed the masses, there is likewise ample opportunity for a company the size of Agri Beef to thrive. The Wal-Marts of the world are not their target customers.
“We’ve chosen to be differentiated and use a unique model that is really difficult to duplicate in any other place other than in a plant our size and in the culture we continue to develop,” Stott says. “All we do is survive on the crumbs from the table of the ‘big boys’ and we’re happy to take those crumbs and make a profit from them.”
Too often, the big companies forget about the high-service, high-touch expectations of the customer base that AB Foods banks on. By focusing on what it can do better than the competitors, Stott and his team are confident the company’s success will continue. He says corporate strategy meetings target how to better grow relationships, not on specific sales numbers and goals. “We’ve never approached any year saying, ‘here are the numbers we need to hit.’” Stott says, an important part of the future is growth with an eye on the environment.
Jay Theiler, executive director of marketing for Agri Beef Co., adds that the company’s biggest success stories are attributed to working with customers possessing similar values. “We have some chain-store business,” Theiler says, “but the company would rather grow alongside smaller, independent retail operators as opposed to relying on one or two gigantic customers.” The same holds true of the distributors it works with. “We don’t need three or four distributors in the market,” he says, and Agri Beef has chosen to work with one or two key distributors to reach its foodservice customers in the Northwest.
McDowell considers JBS, Tyson and Cargill his top three competitors in markets where products are negotiated on price, but being the low-price leader isn’t a top priority for Agri Beef. To the contrary, it is more likely those big companies that consider Agri Beef their competitor, as evidenced by several attempts by them to dabble in their market.
As the company develops salesgrowth strategies to take it to the next level, McDowell says its continued success will not be measured by sales volume alone. “It’s a business that if you incur price increases, you can’t just pass costs through to your customers because a large part of our business is negotiated,” he says. “Our challenge is ‘how do we effectively find ways to continue to take costs out of this business and increase efficiencies while servicing our customers’ diverse needs.”
Considering the processing plant has an optimal capacity of 1,500 head per day and the company is well established in the Northwest, the goals are holistic. “Our focus is more on how we build the relationships and partnerships in the markets that we want to play in. We can achieve success by helping our partners succeed in their environment. I’d rather measure our success in terms of those partnerships we have in those key areas more than anything else.”