Economic links

by MEAT&POULTRY Staff
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When the economy began crumbling last fall, Patti Fortuna-Stannard worried that her sausage-making business would crumble with it.

Fortuna-Stannard’s anxiety was understandable, considering her company, Fortuna’s Sausage, does about 60 percent of its annual business during the holiday season. Fortuna-Stannard figured that increased home foreclosures, job layoffs and a plunging stock market would not bode well for her Charlestown, R.I., business, which sells Italian specialty sausages.

"Being a high-end product, we were concerned," says Fortuna-Stannard , the company‘s president. "We were very, very concerned."

But something strange happened en route to a lackluster retail holiday season for many American businesses: Fortuna Sausage’s sales rose.

"We had one of our best seasons ever," says Fortuna-Stannard, whose business does about $500,000 annually. "We were just amazed at how well it sold."

Other specialty-sausage makers from throughout the country say their businesses also fared well in 2008, a year that will go down in history as one of the most tumultuous in U.S. economic history. However, their good fortune doesn’t mean these specialty-sausage makers were spared all financial challenges in 2008, such as increased prices for raw materials. And they are also concerned about the business challenges that 2009 will bring.

In mid-November, when economic news seemed to get worse by the day, Fortuna-Stannard reacted quickly to offset a potential downturn in her business. She kept a close eye on inventory, not wanting to get stuck with too much unsold product. She also elected to send out an electronic version of Fortuna Sausage’s holiday catalog to save money on printing costs while marketing it as a "going green" message to customers. In the end, the holiday season proved a pleasant surprise for Fortuna Sausage, whose top-selling product annually is "Soupy" (known around the world as soppresata), based on an old family recipe that requires the sausage to air dry for eight to 10 weeks. Fortuna’s No. 1 mail-order seller during the holidays was a dry sausage sampler, consisting of five sticks of dry sausage for $54.95.

The No. 2 seller was a fresh Italian sausage sampler priced at $82.

‘A week would go by and we would say that was our big week," says Fortuna-Stannard, who estimates sales rose about 20 percent for the 2008 holiday season compared to 2007. "But business just kept building right up until Christmas Eve."

Fortuna’s wholesale business was also solid. The company sells to gourmet markets across the country and locally to some independently owned grocery stores. "People that usually order every two weeks from me were ordering every week," Fortuna-Stannard says.

Fortuna-Stannard says her theory for the company’s recent success in the face of the sour economy has to do with a different consumer mindset the past holiday season.

"I think people we’re buying more practical things for each other," she says.

Strong holiday sales

At the Stoysich House of Sausage in Omaha, Neb., owner Frank Stoysich also experienced strong holiday sales to finish strong in 2008.

"Surprisingly, our business has held up quite well," says Stoysich, whose processing operation includes two retail stores in Omaha. "We’ve been pleasantly surprised, especially with the negative economy in the forefront of the news as much as it has been. I don’t know if I can tell you that sales are up, but I can certainly tell you that sales remain strong."

Stoysich House manufactures about 50 varieties of sausage, including fresh (polish, cherry, pineapple, Greek, Dutch apple and others), smoked (Cajun, cheddarwurst, Portuguese linguisa and others), wieners and lean varieties featuring turkey and chicken. Stoysich wonders if cash-concerned consumers have held off on purchasing more expensive meat products like steak and opted for specialty sausage products instead.

While many consumers are passing on purchasing big-ticket items such as new automobiles and extravagant vacations, Stoysich believes they are willing to treat themselves to quality food products, such as the specialty sausages that his business offers.

"They know they can come here and get a quality product," Stoysich says. "People are willing to come here and spend a little more to get more in return and enjoy top-shelf sausage."

Stoysich also says his family’s business has a few things going for it to help it withstand a recession.

"We’ve been here since 1949, so we have 60 years of momentum and reputation to rely on," Stoysich says. "Secondly, the business doesn’t have big mortgage and large equipment payments to deal with. That absence makes us a lot stronger in terms of being able to ride out any potential tough times."

At the Chico Locker & Sausage Co., a small retail specialty sausage shop in Chico, Calif., Dave Dewey says he didn’t see any downturn in his sausage business in 2008. He says his custom processing business was also strong.

"All in all, our business is holding its own," Dewey says. "We have a deli, and it’s also doing well.

"People have to eat," Dewey adds. "But instead of going out to dinner, people are spending more on good quality sausage to take home."

During the holiday season, Dewey says his prime rib and ham sales were off about 15 percent, but sausage and bacon sales were strong. Dewey makes about 50 sausage varieties with beef, pork and chicken. Flavors include a broccoli and cheese sausage, and a jalapeño-cheddar wurst with pork and chicken.

Further north in Orinda, Calif., Skip Lott, president of Montibella’s Sausage, says he saw a downturn coming in his business about three years ago.

"People were turning away from the high-end products," says Lott, whose company sells chicken and turkey sausage with potato and other ingredients. "It was obvious to me that something was wrong."

While his 2008 sales were down, Lott says business began picking up around the holidays. Montibella’s best-sellers are a spicy turkey Italian sausage and a chicken apple variety. He also sells a chicken with jalapeño and cilantro, and a garlic chicken with sweet roasted peppers.

Faring great in ‘08

At the Sausage Shoppe in Cleveland, Norm Heinle figured his 2008 sales would be off a bit when he met with his accountant in mid-December. After all, Heinle says the Sausage Shoppe suffered a 10 percent loss in sales in October when the economy began to sink.

"But we held our own," says Heinle, who has owned the small retail shop since 1974.

Sales were about $310,000 in 2008, up from $300,000 in 2007. "[The accountant] said he was amazed our sales weren’t down [considering the state of the economy]," Heinle says.

Despite an increase in sales, Heinle says profits are "way off," down about 8 percent from the previous year. He attributes it to the increase of price in raw materials, especially hog casings, which he uses for bratwurst, German wieners and kielbasa.

"Hog-casing prices went through the ceiling last year," Heinle says. "We were paying $8 to $12 a hank. Now we’re paying $28 to $30 a hank."

Other sausage makers also endured a surge in raw material costs. Stoysich says increased hog-casing prices affected his operations. So did price increases in dry ingredients, such as spices and seasonings.

"Some of the costs that go into making sausage products have certainly seen noticeable increases in the past year," Stoysich says.

Heinle says high fuel prices in the summer also affected his business negatively. What has spurred the company’s business over the years is people driving from several miles away to purchase the company’s products. But Heinle says less people drove long distances to the Sausage Shoppe in 2008 because of high gas prices.

"We saw this occur especially around Father’s Day and the Fourth of July when gas was getting close to $4 a gallon," Heinle says.

The question for Heinle, Stoysich and other sausage makers is how to deal with this matter. Do you pass increased costs on to customers or find another way to manage them?

"We’re committed to holding our prices at the current levels despite some of the increases," Stoysich says. "We’re going to eat those costs. The last thing I want to do is start raising prices in this economy. You want to try and be as fair as you can and understand that everybody out there is hurting. If I can sell the same amount of product that I did last year…I would rather do that and eat a little of the raw-material costs than raise prices and scare off folks."

Fortuna-Stannard says her company’s costs went up about 60 cents a pound in 2008. While Fortuna Sausage didn’t pass food costs on to its customers, it did pass on some of the shipping costs with smaller orders. Heinle has looked for other ways to save money. For example, he held off on any major renovations or expensive equipment purchases in 2008.

"We are fortunate that the equipment is holding its own," he says. "The only thing we bought new this year was a scale."

Heinle even skipped the annual regimen of resurfacing his store’s parking lot last year. "It saved us $1,800. It doesn’t sound like much, but it is."

What Heinle says the business has going for it is his customers are willing to pay a good price, up to $7 a pound, for premium sausages. "Some people say they are overpriced, but those who know the products realize you can’t get anything better," Heinle says.

Heinle says one of his top sellers during these tough economic times are what he calls the "misfits," the products that are the result of a tie linker that makes a bratwurst or wiener too long or short. "In October and November, people came in specifically to buy the odd-sized brats and wieners because they’re $4 a pound instead of $6 a pound," Heinle says. "People are being more cautious with their dollars."

 Predicting the future

Looking ahead, what do sausage makers think 2009 will bring? If January is any sign, Fortuna Sausage will have a good year. Fortuna-Stannard says business in early 2009 started off better than last year at this time. She says the business received a lot of referral business after the holidays.

Stoysich says 2009 is a question mark. "Is it going to get any worse?" he asks. "I certainly hope not. I think we’ll see some slim weeks around here. My hope, at least for our business, is that if people are going to give up buying the big-ticket items, at least they will be willing to come see us and treat themselves to a good meal."

Dewey also expects some slow times in 2009, especially at the beginning. "Honestly, though, I look for ward to some slow times as long as they don’t last too long," he says. "Then I only have to work eight-hour days instead of 10- and 12-hour days."

This is the third recession Lott’s business has been through.

"This is the worst one, though, and I’m watching it like a hawk," he says. "But we’ll dig out of this. It’s going to be fine."

This article can also be found in the digital edition of MEAT&POULTRY, February 2009, starting on Page 22. Click here to search that archive.

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