When the leadership at Superior Farms decided to invest $17 million in a new lamb plant adjacent to their existing Dixon, California, lamb facility, many people thought they were crazy. After all, the US lamb industry is small. Only 2 million lambs are processed in the US each year, compared to the New Zealand lamb market that processes 30 million per year and the Australian lamb market that processes 70 million per year. And compared to other proteins processed annually in the US – 120 million hogs and 30.3 million beef cows – lamb represents a small percentage of the US meat industry.
But Superior Farms executives, led by Rick Stott, president and CEO, saw something the skeptics didn’t see – an exceptional growth opportunity for an up-and-coming industry, and the chance to produce a truly sustainable protein at a time when the meat industry is constantly facing environmental scrutiny.
Stott is relatively new to the lamb industry, his tenure at Superior Farms started just a few years ago. Prior to assuming the top spot at Superior Farms in early 2013, Stott spent 20 years in the beef industry, with Agri Beef Co., based in Boise, Idaho. When he left Agri Beef he was serving as executive vice president. He was an integral member of the management team that helped grow the integrated beef company from a $125 million firm when he first started, to a company with revenues of close to $1 billion at the time he left.
“I got a lot of grief when I decided to go from the cattle business to the sheep business. Being one of the key executives at Agri Beef, it came as a big shock to people that I would leave the company and the beef industry,” Stott explains. “But it gave me the opportunity to do something in my career that I had always wanted to do – lead a company.
“I also saw a great opportunity to take the skills I had learned at Agri Beef – the skills about developing brands, market segmentation and product differentiation – and apply them to the lamb industry, and specifically to Superior Farms.”
Stott sees a huge opportunity for growth in the US lamb market. There was a 14 percent increase in demand for lamb in foodservice and 9 percent increase in retail over the past two years, he says. And 40 percent of US consumers say they have never tried lamb. “It’s fun to watch that demand starting to grow and to see lamb being discovered,” he says.
“We believe the opportunity for the future of this industry has never been better. That’s why we built this plant,” Stott says. “We’re so optimistic about what we have right in front of us that we’re willing to invest our own money as employee owners. We see something in this industry that’s pretty exciting.”
Superior Farms, with annual revenues of around $250 million,has been an Employee Stock Ownership Program (ESOP) company since 1981. Many of the plant’s 146 employees have been with the company for more than 15 years (the longest serving employee has been there since Superior Farms purchased the plant in 1981). The company has paid out over $20 million to retired employee owners since the inception of the ESOP.
Superior Farms was founded in 1964 in Ellensburg, Washington, and in 1981, purchased the Dixon facility (which was originally built in 1923). The company has an additional plant in Denver, which it took ownership of in the late 1990s, as well as a plant in Hawarden, Iowa, formerly Iowa Lamb, which now produces pet treats for the company. Superior also has a sales and fabrication facility based in Chicago, and sales facilities in both Los Angeles and Boston.
The decision to build a new plant in Dixon was a relatively simple one once the choices were considered, Stott says. “Our old plant was a 1920s vintage plant, so we were going to have to make some changes in the next five years or so. Our options were to try to redesign it bit by bit, not knowing what we might find when we peeled back the layers. Or just leave California altogether and work out of our Colorado plant. The third option was to build a completely new facility,” he explains. “We had to ask ourselves if we were committed to the American, and specifically the West Coast, lamb industry, and if we were committed to expanding the American lamb industry. If so, building a new plant in California was a must from a big picture standpoint.”
California is the second-largest lamb producing state in the US, says Shane MacKenzie, vice president of operations. “We want to support the industry both in California and in the US. We have growers and producers that have made investments in this infrastructure and we want to be here long term for them.”
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From groundbreaking to ribbon cutting, the new Dixon plant took around 16 months to build. The plant celebrated its one-year anniversary in October. When Stott came on as president and CEO 3 ½ years ago, deciding whether to build a new plant was first on his agenda. Fortunately, MacKenzie and the operations team had done a tremendous amount of research, planning and design before Stott joined the company. All that was left was to make the decision to move forward, Stott says.
Since the plant dated back to 1923, serving both as a beef and lamb processing plant, part of the planning process included examining operations at the existing facility to see if any equipment or processes could be moved to the new building. MacKenzie and other members of the company’s operations team spent months researching options for equipment and processing procedures – they even traveled to other facilities around the world for ideas.
One goal behind building a new facility was efficiency – both in the use of space and energy. This translated into building a better plant, but not necessarily a bigger one. The previous plant was 65,000 sq. ft. – the new plant is 50,000 sq. ft.
“The old plant evolved from the ’20s to the ’50s to the ’90s. Whenever there was something new that needed to be added, we just added it wherever it would fit,” MacKenzie says. Years ago, when the plant added case-ready operations they simply put them in wherever space allowed. As a result, the case-ready part of the operation ended up being a ¼ of a mile away from the fabrication part of the processing line, MacKenzie explains. “The first thing we wanted to do in the new plant was to streamline the process which in the end meant saving space.”
In addition, the operations team “right fitted” the new plant, meaning they built it to accommodate the number of animals that were going to be processed. For example, the chiller in the previous plant could hold 4,000 head of sheep and lamb. The new facility has a chiller that can hold 2,500 head. “We were chilling space that wasn’t being used before,” MacKenzie explains. “Our new plant is right sized for the production we are actually doing, which is more energy and space efficient.”
The streamlining of the new plant has also cut down on the amount of time it takes to process an animal – it now takes only 28 minutes, whereas it used to take nearly an hour. The new facility harvests 1,400 lambs per day, and approximately 250,000 per year. The company has an additional 50,000-sq.-ft. lamb processing plant in Denver, where 500,000 head per year are processed.
Like most large-scale slaughtering operations, the new plant is divided into two areas – “clean” and “dirty” – each of which contain separate employee changing areas and cafeterias. To avoid cross contamination, employees working in the slaughter side of the plant stay in the “dirty” area, while those working on the fabrication and packaging side stay in the “clean” area.
Processing at the plant usually starts at 6 a.m., five days per week. The line runs until between 2 p.m. and 4 p.m. A Saturday shift is added at peak times of the year, such as around Christmas and Easter, or other times when there is a higher demand for lamb.
The plant is open to receive livestock 24 hours a day, but typically the animals are brought in the night before they are harvested. After unloading they are housed in barns until they are moved to the processing floor. The lambs are led into the processing area up a series of ramps, then they calmly follow each other onto a center track conveyor restrainer and into the stunning area. The animals are held securely and are rendered unconscious with an electric stunner. Next on the conveyor belt, their throats are slit and they bleed out. Superior Farms’ lambs are certified Halal, which means one of four practicing Muslims, who are specially trained, must perform the final steps in the slaughter. If those individuals are unable to perform their duties – which rarely occurs – the process remains the same but then the product is not labeled Halal.
After bleeding, the lamb’s feet are removed and the carcasses hung up so they can be skinned with a hide puller. The sheep pelts are carefully removed and sent to the hide barn for inspection, salting and drying before being sent to a tannery. Following hide removal, the heads are removed and examined and the carcasses are split and eviscerated. Throughout the harvesting process there are a number of food safety interventions, one of which is the application of a 2.5 percent acetic acid solution to the carcasses for microbial control. The carcasses spend 24 hours in the cooler before moving on to fabrication.
Not unlike its beef, poultry and pork-processing counterparts in the industry, USDA personnel are on site at Superior at all times during production to inspect the animals, ante- and post-mortem. The representative also monitors animal handling concerns, both as the animals arrive at the plant and while they’re being handled prior to and during processing.
On the fabrication side of the plant, employees rotate duties on the processing line every 20 minutes to prevent repetitive stress injuries. Each employee is trained in three to six different jobs in their area so they can rotate and fill in for absent employees.
The carcasses are broken down into four primals – shoulder, rack, loin and leg. Each primal is then broken down into individual retail and foodservice cuts. Around 55 percent of product is sold to retail customers, the remaining goes to foodservice customers.
A significant amount of the retail products are packaged case-ready in vacuum skin packaging (VSP) or modified atmosphere packaging (MAP) to extend shelf life. With lamb making up only 1 percent of the retail meat case, extended shelf life is crucial – retailers need to get as much value as they can from the higher end product they are purchasing.
The plant also features a grinding room where the meat is processed into patties or larger ground packages. After packaging, all products are sent through a metal detector as an additional safety measure.
Typically, it takes no more than two days from when the lambs arrive at the plant to when the product is packaged and shipped to foodservice and retail customers.
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Keeping it green
In addition to being the newest lamb processing facility in the US, Superior Farms’ Dixon plant is also the “greenest” lamb plant in the US, “and perhaps the world,” Stott says. “Making this plant more sustainable was part of the grand plan,” he says.
The previous plant utilized an on-site wind turbine to help generate power. The new plant has added roof-top solar panels to some of the buildings and covered parking areas to generate additional energy. “We also have newer compressors and energy-efficient walls,” MacKenzie says.
Energy consumption at the new plant has been cut by about 55 percent, MacKenzie says. “With our wind turbines and solar panels, we should be able to produce 95 percent of our energy needs using alternative methods.”
The new plant has also reduced the amount of water it consumes by 50 percent. The operation uses about 100,000 gallons of water a day, but returns most of it to the ground water system as well as irrigating neighboring fields.
“Sustainability is a core value at Superior Farms – it always has been,” Stott says. “We are trying to take care of all three legs of the sustainability stool. We want to be sustainable for the environment, for the community and for our employee owners, financially.”
Superior Farms’ efforts toward sustainability are part of the culture among most lamb producers, Stott says. “Sustainability is infused in every segment of the lamb industry.”
“Between using grasses and natural forages, public lands, invasive weed managment, fire prevention and crop aftermath, the lambs are consuming a lot of things that would generally be wasted – we are capitalizing on that,” MacKenzie says.
Many sheep ranchers, including those who supply animals to Superior, will work with other farmers to help them clean up their fields. The ranchers take their animals to graze on the farmers’ lands, which serves both the farmer’s and the rancher’s needs – the ranchers get their animals fed and the farmer can take care of his crop aftermath.
Stott refers to the way that lambs interact with the environment as regeneration. “The concept of regeneration – of using animals to regenerate the land – that just comes naturally when you raise sheep,” he says. “Lambs are pruning vineyards and providing organic fertilizer. Lambs are doing fire suppression by grazing in grasslands around cities. We have a number of innovative ranchers who are finding methods to raise their animals in ways that help the environment.”
Superior Farms has a base of around 250 California ranchers that they partner with from year to year, and an additional 900 from around the US. Some, like 5th generation rancher Ryan Mahoney, have long-term contracts with the company. Depending on the longevity of the relationship with the company and the number of lambs the ranchers provide, Superior makes them silver, gold or platinum partners.
In addition to partnering with area ranchers, the company processes around 7,000 lambs and goats a year for 4-H and FFA youth from California, Oregon and Washington. For a small fee, the company will process and chill the carcasses and send them on to a local meat locker for further processing.
One of the things that attracted Stott to the lamb industry was the potential for growth and the opportunity to increase demand among consumers.
“When I came into the sheep industry, I saw a really unique, high quality product with great differentiation that has a great story,” Stott says. “I see a huge opportunity to redefine the American lamb industry.”
“We believe in establishing brands that are meaningful to the consumer and to our customers as well. Brands that can really deliver value,” says Anders Hemphill, vice president of marketing and brand strategy.
In an effort to understand its target consumers, Superior Farms conducted some segmentation research. “We narrowed in on a couple of specific consumer segments – millennial foodies and baby boomers, who we call ‘mature perfectionists,’” Hemphill says. “We then refreshed the Superior Farms brand to deliver the message to all our consumers that we are an American lamb company that strongly supports American lamb farmers.”
Then Superior Farms created additional brands to appeal to consumers looking for different product characteristics. The Cascade Creek brand is a grass-fed program. Farmer’s Mark is the company’s newly created antibiotic-free lamb product. “There’s a huge demand for antibiotic-free proteins, so we’re trying to do our part to respond to that demand,” Hemphill says. The program just started in January and the company’s sales goals for the new product were met in May.
With an estimated 40 percent of US consumers having never tried lamb, Superior Farms is trying to do its part to increase consumption. “We recognize that lamb can be a bit intimidating for consumers,” Stott says. “We’re trying to develop new products that will make cooking lamb easy for consumers.”
Superior developed a cook-in-the-bag leg of lamb product that’s pre-seasoned and has a pop-up timer to make cooking easy. The company also created lamb bacon and pre-shredded lamb shoulder to give new consumers more ways to experience lamb. Superior Farms’ lamb burgers, tacos and sausage are also sampled and sold at AT&T Park, home of the San Francisco Giants, and other major league stadiums around the country.
Retail sampling is also part of the company’s marketing program. “There’s so much potential for growth in this market,” Stott says. “If we can just get the product into people’s mouths, we know they will come back for more.”
“We’re so optimistic about what we have right in front of us that we’re willing to invest our own money as employee owners.”