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August 22, 2005

From calf to cow | Wolfe's Neck Farm Natural Meats outgrows its nonprofit roots to become a for-profit branded meat company

By Jennifer Hazard
In 2001, Erick Jensen had an idea: Start an organization that would help Maine farmers get higher prices for their cattle. Four years later, Jensen runs a bona fide company with 90 farmers from Maine to Colorado, a natural beef brand that's sold across the country and annual sales of $6.5 million.

As a marker of Jensen's success, in June the nonprofit Wolfe's Neck Farm Natural Meats was sold to a new, for-profit entity, Pineland Farms Natural Meats. It's a milestone not many nonprofits reach, according to Kristin Majeska, president of Waterville-based Common Good Ventures, who has worked with Jensen since he started the enterprise. "A lot of nonprofits are not liquid enough to be purchased, but WNF was truly an exception," she says. "In this case, we knew if they were acquired, they could achieve a higher level for their mission."

While Pineland Farms Natural Meats is in the midst of developing new business strategies, Jensen says its social purpose will remain the same: helping cattle farmers in Maine and beyond get the best value for their product, thereby keeping farmland in production. "Now that we're for-profit, we have the resources to do that," he says. Currently, the company has seven feedlots across the state, with more than 4,000 head of cattle. Jensen would like to see the number of feedlots increase by 30%-50% in the coming year.

Along the way, the company must also achieve profitability, which has eluded it thus far. Its new backing from the Libra Foundation, the deep-pocketed Portland foundation that supports the Maine Winter Sports Center and the Portland Public Market, among other efforts, provides Pineland Farms Natural Meats with a solid financial base, and the company is aided by the growing market for natural beef nationwide. But it remains to be seen if the company's business model ˆ— providing high-quality natural beef to retailers and restaurants at a competitive price while paying farmers a premium ˆ— is sustainable.

Craig Denekas, vice president of Libra and a former member of the board of directors for the Foundation for Agricultural Renewal, the division of Wolfe's Neck Farm in Freeport that operated Wolfe's Neck Farm Natural Meats, says Libra has seen promise in the operation since the beginning. Now, he says, the company is looking to internal growth to improve profit margins. "We're budgeted to have revenues of $10 [million]-$16 million this year, but our costs are exactly the same," he says. "While we're literally breaking even, we have confidence in our base model. We're also hoping to fine tune our costs and find ways to generate more dollars."

For Jensen, the company's growth ˆ— and recent transformation ˆ— are still a little hard to believe. "If you asked me even just three years ago, could this happen? I couldn't have imagined it," he says. "The WNF brand was once the best-kept secret in Maine, and now people all over the country know us. It's pretty amazing."

Accruing capital
The company's roots are planted in a small Freeport nonprofit, Wolfe's Neck Farm, which provides educational programs on preserving the environment and agriculture. It's also home to the Foundation for Agricultural Renewal, which Erick Jensen created several years ago to run the farm's beef and agricultural operations. But by last year, the organization's goals were solidly in place: These days, the meats can be found everywhere from neighborhood natural food stores to Hannaford, and Whole Foods markets to high-end restaurants, and Maine farmers and suppliers have accrued what Jensen says is $600,000 in premium income for their cattle and feed ˆ— money they would not have earned, he says, if their products were sold as unbranded commodities.

With revenues reaching $6.5 million in 2004, it was clear to the Wolfe's Neck Farm board that its little nonprofit organization was ready for big changes. According to Majeska of Common Good Ventures, which provides business assistance to nonprofits, board members agreed that the brand had outgrown their expertise and saw potential for the business to become a for-profit entity.

And, says Craig Denekas, Libra had long seen promise in the operation. "The business was a fledgling idea, but we believed it was a good one," he says. "And we liked their mission, as it is right in line with what we do at Pineland Farms," a New Gloucester teaching farm the foundation operates on the restored grounds of a former state mental health institution. Libra also recognized that the nonprofit model was growing less appropriate for the natural meat business. "There's so much more to itˆ… meeting [U.S. Department of Agriculture] requirements, branding, inspections, etc. It was clear to us that WNF had a lot of responsibility ˆ— and with it the potential for liability," says Denekas. "It was time to take the business to the next level."

So the Wolfe's Neck Farm board decided to spin off the assets of FAR to Pineland Farms Natural Meats Inc. To do so, FAR's assets were sold to the new business, which comprises a team of five shareholders ˆ— some from the original Wolfe's Neck board, others brought in by Libra ˆ— all of whom contribute their business expertise and financial backing to the new enterprise. (Denekas did not disclose the total purchase price.)

In addition to Denekas and Jensen, the Pineland Farm Natural Meats board of shareholders consists of Bill Haggett, former CEO of Bath Iron Works and Naturally Potatoes in Aroostook County; David Packhem, managing director for Common Good Ventures; and Michael Harder, former CEO of Jordan's Meats in Portland. (For more on Haggett, see "An experienced hand," p. 18.)

According to Denekas, board members agree that the first order of business is generating capital. "Any ripple in the market could cause extraordinary expenses, so it's very important to have reserves," he says. "A company isn't successful until it has the ability to cover costs."

To build up its bank account, Jensen says the new firm is stringently examining its costs, looking for savings by creating longer-term contracts with producers and adding new products. While he says the company plans to continue to operate under the Wolfe's Neck Farm brand name due to its strong following, it also may introduce a new brand called Pineland Farm Prime Beef. According to Jensen, high-end steakhouses are looking for natural prime beef to offer to their clientele, and he hopes the addition of a new brand will help fill that void. "Prime beef is not as prevalent here in Maine, but we're told customers in Boston and New York are asking for it," he says.

Quality, not cost
While tapping into new markets is a focus for the company, Jensen says regional tastes often limit what they can offer. "On the West Coast, there is something called a tri-tip cut that no one is familiar with here. Conversely, sirloin tips are popular in the Northeast, but not out west," he says. "We're trying to work with chefs throughout the country to introduce new cuts to the menu."

In addition to providing unique menu options to restaurants, Jensen also hopes to provide meats to the food service industry, with a focus on large, upscale universities. To do so, Jensen recently hired an individual in charge of food service and institutional marketing (he prefers not to disclose the name, as the new hire does not begin work until September).

Such a strategy would have had little success as recently as five years ago, but recent events have boosted the profile of natural meat in general, and the Wolfe's Neck brand in particular. "When mad cow disease and the Atkins diet came into play, it put the entire natural meats industry in a great position," says John Nicholson, a meat director for Austin, Texas-based Whole Foods Market. "Whole Foods did not have to make any changes in protocol, as we were already selling meats raised without hormones or antibiotics, and the WNF brand fit right into that category."

Nicholson also notes that customers are showing more interest in farming practices. "They want to know that the animal has been raised right from day one," he says. And while natural meats are often priced 10%-20% higher than conventional brands, Nicholson believes customers are willing to pay more for a quality product.

While this may be true, Jensen says price is an important selling point among similar brands. He cites Golden, Colo.-based Coleman Purely Natural Meats and Lincoln, Neb.-based Myer Natural Angus as strong competitors. "We're smaller than the others and sometimes that can be hard on competitive pricing, but we really don't want to get into the pricing game. Instead, we hope to differentiate ourselves by offering some of the best product in the country."

With the natural meats industry on the rise, the ability to stand out among the competition takes time, effort and, Jensen says, the ability to be in the right place at the right time. With so much in the works, the original staff has doubled in size. The WNF team included three people, including Jensen, who now serves as president. David Ordway, who worked on sales and marketing for WNF, will remain in his role, although Jensen says he will shift his focus to increasing retail sales. Kevin Wolmath, also from the original team, will serve as procurement director and will be in charge of scheduling cattle transports ˆ— from farms across the country to a slaughterhouse in Souderton, Pa. ˆ— and working with producers. Recent hires include CEO Haggett, the institutional marketing director and Customer Service and Operational Manager Bethany Kaplan.

With the new team in place and plans for internal growth underway, Denekas is confident that Pineland Farms Natural Meats will continue to prosper. "The trend towards natural meats seems to be really helping us along," he says. "All the consumer trade publications say that's where tastes are heading, so we know the market is there to help grow the business."

An experienced hand

Seventy-one-year-old Bill Haggett likes a challenge. The former CEO and chairman of the board at Bath Iron Works left the shipbuilding business in the early 90s, but he found retirement didn't suit him. "It lasted three months," he says. "I just couldn't sit around all day reading books."

Haggett decided to pursue challenging business ventures instead. Specifically, he was interested in projects that added value to Maine's natural resources, and in 1999 he found himself in a new position: CEO and chairman of the board for a Mars Hill-based business called Naturally Potatoes.

The business, which was developed to sustain potato farms in Aroostook County, was formed by a group of small farmers in the mid-90s. These days, says Haggett, Naturally Potatoes sells one million pounds of fresh-cut refrigerated potatoes a week. "That's a substantial amount of sales for Maine potato farmers," he says. "It's quite an accomplishment, when you consider one truckload holds 40,000 pounds."

Naturally Potatoes' success caught the attention of Walnut Creek, Calif.-based Basic American Foods, the nation's leading supplier of dehydrated potatoes. BAF asked if the northern Maine company was interested in selling; while Haggett believed the opportunity would be a boon for the company's investors, namely the area's farmers, he wanted to ensure Naturally Potatoes would keep its roots in Maine and that the workforce would remain intact. BAF agreed to the terms, and the deal is due to close in September (Haggett would not disclose the purchase price).

While Haggett used his past expertise to guide the business, he refuses to take credit for the company's achievements. "I was just one of a team of 75 very capable people," he says. He also credits Portland-based Libra Foundation for its support during the early years. "They really helped get Naturally Potatoes' business off the ground."

Haggett's professional ties to Libra eventually led him to join the board and to become CEO of Pineland Farms Natural Meats Inc. in June. He believes the natural beef business has the potential to increase sales of Maine cattle to people across the country; this also could be benefit cattle farmers of Aroostook County, who often struggle to stay in business. And he hopes to utilize his familiarity with the northern portion of the state as a means to promote business. "There are great opportunities there to develop markets for grain, potatoes and even forest products," he says. "The more business we can produce, the more farmers we involve, the better for all of us."

Pineland Farms Natural Meats Inc.

41 Campus Dr., Ste. 203, New Gloucester

CEO: Bill Haggett

President: Erick Jensen

Founded: June 2005; company was previously a nonprofit called Wolfe's Neck Farm Natural Meats

Employees: Six

Product: 100% USDA Choice and higher-grade natural beef, produced by cattle farmers nationwide

Projected revenues, 2005: $10 million-$16 million

Contact: 688-4808

www.pfnmeats.com

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