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Independent cattle producer battles industry's 'big three' with alternative marketing venture

(Tuesday, Dec. 2, 2003 -- CropChoice news) -- Canadace Krebs, R-CALF Cattleman's Journal, via The Agribusiness Examiner: It takes one hour to fly a single-engine Comanche airplane from St. Francis, Kansas, to Colorado Springs, Colorado. When pilot Mike Callicrate makes the trip, it presents a leap of faith. The weekly flight from his ranch and feedyard in far northwest Kansas to a fabrication plant and retail storefront on Coloradoís "Front Range" represents a carefully calculated attempt to bridge the gap between traditional farming communities in economic decline and fast-growing urban meccas bustling this wealthy consumers.

Itís the last resort for someone who says he refuses to sell any more cattle to the big meatpackers, Callicrate is a lead plaintiff in a class action lawsuit accusing IBP Inc., now part of Tyson Foods, of unfair and anticompetitive market practices. He has also sued National Beef (formerly Farmland National) for discriminating against his feedyard.

His alternative marketing venture, Ranch Foods Direct, is a formidable blend of political manifesto, technical innovation and reverential regard for quality and service. So far, the undertaking has reinforced Callicrateís complaints about the modern economic system. His company has experienced firsthand predatory pricing by powerful and monopolistic corporations, lack of awareness or apathy among consumers, and limited access to the marketplace and to financial resources.

"This project has consumed $2 million more in capital than originally anticipated," Callicrate says during a flight to Kansas City for the Agribusiness Accountability Initiative Forum, one of many political efforts he supports. "It hasnít progressed nearly as fast as Iíd hoped. Too many barriers in the marketplace." Those same pressures have forced other private label brands like Denverís Coleman natural Beef and B3R Country Meats of Childress, Tex., into the hands of giant corporations like ConAgra while crippling scores of similar startups.

"They want to either kill you or buy you," Callicrate says of the big three meatpackers, ConAgra, Cargill and Tyson. "If they canít kill us, they buy us."

With gross sales exceeding half a million dollars a month --- about $11,000 of that spent on advertising and promotion --- the business has yet to achieve profitability. But after a five-year series of fits and starts, itís getting closer, Callicrate says.

Born out of a cattle feederís marketing frustrations in 1998, Ranch Foods Direct is one piece of a larger puzzle aimed at stimulating social and political change. But itís also the result of piecing together key components and relationships necessary to produce the highest quality beef possible.

Earlier this year, the company formed a joint venture with local processor G&C Packing Co., owned since 1944 by the Grindinger family. The collaboration was sealed by a shared interest in slow-speed rinse-and-chill processing technology that flushes out the vascular system during slaughter, chilling the carcass while removing the blood. Among the benefits: more consistent lactic acid conversion due to the cellular infusion of glucose and electrolytes, reduction of pathogens from carcass surface immersion at hide pull and elimination of blood, a quick and even drop in pH levels enhancing tenderness and a significant reduction in cholesterol content.

G&C Packing was the first plant in the country to install rinse-and-chill in 2000. Unattractive to modern, high-speed packing plants because it adds several minutes to processing time, the technology has been installed in eight Australian plants and will be in the third U.S. facility by next spring, according to MSPC Inc. of St. Paul, Minnesota the company that commercialized the technique.

After slaughter, carcasses are trucked to Ranch Foods, where they are transformed into a variety of finished products. The $2.5 million fabrication plant includes the equipment to slice beef into fajita strips and form ground beef into patties. Customers can buy their beef one steak at a time as vacuum-packed, plastic-sealed retail-ready beef cuts that are individually weighed, labeled and priced. In addition, Ranch Foods is introducing processed items, such as pre-cooked prime rib, beef jerky and all-natural preservative-free hot dogs.

Priced ten to 20% higher than commodity beef, most of it ends up at high-end restaurants and upscale food shops as far north as Denver and Cheyenne. Local food advocate Victor Mathews, owner and chef of the Black Bear Restaurant at nearby Green Mountain Falls, is one of those satisfied customers. "All things considered (taste, texture, flavor and cost), you have the best beef in the world," he told G&C Packing after conducting informal taste tests on their steaks.

Traffic in the retail store at 2901 N. El Paso, in Colorado Springs, which opened in May, continues to climb. While internet sales at http://www.ranchfoodsdirect.com are trailing, Callicrate sees growth potential from radio marketing campaigns.

The program processes roughly 400 cattle a month. Only U.S. source-verified cattle raised without growth implants and slaughtered at a young age to reduce connective tissue end up bearing the label Naturally Tender Beef by Callicrate. Half are bought as finished cattle. Purchase premiums are intended to cover the costs of meeting a specific management protocol (which is not as strict as certified organic but emphasizes hormone and antibiotic free and environmental sustainability) and have ranged as high as $50 a head. "We go out in the market and make it very obvious what cattle are worth based on retail markets," Callicrate says.

At the plant, about a third of business is generated from custom processing beef and bison for private labels sold locally and over the Internet, including Lasater Grassland Beef and Black Forest Bison. "It gives more people access to buy directly, and it gives consumers more choices," Callicrate says. "Getting it retail-ready makes their product a lot easier to sell. And the rinse-and-chill process adds more quality to both bison and beef."

The store distributes other natural meats, including lamb raised by business partners Doug and Susan Samuelson, who own and operate the historic Warren Ranch Co. near Cheyenne, Wyo. a former state legislator, Doug also helped lay the groundwork for the development of Mountain States lamb Cooperative, which supplied animals for Cedar Springs Fresh American lamp marketed by B. Rosen & Sons Inc. of New York City.

"By going around the system, there might be hope of discovering the true value of livestock and then receiving it," Callicrate says. "We have to avoid the current packing, processing and distribution system. It denies access, and itís too predatory. We have to create new avenues and support the small systems that are out there."

Callicrate admits to having some advantages over other cattlemen in starting a direct marketing venture. For one, he has largely been able to subsidize his startup with revenues from another business --- the Callicrate smart-bander castration tool, which he invented and patented in 1991. By avoiding the constraints of risk-averse lenders or cooperative structures, he and his business partners can be more flexible, adaptive and responsive to every-changing circumstances. "This type of project is not conducive to group decision-making," Callicrate says.

He also happens to be strategically positioned geographically. The county with the highest per capita income in the U.S. - Douglas County --- is just north of Colorado Springs on the Interstate 25 corridor.

"Iím here to make a local food system more feasible," he says. "The Ranch Foods Business model needs to be repeated across the country." As that happens, livestock producers will experience more competition for their product. "Farmers need a market," he adds. "They shouldnít be forced to get into the meat business to have access to it."