Rinse and Repeat

It’s 8:00 a.m. August 18th 2030 and I’m checking my email.  Yet another offer in my inbox to sell us their food company and convert it into a co-op.  Of course they want to sell to us.  We can pay well for their business and it’s in the seller’s interest to get a good exit.  We pay well because we have the expertise and skilled labor to add significantly more value to any food businesses we buy and convert.  Everyone wins, the seller gets a good exit, our cooperative get’s a viable business that we can apply our expertise to significantly increase the company’s value ( and increase significantly more than we paid).  Our cooperators get meaningful and secure work and growth in equity.   Once the word got out how much value our business could add to a food business, we didn’t have any trouble sourcing good deals to expand and lenders came out of the woodwork.  

We make it look easy, but it wasn’t always so.  It took years of hard work, trial and error, and hand wringing to make this a reality.  It all started with our original direct to consumer meat marketing business.  At first we struggled, but after some suffering, we realized that our in-stock rate and speed of delivery was a key factor in improving our business.  In an environment where our customers expected delivery in one or two days and 100% availability, we were able to offer two day delivery to 99% of the US while keeping our products in stock 100% of the time.  We did this without any significant expansion of inventory.  Keeping products in stock ended up increasing profitability by more than 100%.  Our accountant couldn’t believe it.  She thought we might be doing something illegal.  It was just common sense we said.

The next step was to look back at our manufacturing.  We spent time investigating the constraining factors in our operation.  Turns out, we weren’t maximizing our smokehouses (our business constraint) and we exposed some significant capacity.  That significant capacity allowed us to sell more products and generate more contribution margin … and it turns out, the wasted capacity we uncovered in our operation existed in many meat processing (and food processing) plants across the country.  Every plant was different, but every plant had a constraint and if we could identify and exploit that constraint, we could significantly increase the profitability of the business.   

In the end, we were able to develop a checklist of questions to ask before we buy each business. With these questions, we could figure the potential increase in profitability if we applied our management solutions to each potential acquisition.  Suddenly the opportunities were all around us.  The only thing missing was the right people to help us expand. 

So we developed a training program that could rapidly train new managers and new cooperators, which allowed us to greatly expand the business.  Our training systems were so robust that we could find and train good leaders from all walks of life.  At this point, because we were able to train effectively, there was no shortage of great people.  If anything, we needed to work harder to get this abundance of great people the great career opportunities they deserved.   At this point, we were able to rinse and repeat:  Find the Deal, improve the business with our proven methods, generate some cash, train the people, then do it all over again.  Today no one in our industry questions what a coop is and whether it is something that works.  It is considered the gold standard for business governance, management, and workers.

We’re not the only ones either.  I recently read an article in Fortune, a large coop was looking to build a new headquarters.  Municipalities were competing to bring them to their town.  Seems like everyone recognizes that coops are the best form of business, so much so, that towns are competing to bring them into their area.   That only used to happen for big corporate outfits.  The coops time has truly come. 

Published by niklaus30

I'm an Iowa State grad with degrees in agribusiness, now living in Michigan. I like food science, grazing, and selling things, not necessarily in that order.

10 thoughts on “Rinse and Repeat

  1. Nick–I love your well-articulated vision! I had a paragraph on your business in my prompt and alluded to how you solved the immigrant dilemma (prison’s dilemma from game theory?) –if the Fed or the meat packers have to flinch first.
    It sounds like many facets of your future are in place now and you’re well on track. What are the areas in which you see potential challenges to building this future? inventory (love that 100% in stock!)? training? Friends who are members of the Bruderhof religious community have shared that after a 100 year run, there are signs of members faithfully living the life without understanding the undergirding principles. What do you think will keep the coop fresh over time ? will it be the ongoing acquisitions or new leaders arising or something else?

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    1. I think you hit the nail on the head when you mention that there are folks that can be involved without understanding the underlying principles. This is where I need the most help or need to build a new “muscle”. It’s one thing to know a solution, its totally different thing to teach that technical solution so that folks understand. I think I mentioned in our slack channel that my conflict centered between the personal sacrifice of quality time with family and taking on new challenges in growing/expanding the business. The idea of the co-op is probably good thing in principle, but simply converting to a co-op is not really a solution without the management or democratic management practice. I think that this is where the focus needs to be. Organizing a system and scaling it would require that I have access to these skills. If I did, I think that that I could do the expansions while also preserving my sanity/family life :).

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  2. Nick, another great piece of vision and like Jon, I sense you are well on your way. The secret sauce of finding constraints provides a valuable through-line in your work. So I turn that question on you – what constraints are keeping you from taking the next step? What assumption have you made in your own life about what you can do or who you are or what you need to be happy and safe that might be whispering sweet nothings in your ear? Can you find the lie and expose it to some sunlight? I believe in this vision and your ability to get there.

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    1. You and Jon really got me thinking :)! Up until now I haven’t really had a way to solve me core conflict, which is the conflict between taking on more hard work and expansion and sacrificing family life…but being part of this group has shown me that the expertise for shared ownership and democratic management actually does exist already. I don’t need to reinvent the wheel. And, if I can execute on this, it would be possible to expand while sharing the burden of ownership and management. This could preserve the family life while also achieving some of my professional goals. This is definitely the direction of a solution.

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  3. Nick, I’m so inspired by this vision! You’ve clearly outlined a pathway toward cooperativism for your business and industry. The key elements – a checklist and training program – seem achievable in the short term. What questions might be on the checklist? Are there any existing meat cooperatives that could support you in developing one? Who may be able to help you develop an outline for a training program curriculum? Your vision is both transformative and achievable.

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    1. Hi Jennifer,

      Thanks for reading. I think that the checklist is pretty simple in terms of small meat packers (local rural custom meat locker type plants): 1) Does the packer slaughter everyday? Is the packer operating at capacity all year around or does the packer have slow season (usually early winter in the Upper Midwest)? Is the packer turning away animals during the busy season?

      If the answer to the first question is no, then that business has significant capacity that is not being used and that means there is money on the table and profitability could be increased 100% at least. If the answer to the second question is question is yes, then there is additional capacity and profits could be significantly increased with some marketing interventions I’ve already developed. If the answer to the last question is yes, then there is a lot of unmet demand out there and any increase in capacity will result in immediate profitability.

      I don’t think there are any existing cooperatives in this small plant environment.

      The training is a bit more wishy washy. I’m not really sure how to do that, but ultimately you need good people and supervisors to run the small plants. I think I could lean on our local state University, I have a good relationship with the meat heads 🙂 at our state land grant.

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      1. Nick I think some OD/HR types have probably got a training template and process map documentation that could be modified for your industry.

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  4. Nick its great to see this practical and well thought through vision for transforming your industry. My questions are:
    – What about the immigration question that you keep talking about? How does that factor in here?
    – This vision seems to be about continual growth. Is that right? Is there some point at which growth is not the best choice? What would be constraints to growth, or what would be reasons to NOT grow?

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    1. Hey Anna, thanks for the comment! In terms of the immigration question, I guess I was thinking (but didn’t make it explicit), that we wouldn’t do things the way that many in the industry do them.

      In terms of growth…I suppose to a certain extent I do have growth envisioned. If I buy a meat business, I want to get paid for my risk and know how. However, if the intention is to share equity and governance, then there has to be enough there to share and get everyone on board. So, I guess I feel I have to have a way to grow the profits and volumes right away to make sure the pie is big enough to cut. If it isn’t, then folks start to get’s hard feelings :).

      But your point is well taken and I don’t think that I would necessarily pursue growth for growth’s sake.

      Make sense?

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