Marketer: West Grey Premium Beef, RR# 3 Durham, Ontario: owned by Chet Calhoun, Doug Calhoun, Peter Knipfel and George Maxwell

Overview of the Business

West Grey Premium Beef (WGPB) is a provincially inspected abattoir, slaughtering and dissembling beef cattle and lambs. Almost all of the cattle are supplied by two of the owners, Doug Calhoun and George Maxwell, who both operate farms and feedlots in the Chesley area, located in Bruce County. Peter Knipfel is the owner of an independent grocery store in Chesley. Chet Calhoun, along with being a part owner, is the general manager and marketing manager. Chet, who has previous experience and a business background with Canada Building Materials, brought considerable talent as manager and marketer to WGPB.

The core business is processing beef cattle into primal cuts, followed by marketing and distributing the product to wholesalers, retailers and food-services suppliers. West Grey has 40 employees and processes approximately 200 head of cattle and 40 lambs a week.

WGPB also runs a small retail business at their plant located on Hwy 6 near Varney (a few miles south of Durham, in Grey County). It also is part owner of another retail business, Cottenie’s Country Fresh Meats in Owen Sound. In addition to WGPB products, these retail stores offer pork and other deli products sourced from Stemmler Meats in New Hamburg. Farm products from a number of other local sources round out the stock of the retail store.

The company does a small amount of further processing to add value to products e.g. sausage, hamburger patties, steaks and similar products. In addition to their own production, they process a few beef animals for other producers as well as a few lambs.

The impetus for the creation of WGPB is expressed on the website (www.premiumbeef.ca) which reads as follows:

WGPB was founded in 2003 by George Maxwell and Doug Calhoun, two fourth-generation family-owned farmers from Bruce County, and Peter Knipfel. Together, they decided that the beef industry needed something done to renew consumer’s faith in the beef industry, as well as to prove that not all beef is created equal.

Another reason for starting WGPB was to improve and stabilize income throughout the year. The owners felt that they could eliminate a degree of seasonality in their income by having control of the processing and marketing.

The enterprise started almost from scratch. WGPB purchased a very small country abattoir at its present location. There were four employees, and no customers. Chet Calhoun recalls:

“We slaughtered a few cattle, packaged up the meat, and I said: ‘OK George, where is this meat going?’ When I received no answer, I started with the Yellow Pages and a telephone.”

Since starting up, growth was very rapid, reaching the current level within three years. It has stayed at its present size since 2006.

Marketing Strategy

WGPB’s objective is to be a part of the independent business economy, where business is done on a small scale. To this end, the company wants to continue to buy from, sell to, and co-operate with other small businesses. To quote, Chet Calhoun: “We aren’t interested in being big. We are about customer service, paying attention to their needs. You have to listen to the customer, find out what they want and need and do something about it.”

Another core founding principle is the commitment to enhancing the local economy. This is particularly true during the BSE crisis when the market for cull cows was effectively devastated[1]. At the height of the BSE crisis, WGPB was the only sales outlet (and opportunity for some cash flow) located in the centre of Ontario’s beef cow sector. WGPB paid over the market for cows, and continue to offer attractive cow prices. Overall WGPB provides employment for 40 people, year-round – a significant contribution to the area economy.

The retail outlets have helped other small local agricultural producers to sell product thus making further contribution to the local economy. In summary, the business and marketing philosophy can be simply surmised as follows:

• Offer consistent high-quality product.
• Focus on customer needs.
• Buy from local businesses.
• Sell to local businesses.

Overall, WGPB’s philosophy, vision, strategy, marketing tactics and production are connected and interrelated. Their marketing strategy can be best described as flexible and response based. It follows a simple, certain logic: simply, find out what the customer would like, and then give it to them. WGPB also strives to be environmentally responsible in that they conduct business as close to home as possible.

There are also some minimum-volume requirements necessary for business viability. This fundamental drove the rapid growth to the current size. As well, there were other extenuating circumstances. The BSE crisis hit within weeks of the WGPB opening and at the time, the owners had few if any marketing alternatives. This provided a powerful incentive to ramp up production very quickly, which in turn presented significant marketing challenges.

The imperative to ramp up production required a modification of the founding vision. Production had to match customer needs. For example, WGPB strives to produce premium beef at a premium price, but there are other realities. Firstly, not all customers wanted a premium beef product. Secondly, it is necessary to sell the ‘whole cow’ – in other words find markets for all the cuts, many of which are less desirable and lower end. As a consequence, WGPB made a number of changes to the product line, and more changes will be made as WGPB adapts to demand.

Developing the Business

In the meat business, competitors are all under similar pressures, which mean that almost every week some supplier is offering some product at a low price in order to get rid of it.

WGPB’s experience in listening to customers has made two points very clear (1) product consistency is critical and (2) consumers are price sensitive. As a result, the company now offers 419 products in three broad categories:

• Premium - under the West Grey Premium Beef brand name.
• Select - offered at a discount, which turned out to be a positive marketing move.
• Ungraded - utility product which competes mostly with imported beef. Note: ungraded beef can come from animals over 30 months or finished cattle.

WGPB was the first provincially inspected plant in Ontario to achieve HACCP certification and remains the only such plant with this certification. This designation illustrates WGPB’s commitment to customer concerns with respect to quality. Early in its development, the company determined that the key to success was getting a supply contract with Sobey’s. This was shortly after the Aylmer meat issue in 2003, when there were allegations that meat from dead stock was finding its way into the human food supply. Since food safety standards for provincially inspected plants are less stringent than for federal plants, the response of the major grocery retailers was to simply cancel all supply from these plants.

WGPB was informed by Sobey’s that if they were able to meet the same safety standards as those applied to the federally inspected plants, they would have the opportunity to supply. Consequently, WGPB proceeded to implement the HACCP protocols which is an extensive and exhaustive process, and involves exacting inspection routines and thorough documentation. One employee is dedicated full time to administer HACCP.

The HACCP designation did not however result in the promised supply contract. Nonetheless the designation is an exclusive for WGPB as a provincially inspected plant, and an assurance that everything possible is being done to assure safety and quality in the products that are offered to the public. It also mitigates against lawsuits that might arise from unsafe products.

WGPB also strives to differentiate itself on a number of unique product and service attributes including:

• A long history as a cattle producer.
• Adherence to quality-control standards at the farm.
• HACCP quality at the plant.
• Clean, attractive packaging.
• Customer service which comprises a range of services including special packing, special cuts, consistent on-time delivery and consistent accuracy in filling orders.

Responding to Market Conditions

WGPB’s business has been inextricably influenced by the external business conditions. Overall, the meat business is a very tough, competitive business where “there is always a plant willing to dump something.” Survival depends on a constant contact with customers, and a willingness to listen to them. As the general manager, Chet Calhoun has a particular talent in dealing with customers. The key competitive factor is marketing. To quote: “In the meat business you can’t wait for orders to come, you have to call all of your customers every week.” For Chet Calhoun, this means over 100 phone calls per week. Many of these are not simply the taking of an order; rather it is fixing something that wasn’t right; changing the way orders are packaged; or changing the way a particular product is cut. WGPB is able to respond in small tactical ways to customer needs, and thereby maintain a high level of goodwill with the customer base.

WGBP is firmly committed to the continual development of goodwill which makes the following possible:

• It keeps your customer close and reduces the willingness to buy low-priced products from another supplier.
• The ability to sell a little more. Customers stick with you.
• The ability to persuade a customer to take something that they do not usually take because of quality, consistency, honesty and commitment to customer service. In effect, customer service is not just a high-level strategic concept; it is just plain day-to-day best practices that reward the business.
• Finally, it has a fundamental purpose. When you are in the meat business, “you gotta sell the whole cow.” This means finding opportunities and customers for the full range of products.

The marketing mix includes the website, a newsletter that goes out with the orders, and the occasional promotion item. The newsletter offers free advertising to WGPB customers.

The future expansion will be in two directions, neither of which involves significant volume increases. The first direction is to increase the retail side of the business. “To put all of our meat through our own retail stores would be ideal.” There are currently three retail outlets, one at the same location as the plant, one at the store owned by one of the partners, and a part ownership at another outlet in Owen Sound. In total, these outlets sell about 10% of the total volume of the plant. Expansion plans could include more retail stores as well as sales of complementary products. For example WGPB carries pork and a line of deli products prepared by another processor, Stemmler Meats of Heidelberg.

The second direction is to expand WGPB branded products which includes the ‘Big Bruce[2]’ brand of hamburger patties. This doubles the value of the ground beef that goes into the product.

It should be noted that even at full plant capacity, the owners continue to market approximately 50% of their cattle through conventional marketing channels.

In summary, the marketing strategy is guided by an intimate knowledge of the business, and of customer needs. At a broader strategic level, business direction is largely a response to challenges and figuring out a way to “turn the challenge into an advantage”

Logistics

Approximately 40 to 50 head of beef cattle are received and slaughtered at the plant each day. In addition, the plant slaughters 40 to 50 lambs per week on a dedicated day. Some cows are slaughtered as well, to fill out the product mix. All finished beef animals are sourced from the farms of the owners; cows and lambs are procured from other local farms.

WGPB delivers its own product, but contracts other transporters if the need arises. The fleet comprises two tractor-trailers for cattle shipments, and one straight truck to transport product deliveries.

Challenges and Threats

A major current challenge is the requirement to deal with upcoming regulations concerning Specified Risk Materials (SRMs). SRMs are parts of certain animals most susceptible to BSE infection. As a consequence, these tissues must be handled separately as a hazardous material. This requires new construction for the storage and handling of these materials, as well has the additional expense of disposal. Early indications suggest that many provincially inspected plants will close rather than assume the burden of handling SRMs.

Perhaps the biggest challenge is the nature of the competition, which in a word is tough. Competition comes from direct competitors (other provincially inspected plants) and large beef processors such as Better Beef (Cargill). To quote: “Cargill is the largest privately owned company in the world; they can play hardball.”

Market access is always a challenge. Large retailers require minimum volumes and are not interested in dealing with small players. Thus a small packer such as WGPB must find markets within smaller retailers and specialty outlets.

Key Influences and Information Sources

The WGPB strategy was influenced in part by following a successful model established by a competitor, Norwich Meats, located in southwestern Ontario (south of Woodstock). Norwich Meats has a longstanding reputation for quality products and service.

Two consultants provided guidance and advice that was critical to WGPB success. These included:

• Fulton Food Safety, which helped set up the new plant and was very instrumental in getting the enterprise started up.
• Walter Marini, who has business experience and expertise specific to the meat- processing industry. He assisted with the business planning and gave other advice which saved WGPB many thousands of dollars.

Both consultants are based in Guelph, Ontario.

Lessons Learned

The WGPB experience provides a number of lessons to producers who are considering new marketing options for their livestock. They include:

1. A winning attitude is everything – the WGPB case illustrates that the best laid plans often go awry. Success depends on having the necessary skills and, more importantly, the attitude and sheer determination required to make the business a success.
2. Commit to know and understand your customers – clearly WGPB’s commitment to serve customers has led them to introduce new products, offset competitive sales efforts and, most importantly, grow the business. If you know and understand your customers and make them happy, they trust you. And if they trust you, they will continue to buy from you.
3. Be flexible – circumstances may make it necessary to alter the initial strategy. Don’t be afraid to change direction if the change makes good business sense.
4. Be true to your morals and beliefs – customers demand consistency and honesty. You have the opportunity to demonstrate this every time you make a sale. If you promise quality and you deliver, you will create a loyal customer.
5. Watch where you spend your dollars – you also have to watch where you spend your money. If you believe in building local economy, you have to source local supply.
6. Just do it – if the founding partners had known in the spring of 2003 what they now know, they may never have started the business: “With all the stuff that gets thrown at you, just keep going.”
7. It’s an ill wind that blows no good – starting a new business is more difficult than you can possibly imagine. There will be many problems. But if you believe in your objectives and are committed to success, you can turn every problem into an opportunity. Failure is simply not an option for those who are determined to succeed.

[1] When the first case of BSE was confirmed on May 20, 2003, the U.S. closed the border immediately. The greatest impact was on cull cows since a large proportion of these animals were purchased by dedicated plants located in the U.S. In due course, trade to the U.S .for processed meat and animals under 30 months of age resumed. However, the border for over- 30-month cattle (mostly cows) continues to be closed.

[2] Big Bruce is a brand particular to Bruce County – a major beef producing county in western Ontario. Big Bruce is a statue of a large beef animal located in Chesley, Ontario.