Michigan Turkey Growers
By Mary Holz-Clause, Co-director, AgMRC, Iowa State University, firstname.lastname@example.org
Bil-Mar Foods Division of Sara Lee announced it would stop slaughtering turkeys in its Zeeland, Michigan plant in early 1998. As a direct result of the announcement, 17 turkey producers banned together and formed Michigan Turkey Growers Cooperative during the summer of 1998.
Harley Sietsema, current chairman of the board of the cooperative, said, “We knew at the time we were taking on a big challenge, but we needed to do something to protect our investments. After Bil-Mar left, our closest market was seven hours away.”
The first step the group took was to determine if the idea of a turkey processing facility in Western Michigan made economic sense. They hired Sparks Commodities (now Informa) to conduct a feasibility study for them. The group received assistance from a couple of local economic development programs to help pay for a portion of the feasibility study.
The study came back that the key to making the value-added agriculture business successful was going to be market development and quality product.
The cooperative was organized as a one-person, one-vote cooperative. The next big challenge was to raise the money for the plant. The 17 grower members contributed almost 70 percent of the equity for the facility, with the balance raised from outside investors. The remaining capital needed to procure and renovate the facility was financed through a consortium of four banks, with CoBank being the lead bank. In addition to the funds needed for the facility, several additional million dollars was needed for operating capital. Total funding for the project approached $30 million dollars.
A big plus for the Cooperative was the ability to hire former management individuals from the Bil-Mar Foods plant. The opportunity to put together a management team of several key executives with over 100 years of combined experience in the turkey meat businesss was key to their future success.
During the interim between Bil-Mar’s plant closing and the startup of the Grower’s new plant, the producers made some temporary marketing agreements with a couple of other midwestern turkey processors, as mentioned above. This was part of their strategic plan to maintain the farm workforce that was in place and of significant value to the Growers.
The cooperative located its processing facility in an idle Simplot potato processing plant in Wyoming, Mich., just southwest of Grand Rapids. The facility, which had been vacant for several years, opened its doors in 2000 and ramped up its production to approximately 4.25 million turkeys in a year's time. The plant now processes in excess of 125 million pounds of boned turkey meat. The facility is currently the most up-to-date, “state-of-the-art” facility in the U.S. turkey industry. It is the only turkey processing facility that has a humane “controlled atmosphere stunning system” in the nation.
Initially, the plant hired about 215 line employees and another 55 in sales and management. Many of them worked for Sara Lee’s Bil-Mar Foods division before it discontinued its contracts with growers and ended its Michigan-based slaughter operations.
The economic impact of the facilities was estimated at more than $70 million through the purchases of feed grain, supplies, utilities, payroll and other items necessary for the operation of its processing facility.
However, the cooperative faced some tough times. To obtain bank financing, the Cooperative had to have more than 60 percent of its first year's production pre-sold. That forced the sale of those products to be made in a noncompetitive manner and caused an operating loss for the first year. After the initial first year of capital bleed, conditions improved for the facility as they established market share and honed their production efficiencies.
“We had one year of normal market conditions and the beginnings of profitability when the market changed; 2003 hit us hard. We lost several million that year and had to go back to the farmers for more equity. Our farmers became the cushion for the business and kept the plant open. Without their support, we would not have had enough capital to sustain us. We would not have made it,” recalled Sietsema.
The last several years the market conditions have improved and their market share has grown. The cooperative recently purchased another facility where they will cook and slice turkey products. This facility supports the Golden Legacy Brand. The Golden Legacy product line includes fully-cooked, ready-to-serve turkey breasts and roasts, as well as specialty meats including hams, luncheon meats, franks, sausages and both sliced and logged turkey breasts.
Two additional brands are Silver Legacy and Legacy. The Silver Legacy line is raw turkey steaks, fillets, burgers and sausage links and patties. The foodservice pack products are marketed under the Legacy brand, as well as the industrial pack products, ground turkey, and retail cash-and-carry products.
With the assistance of a USDA Value Added Agriculture Product grant, the cooperative is currently working with several fast-food chains to get some of their turkey products onto the menus. Said CEO Dan Lennon, "We believe strongly that the fast-food area is not well penetrated with turkey products. There's a lot of chicken and beef, but not enough turkey.”
Today, the firm employs 380 people with market for their products in South Africa, Mexico, China, Taiwan, Canada, Western Samoa, Dominican Republic and Russia. Their sales are in excess of $110 million dollars. The Web site for the firm is www.miturkey.com.