March 13, 2002

SPECIAL OAMP REPORT: Ohio processors discuss surviving, thriving in the future

by Bryan Salvage

In order for Ohio's smaller processors to survive and thrive in the future, their state-inspected plants must eventually be allowed to ship product out of state, smaller companies must become more niche oriented and the 136 plant members of the Ohio Association of Meat Processors must continue working together to help all members minimize the growing costs of doing business.

These issues and more were covered during the Ohio Association of Meat Processors' annual convention recently held in Dayton, Ohio. In many cases, this convention marked a season of changes for the association. After a 16-year run in Worthington, Ohio, the convention moved this year to Dayton; Valerie Parks Graham became OAMP's executive secretary; and even the association membership continues to change.

“We lose membership on a yearly basis through attrition,” said Vic Caven, vice president of Conover, Ohio-based Caven's Meats Inc. and outgoing OAMP president. “There's just not as many small plants that can stay alive today because of overhead costs like employee insurance and workman's compensation problems.

“There is a multitude of challenges the small businessman has to deal with today in addition to producing a wholesome product,” he told the Meatingplace.com. “We're trying to keep our members involved by having members serve in groups or on committees to help each other reduce such costs. This has been a major priority for OAMP.”

Opening the markets is also essential to help Ohio's smaller processors prosper and grow in the future.

“With the influx of the Internet and worldwide market, you can get a Web page and sell snack sticks in Europe if you want to,” Caven said. “Ohio's state-inspected meat plants at this point are still prevented from being able to market their products outside of the state of Ohio. I read in a recent newsletter that interstate shipment is on the Farm Bill with a few preclusions. I think eventually it's going to happen. I just hope it happens soon enough.”

Caven told the Meatingplace.com that several of OAMP's larger member companies recently switched from being state-inspected to federal-inspected plants in order to sell products to out-of-state markets.

“Some of these plants that just went federal are on the Indiana or Pennsylvania state line, and they can now service markets they couldn't reach under state inspection that are just 20 miles away from their operations,” Caven added.

If switching from state to federal inspection can open new market opportunities, why aren't more plants doing this? There are several reasons, Caven said.

“For a lot of us, it's a matter of individual preference,” he added. “I have always believed in small government. I think big government has too much power. And on a state inspection basis, the inspectors will take problems you have one at a time, help you and work with you on them.”

Many people believe state inspection is just as good -- if not better -- than federal inspection, Caven said. But there are activists who are fighting to keep the present distribution restrictions of state-inspected plants in place.

“Carol Tucker Foremen [director of the Consumer Federation of America's Food Policy Institute] has been one of the more vocal people who has kept the state inspection issue from getting passed on the Farm Bill,” Caven said. “She says Ohio has a great state inspection program, but other states don't. My argument is if certain state-inspected plants are lax, then the federal plants in that state will be lax, too. The same people are running these plants -- whether they are state or federally inspected.”

OAMP's position on interstate shipment won't be derailed.

“We need to continue supporting and pushing on the interstate shipping issue,” said Mark Schad, incoming OAMP president and head of Cincinnati-based Schad Meats Inc.

Business climate is forever changing

Caven told the Meatingplace.com that all small meat businesses face similar challenges after the first of each year.

“After January, people have to pay taxes. Christmas is over, and you have Lent with a lot of people going on [meatless] diets,” Caven said.

These things have affected the meat industry every year for the past 30 years, he added. But there are some new emerging issues processors must now deal with, such as the changing climate of rendering.

“The rendering companies are now charging $25 a pickup,” he said. “We'd get $2,500 to $3,000 a month they used to pay us, now we're paying them.”

As a result, OAMP conducted a special session during its convention on composting as an alternative to rendering. Highlights of that session will appear in a future Meatingplace.com news story.

Niche marketing key for success

When asked what advice he had for small processors for the future, Caven said they must drop unprofitable products and stick to processing successful niche products.

“If you're in the Cincinnati, Cleveland or Toledo area, you have a lot of ethnic people who want certain products that aren't available at local grocery stores,” Caven said. “There's one opportunity.”

Caven said his grandfather started his business more than 50 years ago. The fifth generation of his family now runs the business, which slaughters beef, pork, lamb and veal. And the company produces a wide range of products including wieners, bologna, lunch meat, roast beef, ham, snack sticks and jerky. The company also operates a retail store and services a large wholesale route that delivers products to restaurants and hotel/restaurant/institution accounts during the week.

Caven said he would like to get more into the snack-stick and jerky markets, which are huge. But in order to get into that market on a smaller scale, a small company must offer a unique product and consider selling it through unique formats.

“Everyone sells snack sticks in stop-and-go stores and walk-in grocery stores,” Caven said. “I've been targeting sporting goods stores and lumber companies. You have to distribute product where it will sell (without having to pay expensive slotting fees).” Slim Jim's in Kroger stores are in the front aisle. They want it up front; they want first picks. Well, they pay premiums for that privilege. The small businessman can't afford slotting fees because he doesn't do such a high-volume of business.”

Caven says that sooner or later, small processors must focus on making products that make the most money and drop those products not making much money in order to combat the overhead problems small processors are facing.

“The small companies need to keep finding their little niche markets,” adds Schad. “They need to concentrate more on what they're really good at and let go of those products and services that are not profitable.”

The future

When asked if there will always be a place for the small processor, Caven answered: “I hope so. But how good or bad business does is always going to be based on the economy.”

Dealing with issues like workman's compensation can be best solved if a group tackles this problem versus an individual company.

“Consider OAMP's workman's compensation group plan,” Caven said. “At one time I was paying $25,000 a year for workman's comp. OAMP formed a group and that has reduced payments to $2,000 to $3,000 a year. Those savings are monumental.”

Dealing with health insurance, however, is trickier, particularly for the small family-owned processor.

“If I hire a kid 27 years old, he will cost me $100 a month for health insurance,” Caven said. “Someone who has worked for me for 40 years and is 61 years old and waiting to retire will cost $850 a year -- and he's less productive than he was when he was 18 and he's costing us more money.

“But he's part of the family,” he added. “I just can't say `I can't afford you anymore, goodbye.' That's an example of one tight spot you're in with a small family-owned business. This association is founded on family businesses. I'm hoping we can stay viable. We can best address problems like workman's comp as a group. We must do what we can to keep each other's business afloat.”

Incoming OAMP president Mark Schad says he would like to see the association work closer this year with The Ohio State University and other land-grant universities.

“I think they have a lot to offer small meat processors who don't have the time or resources to get scientific information,” he said. “Land grant universities can provide this. And USDA wants more scientific evidence to back up our Hazard Analysis & Critical Control Point plans. I hope we can work more closely with Ohio State and other land grant universities to supply us with this type of information.”

OAMP Executive Secretary Parks-Graham says the biggest challenge facing her members in the future is “making money.”

“A lot of family-run, mom-and-pop businesses are finding it tough to make a living,” she said. “We've got to get the next generation of young people to keep these businesses going. Small shops around the state are good for the communities.”

When asked if many children of mom-and-pop shop owners plan to carry on the family processing business, she said it's a mixed bag.

“I came from a farming background,” she said. “Too many kids are seeing their parents struggle and are saying 'I don't want anything to do with that—I can't make big bucks.' They know they won't strike it rich. They also have to enjoy what they're doing. But many parents are doing what they can to keep them involved and in the business.”

Caven said that this year's convention attempted to bring the convention theme back to the family.

“That's why we held it here at the Holidome,” he added. “You have swimming pools, pool tables and things for kids to do. From what I heard, everyone enjoyed themselves.”

This article reprinted with permission from Meat Marketing and Technology Magazine.

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