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Company Perspectives
From ranch to table, we will be the leading producer of quality branded meat products. Our company family will accomplish this with employees, partners, and communities using integrity, leadership, and innovation.
Agri Beef Company functions as a vertically integrated beef producer, which operates a ranch, cattle feedlots, and beef processing and packaging facilities located primarily in the Pacific Northwest. Breeding programs at IL Ranch in northern Nevada supply Agri Beef's feedlots with more than 5,000 calves and 9,000 lambs annually. Also, the company provides feedlot services to cattle producers in the Pacific Northwest at its four facilities in Idaho and Washington. PerforMix Nutritive Systems manufactures a variety of nutritional supplements for healthy animal growth, while state-of-the-art veterinary centers at the feedlots provide animal care. Agri Beef's Washington Beef subsidiary processes and packages beef products for the company and its customers. Agri Beef offers cattle management services for client cattle companies, handling 40,000 head annually. Services include custom programs to assist ranchers with cattle procurement, feeding, and nutrition; financing, forward contracting, accounting, and inventory management; inspections; trucking; and end-product merchandising. The company manages the National Beef feedlot and processing and packaging operations in southwestern Kansas, and it owns the Supreme Feeders operations in Liberal, Kansas.
Agri Beef sells its own beef products under the Washington Beef brand in the United States and St. Helen's brand for export. The company's premium brand is Double R Ranch, touted for its quality as grain-fed Northwestern cattle. Agri Beef specializes in American Kobe beef and Kurobuta pork, high quality meats with unique marbling and flavor properties which the company markets to upscale restaurants and specialty retail grocers under the Snake River Farms brand.
A Boy's Dream
As a child growing up in northern California during the 1950s, Agri Beef founder Bob Rebholtz aspired to be a cowboy. He dreamed of owning and operating a large agricultural enterprise that would be a source of high quality food to a growing world population. Pragmatic from an early age, Rebholtz spent his childhood summers learning about animal health and nutrition, and as a young man, he attended Stanford Business School. He graduated in 1963 and went to work in the cattle industry. By 1968 he felt prepared to venture into a business of his own. That year, he acquired Snake River Cattle Feeders, a small, 4,000-head cattle feedlot in American Falls, Idaho. The location on the fertile Snake River plain provided the feedlot with cost-efficient sources of potato, barely, wheat, and high-moisture corn.
As an independent businessman, Rebholtz found several factors essential to the successful achievement of his dream. These included hiring innovative, capable people and establishing a business culture oriented to Total Quality Management (TQM) in order to insure production of the highest quality beef. Also important was the development of relationships with suppliers so as to obtain high quality supplies for beef production.
By 1975, Rebholtz was ready to expand the business. The company acquired El Oro Cattle Feeders of Moses Lake, Washington. Eventually, Rebholtz joined with a friend and fellow feedlot owner to incorporate a new livestock feeding business in Boise, Idaho, named Agri Beef, Inc. That year, 1978, Rebholtz relocated company headquarters to Boise. With the move to a sizable Idaho community, Agri Beef sought to attract employees in the field of high technology information systems, who would be capable of developing state-of-the-art systems oriented to the beef industry. Rebholtz saw the efficiency created by information management as one of the cornerstones of future growth.
The long-term growth plan for Agri Beef involved vertical integration of all facets of beef production, from ranching and feeding cattle to processing and packaging beef products. As such, diversification into related industries would simplify supply chain management processes and facilitate development of economies of scale. Animal healthcare figured prominently in achieving this goal. In 1981 Agri Beef purchased MWI Veterinary Supply, a distributor of animal drugs and vaccines, pet food, and animal nutritional products to veterinary practices nationwide. PerforMix Nutrition Systems, founded by Rich Rawlings in 1983 and later acquired by Agri Beef, provided nutritional products specifically designed for cattle. In 1988, the company purchased the IL Ranch near Tuscarora, in northern Nevada. With 1.4 million acres of land, the ranch provided ample space for breeding cattle and sheep. At IL Ranch, Agri Beef developed the Western Red breed, a cross of the Red Angus, Red Braham, Gelbvieh, and Hereford breeds of cattle. IL Ranch enhanced the vertical integration of Agri Beef, as it supplied calves for the company's feedlots in preparation for market.
Specialization in Kobe Beef
Agri Beef took a bold new direction in 1990, when the company began to specialize in Japanese Kobe beef, a particularly high-quality beef renowned for tenderness and buttery taste. Kobe beef obtained its unique qualities from a rich marbling texture. The fat grew inside the muscle rather than outside of the meat in the manner of commodity beef. Hence, the marbling effect enhanced Kobe beef's tenderness and intense flavor. Produced from Wagyu cattle brought from China to Japan in the second century for use as a draft animal, Kobe beef took its name from the Kobe region of Japan, where superior cattle had been bred for hundreds of years.
In order to develop an American version of Kobe beef, Agri Beef cross-bred American Black Angus cows with Japanese Wagyu bulls. Fifteen bulls, flown to the United States from Japan in a jumbo jet, provided the initial stock for the breeding program. Then Rebholtz sought the highest quality Black Angus cows owned by others; once impregnated, he purchased the cows at a premium price. Agri Beef fed the calves a measured ration of barley, wheat, and alfalfa for about 500 days, compared to 120 days for regular domestic cattle. Thus, a combination of genetics and the slow-grow feeding method generated the Kobe beef's rich flavor and subtle texture. Though myth has it that the Japanese fed the cattle beer and barley, massaged them, and brushed their coats with the liquor sake in order to nurture the unique qualities of Kobe beef, Agri Beef contended that the stress-free living of the wide open American West precluded such measures.
Marketed under the Snake River Farms brand name, Agri Beef began to sell Kobe beef in Japan and the United States in 1991. The quality of Kobe beef presented certain problems for marketing in the United States, however. While public concerns about health and cholesterol pushed the beef industry to produce leaner meat, Kobe beef followed a different health philosophy. Though higher in fat content than commonly consumed cuts of beef, Kobe beef was lower in saturated fat and higher in unsaturated fat, the kind of cholesterol desirable for a healthy diet. Kobe beef did not carry the cholesterol problems generally associated with high fat content in beef. Also, Kobe beef did not fit the U.S. Department of Agriculture's grading system, which would rank it all as prime cut. Agri Beef, in fact, developed its own grades: Silver, with marbling as ten to 15 percent of the total cut, placing it on par with prime beef; Black, with 15 to 20 percent marbling; and Gold, the top grade, with more than 25 percent marbling.
Acquisitions, New Business Enhance Vertical Integration
Agri Beef expanded to the Midwest in 1995, when the company purchased Supreme Cattle Feeders, a 70,000 head feedlot in Liberal, Kansas. That enterprise served as Agri Beef's entrance into management of National Beef Packing Company. National Beef signed an agreement with Agri Beef in the expectation that new management would improve the long-term value of the company. National Beef, then the fourth largest beef packer in the United States, comprised a joint venture of Farmland Industries, John R. Miller, and entities owned by Ezra K. Zilkha. The joint venture included slaughter and boxed beef plants in Liberal and Dodge City, Kansas. Agri Beef planned a vertical integration at the southwestern Kansas operations. Responsibilities involved breeding and maintaining a supply of feeder cattle all year round as well as the handling of forward contracting, financing, and related risk management practices.
As part of the vertical integration strategy for Kansas, in 2001 PerforMix Nutrition Systems constructed a new plant in western Kansas to produce a liquid suspension supplement for Supreme Feeders and other customers. Rapid increase in usage of liquid supplements, as well as anticipation of future growth in the feedlot and dairy industry, prompted PerforMix to initiate the joint venture with Cattle Empire LLC, and Doll Feed Services, Inc.
Agri Beef expanded its Idaho feedlot operations with the acquisition of Boise Valley Feeders, LLC in 1998. A state-of-the-art facility, Boise Valley Feeders used the most advanced techniques in cattle feedlots, such as a two to five degree slant in calf bunks to encourage moisture and animal waste to drain away from the bunk for healthier living conditions. The 25,000-head facility provided ample space to maintain health and prevent injury of client cattle, and Boise Valley Feeders used small herd pens in order to provide focused attention. Also, Agri Beef renovated 80 percent of the pens at Snake River Cattle Feeders, the original facility in American Falls, Idaho. The feedlot provided 25,000 head of cattle with one foot of bunk space and 250 square feet of roaming space per calf. The company built a state-of-the-art veterinary center for animal healthcare, as well.
In May 2003, Agri Beef announced that it had acquired Washington Beef, located in Toppenish, in south central Washington. The company processed and packed 1,100 head of cattle per day, including custom beef packing. Agri Beef maintained operations and the company name, including the Washington Beef and St. Helen's brands. Agri Beef acquired Washington Beef to enhance its vertical integration of every aspect of beef production, from raising cattle to feeding, and butchering and packaging. The opening of a PerforMix Nutrition plant furthered that intent. Concurrently, Agri Beef expected the merger with Washington Beef to strengthen the Pacific Northwest beef industry as a whole. The combination would sustain competitiveness by strengthening the domestic cattle supply, particularly as it would reduce reliance on cattle imported from Canada. Agri Beef expected mandatory country-of-origin labeling, beginning in 2004, to reduce sales of Canadian beef in the United States. Also, the combination of Washington Beef and Agri Beef competed more effectively with Tyson Fresh Meats, which owned and operated a larger plant in nearby Pasco; hence, it ensured competitive pricing for area beef producers.
Vertical integration of the beef supply chain proved to be an asset to Agri Beef when concerns about mad cow disease reached the beef industry in the United States. Control of the supply chain gave the company control over quality of production and, therefore, the quality of its products. Moreover, the company implemented safety standards on its own, even before mad cow disease hit the United States. When the U.S. Department of Agriculture mandated a food safety program in 1998, it did not require changes in cattle feeding operations. Agri Beef implemented a safety program anyway. Toward that end, Agri Beef exceeded regulatory standards by implementing a dual ISO/HACCP certification of food safety standards, becoming the first cattle feeding operation to be registered by both the International Organization for Standardization (ISO) and Hazard Analysis Critical Control Point (HACCP), in 2003. Being one of the few U.S. cattle companies to be vertically integrated enabled Agri Beef to establish a system of safety and standardization along the supply chain that was "unprecedented" for efficiency and quality, as well as safety. When instances of mad cow disease arose in the American beef industry, Agri Beef confidently issued its Safe Guarantee, in early 2004.
Premium Products at the Forefront of Marketing Efforts
When Congress banned the import of Japanese beef in 2001, due to mad cow disease, Japan responded by banning American beef imports. The situation required Agri Beef to develop markets for Kobe beef within the United States. Indeed, the ban on Japanese beef helped to generate sales of American Kobe beef. Agri Beef sold slightly less than three million pounds of Kobe beef in 2002, a 32 percent increase over the previous year. The high quality meat sold at specialty grocers at $5 per pound for hamburger and $40 per pound for tenderloin, compared to beef commonly sold in supermarkets, priced at $2 per pound for hamburger and $11 per pound for tenderloin.
To further develop consumer demand for American Kobe beef in the United States, Agri Beef applied drama to its marketing strategy. In January 2003, Old Homestead Steak House in Manhattan introduced Snake River Farms to diners by offering an attention-getting $41 hamburger, made with 20 ounces of Kobe beef. The outrageous price attracted media attention, and people called the restaurant asking about the $41 hamburger. Old Homestead sold more than 200 in a day, and celebrity attention contributed to the excitement. James Gandolfini, of the popular television series The Sopranos, and Mike Piazza, New York Mets baseball star, both enjoyed the Kobe hamburger at Old Homestead. Attention exceeded expectations, and the strategy facilitated an increase in business for both the restaurant and Snake River Farms.
In March 2003 Agri Beef introduced all-natural pork products with qualities similar to that of Kobe beef, called Kurobuta pork. The company applied the slow-grow method of producing premium meat to purebred Berkshire hogs, said to have been discovered in the Berks region of England by Oliver Cromwell's army during the 1700s. Raised on small family farms in Iowa, the Berkshire hogs were fed at 10 percent slower pace than average hog breeds. The experiment succeeded in producing similar results as the Kobe beef: rich marbling and tender, flavorful meat. Kurobuta pork ranked first on 19 of 25 attributes when judged by the National Pork Board.
Kurobuta pork was not as easy to promote as Kobe beef, which had a standing reputation for its unique qualities. Also, Agri Beef encountered the same problem with the pork as it had with Kobe beef, in that the American public had been educated to think of marbling as bad, that it meant the meat contained too much fat. Consequently, with a $10,000 advertising budget, Agri Beef employed the marketing tactics derived from the bestselling book The Tipping Point, by Malcolm Gladwell. The first step was to identify the "connectors" who influence many people. As such, Agri Beef contacted well-known chefs and persuaded them to put Kurobuta pork on their menus. High profile chefs who began to cook with Kurobuta Pork included Wolfgang Puck of Los Angeles, Thomas Keller of Bouchon in Las Vega, Eric Ripert of Le Bernardin in New York, and Jay Murray at Grill 23 in Boston. Renowned New Orleans chef Emeril Lagasse raved about Kurobuta pork on his blog. At Jon Mortimer's restaurant in Boise, pork tenderloin became the most popular meal on the menu, accounting for 20 percent of entree sales. Mortimer showcased the meat at a special meal presentation of Idaho foods at the famous James Beard House in New York City.
Marketing for Kobe beef continued as Agri Beef introduced new products for grocers. In October 2003, the company introduced a package of frozen hamburgers, containing two, eight-ounce Kobe beef hamburger patties. A special patented process allowed cooking to retain 50 percent more juice than regular hamburger by providing space within the meat for juices to cook "into" and settle. In June 2005, Agri Beef introduced American Kobe roast beef, referred to as Butterknife Beef, to be sold in delicatessens or for catering buffets.
Restaurant marketing continued to be a mainstay of promoting Kobe beef. Wolfgang Puck prepared Snake River Farms Kobe beef at two 2005 Academy Awards dinners. After Agri Beef's premier breeding bull, Fukusuru, died in 2005, after 13 years of productivity (normal for Wagyu bulls), Rogue Ale of Newport, Oregon, dedicated St. Rogue Red ale to him. The restaurant and brewery placed the story of American Kobe beef on the bottle label, crediting Fukusuru as the first bull to propagate the line of quality American Kobe beef. Washington State University had ranked Fukusuru as the top bull for marbling. In order to retain Fukusuru's exceptional genetic base, Agri Beef preserved 100,000 units of the bull's semen, which was cryogenically frozen.
Congress extended the ban on Japanese beef imports in 2005, further assisting sales growth at Snake River Farms. As the largest producer of American Kobe beef, Agri Beef sold $15 million of Kobe beef products in 2005, which increased 30 percent over 2004 and accounted for 75 percent of total beef product sales.
In 2005 Agri Beef introduced a new brand of beef product designed to meet consumer demand for locally produced foods. The Double R Ranch brand, named for company founder Robert Rebholtz, intended to laud grain-fed beef from the Pacific Northwest as comparable or better in taste and quality as Midwestern corn-fed beef. Products included Double R Ranch Signature beef, sold to restaurants and upscale grocers, and Double R Ranch Premium cuts of beef. Double R Ranch Quick Chef offered convenience with marinated, heat-and-serve beef products, ready to eat in 20 minutes. Agri Beef marketed Double R Ranch products in 13 Western states.
Principal Subsidiaries
Boise Valley Feeders LLC; El Oro Cattle Feeders; PerforMix High Plains LLC; PerforMix Nutrition Systems; Snake River Cattle Feeders; Supreme Cattle Feeders LLC; Washington Beef LLC.
Principal Divisions
AB Foods; Livestock Division.
Principal Competitors
Cargil Meat Solutions, Inc.; ConAgra Meats Co.; Tyson Fresh Meats, Inc.
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