For five years, the meatpacking plant in this part of ranch country in northwest Nebraska stood vacant and silent. Now, thanks in part to new owners and SBA financing, the plant has re-opened as a supplier for organic, natural grass-fed, premium and halal beef for domestic and overseas markets, and given a small town a big economic jolt.
Open Range Beef purchased the shuttered plant from the city of Gordon in late June 2013, and have spent the last five months upgrading the operation with state-of-the-art equipment and material. With the purchase and re-opening, the business also created 100 new jobs, said co-owner Pat Shudak, a big deal for a town of around 1,800 people.
Preparing products for exporting to overseas beef lovers
The 36,000-square foot plant expects to hit a target of 250-300 head of cattle per day, or about $120 million worth of cattle per year, from local ranchers for its USDA-certified beef processing operation. Open Range Beef chiefly will serve Rastelli Foods, a New Jersey-based humane and sustainable agricultural company with high-end clients in both domestic and overseas markets.
Serving as a hub for specialty and organic meats for export, the company had to buy more expensive equipment such as hot water to clean carcasses, and follow strict guidelines. For example: there’s a long list of specific requirements for meat to be certified halal if it’s to be exported to Muslim customers.
“We’ll be sending beef to Japan, Hong Kong, the Middle East, Europe,” Shudak added. “The qualifications and restrictions are long; some dictate cattle only be 30 months or younger, and some countries don’t allow importing certain parts, such as livers, kidneys and parts outside the main cuts of meat. Each country’s certification is different.”
Because the plant is mid-sized, explained co-owner Jill Noetzelman, “we can switch gears whenever we need to for custom slaughtering, which benefits meat producers and the packer,” a competitive advantage over bigger plants, such as those which process up to 5,000 head of cattle a day. Those enormous operations leverage economies of scale with relatively inflexible work flows can’t allow for smaller, specialty orders.
Economic benefits for rural northwest Nebraska
As a result, Shudak claimed, Open Range Beef’s operation expects to have a direct positive impact of nearly $5 million a year and an overall economic impact of $22 to 25 million a year for the area.
“We also purchase our supplies as much as possible locally from retail, lumber yards and hardware stores,” Noetzelman said, a move which generates significant secondary economic benefits for the town from the plant’s presence.
“It’s too soon to say what our revenues look like,” Shudak added. But the outlook is bright: “The cattle market was at an all-time high when we took over, and it’s even looking a lot better now.”
Ranchers also will benefit with Open Range Beef’s location: the next closest packing plants for livestock producers in the area are Lexington and Hastings, Neb., and Fort Morgan, Colo., some hundreds of miles away.
Turning to the SBA to finance the purchase
Shudak said the ownership team moved from building a solar development company in Hawaii as part of its investment portfolio to the specialty beef industry after a high school friend of Shudak’s mentioned he had considered going into the fast-growing specialty beef business. Private equity supplied the financing to purchase the plant, but the team needed more for the equipment, operating capital and cattle purchases.
“This wasn’t a conventional loan like for a retail or storefront business,” Noetzelman said. So they turned to BizCapital, a multi-state lender which offers competitive loans to small- and medium-sized companies located in underserved markets, and one of Missouri’s Lenders of the Year for 2012, and First Bank of the Lake, an Ozarks-based lender experienced with SBA applications. With their help over the six-month application process, Open Range Beef was approved for $3.8 million in financing in April 2014 using the SBA’s International Trade Loan program, one of only four guaranteed loans of this type in the four-state region this fiscal year. This program which offers a 90 percent guarantee to the lender, offers access to capital for a small business in a position to expand existing export markets or develop new export markets.
“I don't believe we would have put this together without the SBA,” Shudak said. “The nice thing is that we had a lot of equity in this plant and had real strong appraisals. In approving our loan, the SBA focused on job creation, helping the local economy, exporting, things that really matter to our business. Without the SBA, we found banks weren't keen on certain businesses, and packing houses were one of them.”
And for a good reason: the business of beef harvesting and processing industry is cash-intensive and a volatile commodity-based one.
Looking toward a promising future
Shudak said future plans call for expansion of the plant’s cooler space and adding more jobs as the company’s capacity grows.
“The majority of our employees we have now we first hired at the beginning for construction work during the renovation,” Shudak said. “When we started the remodeling there was a real lack of available construction crews in the area, so we brought in a construction manager and hired former plant workers and trained them.”
When they finished the construction work, those same employees put down their hammers and put on their frocks, and Shudak noticed “there's a huge amount of pride in the building, because they did the work to bring it back.”
While the town’s residents, along with members from the nearby Oglala Sioux Tribe reservation, who filled many plant positions in the past, make for a healthy labor pool, the plant’s promised growth is enough so a challenge for Gordon’s city manager is to address potential housing shortages incoming workers likely are to face.
Open Range Beef also points to the area’s diverse work force as a benefit, with Native American, African-American, and Guatemalan and other Hispanic employees of all working ages on staff, and young professionals in the area also seeking to be part of the business.
“You know, our philosophy coming into the business here is that you treat your employees like family, appreciate each individual, and create the positive work environment where employees who spent 8-10 hours a day here want to come to work here,” Noetzelman said.