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Dakota Beef

posted on June 10, 2005


The U.S. House of Representatives this week rejected an amendment to an agriculture appropriations bill that would have implemented mandatory Country of Origin Labeling, or COOL.

Approved initially as part of the 2002 Farm Bill, mandatory COOL has met a series of legislative challenges, but was scheduled to take effect next fall.

Retailers and the meat packing industry say mandatory COOL would cost them as much as four billion dollars in the first year alone. But proponents of the program including some western cattle producers claim mandatory COOL ultimately would enhance sales of goods.

Despite the pros and cons of country-of-origin labeling, other labeling initiatives can help producers differentiate their products. A case in point can be found in South Dakota, where one entrepreneur with virtually no experience in the cattle business is building a brand for a different kind of beef. David Miller explains.

Dakota Beef In a world of falling prices and tight margins, agriculture is no stranger to business ventures that cut out the middleman and put a few more dollars into the producer's pocket. Usually, the businesses are made up of farmers and ranchers hoping to make a little more. But sometimes a business in rural America will pop up for totally different reasons. Following this second path, is Scott Lively, founder and CEO of Dakota Beef.

Scott Lively, CEO, Dakota Beef:Scott: "My wife is from South Dakota. I had the idea in South Dakota. I was in a corn field pheasant hunting for the first time, never been in a corn field or pheasant hunted before, and had the idea of the organic beef; vertically integrated. And so Dakota Beef, no one had the name and it worked."

Lively had no agricultural experience, he wasn't raised on a farm, he didn't raise cattle as a child, and he had never been part of an agriculture venture. At a cross-road in his life, Lively was looking for something new.

Scott Lively, CEO, Dakota Beef: "...kind of lived the Internet boom. Never involved in a .com but did the Internet boom. I wouldn't say I burnt out on it, but it was really good to me and it enabled me to fund Dakota Beef initially. I mean, all of my proceeds from that went into this company much chagrin to my wife. But, uh, I was done with technology and got out at the right time."

It was 1999 when Lively began to formulate his business plan. The main concepts were social responsibility, vertical integration and the creation of a consistent, quality organic product. The target market would be health conscious consumers on both coasts. But investors ended up being few and far between. Scott Lively, CEO, Dakota Beef: "People loved the deal, they just -- there was something that they just couldn't get their teeth into, no pun intended. And we finally came across a very, I wouldn't call it progressive, but a not too risk-adversed private equity firm that believed in us and believed in the product and have really jumped in with both feet and supported us."

In 2002, Lively secured the necessary capital to launch Dakota Beef. To date, almost 10 million dollars has been spent to get the company up and running.

In the same year, Lively found a meat processing plant in Howard, South Dakota, that had been closed for about 10 years. The fit was perfect. He could live up to his beliefs of social responsibility by creating jobs for people who lived in the area and he could begin production earlier than planned because he wouldn't have to build a processing plant from scratch.

Knowing he had never run a food company before, Lively hired experienced employees to run the plant and market the product. After more than three years of watching and waiting, his newly hired crew of 20 sent the first product out the door in October of 2003.

To control quality and consistency, the cattle are purchased just after weaning from more than 30 USDA certified organic producers. Currently, Dakota Beef is paying farmers and ranchers a premium of 20 percent over the spot market prices.

The animals are sent to one of four certified organic feedlots operated by independent contractors. This year, feedlot operators like Marcus Joachim (YO-kum) of Corona, South Dakota, will handle about 1500 head of Dakota Beef's cattle.

Marcus Joachim, Faith Acres: "Well, I've been custom feeding cattle for 25 years. And they needed -- I've got organic feed and so when they came along it just kind of meshed. I had the feed and they had the cattle for it. That is the way it went from there."

The cattle are fed according to a specific regimen that includes organically grown corn and flax seed. As the animal nears the end of the finishing process vitamin E is added to the daily ration.

The breeds sought out by Dakota Beef are predominately Angus but one day the company plans to have its own set of genetics. There are even plans to provide carcass data to both feedlot operators and farmers after processing is complete.

Twice a week, a packing plant in Omaha processes the cattle and sends the sides of beef to Howard. And each side of beef can be traced all the way back to the farm where the animal was born.

Until recently, Dakota Beef products were only available in the Williams-Sonoma catalogue and a few white tablecloth dining establishments in San Francisco, New York, Boston. But in May, the company was awarded a large contract to supply fresh meat to more than 50 of the 170 stores that make up the Whole Foods Market grocery store chain. And right now, steaks and burger are available in the five Sioux Falls Hy-Vee super markets. Hy-Vee is a grocery store chain with over 200 stores in seven states.

Scott Lively, CEO, Dakota Beef: "God Bless Hy-Vee in South Dakota for carrying our product but the Midwest is not our niche market right now, it really isn't. The people are happy to see it here, they are thrilled to have a Dakota raised product processed here, sold here in their stores and they buy it, it's great. But 80% of our beef still goes to the West Coast and the other 20% goes to the East Coast..."

The future looks bright for Lively and his company. Expansion at the Howard plant is underway. The work will condense all aspects of production under one roof and increase the size of the line. Once complete, 80 animals per day will go through the plant and the employee base will jump to 60.

For Market to Market, I'm David Miller


Tags: agriculture animals beef livestock meat news pheasants