Making connections is vital to eliminating the sense of isolation felt by many in rural America. For rural businesses, that sometimes means reaching beyond local borders to new markets. A case in point, as producer Nancy Crowfoot found last summer, is a small-scale soyfoods operation that's scaling new heights.
It was a business set-up that seemed ideal ... at the time.
1999: Tom Lacina: "Tofu seemed to be the right size of a, of a business that can be done on a family level, without a huge investment in packaging and machinery and the like."
But within a few years of operation ... reaching a height of production of 150,000 pounds of tofu a year ... Lacina realized his "family" operation could be in jeopardy.
The soy industry was changing. The federal government allowed labeling of products that said "25 grams of soy protein a day as part of a diet low in saturated fat and cholesterol may reduce the risk of heart disease."
Tom Lacina, President, Wildwood Harvest Foods, Grinnell, Iowa: "Suddenly you had companies like ConAgra, General Mills, Dean Foods becoming serious contenders in the soyfood industry. And with that I realized I had to make a choice. I either had to grow and match that or pull back."
He decided if his company was to survive, he needed to merge with an existing, successful company. By August 2001, he joined forces with Wildwood Natural Foods, which has made tofu and 20 different soy products in California for more than 20 years. The two companies became Wildwood Harvest Foods.
Why would a company with products in hundreds of stores in a dozen states want to merge with a small family business? One of several reasons: money.
Tom Lacina, President, Wildwood Harvest Foods: "They've been making tofu for 20 years but what they wanted to do was build a bigger facility because they were up against the wall. There were interested in bringing the products out to the Midwest where the soybeans were grown. Plus there's a lot of interest in the state of Iowa in developing value-added agriculture and I was able to assemble funds."
Lacina received an initial $ 3.3 (M) million dollar equity investment from an Iowa-based venture capital fund with additional commitments of up to $3.8 million. That money, plus funds from other private investors and conventional bank loans financed, among other things, construction of a 20,000 square foot plant in Iowa to start a new line of soy yogurt and soy beverages. The money also remodeled and equipped a California plant for the making of tofu products.
It took the merger with the larger California company to get the attention of the investors, particularly the venture capital group, the Iowa Agricultural Finance Corporation. The appeal was the opportunity to get Iowa products and ingredients beyond the state's borders.
Dan Winegarden, Iowa Agricultural Finance Corporation: "We did look at them in 1999 but the secret to creating a true growth opportunity was finding a way to access larger markets than what Midwest Harvest had originally, which is the regional tofu production and the opportunity to reach outside of Iowa to get to those California and West Coast customers where frankly the soy customers are at, and organic customers are. That was what made it a real investable growth business."
Being labeled a "growth business" can place a lot of pressure to succeed on a family once used to making its own way with just one product. But Tom Lacina's wife, Alesia Lacina says in some respects the merger , for her, helped reduce her workload. For example, she and her sister used to make the tofu, create recipes, and they wrote a tofu cookbook. They also had "office duties".
Key: 1999 Slug store demo: "Hi. Would you like to try a chocolate chip cookie. Or soynut butter cookie?
Plus, they both conducted promotional road shows as the Soy Sisters trying to get consumers to sample their product.
Alesia: "We were just wearing ourselves out. We were just tired. Right now I'm more focused. I'm doing one job now rather than five jobs."
Since the merger, Alesia's one job has been to design the graphic look for the entire line of Wildwood Harvest products. Her sister and her husband have left the business.
Company president Tom Lacina, continues for farm 320 acres, but since the merger, he spends more time consulting with his investors, a board of directors, and those who run the California operation. With such added responsibility, has he had second thoughts or regrets about the decision to merge?
Tom Lacina, President, Wildwood Harvest Foods: "I don't know regrets. There are difficulties in any path taken. One of the reasons that I thought the merger was important was because of that 20-years of experience and the last thing I was going to do is come in and say I know better because I've been doing this for a year and a half."
No matter any differences, what bonds the West Coast and Midwest operations, Lacina says, is philosophy. In addition to providing healthful soy food products, both wanted to provide a value-added market for Midwest soybean producers.
Tom Lacina, President, Wildwood Harvest Foods: "I was approached by somebody from South America who wanted to sell me soybeans. I had to chuckle and say thank you very much but no, we're committed to buying from the Midwest."
There is also an agreement between Wildwood and its investors that could eventually allow farmers to buy shares of preferred stock in the company. But both Lacina and the investors in Wildwood Harvest say the company needs to first become a bit more established in the marketplace. While the California portion of Wildwood is well known on the West Coast ... it is still being introduced to the Midwest.
For Market To Market, I'm Nancy Crowfoot.