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Innovative Chicken Processor Gains Market Share

posted on August 2, 2002

The USDA's Food Inspection Service is reviewing its actions on the recent recall of 19 million pounds of E.coli tainted beef.

There is also congressional interest in the matter. Many on Capitol Hill as well as the food aisle would like to see the USDA's ability to demand such recalls be strengthened. Currently it is the meat processor who voluntarily determines whether product should be retrieved from stores. Given recent E.Coli discoveries, the procedure hardly promotes confidence in the government's ability to ensure safe food.

More often consumer confidence comes from the products and practices of individual companies. A case in point is a small but growing Nebraska poultry venture that is winning market share on the multiple merits of its product. Jeannie Campbell explains.


Innovative Chicken Processor Gains Market Share

This is a success story about faith and perseverance. Those are two things not normally articulated in most business plans, but two years ago it was all Mark Haskins had to go on.

Haskins is president of MBA Poultry. After just 15 months in business, the company filed for reorganization under federal bankruptcy laws in January of 2000.

Its premium product, sold under the "Smart Chicken" label, was popular with regional consumers. But equipment problems at the company's processing plant in Tecumseh, Nebraska, forced lengthy production shutdowns. Sensing that if he could keep product on the store shelf the company would survive, Haskins did the only thing he felt he could do ... file for bankruptcy.

Mark Haskins, President, MBA Poultry: "Growth for the sake of growth is not what we are a part of. What we want to do is to grow because sales has determined a new level of demand for us that will then change our production schedules and increase the size of the company..."

With the equipment problems fixed, and with the help of private investors, the company was out of the reorganization by the third quarter of 2000.

Since then, MBA's growth has been staggering. The number of retail outlets selling Smart Chicken has quadrupled to 14-hundred stores in 14 states, mostly in the Midwest. Its share of the market in Nebraska's two largest cities is near 75 percent. Sales growth in the Kansas City market also has soared. And most of that growth has come from word-of-mouth endorsements.

Mark Haskins: "We spend very little money on a media-type advertising campaign..."

"Word-of-mouth is not as fast as the media approach some companies can have. But it's extremely loyal and that loyalty is what we're after..."

What consumers are talking about is air-chilled chicken. Here's how it works:

The poultry is chilled on individual shackles in a special air-cooled facility. To preserve the freshness of the carcass, the birds are chilled using cold, purified air projected at a high velocity. The four-hour process lowers the carcass temperature to 38 degrees. The chickens then are aged four hours to improve tenderness and increase the edible yield of breast meat. The birds are then either packed whole or cut into pieces for packaging. The chickens generally reach retailers within 24 hours of processing and the absence of water in the package means a longer shelf life.

Traditional methods immerse the birds in a common slurry of ice and water. The system allows the birds to absorb water and, according to critics, creates the potential for cross-contamination. The government allows water to comprise up to 8 percent of the packaged weight. USDA estimates the additional water weight costs consumers more than $3 billion a year.

Johnny Haer, poultry farmer: "I think that the future of Smart Chicken is the future of the poultry industry in the United States. I think that air chill will someday not be a niche market but it will be what the poultry industry is in the United States."

Johnny Haer is among 24 producer-investors who share in the ownership of the company. Though he says times were tough during the reorganization, the sacrifices have paid off.

Johnny Haer: "We had to concede a little bit on our grower checks to get things up and going again. But it was a matter of give and take and the growers were willing to do what it took to get the thing going again."

A couple of factors aided the company's quick recovery. First, demand for the product never wavered and, in fact, grew rapidly once a consistent supply of Smart Chicken was available. Second, the producers improved their efficiency in raising the birds.

Johnny Haer: "Our average daily gains are much better than they were back then. We're producing chickens at yield with a lot more meat to the plant. We're just a lot more efficient grower then we were back then."

To sustain the company's growth without stressing its capacity, MBA has begun to diversify its product line. It's signed agreements with three large natural foods grocery chains to provide vegetarian-fed chickens to health-conscious consumers. Fed a ration high in soy meal and soy oil, the vegetarian chickens are more expensive to feed out. But Haskins says the company has been pleasantly surprised by the results.

Mark Haskins, President, MBA Poultry: "We have been very delighted with the margins that we are able to obtain with this particular diet."

"We were initially told by nutritionists that the birds may not perform as well as what they had been doing on the conventional diet ... but the bird performs as well as the other birds that are fed the conventional diet."

The company also has developed a whole fresh chicken in a bag that's microwave-ready. Currently sold in test markets as "Quick Chick," the product provides a fresh chicken dinner in just 25 minutes.

Johnny Haer, poultry farmer: "We are learning what we can do with an air chill product. We've got the Quick Chick product and we've got the veggie-fed birds and these are all things we can do because we're an air chill product and we have the extra long shelf life."

Sales for the company this year are expected to reach $30 million, a 12 percent growth over last year. That's spurred MBA to construct eight new confinement buildings that will house 1.5-million birds this year.

The company's growth also has helped the local community. MBA now employs 280 people and has an annual payroll for its hourly workers of $6 million.

Mark Haskins, President, MBA Poultry: "... we have had an economic impact on this area of some $50 million, which is something we are very proud of. Our growers will receive in 2002 some $2 million for their grower fees that we will be paying them."

That money has kept some producers on their land. Johnny Haer and his family farm 1700 acres of corn and soybeans in the Missouri River bottom. He says the profits from their poultry operation have helped offset persistent low commodity prices in recent years.

Johnny Haer, poultry farmer: "Corn and soybeans have not been real moneymakers for the farmer out here and the diversity and income that broiler operations have provided for us has really worked well."

Faith, perseverance and problem-solving have rekindled the future for MBA Poultry. What's left now is to practice patience ... and to wait for the chicken-consuming public to climb on-board.

Mark Haskins, President, MBA Poultry: "The last thing that MBA Poultry wants to be exposed to is the commodity side of this business. We got into niche production of Smart Chicken and we want to protect that niche."

For Market To Market, I'm Jeannie Campbell.


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