Crossroad of two dirt paths

Small meat processing industry at a crossroads

–by Liz Morrison

Minnesota’s small meat processing industry is entering a critical transition period, as aging owners approach retirement, and aging facilities need modernizing.

That’s according to a new AURI survey of Minnesota’s 280 small meat and poultry processors.

The study, released in May, found that two-thirds of the owner-operators of small meat processing plants in Minnesota are at or near retirement age. But just one-third have succession plans to ensure that the business continues to operate after they retire.

And it’s not just the owners who are getting older. Half of the state’s small meat processing plants are over 40 years old, the survey found.

These processing businesses — often longtime fixtures of small towns — are an essential part of Minnesota agriculture, says Paul Hugunin, an official with the Minnesota Department of Agriculture’s Minnesota Grown program. “A vibrant livestock economy requires access to meat processors.”

The Department of Agriculture requested and sponsored the survey to get a handle on the needs of this sector, which is largely made up of sole proprietorships and family-owned companies having fewer than 10 employees and annual profits under $200,000. These companies buy nearly 80 percent of their slaughter animals from local livestock farmers, according to the survey, and sell 60 percent of their products within
their counties.

“We’re at a crossroads for this industry,” Hugunin says. “We don’t want to see a plant that’s been an important part of the community close its doors” when the owner wants to retire. “That’s a loss to the community, to local livestock producers and to hunters,” who rely on small meat plants to process wild game.

Other challenges, too

The survey reveals other challenges, too, says Randy Hilliard, AURI project manager, who oversaw the research.

Highly seasonal supply and demand, which peaks in the fall and early winter, leads to erratic cash flows and labor issues, he says.

Small processors are also hard-hit by the cost of regulatory compliance, says Carissa Nath, AURI meat scientist. Survey respondents acknowledged that regulations had improved documentation, product tracking and safety. But many also complained about time-consuming paperwork, a shortage of inspectors and operating restrictions that weigh on profitability. Meanwhile, consumers’ increasing focus on food safety creates pressure for expensive new regulations, Hugunin adds.

Cumbersome regulations, and a lack of expertise in financing, marketing and product development also discourage “the new entrants that are necessary to sustain and grow the small meat processing industry,” Nath says.

Opportunities exist

At the same time, the survey highlights opportunities in this sector, Hilliard says. For example, about a third of respondents said they are considering expansion.

The burgeoning local foods movement is creating opportunities for small processors to connect with consumers through branded products, Hugunin says. Demand for pre-cooked or pre-assembled main dishes, nutritious snacks and ethnic foods is also sparking innovation, Nath says. More than half of survey respondents, for example, make marinated meat products that are ready for the oven or grill.

The survey findings suggest that Minnesota’s small meat processing industry could benefit from assistance with:

Succession planning
Nearly three-fourths of survey respondents said they will need to address succession within the next decade.

Mentorship
for people entering the profession.

Marketing
programs to link small processors with both consumers and livestock farmers.

Facilities improvements
The Minnesota Department of Agriculture has funds available for physical plant and equipment upgrades through the Agricultural Growth, Research and Innovation program (AGRI). [http://www.mda.state.mn.us/en/grants/grants/valueaddedgrant.aspx] Improvements are eligible for a value-added grant of up to 25 percent of the project cost.

“The survey tells us that this is a time-sensitive issue,” Hugunin says. “There’s a window where we want to make sure there is opportunity to expand, upgrade and transition to the next generation.”

To read the entire report, “The State of Minnesota Small Meat Processors, May 2014,” go to auri.org.

The AURI survey of small Minnesota meat processors found that:

  • Two-thirds of owners are at or near retirement age;
  • Two-thirds of owners have no facility succession plan in place;
  • Half of processing facilities are over 40 years old;
  • One-third of processors have plans
    to expand;
  • Regulation changes have resulted in more paperwork and documentation, impacting business and;
  • A shortage of inspectors is limiting processing at some facilities.
AURI and the Meat Processing Industry
Idea to reality:
The statewide survey gathered information on the needs of small meat processors.

AURI’s role:
AURI designed and managed the survey, which was carried out by Southwest Minnesota State University’s Marketing Advisory Center in Marshall, Minnesota.

Outcome:
The Department of Agriculture and AURI will use the information to improve services for Minnesota’s small meat processors.

Partners:
Minnesota Department of Agriculture; Southwest Minnesota State University.

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