Local packing plant (Cheyenne: for sale, real estate, attorney)

[jody_wy]

My grand dad had a cold storage plant and my grandmother could make a neck bone shine when she got thru boning. We have a saw and big grinder and usually do our own beef and game meat in late fall when we have cooler weather to hang stuff. We do a lot of lambs during the year but at home in the kitchen after hang up for a night too cool.
Well we had a steer finish and I wanted him hung a couple of weeks , we just picked him up at the local plant. They told me it is for sale, and it getting their busy time of year. They did fair lambs this week , fair pigs the next two then fair beef.... and then right into hunting season . Then back to domestic animals in December. It is a state inspected plant and they do sell jerky , sausages, and whole and half hogs when not in hunting season. Good business if somebody not afraid of work.

[Plainswalker]

I wish them the best of luck in selling their plant!!!

[jody_wy]

If I had the money I would buy it set my Daughter and SIL up .... they both have worked on a meat cutting line

[sunsprit]

Long Post ... been in/around this biz for a long time and have some first-hand observations about making money in it ...

anytime somebody tells me that their business is for sale, especially heading into their "busy season", leaves me with a whole bunch of red flags.

absent a legitimate rationale for the sale ... change in family situation, illness restricting ability to run the place, other ventures presenting which are more attractive and they need the money, years in business now wanting to retire, etc. ...

I'd be asking for a look at the books and 4 years prior P&L's. One also needs to know exactly what is for sale in terms of fixtures, inventory, equipment, real estate, contracts, and so forth.

Having just been down this path over the last 5 years, trying to open up a new USDA processing facility in the Cheyenne area, or buy an existing one that was in financial distress and with severe difficulties complying with the recently imposed (over the last few years, each year tighter requirements) upgraded regulations for operations, these are not easy money businesses.

I've been around the red and white meat processing biz for over 20 years, and I looked at 4 businesses that had been operating full-tilt boogie with great market demand and busy busy busy for years ... for sale, and the owners were finally getting out because they weren't making a dime after all their labor.

One fellow had bought a plant that I was considering, worked it for a year, and spent his entire retirement savings trying to bring it up to USDA approval (which isn't much more difficult these days than WY state approval due to the recent regs changes applying the same standards to small operators as the big boys). He spent more money in legal fees dealing with the authorities than the place was worth, but he'd been chasing his money with more money. Finally got opened, managed to hire enough crew to operate with scheduling a few of them for each processing day, and worked his tail off to keep the plant open so he could process his son's livestock production. He had to continue working his primary job just to make a living rather than taking his anticipated retirement. Managed to hang on long enough to go in the hole mid-6 figures and finally offered the place to me at pennies on the dollar just to be able to walk away from the building and fixtures. The final straw was his reefer compressors needing replacement and he couldn't afford to do that. I wasn't taking on that bunch of problems, and the plant would not meet the 2012 new regs without significant upgrades. They finally sold off the equipment and the building now sits vacant.

Same story for another friend, who'd also been in love with that facility and wanted a place to process his family's livestock. He couldn't justify the expenses to acquire the place and bring it up to current standards, and he is a lot sharper than me when it comes to knowing how to play the compliance games and construction. He wound up starting from scratch with a building (and he's the GC, been in the biz for decades) on a piece of rural industrial property he was developing that he already owned free and clear. Spent more in legal fees than the building was worth in a protracted legal battle with the area residents who didn't want a 3,000 sq ft (that's pretty small!) processor in their area. Mind you, this wasn't like he was building it right down the street from a high density residential area, this was out in the country and surrounded by over 1.5 sections of industrial/commercial zoned land in an industrial zoned portion with proper roads, sewer, water, and power in place. Finally got the Z&P limited approval, got the equipment, and then had a two-year fight with the varying determinations of the inspectors as to what would and would not satisfy their individual interpretations of the new regs. He finally had to go to Wash DC to deal with the top level folk, who issued their approvals which were then denied by the regional staffers on site. Another $100K lost in legal fees, and over $50K remodeling the building which had been designed by an architect who specializes in food processing facility design. I'd note that there were 3 remodels undertaken, all dependent upon who was the site inspector that day and what they'd accept. A couple of the inspectors wouldn't even accept brand new commercial food processing equipment certified to meet USDA standards, and they had to modify some or exchange it for other equipment.

He finally got approval for the physical plant and managed to staff up the place. Same deal as the other plant, he got a staff list and for each scheduled production day, they have to go down the seniority list and offer the day's work. It takes a lot of planning/scheduling to be able to put together a crew on a given day and it's not uncommon to see a worker have to cancel in the AM of a scheduled day. So they either run short-handed or he may be able to call in one of his other workers on short notice. The margins in the business don't allow him the ability to bring in more staff than needed for the scheduled day's production just in case somebody doesn't show up to work.

On top of all the plant, building, equipment, and other difficulties to open the biz, he's been shut down several times because his HAACP plan didn't meet the approval of the USDA inspector that day. So he's got to contact his attorney, get the plan re-written, and either hold up the livestock processing or call everybody up and ask that they come retrieve their animals. The bureaucratic nightmare for him has been that the inspector cannot tell him what they will be satisfied with, all they'll do is tell him that what he's got in the manual isn't satisfactory. So he gets to pay to have it rewritten and then submit it for approval. It's kinda' a game, because what satisfies one inspector doesn't necessarily satisfy another. Meanwhile, there's lost days of production, workers sent home with a short day, etc. My bet is that he's got a shelf full of HAACP binders now and knows which one to have on the shelf for each of the various inspectors that come through the plant. The USDA assigns inspectors, and they rotate them through the territory because they don't want anybody getting too cozy with an inspector.

He's busy busy busy. I have to book my livestock production into their schedule 2-4 months in advance, depending upon time of year. Don't even think about getting in there during fair season when all the market livestock starts coming through unless you've made a reservation long in advance. Hunting season? don't bring him domestic livestock, it's not gonna' get processed.

Speaking of which ... an inspected plant cannot do wild game and domestic livestock processing concurrently. They can do one or the other, then it's a shut-down/sanitation and change over to the other processing. Gotta' avoid any potential for cross-contamination of the various bacteria and other bad stuff that needs to be controlled, and the tactics are different for the control.

I mentioned to yet another friend here in the Cheyenne area that I'd been pursuing opening up a plant and that I'd seen a sizable demand for the services. Even thought about trying to set up a mobile plant; buy a suitable box van truck with a reefer on it, wash-down Hotsy, etc, processing equipment. To my surprise, he offered me a complete set of the equipment I'd need for almost nothing ... his family had owned two processing plants in the area for years and had the stuff sitting in one of their barns under wraps. Shut the plants down awhile back because their buildings didn't meet the new codes and couldn't be brought up to standard without a huge investment which couldn't pencil out for a ROI. So they walked away from what had been a profitable business for them. The whole family used to operate the places on schedule; they'd use their paid-for equipment and facilities, have folk bring in their hogs or beef or lamb to process, and then work it for a few days each month. If they didn't have enough volume to justify opening the doors, they'd cancel the session and re-schedule for the next. If it hadn't been for them having all that equipment long paid for, they'd not have been able to operate at all.

There's certainly the demand, the current operators in this area IMO don't do a good job and they've had their facility up for sale for several years ... at $1 mil for a small place, can run it with 3-4 workers. That includes the plant, equipment, fixtures, office, and the real estate in an industrial area of Cheyenne. Come hunting season, they're swamped.

So ... if anybody thinks that this is an easy business to get into if you want to work hard and make a lot of money in a small-scale inspected processing plant ... you really need to know what you're doing, have appropriate legal and accounting and management ... and be able to identify the items or compliance that may be soon costing you a lot of expense to continue operations. BTDT, it was hard enough to try complying 5 years ago, it's a nightmare now for the small plants. The feds are aggressively seeking to shut down the small operators, and the big boys in the biz are supporting the requirements that all plants meet the same standards, regardless of size. The reality is that many of the food safety issues of the big plants are unique to their operations simply due to the volume going through their facilities and not an issue in the smaller plants.

I've seen a dozen plants close over the last decade, some of them operated by the "big boys" in the business. This is an industry that gains efficiency by economy of scale, affording more equipment and faster through-put. A small outfit doing lambs at $85/each has got to hustle to make any money at the end of a day. Value added products require the commercial kitchen operations; sausage doesn't come directly from the processed livestock on their way through the plant.

BTW, if you are processing for resale, a state inspected plant is only good for resale in that state. You must have a USDA inspection to cross state borders for resale. This becomes an issue when you're processing for somebody that's a reseller and you're close to a state border area.

[jody_wy]

Government regs one reason there are so few Dairy farms any more and the thee are much bigger