Thursday, May 20, 2010

Feeder Pig Customers, Approach to Production Improvements

Where you can encounter our pigs.

Wooly Pigs recently sold approximately 150 feeder pigs to Provenance Farm, Pasture Prime Wagyu and Mosefund Farm. There's also a new farm in Colorado that bought a few pigs.We've sold pretty much all the barrows produced in the Midwest since January.

Besides Colorado, those are all repeat customers - Mosefund, in particular, has bought more pigs than anyone else in the USA.

All those farms are small, and somehow they are all able to make money fattening our special pigs.

Provenance sells in Minneapolis, Pasture Prime Wagyu sells in Florida and Mosefund specializes in New York, but sells nationally too.

Provenance bought a mixed batch of pigs (purebreds and crosses). They would have preferred to have bought all purebreds if we'd had them. Unfortunately, the Madison Club in Wisconsin, and Mosefund in New Jersey got some of those.

Pasture Prime tends to buy crossbred hogs. From raising purebred Wagyu cows, Torm Siverson, Pasture Prime Wagyu owner is aware of how a little heterosis really helps to decrease the cost and risk of raising an animal.

Mosefund just bought a big load of purebreds. That's in keeping with the quality-at-any-cost approach of Mr. Andersen (owner of Mosefund). They are also finishing their current batch of pigs on a grain diet supplemented with acorns. That's better than what Wooly Pigs does - because Wooly Pigs is focused on consistency. Our goal is to produce a consistent wholesale stream of very high quality lard-type pork, killing once a week.

One problem with inconsistency is that if someone gets something really great one time and then gets something worse, they'll feel you are slipping or cheating them. if it is always the same, if they like it once, they'll like it again and again.

When I worked as a consultant in Germany, my neighborhood brewery, Unionsbraeu, was (is) one of Germany's best small breweries. You could theoretically call it a "microbrewery" - but given how in the USA, "microbrewery" might as well be a synonym for "small brewery managed by dilettantes who like to make beer", I don't feel OK using that term. The problem with Unionsbraeu: on a good night, if they'd tapped a great keg, the beer was arguably the best in Germany.

Ayinger, on the other hand, was (is) a bigger brewery in Bavaria, that makes a lot more beer than Unionsbraeu. It is the best of the "real" breweries, although it is much smaller than the big ones. On a bad night at Unionsbraeu, it wasn't as good as Ayinger. This wasn't my opinion; I heard this from beer connoisseurs.

The goal of Wooly Pigs, right now, is to be like Ayinger, and fill the demand for lard-type pork. Mosefund looks like it wants to be like Unionsbraeu.

In general, I try to make sure that when we make quality improvements, we can capitalize on them quickly and permanently, especially if those improvements increase the variable costs (per pig costs) of doing business. E.g. we didn't train a slaughterhouse in seam butchery techniques until was clear we had a lot of hogs to do that way, and we'd benefit for the foreseeable future.

In the course of running this business, I have found that it can be very wasteful to implement improvements speculatively, particularly if they increase variable costs. Increasing variable costs is really asking for trouble - because given the company's rapid growth, profit margins are continually shrinking.

Hence, if we were finishing some hogs on acorns right now, it would be too early. When it is clear we can market such hogs at a premium, sell them in volume, and do it for the foreseeable future, while keeping costs under control - it will probably be the top priority of the company.

When I worked in the financial derivatives world, it was the same. The goal was always to identify some niche with major profit potential, then move into it and scale up in a big way. We put up with all sorts of awful problems for months in the initial phases, and when we were scaling up, we'd try to improve things permanently and things would get nicer and more manageable.

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