MeatingPlace - June 2005
"Lean Spirited"
By Deborah Silver, managing editor
Processor Laura Freeman tapped into the concerns of health-conscious consumers with Laura's Lean Beef, putting her reputation on the line and her face on every package. What's next for one of the industry's growing success stories.
She's the face that launched a thousand shipments, but the first time Laura Freeman attended the annual meeting of the National Cattlemen's Beef Association in her new capacity as president of her family's feed-cattle business, she had a rude awakening. No sooner had she walked up to the registration desk to sign in, than she was directed to the women's activities. The year was 1984, and conference organizers simply assumed that she was a spouse.
More than 20 years later, the industry still remains a predominately man's world, but no one in it would say that Freeman doesn't belong in its top ranks. Under her guidance, her family's Lexington, Ky., farm has undergone a total transformation. Gone is the feed-cattle farm and in its place is Freeman's new namesake operation, Laura's Lean Beef, with more than $110 million in naturally raised beef products sold annually.
Freeman, who considered a career as a philosophy professor after graduating from Duke University, clearly tapped into her inner businesswoman when she bet the farm, adapting it to what is now one of food's hottest trends--natural, leaner products for a more health-aware public--and recognizing that if she personalized those products with her face on the package, consumers would buy.
With her fresh branded-beef program one of the industry's most surprising success stories, Freeman is now turning her attention to new retail arenas, such as fully cooked, and working to make sure that Laura's Lean is in retail meat cases nationwide. Slow and steady is her strategy, keeping costs down and awareness up.
In a candid interview with MeatingPlace, Freeman spoke about her trial-by-fire introduction to the beef business, her decision to go lean, keeping traceability on track, what the future holds for Laura's Lean--and a daughter waiting in the wings.
MP: What motivated you to go into the family business?
Freeman: In 1981, I was working on a local newspaper as a lark, heeding the advice of my professors to take some time off before going to graduate school. My mother was running the farm, which had been in her family since pioneer days. She was one of the first women in the country to run her own cattle operation. In its day, our farm was famous for breeding shorthorns. But times had been tough on the farm for several years. My mom told me she was going to have to sell, but I couldn't stand the thought of our family losing it. I told her that I'd run the farm, even though I didn't have a clue how. Those first few years in charge were really the school of hard knocks for me.
MP: How did you get interested in moving into processing--and with a natural, leaner product?
Freeman: We had a feed-cattle operation, buying young cattle out of the stockyards at 350 to 400 pounds and taking them to 650 pounds. But in the early-80s, there was a government buyout of dairy cattle, which flooded the market with dairy beef and crashed the cattle market. We really struggled economically for a few years. During that time, I gave birth to my daughter and gained quite a bit of weight. The doctor handed me the Pritikin Diet, which allowed me about three ounces of fish or chicken three times a week. I couldn't eat any beef, and that put me in quite a pickle. Then I had this 'aha' moment. Why couldn't we make low-fat beef? And that led me to thinking about the entire health component of the industry. Virtually all the cattle on our farm were given low-grade antibiotics and synthetic hormones and I thought, that can't be good for anyone's diet. Why can't we raise our cattle without the drugs?
I had a lot of homework to do. I found two professors at the University of Kentucky, specialists in food and animal science, who understood what I was after and helped me develop a program. Then, I went to talk with Mel Coleman [former chairman of Coleman Natural Products], who was really the only one doing something similar to what I had in mind. He helped put me on the naturally raised path. I had to familiarize myself with breeds. I realized early on that I'd have to switch over to continental cattle. We had mostly Angus on the farm--Aberdeen Angus and Black Angus--which have deep roots in bluegrass country. The only way to get low-fat, leaner beef would be to switch to French breeds, such as Limousin and Charolais. Finally, I branded my product in 1985.
MP: What were the risks in going after the natural, lean market? How did you get your products into the major retail chains?
Freeman: At the time, I was so broke that it didn't matter what the risks were. Of course, it helped that I was in my 20s, with energy to spare, never perceiving I couldn't make this work. In those days, branded beef was not common, and I realized that, in order to convince a grocery store to buy it, I'd have to focus on the uniqueness of our product. I'd had some success with grocers on the local level in Kentucky for about a year. But in 1986, I got a real break. Kroger was looking for a program that would bring in new customers without cannibalizing its existing business. I went in with my pitch, strongly playing up the health and regional angles of my beef, and they went for it. It was crucial to me that mainstream grocers pick up the products, because that's who I developed them for--Kroger, Albertsons, Safeway and the like, not Whole Foods or Wild Oats. That's why I called it Laura's Lean Beef, not Laura's Natural Beef. Lean is a mainstream concept. Plus, lean put the emphasis on the immediate benefits of low fat and weight, which was more important to me than focusing on the long-range benefits of being raised without chemicals.
MP: How does Laura's Lean Beef differ from other natural beef products?
Freeman: Ours is the only naturally raised beef that's low fat. That's our market position. We're the only one playing that card in the healthy-foods arena.
MP: Is your beef considered natural or organic? Is it getting harder to differentiate between the two?
Freeman: There are many regulations that govern organic beef. Cattle must be raised on grass or corn that has been herbicide- and pesticide-free for three years. You can't use conventional fertilizer. You can't use de-wormer, and so forth. It's a very expensive proposition, which is why there's not a lot of organic beef around. Laura's Lean is naturally raised, which means we don't use antibiotics or growth hormones, and the feed is all-natural and contains no wood waste. It's an affidavit program that goes through the U.S. Department of Agriculture's Food Safety and Inspection Service. In order to qualify as naturally raised, you have to prove that your cattle were raised without antibiotics and growth hormones, which is where traceability comes into play. We've had a traceability program in place for 20 years, which includes a massive database that we've created through ear tags.
MP: Do you audit your suppliers to make sure they're in compliance with your traceability standards?
Freeman: We have 16 people whose sole job is to monitor and document the cattle; seven are in the field visiting suppliers. We'll slaughter 75,000 cattle this year, and every one of them will be traceable back to point of origin.
MP: After your initial success with retail grocers, how did you determine the direction in which to take the company?
Freeman: I had another lucky break. Although I came from a family of entrepreneurs, I didn't consider myself a businesswoman during those first years of Laura's Lean Beef. In 1991, I met John Tobe, who had been an executive with Long John Silver's for many years. He'd been around the block in the food business and knew the ins and outs of strategic planning. He became my business partner and mentor, which really helped in rural Kentucky. He worked with me to develop a strategy for building a national brand. Initially we sold our product from Lexington to Cincinnati to Indianapolis to Detroit. That central corridor became our bread and butter. Next, we went up and down the mid-Atlantic coast. At times we've taken what John calls a scud-missile approach, including some costly forays early on into the West, where we didn't have distribution. I'm happy to say that we're now bi-coastal, with products in 5,200 stores nationwide. Our goal is to solidify distribution channels, develop some economies of scale and in-fill the country.
MP: How would you describe your core customer?
Freeman: We have three core customers. First, there are those with real health issues--heart problems, high cholesterol, diabetes, obesity and such. They're the ones who have to limit their fat intake, but are bored with chicken and want to be able to eat beef. Second are those who are into organics--the Whole Foods customer--who want a naturally raised product. They're into the low-fat angle, as well. Third, we have the broad middle of the bell curve, consumers who want to be healthy and keep their weight down, but want food choices to be simple and painless, with no guesswork. Just your average person who hopes to go into the grocery store and find a big, healthy choice in every aisle. Most baby boomers fit into this category.
MP: A major component of your branding program is that there's a face and a name to your products--yours. How did that strategy come about?
Freeman: This is not a high-margin business, so we couldn't afford national advertising. For us, point of sale has always been big, so we decided to use our package as a way to draw customers to the products. Our first label featured a picture that my brother's girlfriend had drawn of a cow holding barbells while standing on a scale. After we'd had some success, we decided to go more professional and hire an agency. The first image they developed for our label was a drawing of a high-class cow. Then, they hit on the idea of personalizing our product. After all, it's called Laura's Lean Beef, but who is Laura? Most of our customers didn't think I existed, so we decided to show them that I was real, to put myself out there for all the world to see. Since women are the primary grocery shoppers for their families, we felt they'd identify with my image.
MP: How do you go about evaluating the success of your approach?
Freeman: We evaluate primarily through direct customer dialogues by phone and e-mail. Every Monday, I read a report of customer comments for the previous week. In general, I've noted that consumers want to be healthy, but they don't have the time. They also feel that beef is complicated, and they want it to be easy. That desire is informing our summer ad campaign--'Healthy beef made simple.' We're creating a strong Web component for the campaign with new recipes and more information. We're also sending our customer-service staff to cooking school, so that when consumers call up, our staff will be able to speak with expertise on the various cuts, how to cook them simply and with health in mind.
MP: You continue to expand your product line. What are some recent examples? What new products are you working on?
Freeman: We recently introduced fully cooked barbecue, pot roast and meat loaf, and the focus will be on those three products for now. Fully cooked has been a learning curve for us, working with co-packers, developing packaging, rolling out the products. We're taking it slow. This summer, our big introduction will be frozen patties. One of my main interests is how to make the entire food system more sustainable. We're using 100 percent recycled material for the patties box, which holds eight patties and is streamlined like a corsage box to take up less space. We're also working on improving transportation to cut back on fuel consumption. I'm very involved in a project called Sustainable Food Laboratory, which works to make the entire product life cycle more efficient.
MP: How do you hold costs down so as not to pass them on to consumers?
Freeman: Keeping costs down is a struggle. It costs more to raise our cattle because we don't use growth hormones or antibiotics. That results in a decrease in feed efficiency, and the cattle grow slower. But we also can't afford to move too far away price-wise from the rest of the beef industry. Right now, we're working on bringing down back-of-the-house costs, partnering with a couple packers to bring those costs more in line with the rest of the industry.
MP: Your company has grown 20 percent per year compounded for the last 15 years. How have you been able to sustain that kind of growth?
Freeman: Actually, our growth for the last quarter reached about 30 percent, and we expect it to stay there. We've sustained it by coming out with the right product line at the right time. We haven't tried to grow too fast. And we've been diligent about keeping our costs in line with production and sales. We've worked hard to be the lowest cost producer in our market sector.
MP: Has the closure of the Canadian border impacted your business?
Freeman: The impact on us has been negligible. Having said that, I think the border should be opened. This is really a trade restriction issue. We've worked with ranchers in Western Canada for the last couple years in raising our Limousin cattle, and the situation has been devastating to them. My heart and head sides with those ranchers. Of course, they may have the last laugh when they build their own processing plants.
MP: Your daughter will be graduating from college soon. Is she interested in going into the family business?
Freeman: Absolutely. At the moment, she's interested in agriculture from a third-world-development standpoint. But she comes from a long line of stubborn, old pioneer women, and has told me she definitely wants to come back. That, of course, makes me very happy. When a farm has been in the family as long as ours, you don't want to see it end with you. And transition is critical with family farms. Fortunately, my daughter has watched me run the business, and that's given her a reality check. She knows what she'll be getting into.
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