Serving high-end restaurants isn’t always easy

LaGrange, Indiana — Gunthorp Farms is famous.

Superstar chefs laud the farm’s pork in big-city magazines and food publications. The name Gunthorp is all over the menu at Frontera Grill, one of Chicago’s best-known and most decorated restaurants. Big-time politicians in three states have bestowed honors, and Gunthorp Farms once provided the Thanksgiving turkey for the mayor of Chicago.

In 2013 the farm raised close to 150,000 chickens, 10,000 turkeys, 12,000 ducks and more than 2,000 of its signature hogs on pasture, with the majority of that production going to restaurant and grocery customers in and around Chicago, Detroit and Indianapolis. Gunthorp is one of the best-known and most desired high-end meats brands in the Upper Midwest and perhaps the entire country.

Greg Gunthorp has come a long way from those days when he couldn’t find anyone to buy his pastured pork in the wake of the great hog market collapse of 1998. He’s looking forward to leveraging his brand by expanding further into retail channels as a means of improving margins.

“It’s been fun,” Greg says. “And so much more rewarding than when I was a commodity producer.”

The rewards have come at a price, though. Some of that is in the form of actual dollars, such as the nearly $1.5 million that has been invested in the farm’s USDA-inspected slaughter and processing facility over the past dozen years or so. There are the psychological costs of dealing with government bureaucracy and finicky chefs who don’t always pay their bills.

And Greg, who was a very visible early proponent of putting pigs back out on pastures, sounds a bit wistful when he says that he spends almost all of his days dealing with the processing and marketing sides of the business. “I don’t really spend a lot of time outside raising pigs anymore,” he notes. “This is a crazy lifestyle.”

For love of pigs
“I had pigs in my blood,” Greg stresses. “Grandpa and dad were both really good pig men.” These were pasture-farrowed and raised pigs — mainly Duroc. The Gunthorps would farrow 150 sows outside in huts each summer, about a hundred outside in huts in the northern Indiana winters, and all the finishing was done under open skies.

While some buildings were added over the years, the Gunthorps never moved to total confinement. Greg continued the tradition in the mid-’90s when he returned home from Purdue University after getting his fill of the “get big or get out” ag college mantra. With modern fencing materials available, he returned to the operation’s former practice of “hogging down” fall cornfields.

But within a few years he was faced with having to quit the business. “In ‘98 I sold hogs for less than grandpa sold them for in the Depression,” Greg says. “I had three options: sell out, grow on contract, or sell ‘em myself. I said I wasn’t going to be the last Gunthorp to sell pigs.”

Having little heart for the contract-confinement game, he chose the marketing route as the best way to capitalize on the Gunthorps’ long experience in pasture-based production. Greg had been reading and learning about the potential with pasture-raised meat markets, and thought he could develop a business as the niche expanded.

Relates Greg, “I thought it would be easy. But it wasn’t.”

First off, this part of rural Indiana was not (and still isn’t) on the cutting edge of the alternative foods revolution, so Greg had to go searching for other markets. He called dozens of restaurants, grocery stores and small processors within a large radius, and not one of them would give him the time of day.

His big break came at a sustainable agriculture conference in Missouri, where Greg was speaking as part of a USDA-SARE grant he had received to demonstrate pasture pork production. Another attendee told him that a friend was getting out of the hog business, and a Chicago restaurant the friend had supplied was looking for a new source of pork.

The restaurant was Charlie Trotter’s, at the time rated near the top of U.S. and global dining surveys. Greg managed to reach the chief chef there, and had a long phone conversation about his pigs and production methods. Greg and his wife, Lei, put a plastic stock tank in the back of their Suzuki hatchback, added ice and a newly killed hog, and braved the traffic of downtown Chicago to reach Charlie Trotter’s.

The immediate reward for their effort was an order for one hog every three weeks. The long-term impact of the deal is that it allowed Greg to inform other restaurants that Charlie Trotter’s was serving his pork. The orders started pouring in.

Investing in processing
Processing was the second hurdle, one that Greg is dealing with to this day. If Gunthorp Farms pork was going to be served in Chicago, he needed access to a USDA-inspected slaughter and processing facility that would do the cutting required to satisfy chefs. This kind of facility did not exist in the area, so Greg and three partners bought a small plant 35 miles away in southern Michigan.

“We failed miserably. Fell flat on our faces,” Greg says. “I couldn’t manage the farm and sales plus the processing from so far away.” Having multiple partners spread the damage enough to keep the Gunthorps out of bankruptcy court, but their finances certainly took a hit. Another person might have quit at this point.

“I was stubborn. I still thought I could do this,” Greg describes. But banks weren’t on board after the debacle. So with some creative financing that included credit cards, the Gunthorps built a state-inspected, quarter-million dollar kill and processing facility at the Gunthorp farmstead. Soon another quarter-million was invested to gain USDA approval for interstate sales. The facilities and equipment investments have since steadily risen with the growth of the Gunthorp Farms business.

Red meat and poultry
There may be nothing else like it in the United States: An on-farm, USDA-inspected facility with the capability of killing and processing both red meat and poultry. And it has proven to be a mixed blessing.

The plant indeed allows the Gunthorps to meet the specific needs of their high-end restaurant and grocery clientele. It allows Greg to say that he controls the quality of his meats from field to restaurant kitchen.

For instance, he convinced USDA to allow the use of citric acid as an anti-microbial rinse instead of the industry standard of chlorine, a reported carcinogen when mixed with organic matter. He gained approval to rapidly air-chill birds instead of using chemicals, and uses far more water than the typical slaughter facility.

Essentially, he can say that no GMOs, antibiotics, hormones or carcinogens are in his meats from field to fork. Greg says he’ll be ready when customers start demanding organic meats: “We don’t do anything that is not organic-certifiable.”

The Gunthorps built a hickory log-fired smokehouse for adding value to less-popular basic cuts, and have a steam kettle for processing fats. He processes chorizo (Spanish-style sausage) for his largest restaurant customer, Frontera Grill, owned by celebrity chef Rick Bayless.

A new packaging and labeling machine has opened possibilities for increased retail sales that could further leverage the Gunthorp brand. And perhaps most importantly, having the facility virtually guarantees that Greg can have product processed the way his customers want it, when they want it. It is also an expensive and laborious proposition. USDA inspection isn’t cheap for a small plant like this one. The new vacuum packaging machine cost $130,000; Greg says he “lost a lot of sleep over that.” The Gunthorps could use some more land (see accompanying article), but their capital is tied up in the processing plant.

And the plant is extremely inefficient compared to those operated by the giants of the meat industry. Greg usually has three people on the kill floor working through about 600 chickens, 240 ducks or 10 pigs per hour. Part of that has to do with the relative lack of automation, including having people manually removing feet and heads. Another part is due to the careful handling and cleaning that must be followed in lieu of chlorine use and other common industry processes. Altogether, Greg employs nine people in the plant on both the kill floor and in the cutting and cold-storage areas.

“That’s six to ten times more labor per animal than is typical in a large plant,” Greg notes. “Processing and distribution at this small scale can easily eat up the premium. We’re one of the largest niche marketers in the Upper Midwest, and we’re still not big enough to justify a USDA-inspected plant.”

He originally hoped to run the kill floor just one day a week, but now he’s operating with two shifts of workers at least three days during much of the year, and would like to expand to a steady four days per week by doing custom work for producers who can offer reliable streams of animals.

“This is a manufacturing business, whether I like it or not,” Greg explains. “Looking back, I would have been light years ahead to do processing, but not slaughter.”

Picky chefs
Dealing with restaurants isn’t always fun, either. Chefs generally don’t want the entire hog, which of course creates utilization problems for Greg.

Many do not want frozen meats, which of course creates problems with pasture-based production in a climate where seasonal production makes sense. While many chefs are loyal customers and supportive of local farms, others are not.

Greg’s main delivery guy, Jamie Stanton, is blunt about another major problem: “The simple truth is that the restaurants don’t want to pay.” That isn’t a good thing, given that restaurants account for about 60% of the Gunthorp Farms business.

“When we picked our path,” Greg adds, “we picked upscale restaurants. It might have been better to pursue a different route.” But while margins are probably better with farmers markets and buying clubs, Greg said it would be difficult to build the volume required to support a processing plant with these avenues alone.

“I’m not going to second-guess decisions made years ago,” he stresses.

Looking to diversify
He does want to diversify, with new efforts in the works on both the wholesale and retail ends of the spectrum.

Greg is buying some extra gilts and sows with the idea of supplying Niman Ranch, now procuring pigs from direct marketers. He figures this will help balance his pork supplies with the needs of his own market.

In late 2014, Greg was in the final stages of reaching an agreement with Whole Foods Market to supply at least 8,000 air-chilled turkeys this year. Gunthorp Farms already supplies Green BEAN Delivery in Indianapolis and Seven Sons Family Farm near Fort Wayne (see Graze, November 2014).

Until just over a year ago, the Gunthorps offered retail cuts from a storefront at the farmstead plant, but sales weren’t enough for the required time, labor and space. Son Evan now handles pre-orders on Saturdays.

Still, Greg has ambitions for expanding his retail offerings. This, he figures, will require more effort than has been made in the past.

“We’ve done a decent job of creating brand recognition in Chicago, Indianapolis and Detroit, but we have been horrible at leveraging the recognition from the chefs and turning it into retail,” Greg says.

Overall, the idea is to boost per-unit margins rather than continually expanding production. “If we just keep expanding, that increases our risks and keeps us on the treadmill,” Greg explains.
He is doing an evaluation of the business enterprises, and may adjust the product mix accordingly. For instance, while chickens “get us in the door in a lot of places,” Greg says they produce the lowest margins of the farm’s species due to the high level of labor and management required for the price obtained. “Chicken is really nice. But the perception in this country is that they’re still only a chicken, whereas people will go out to a restaurant looking for pork chops,” Greg explains.

He is hopeful that the business can attract one or more of his children to the business. Oldest daughter Keri is studying agricultural business at Purdue. High school student Evan is working half-days on the farm and in the plant, and younger daughter Cassidy also helps out on the farm.

“We’ve got a long ways to go to get to where we need to be. Long term, we have to look at our place in the industry,” Greg stresses. “There’s a huge opportunity out there in all of these things. We’re just on the edge of figuring this out and making it big.”