Hitting their milestones

It is common knowledge that most new small businesses fail. Only the best survive and prosper.

AURI has supported many winners in Minnesota’s dynamic agriculture sector — helping energetic innovators solve technical problems and providing marketing expertise, research help and sound business advice. Here is a progress report on some of the businesses that came to AURI for help in the last few years, then went on to develop successful markets for Minnesota ag products.

Poultry power nearly here

Benson, Minn. — Sometime in the next few months, heavy equipment will begin transforming an 84-acre field just outside Benson into the nation’s first poultry litter-powered electric plant.

Last October, the Fibrominn biomass power plant received key Minnesota Pollution Control Agency air emissions permits, clearing the way for the facility to be built. When completed, Fibrominn’s plant will generate 50 megawatts of electricity per year — enough to power roughly 50,000 homes — by burning 500,000 tons of turkey litter and other ag biomass.

Fibrominn’s parent company, Fibrowatt, operates three poultry litter-fired plants in Britain and is working on several more facilities in Europe and the United States.

“The MPCA permit was the final major permit we needed,” says Ann Martinez, Fibrominn public affairs manager. “This is the first permit of its kind in the country. All the major questions have been addressed.

Martinez says Fibrominn has held monthly meetings with a 12-member community group to address Benson area residents concerns. Developing community support was key to the project’s approval, Martinez says. “The community was fully involved and has been fully supportive.”

Litchfield turkey producer Greg Langmo first contacted Fibrowatt in 1998 to pursue building a plant in west central Minnesota. After numerous meetings and the arduous permitting process, “now we’re … finalizing financing, design plans and contracts,” Martinex says. “We’re looking at a late spring ground-breaking.”

The $100 million Fibrominn project is expected to create 30 jobs and generate more than $8 million of economic impact per year.

• On the road: 1998, when a Litchfield farmer approaches Fibrowatt of England.
• AURI pit stop: AURI helps with early feasibility studies.
• Long and winding road: Environmental permitting process takes a year and a half.
• Straightaway: MPCA air quality permit approved in October 2002.
• Picking up speed: Groundbreaking is expected in late spring of 2003.

Bird cakes escape fire, are bundled in new packs

Chaska, Minn. — Wildlife Sciences has added three new seed-and-suet products to its line of premium wild bird food. And the company is again selling large birdseed blocks after a plant fire last fall interrupted production.

Wildlife Sciences makes 13 varieties of St. Alban’s Bay and its own name-brand of birdseed cakes. The 11- and 13-ounce cakes are a blend of beef tallow, seeds and berries. In February, the company introduced a starter pack: five suet cakes plus a green coated-wire cage feeder to hold them. Also new in February: an economy pack of twelve suet cakes. Wildlife Science’s seven- and 10-pound birdseed blocks were back on store shelves in February, too.

These additional products give Wildlife Sciences a larger presence on store shelves, says former commodities trader Bill Gleason, who founded the company in 1996 with partner David Pichotta. This winter the company also began offering retailers a floor-stand display case for added merchandising pizazz.

St. Alban’s Bay wild bird foods are now distributed nationwide in independent pet and garden stores, farm stores and Hardware Hank stores. An economical plastic film package, introduced last year, helped the seed cakes gain entry to price-competitive “big box” retailers, including Petsmart.

AURI helped the company revise its suet formula for the new package. That turned out to be “a bigger engineering challenge than we expected,” Gleason says. AURI also helped the company open a processing plant in Chaska, where they make suet cakes under their own as well as others’ private labels. Temporary labor gives the young company production flexibility while it builds sales. “Our biggest challenge now is market penetration,” Gleason says.

For more information visit www.suetplus.com

• On the road: 1996
• Rough road: Original cardboard and plastic packaging too expensive for mass market.
• AURI pit stop: AURI reformulates suet cake to work with new packaging.
• Mile marker: Wildlife Sciences opens manufacturing plant in Chaska.
• Roadblock: Fire in 2002 interrupts birdseed block production.
• Straightaway: Company gains shelf space in national chains, including Petsmart and Hardware Hank.
• Picking up speed: Three new suet cake products introduced in 2003.

Minnesota’s only chevre is a world champion

Kimball, Minn. — The first five years have brought dramatic growth for Stickney Hills Dairy, Minnesota’s only commercial goat cheese producer.

Brad and LeAnne Donnay, Brad’s brother Kevin and Dave Lenzmeier started the venture in 1998 with 50 dairy goats and a farmstead cheese plant, built with help from AURI. Now, Stickney Hills milks 450 goats and makes 15,000 pounds of fine chevre a month.

Stickney Hill’s growth spurt came last year. Kevin Donnay left the business to operate an organic dairy cow farm. The remaining partners added 350 goats, enlarged the milking parlor, and re-equipped the cheese plant to boost production and save labor. They also redesigned the label and package. “And then we had to market it all, too,” says Brad Donnay, president. “It was a very challenging year.”

Stickney Hills now dominates the Minnesota chevre market, Donnay says. He furnishes goat cheese for two dozen Twin Cities restaurants, all the Byerly’s and Lunds grocery stores, and most Twin Cities food coops. However, Minnesota is a small market, he adds, so three-fourths of Stickney Hills chevre is shipped out of state. “Marketing hasn’t come easy, but we’re selling everything we make.”

The Donnays now employ eight part-time workers, plus a herdsman and sales director. They’re hoping to add another 200 goats this spring. Brad, who holds a dairy science degree, is also working on cross breeding for higher butterfat and protein — components for the best-tasting cheese.

It’s an advantage to control quality at every step of cheese production, Donnay says. Last spring, for example, Stickney Hill’s Chateau Chevre placed ninth in the 2002 World Championship Cheese Contest. “We’re also very cost competitive, because we own our own goats,” he says. “Our pricing helps us get into new markets.”

For more information about Stickney Hills Dairy products, visit www.stickneydairy.com.

• On the road: 1998
• AURI pit stop: AURI helps with nutritional analysis, labeling and technical consulting on farmstead cheese plant.
• Rough road: A founding partner leaves in 2002; the dairy completes a major expansion.
• Mile marker: Stickney Hills Chateau Chevre places in top 10 at 2002 World Championship Cheese Contest.
• Straightaway: Dairy now shipping 15,000 pounds of chevre a month nationwide.
• Picking up speed: Plans underway to add another 200 goats.

Rhubarb wines selling out; owners keep expanding

Laporte, Minn. — Forestedge Winery has sold out its entire vintage three years running. The farm winery on the edge of the Paul Bunyan State Forest produces rhubarb and berry wines. Since its founding in 1999, Forestedge has tripled, then doubled, wine production and twice expanded its facility. Now, owners Paul and Sharon Shuster and John Wildmo are preparing to grow again.

Forestedge’s first vintage, 5,000 bottles of rhubarb and rhubarb-blend wines, sold out in just six weeks. “Immediately, we were confronted with all the problems of being too successful too quick,” Paul Shuster says. “It’s just as easy to go out of business by having too much business as by not having enough.”

In 2001, the Shusters remodeled the second floor of their winery for controlled storage and added more wine-making equipment. AURI, which provided technical assistance in the beginning, helped the company find fruit growers to supplement the winery’s 1,000 rhubarb plants. That year’s vintage, 15,000 bottles, also sold out in short order.

In 2002, the winery added 800 square feet and upped the vintage to 30,000 bottles, which sold out by December. For the first time, the business produced enough revenue to pay the owners a salary.

Production in 2003 will again be about 30,000 bottles. Meanwhile, the partners are expanding the production facility again, adding storage and freezer space. And they’ll add a thousand more rhubarb plants this spring.

Forestedge, one of 11 Minnesota farm wineries, benefits from the Bemidji area’s strong tourist trade, says Shuster, a longtime maker of fine wooden kitchen utensils. “We’re a draw for people who have fished for several days and want to do something different.” The winery gives tours, operates a gallery, and last August held an arts fair that drew more than 4,000 visitors.

“It’s our mission to entertain as well as sell wine,” Shuster says. “Plus, we’re a value-added farm business that does have an impact on local growers. Value-added farming — that’s the answer for rural development.”

For more information, visit www.forestedgewinery.com.

• On the road: 1999
• AURI pit stop: AURI helps with equipment, packaging and pricing information, licensing, technical needs and market feasibility.
• Rough road: Strong sales require expansion sooner than planned, straining labor, capital and technical needs.
• Straightaway: Winery develops supply agreements with local growers for rhubarb, strawberries, chokecherries and other northern fruits.
• Mile marker: First annual winery arts fair in August 2002.
• Picking up speed: The winery’s third expansion now underway.

Soy-wax patent keeps candle business burning

Redwood Falls, Minn. — In January, Redwood Candle Company received a patent on its soy-oil wax. The patent is a boost for founder Jill Anderson. She weathered a tough 2002, holding sales steady at her four-year-old company despite a severe gift-market slump.

AURI scientists helped Anderson improve her scented soy candles with hydrogenated oils for longer burn time. Later, AURI helped her sort out the pros and cons of a formula patent. The patent process is long and expensive — Anderson spent three years and about $15,000. The payoff? She’ll be able to license the formula, which is now being widely copied.

Anderson was the first in Minnesota to make scented soy candles commercially. Soy wax burns soot-free, a big advantage over paraffin. Anderson started the company in 1998, making candles in her basement and marketing them with energy and panache. Sales grew rapidly, passing the million-dollar mark by 2001. Late in 2000, Anderson moved her operation to a 14,000-square-foot manufacturing plant and at her peak employed more than two dozen workers.

Growth stalled last year, though, as the economy faltered. “2002 was a horrible year for the gift market,” says Anderson, who also manufactures scented soy lotions. “It was a year of just making it through. … 22 of our customers went out of business last year. Normally, we lose about four a year.” To compensate, the company is doing more private-label manufacturing.

If there was a bright side to a disappointing year, it’s that “we had to go into other areas, so we’re more diversified now.” Though she had to reduce her workforce and watch every penny of expense, Anderson held sales flat last year, maintaining enough volume to run her manufacturing plant five days a week. And this spring, she will release a new line of Redwood candles. From that standpoint, she says, “you could say we had a successful year.”

For more information, visit www.redwoodcandle.com

• On the road: 1998
• AURI pit stop: AURI improves soy wax formula for increased burn time.
• Mile marker: In 2001, operations move from founder’s basement into a Redwood Falls manufacturing plant.
• Rough road: Gift-market slump forces company to reduce workforce.
• Change of direction: Company weathers 2002 downturn by stepping up private-label manufacturing.
• Mile marker: Redwood Candle receives patent on its soy-oil wax.
• Picking up speed: New line of Redwood candles in the works.

Mattresses fluff up the state’s wool business

Harmony, Minn. — High Pointe Coverings is becoming a significant consumer of local wool.

High Pointe makes soft-sided mattresses of pure domestic wool. The hand-made mattresses have seven layers of carded wool, which are double stitched, then encased in cotton ticking and hand-quilted.

Lloyd Peterson, a retired farm equipment representative, began producing the mattresses two years ago at his commercial tarp-sewing business. Driven by a near-missionary zeal for the comfort of woolen beds, Peterson has made lots of converts and is now selling about 100 mattresses per quarter. At 35 pounds of wool per mattress, “we use a lot of wool,” he says.

At first, the company couldn’t buy wool in the Midwest, where the industry virtually disappeared after World War II. “But it’s starting to come back,” says Peterson, who is cooperating with the Minnesota Sheep Growers Association. “Now, we’re using Minnesota and Wisconsin wool in our mattresses and we like this wool better.” Local wool is more resilient than other domestic wool, he says; it makes a superior mattress.

So far, most of High Pointe’s sales have come through word of mouth, public health referrals and the company’s Web site. The mattresses, which rest on top of a regular mattress, come in four sizes and sell for $269 to $425. “We want to keep the price low so everyone can have one,” says Peterson, who for 40 years has slept on a wool mattress that is over 100 years old.

Peterson makes a point of calling buyers after a few weeks to ask how they like their new mattresses. “We haven’t had a dissatisfied customer yet.”

For more information, visit www.natureswool.com

• On the road: 2000
• AURI pit stop: AURI helps with product roll-out.
• Straightaway: Sales volume grows steadily in the first two years; current sales are about 100 mattresses a quarter.
• Mile marker: High Pointe Coverings now buying wool grown in Minnesota and Wisconsin.
• Picking up speed: Exploring new products, including a foam-and-wool mattress.

Chips a-soy riding high, more snacks on the way

Clara City, Minn. — Kay’s Naturals is riding a nationwide wave of interest in high-protein diets.

Kay’s makes all-natural protein chips — small, cracker-like chips in five zingy flavors, including chili nacho-cheese and lemon-garlic-potato. The chips contain nearly 30 percent protein from soy and whole grains. Low in fat and high in fiber, the chips won first place in the cracker contest at the 2001 Natural Food Expo in Washington D.C. “For a protein chip to take first place is amazing,” says Kay’s CEO Ann Kazemzadeh.

With AURI marketing help, the chips were introduced in the Midwest in January 2001 and gained national distribution last September. They are sold at natural food stores, co-ops, health clubs such as Bally Total Fitness, and many grocery stores.

The chips are also winning a following among personal trainers and their clients, says Massoud Kazemzadeh, a cereal scientist who developed the patented chips. The best seller so far: Kay’s gluten-free lemon-herb chip.

Massoud says he expects that strong consumer interest in high-protein diets, such as the Zone and Atkins, will push chip sales near the million-dollar mark by next September. He said the company is prepared to “invest substantially” in upgrading a Clara City facility where the chips are manufactured.

Kay’s is also attracting interest from major U.S. food companies. The company is earning a reputation for coming up with high-protein grain products that actually taste good, Ann says. Massoud is now developing several new soy-protein foods, including pretzels, crunchy salad bits and breakfast cereal.

In addition, the company is working with diet companies that want to sell Kay’s chips under their own labels. Private label licensing benefits young, cash-strapped companies like Kay’s, which lack the marketing dollars to promote new products, Massoud says.

“We started out thinking we would be a little snack company with a branded product,” Ann says. “We’re doing a lot more licensing and research and development than we expected. We’re really pleased about that.”

For more information, visit www.kaysnaturals.com

• On the road: 1997
• AURI pit stop: AURI helps with product roll-out.
• Mile marker: Company buys manufacturing plant in Clara City.
• Straightaway: Chip sales approach $1 million in 2002.
• Picking up speed: Four new products in development; licensing talks underway with other companies.

Branded products are sweet deal for honey company

Marshall, Minn. — The Walnut Grove Mercantile brand has helped Klein Foods double sales in the last three years.

The old-fashioned brand is the latest brainchild of former schoolteacher Steve Klein, who turned a 50-year-old commodity honey operation into a specialty food business in 1991. Ten years later, the company built a $500,000 manufacturing plant in Marshall and opened a retail store. Early this year, Klein added Internet sales.

Klein Foods has carved out a niche in contract manufacturing for small food companies, specializing in flavored honeys, syrups and other liquids packaged in glass. “We help a lot of start-up companies,” Klein says. “We’ll do small runs — say, 100 cases rather than 100,000 cases.”

Klein, who took over his father’s commercial beekeeping business in the 1980s, began making flavored honeys in the early 1990s. Over the last three years, honey product sales have surged, Klein says. Demand now far outpaces yield from the company’s own hives, creating a market for other honey producers.

Besides private-label manufacturing, Klein makes several dozen products under his own label, Walnut Grove Mercantile. He started the brand in 1999 with assorted handmade soaps, fruit preserves and fruit syrups, all developed with AURI’s help. The packaging, featuring 19th-century-style lettering and fictional shopkeeper Lars Olafson, has an old-fashioned country store look.

Last year, Klein added 10 flavors of homemade fudge and a variety of sauces and dressings. There is a new line of Walnut Grove greeting cards based on old-time advertisements. More packaged foods are in the works.

Walnut Grove products are distributed in gift stores nationwide. In the fall of 2001, the company also opened its own Walnut Grove Mercantile retail store in Marshall, with a by-gone ambience. The store has outperformed expectations, Klein says, posting a 25 percent sales increase this Christmas, despite the soft gift market. In January, the company also began selling all its products on the Web.

Growing from a commodity business into a food processing and retail company has been difficult, Klein says. “It’s really an entirely different business. But the exciting part is seeing your name on products and seeing people buying them.”

For more information, visit www.walnutgrovemerc.com

• • On the road: 1991 and 1999
  • Rough road: Competitive pressure in the Midwest beekeeping business forces company to diversify into specialty food processing.
  • AURI pit stop: AURI helps formulate Walnut Grove Mercantile’s first branded products, including soap, preserves and syrup.
  • Mile marker: Company builds a new processing plant in 2001; Walnut Grove Mercantile retail store opens the same year.
  • Straightaway: Flavored honey sales surge.
  • Picking up speed: New products added to the Walnut Grove Mercantile brand, including fudge, sauces and greeting cards.