What Should We Do?
Usually, we like to take Hot Beef as a chance to share some little known meat facts with you, but this week, we’re going to ask you to share with us!
Covid has massively disrupted the way people eat and has tested the flexibility of our food system to the extreme. Before the pandemic, Happy Valley pretty much exclusively sold meat to high end restaurants, but as Covid continues to stress our humble part of the food world, we’ve had to adapt and pivot to keep our mission, to improve the lives of the people and animals that feed us, alive.
Today in Hot Beef, we’re going to tell you a little bit about our Covid journey, where we are heading and how we’re trying to get there, but wait… there’s more! We know you’re an important part of our ecosystem, and in all this pivoting, we realized that we can’t even dream of succeeding without asking where you want to see us go. That’s right, we want to know what you think about us and how you think we can best impact your life.
We've created a short 5 question survey to help us get your opinion and suggestions. Click here to take our survey. Just reply back with what you think, or shoot us an email at email@example.com and don’t forget to share this email with your opinionated friends!
We know we can’t build a successful alternative meat system with just one prospective in mind. We all sit on the board of a better way, so please… give us some direction!
So where do we begin?
2020 looked to be our year! We had just hired a few new people, our restaurant business was going strong and we were set on pushing into doing business with schools. One of the key challenges in our business is balancing all the cuts on the whole animal (for every 12 oz ribeye steak that we sell, we need to sell 30 lbs of ground beef 😳). We buy whole animals because that’s how farmers sell meat. If we didn’t, we’d just be buying anonymous cuts of meat from some company and we wouldn’t know our farmers (FYI, most meat companies buy boxes of meat from other companies). Schools were perfect; they largely cared about small farms and used mostly ground beef because it’s easy and versatile.
To support our growth, we let farmers know about a year ahead of time how much meat we think we need. Most farmers bank on a little extra growth as well. Beef cattle are a two year game – our animals are 24-28 months when they are harvested. Given our track record of steady and predictable growth, in an industry we knew, projecting out a year, as they like to say, “ain’t no thang.” But then on March 15, everyone I knew was laid off; the mayor banned indoor dining and the great metamorphosis began.
If you build it, will they come?
The first thing we did was put up a Shopify website. We didn’t know if individual people would want meat from us, but we wanted to make it available in case they did. We launched shop.happyvalleymeat.com on Monday March 16, 24 hours after learning of the ban.
Luckily, we had a warehouse partner and a long relationship with FedEx. We had been shipping via FedEx for a long time so we knew that part of the game, but the scale was different. Our minimum order for restaurants is 30 lbs (written 30# for those in the know), because at 30 lbs, the unit economics start to make sense. The cost of the box and the shipping is roughly the same for 30 lbs as it is for 1 lb, so the closer we can get to 30 lbs, the smaller the per lb price is to cover shipping.
My mind was in such a wholesale mentality, that I thought we could require an ecommerce site with 30 lb minimums; luckily, I have a team that is smarter than me and we set the minimum to 5 lbs (which is still a lot of meat... I’ve been told).
The biggest struggle on the operations front is that restaurants are pretty good at butchery, while most people probably are too but they haven't learned that yet. All of the meat we had in inventory was cut with the idea that restaurants would further cut it how they liked. Our meat had extra fat on (which chefs love), they were big (the smallest cuts of meat were 3-5 lbs, most were 10+ lbs) and they weren’t branded. They just had the generic labels that the processing plants used. So for the first few weeks of having an ecommerce site, we sent out fugly packed (but perfectly tasty) big ol’ cuts of meat.
We shared our site with friends and family, and we started seeing orders trickle in, while restaurant orders completely halted. We didn’t know how we could continue and we prepared for the worst when luckily we were included in an Eater article telling readers where they could get food. We went from ten orders a day to getting two hundred orders in a single day!
Ride the wave
Little known to us, an ecommerce business is no walk in the park. It’s rewarding, getting to talk directly with the people eating our meat, but also, there is a high expectation about how food looks, what cuts are good to eat and what an online shopping experience looks like, not to mention the melding of our digital systems to connect our shopify store with our warehouse operations. The massive uptick forced us to shut down our site for a week to make sure we could deliver to everyone who ordered. To get the business going again, we had to open the store at 9am and close when we sold out (some days at 9:30am).
As people couldn’t easily get food from their local stores, we saw our role develop into a critical lifeline for the scores of new everyday chefs. The next few weeks were spent hammering out our online shopping experience, figuring out how to get meat cut how people wanted and having meaningful conversations with our new customers. We started printing inserts to go with our orders that explain how and why our meat is different, why things might look and smell different from grocery store meat and just thanking the crap out of the eaters that trusted us.
Follow the money
One of the major broadside shots we took during the first few months of the pandemic was that since restaurants weren’t able to bring in revenue that even remotely resembled what they made before, they couldn’t pay us. We, like most companies in our shoes, have to extend credit terms to restaurants in order to do business with them. Ours are between 14 and 30 days, with some balances as high as $150,000! Without income to pay us, our receivables and our cashflow were dead in the water (still, as of today, we have tens of thousands of dollars owed to us that we might never see).
This is where we saw another great boon of ecommerce. Where restaurants take 30 days to pay us, home cooks pay immediately! If it weren’t for the ecommerce boom, we wouldn’t have been able to pay our farmers or our own bills, something I’m immensely thankful for. We also got a PPP loan. It was less than we would have liked, but given that we’d spend it all on payroll, we were grateful nonetheless.
What’s a farmer to do?
At this time, I was also spending a lot of time talking to farmers in order to keep the beef supply moving. As we were picking up ecommerce steam, the meat supply chain changed heavily (we wrote about it previously, check it out here). When I called our farmers, they were panicked. They couldn’t get slaughter spots at the local plants and the big packers stopped buying so they didn’t have a safety net. Even worse for our farmers, their animals kept growing and their bills still needed to be paid.
The way we typically work is that we have standing slaughter spots at three independent processing plants and we schedule out a year in advance. We knew that if we let any of those spots go, we’d never get them back, so not only did we need to keep our sales up to pay the bills, but it was also critical in order to have any supply for the future.
I was worried that our panicked farmers would stop selling to us out of fear that we wouldn’t weather the storm. We’d lose all income and the slaughterhouses wouldn’t have room for us once we managed to get sales back. Luckily, they overwhelmingly had faith in us and we were able to keep all of our commitments to our farmers. It was a proud day when one of our salty old farmers told me he had bet on the right horse by a long shot.
Meatballs in aisle 3 please
While ecommerce was fun and exciting, most of our ecommerce business wanted steaks, but as we said before and will say again (over and over again), we need to move a lot of ground beef in order to have a healthy business. It seemed like since our restaurant business took the biggest hit in losing our ground beef accounts, we had to find a way to replace our ground beef business fast!
Our solution: meatballs and sliders! We had been making meatballs and our beef+mushroom sliders for our restaurant customers already so we decided to try our hand at putting those same meatballs in smaller packs and seeing how home cooks liked them.
This business looked a lot like our old B2B business, except we had a steep learning curve as to what makes a retail store happy (it’s moving product quickly! Gah doy!).
The beauty of this plan was in the balancing act. Ecommerce would take the steaks, which people always love, and the retail business could take the ever present ground beef... reaching cattle nirvana!
Glory days, well they'll pass you by. Glory Days...
About two months into our ecommerce business, we realized it was getting harder to find new customers and sales slowed down… a lot. Big ecommerce companies spend tens of thousands (even millions) on digital advertising, targeting the people that they think will be most interested in their products where those people spend most of their digital time. If someone clicked on one of our ads they immediately saw four of our competitors in their feed, it became an advertising arms race, something we’ve never been good at or interested in here at HVM.
Through the summer and early fall things were bleak for us. Sales kept dropping and we felt the hurt of the pandemic more than ever. At this same time, we realized that even though retail is a strong business move, retail growth for little businesses with small marketing budgets is a slow growing business. The summer felt like we had lost all the wind in our sails. It was a difficult time.
Sacrifice and perseverance
We’ve always been a lean company, but anything that couldn’t immediately be justified was cut from the budget. The PPP funds had run out and the instant payments from ecommerce became smaller and smaller. We recgonized that the businesses we were now in (ecommerce and retail) were slow growth businesses for a brand like ours. We even, unfortunately, had to let some people go, the result of many sleepless nights.
We kept our shoulders to the grindstone and saw our business turn around. Little by little retailers started talking to us, our ecommerce customers kept coming back and miraculously, new ones found us. And then Christmas came and Christmas is always a good time to be in the food business.
In the end, we ended up with sales that were less than 2% down from 2019, which we’re crazy proud of considering we lost 80% of our customers! We’re still not through to the other side, but more and more everyday, I feel like the sand we walk on is firming up. I don’t know what 2021 holds, but I feel like come 2022, we’ll still be here, serving our mission to improve the lives of the people and animals that feed us. And now, we have a direct connection with a major player in the alternative food system we are building, and that’s you.
Where we’ll go
For 2021, we are focused on growing two aspects of our business: 1) our retail business, making packaged items for grocery stores around the northeast and 2) we want to work with schools as they come back online.
Our goal in retail is to get the word out that the best way to support small farmers is by buying ground beef, and then, we want to give our customers the coolest, easiest and most delicious ways to support those small farms. There are so many amazing things you can do with ground beef, not just meatballs and burgers, but dumplings, bowls, pies, tacos, snacks, even a miso-like amino paste. Have any suggestions? We’re all ears.
Our goal in schools is to be there when kids learn what foods they should eat, what they like and how to nourish themselves. We don’t want to just be vendors, but partners. Before Covid, we did butcher demos, and presentations for students to learn exactly how meat gets to the table, a program we are excited to continue when it is safe.
The end goal of our business isn’t just to be a bigger business. It’s to change a food system that we think is unjust and harmful, especially, in meat. We see a critical missing link in the meat system, and that’s midsized infrastructure; everything is either really big or really small. It makes the act of getting better food to more people really really hard, in fact, damn near impossible. By building a solid sales base, we want to open more of the middle sized infrastructure, allowing more meat companies to exist in between the current stages of basically non-existent and controlling.
Friends, let your grocery stores and schools know we’re coming. For our restaurant friends, we’re still here fighting alongside you. You’ll always play a central piece in our vision for a complete and balanced food system. But let’s take one year at a time. 2021, here we are!