Big Margin Bottleneck Buster
We often hear the notion of synergy bandied about without care or concern for its literal application and impact on operations, in the MOE Farms model, you will find its use a prerequisite. The profit centers in and of themselves are powerful stand-alone business units, however, together the sum is truly synergistic in effect and in fact.
One of the formidable hurdles to consistent profitability, in a Wagyu beef operation, is timely access to a harvest facility. This is a result of the monopoly-like grip of four companies controlling almost 96% of capacity creating effective structural and institutional barriers to harvest and packing services. Most of these plants run at a rate of hundreds of animals per hour, no thatís not a typo.
This is a result of industry consolidation that is a consequence of the mono-culture producer model and agro-industrial complex scale production processes. Perhaps the best analogy would be an hourglass; at one end, you have the producers, at the other consumers and stuck in the middle, where the quality and margin draining bottleneck occurs, the packers. These plants have evolved into industrial scale operations, some running at 600 animals per hour, (e.g. the most recently built plant located in Houston, Texas) making it unprofitable to service producers of nutritionally superior beef, pork, poultry and other livestock genetics.
Aside from capturing additional margin, the larger reasoning & justification for packing plant is to guarantee consistency of quality, supply, deliverables, humane harvest, costs containment, competitive advantage (creating brand preference), contribution to margin and unlocking a major bottleneck in the transaction chain from farm to fork. Unlock the bottleneck and you unlock the margin.
This is a USDA approved multi specie plant design. The facility design exceeds U.S. Department of Agriculture standards, and the more stringent European Union Food Regulation Standards, which would authorize MOE Farms to sell its products internationally as well as domestically.
After genetics and breeding this is the top contributor to the 30 + year supply/demand imbalance and why production costs are so high and the average size of Wagyu operations so small. This facilitates scalability as well while creating an effective and durable structural barrier to competitive entry risk and the point at which the contribution to margin and control of consistency, quality and reliability of supply is the most leverageable.
Empire Packers plans to process four types of livestock from initial harvesting to custom packaging and shipping of prime+ meats direct to customers. The plant design as proposed will consist of three independent buildings to include dry aging, curing and heat and serve processing.
The packing and power plants are for internal processes and services are not offered to the public for resale, this results in a greatly reduced regulatory profile. Consequently, reducing construction and costs of operation by 30%. The value and resiliency of this as a competitive advantage, major margin contributor and consistent high margin profitability cannot be over emphasized.
Empire Packers will be partnered with E Q Power, located on-site, to provide 100% renewable, zero emissions and Carbon negative power services. The plan is for a state-of-the-art and environmentally-friendly meat processing facility to come on line in mid-2018, with approximately 30 full-time employees. According to the project narrative, the main building is proposed for about 12,000 square feet for processing of up to 25 cattle per day, scalable to 45 beeves/day.
The packing plant is the choke point and bottleneck in the supply/demand equation in the premium beef and pork supply chain. Control of this is the single most leverageable component in terms of margin, quality and cost controls, reliability of deliverables and rapidity of market share and capacity growth. The waste to biofuel power plant, from an operational perspective is just as powerful in its effect on results with the added bonus of taking an expensive liability, waste disposal, and turning it into renewable inputs i.e. feed, fuel, fertilizer and energy.
The value and resiliency of this as a durable competitive advantage and barrier to entry cannot be over emphasized.