The New Meat Rules

Paul Willis doesn’t fit anybody’s criteria for celebrity. Yet the finest chefs in New York City roll out the red carpet when his name appears on reservations lists. He’s no food critic, either, but maître d’s in San Francisco turn fussy when Willis walks through the door.

“Not bad for a hog farmer from Thornton, Iowa,” Willis mused.

Willis’ pigs afford him carte blanche, from coast to coast, in restaurants where the masses couldn’t secure a reservation in a month of Saturdays. Though they occupy just 20 acres on Willis’ 700-acre spread along Interstate 35, some 35 miles from the Iowa-Minnesota border, the hogs are the stars of a burgeoning meat empire—Niman Ranch, hadquartered 1,900 miles to the west in Oakland.

Niman Ranch is projecting sales of $55 million this year, more than quintule from four years ago. That still makes the company a “mere blip”—in the words of Niman Ranch marketing director Frankie Whitman—on a landscape dominated by multi-billion concerns Tyson Foods and pork king Smithfield Foods. But Willis, the manager of Niman Ranch’s pork division (as well as the first hog rancher under contract by company), shudders at the thought of Niman Ranch playing in that league. "The commodity business is all about volume,” he notes, “and that’s not what we want to be.”

Don’t confuse that statement with a lack of ambition within a company that bills itself as the producer “of the finest tasting meats in the world” and whose website is replete with rave reviews from the likes of Bon Appetite Magazine, The New York Times and The Wall Street Journal, which sings the praises not of NIman Ranch’s exponential growth, but its Applewood-smoked bacon.

Bill Niman, the charismatic founder who oversees the daily operations of the company, ponders the double-edged sword of success: “Big is not necessarily beautiful,” he said. “We wrestle with that all the time.”

Niman ranch doesn’t dabble in chicken, the nation’s most popular meat source, and its corporate headquarters is marked only by a wooden shingle hanging outside a quaint wooden waterfront building on the south end of Oakland’s Embarcadero. And not even Niman himself gets all that worked up that his name—hence that of his company—is commonly mispronounced, as in Neiman Marcus. Fact is, Niman rhymes with Simon.

But Niman Ranch’s mom-and-pop façade was washed away by the wave of profits that accompanied the Atkins Diet revolution, a phenomenon that spotlighted Niman as a favored son by animal rights activists.

“As far as concern for the animals goes, Niman Ranch in the United States is very much like the Soil Association in the UK, in that they take animal welfare very seriously,” said Bruce Friedrich, director of farmed animal campaigns for the Norfolk, Va.-based People for the Ethical Treatment of Animals (PETA). “I know that among people we talk to on farmed animal issues, Niman is often held up as the standard to shoot for.”

Call it good karma, but the company found itself occupying a lucrative niche when meat suddenly became hip again, thanks in no small part to Dr. Atkins. The company was unaffected by the fallout from mad cow disease, Whitman noted, primarily because the disease is spread from animal to animal by the consumption of infected animal by-products—a forbidden practice at Niman Ranch. The fatty, flavor-rich beef, pork and lamb that Niman’s farmers and ranchers produce by adhering to a strict code of barnyard ethics creted a cult-like following among the patrons of some 1,100 largely upscale restaurants and retailers in 40 states and Washington, D.C., with a heavy concentration in the Bay Area and New York City.

“This is not hippy meat,” said Don Anderson, the manager of Niman Ranch’s 12th Avenue processing plant and a nearby cold storage unit in east Oakland. This is high-end cuisine. Yeah, our customers care about the environment and the animals, but thy have to have enough disposable income to be able to make that part of their lifestyle.”

Niman Ranch’s center-cut pork chops were recently selling for $7.29 a pound at Trader Joe’s—the largest retailer of the company’s products—while similarly cut non-Niman chops at Safeway and Lucky in the same Oakland shopping complex were priced at $5.99 and $3.99 per pound, respectively. Prices on beef were even more disparate; Niman Ranch chateaubriand (thickly sliced top sirloin) sold for $9.49 a pound, while top sirloin sold for $6.49 and $5.99 at those major-market competitors.

“You can’t go to the supermarket and say, “God, they’re making a fortune on this,’ Willis said. ‘When consumers are buying something from Niman, they’re farming by proxy. They’re voting with their dollars for sustainable agriculture.”

How much of a profit Niman Ranch is reaping is unclear. While sales have skyrocketed in recent years, pinning down profit margins on privately held companies is elusive. The volatile commodities market is not for the faint of wallet, and bottom lines in such businesses are vague when shareholder accountability is not an issue. A recent Forbes Magazine article reported that the company nearly doubled its sales to $31 million in the past year while somehow incurring a $1 million loss … prompting Bill Niman to quip “We’re not a cash cow.”

The bottom line for Niman Ranch’s farmers and ranchers can be fickle, as well. For while the company currently pays about $170 for whole hogs, for example—$15 above the price pork giants like Smithfield pay for pigs reared in mass-production environments—Niman contractors can incur considerably more expenses for raising grain-fed, antibiotic-free and free-range animals. In addition, they are  forbidden from participating in common practices such as selling pork bellies at a premium and then dumping the rest of the animal on the commodities market.

“That was not part of the protocol initially; that’s something that evolved,” Willis said of the lofty standards imposed on Niman Ranch operatives. “There were a lot of animal welfare groups that were concerned about how pork was raised, and most of the people in the pork industry were scared to death of those people.

”I went to the Animal Welfare Institute in 1977 and said ‘I know what you don’t want, but what is it you do want?’ From there evolved AWI’s Pig Husbandry Standards, which are basically the guidelines for pigs being raised in pastures or straw-bedded pens.”

Abolishment of gestation stalls—steel pens in which sows literally have no room to turn around during nearly four months of pregnancy—has long been a focal point of the Alexandria, Va.-based AWI, which essentially has declared war on Smithfield Foods and other industry leaders.

“Honestly, I think there are a lot of family farmers out there that were doing the right things, but Niman did come up with a system that was unique in allowing these small farmers to work together,” said Chris Hyde, an AWI research associate. “That certainly is something that never has been done. It’s allowing family farmers to stay in business while still being able to abide by with their consciences. Niman Ranch has given ethical animal husbandry a much broader appeal.”

Said Willis: “We’re not disillusioned that we’re raising animals for food. But raising them by factory standards doesn’t appeal to a lot of us.”

Pork accounts for nearly 60 percent of Niman Ranch’s business, and its 447 hog farmers are primarily located in the Midwest. The company slaughters some 2,500 hogs weekly, compared with 175 cattle and 20 lambs (which have a high seasonal fluctuation). Many of Niman Ranch’s farmers and ranchers have a bio posted on the company’s website (nimanranch.com), which also serves as a candid disclosure portal of virtually every facet of the company’s operations, from feed protocol to waste disposal to slaughterhouse ethics.

It’s a long way from the 11-acre ranchette that Bill Niman and his soon-to-be bride, Amy, bought in the bucolic coastal Marin County town of Bolinas for $18,500 in 1970.  The business had its vague beginnings four years later, when the Nimans and author Orville Schell forged an alliance and expanded their Bolinas holdings to 206 acres. That has since quadrupled to more than 1,000 acres, which was subsequently entirely absorbed within the boundaries of Point Reyes National Seashore when the federal government enacted a writ of eminent domain to confiscate the land under the auspices of protecting it from development.

In the case of Niman-Schell (as the company was known in its fledgling years), the feds’ heavy-handed tactics turned out to be a godsend: a $1.3 million buyout (in exchange for a monthly rental payment of $3,000) bailed the company out of a high-interest mortgage on the vast, stunning piece of seaside real estate that had come to be home for both men’s ranches, not to mention the company’s initial cattle headquarters. The catch: the property, technically under a 99-year lease, is immune from inheritance laws and reverts entirely to federal control when both Niman and Schell have died.

Amy died tragically in 1976 from a horse fall on the property. She was 33. (Niman, who has no children, last year married his third wife, Nicolette, shortly after divorcing his second wife.) In 1978, Schell published “Modern Meat,” an expose of the dark underbelly of the meat industry. The pair operated what amounted to a profitable boutique company with Niman himself overseeing the feeding, slaughtering, delivery and billing of the beef. It wasn’t until the mid-1980s that Niman-Schell hired its first fulltime employee.

“Just the way the company came together,” Niman says, “there was so much serendipity.”

In the meantime, the personal and business relationships between the two principals were coming undone. Neither is enthusiastic about elaborating. Schell, now the dean of UC-Berkeley’s graduate school of journalism, declined comment. Niman, who oversaw the relocation of the company’s headquarters to Santa Rosa in 1988 and San Francisco a decade later, is only slightly more forthcoming on the fractious 1998 transaction—during which he took on a pair of business partners—that served as the coup de grace of the long-unraveling pairing with Schell: “I walked away with all the debt. I thought I paid too much, and he didn’t think he got enough. If everybody thinks he got screwed, it was probably a good business deal.”

Meanwhile, with new partners providing an influx of capital, Niman had contracted for roomier digs in San Francisco’s Potrero Hill district. But seismic retrofitting on that property tuned out to be problematic—contractors were at a premium as old San Francisco buildings were upgraded at a furious pace during the dot.com boom—and Niman began sweating as his lease came up for renewal. Compounding the problem was the bull job market. The company turned its sites across the bay.

“You couldn’t hire people then,”Niman recalled. “When we would run an ad, we couldn’t get a response in San Francisco. But when we ran an ad in Oakland, we got all the responses we needed. San Francisco wanted nothing to do with us.”

Niman took the hint. Securing a favorable loan through Oakland’s Community and Economic Development Agency (CEDA), he built a processing plant and cold storage unit in the city’s economically depressed San Antonio/Fruitvale District. As part of a federal program aimed at creating jobs in low-income neighborhoods, he received a low-interest $22 million loan in 1996.

Quickly, Niman Ranch gained the type of favorable reputation within the community that that it enjoyed among animal rights activisists. To date, the company has hired 117 employees, 52 of them Oaklanders.

“They truly have been outstanding from the standpoint of identifying qualified Oakland residents for the higher-end skilled jobs,” said Gregory Hunter, a commercial lending manager for CEDA. “They have worked with the city’s consultants to make sure that local residents have a chance to fill those jobs. As for the entry-level position, they’ve done a superb job of filling those with Oakland residents and training them, over time, for the higher-level jobs.”

Danny Vargas, 26, was “flipping burgers” when he walked into Niman Ranch five years ago. Now he’s a shipping and receiving supervisor. “It changed the trajectory of my life,” Vargas declared. “I shudder to think of where I’d be on my previous path.”

Niman Ranch’s hiring numbers in Oakland likely would be even more impressive had it not extended offers to all of its employees from its San Francisco days, dozens of whom transferred to the East Bay. Rae Lujan, a packing supervisory who now has 13 years seniority, was one of them.

“When I came to Niman Ranch, I saw some promise,” Lujan said. “It looked like a fast-growing business—and it sure was.”

Lujan works in a white lab coat and a yellow hard-hat in a chilly, sterile room with dozen or so other cutters and butchers, all of them designated “minorities” by CEDA standards. But to connoisseurs of Niman Ranch meat, this is the Sistine Chapel.

“The best thing about Niman Ranch is that they have these incredible butchers,” noted Marsha McBride, who was the kitchen manager at San Francisco’s Zuni Café before opening her own restaurant, Café Rouge, in Berkeley. “They’re really artists, masters. It’s a lost art, and they do a beautiful job. That’s the thing that really makes them different from any company.

“Being a butcher is hard,” concurred Jorge Bautista, a 29-year-old Mexican immigrant who has worked at Niman Ranch for four years. “You have to do everything perfectly.”

Bautista, and virtually all of his colleagues, have been trained and mentored by Oscar Yedra, who, at 35, is a 16-year veteran of the company.

“It takes about five years before someone is highly skilled as a butcher,” said Yedra, a native of Mexico City. “Always, there’s something new.”

That’s hardly an understatement for a company which now boasts some 175 products and is running two shifts at a processing plant it has already outgrown.

“They’ve grown and they’re really large now,” said McBride, a Niman Ranch customer since 1986. “The beef is still probably some of the best beef, whereas the pork is the best pork in the country.  “But it isn’t the same company we all knew; there are some inconsistencies that come with growth.”

Three years ago, for example, Niman Ranch voluntarily recalled 1,900 pounds of ground beef that was suspected of E. coli contamination. In the scheme of things within the meat industry, the recall drew little attention. But the incident served to underscore the fact that Niman Ranch, for all its folksy qualities, had left its boutique days far behind.

“The major challenge for us is to continue to produce the finest-tasting meat in the world while experiencing a 30- to 35-percent compounded annual rate of growth,” Bill Niman said. “But you’ve got living creatures and you’ve got quality issues, and you can’t just dial it up.”