30 Hutterite Colonies, 800,000 Chickens and 1 Economic Developer

October 16, 2017

The Project - Episode #30

This week we bring you a bit of an unusual site selection story involving Montana Eggs, a company formed as a partnership of 30 Hutterite colonies, a denomination of communal Anabaptists, like the Amish and Mennonites, in Montana. In September 2017, the company celebrated the grand opening of its $9 million, 58,000-square-foot egg grading facility in Great Falls, Montana. The new operation will process more than 280 million eggs annually. To get the full story, we talked to Mike Kleinsasser, Secretary-Treasurer of Montana Eggs and Brett Doney, President and CEO of the Great Falls Montana Development Authority.

Patience Fairbrother (DCI): So to kick things off today, I’m going to ask my co-host, Andy, three questions. Andy, are you ready?

Andy Levine (DCI): I’m ready, go ahead.

Patience: Great. So, this one’s hard, what did you have for breakfast this morning?

Andy: I actually had some fruit.

Patience: Okay, that’s incorrect. The correct answer was supposed to be that you had eggs this morning.

Andy: Well, I don’t like eggs that much, so anyway.

Patience: Oh, okay.

Andy: But go ahead.

Patience: So, as somebody who doesn’t like eggs that much, how often would you say you have eggs?

Andy: I like an omelet. And I’ll have an omelet, maybe every other week, so, maybe every two weeks.

Patience: Okay. So, with that in mind and your various other knowledge, how many eggs would you say the average American consumes each year?

Andy: I’m gonna guess, okay, I’m gonna guess something like 300. I’m gonna guess one a day, so 365 eggs a year.

Patience: That’s actually pretty close. So, the correct answer is 268 eggs a year and that’s the average American. So, the US egg industry is a thriving $10 billion a year industry that produces about 75 billion eggs annually. And our story today focuses on one company that supplies, virtually, all of the eggs in the state of Montana.

Andy: So, welcome to episode 30 of “The Project, Inside Corporate Location Decisions.” I’m Andy Levine of Development Counsellors International.

Patience: And I’m Patience Fairbrother, also with DCI and Andy’s co-host of “The Project.” So in September 2017, Montana Egg celebrated the grand opening of its $9 million, 58,000 square foot egg grading facility.

Andy: The new operation in Great Falls, Montana will process more than 280 million eggs annually from a supply of 1.2 million chickens.

Patience: So, to put that in context, in 2015, the state of Montana as a whole produced a 142 million eggs. This facility alone will produce nearly twice that amount.

Andy: I told you I liked omelets and that’s a lot of omelets. There’s one other interesting thing about this company, the fact that it was formed by a partnership of 30 Hutterite communities.

Patience: So, the Hutterites are a denomination of communal Anabaptists, like the Amish or the Mennonites, known by appearance for the men’s black beards and traditional 19th century clothing.

Andy: The Hutterites migrated to North America in the 1870s from Germany and Russia and initially, landed in South Dakota. From there, some of the colonies branched off to move to Alberta, Canada and Montana where many of them remain today.

Patience: So Mike Kleinsasser, who’s the secretary-treasurer of Montana Eggs was among the second group that put down roots in Montana. For more than 70 years, the Hutterite colonies have been driving Montana’s dairy industry and producing 98% of Montana’s eggs. But producing eggs wasn’t always a business venture for the Hutterites. Here’s Mike Kleinsasser.

Mike Kleinsasser (Montana Eggs): We’ve always been a farm ranch operation. So, we did have chickens, every colony had, every community had chickens. They had a small bunch of chickens, 600 to a 1000 chickens. And they raised them in the small barn where the chicken was able to roam around, there was no cage’s or anything at that time.

You know, you needed eggs to support the colony, to support the members and was able to sell, you know, going out to small towns and sell them into restaurants or individuals.

Andy: So, the Hutterites primarily produced eggs to sustain their own colonies which contain about 25 families on average each. Whatever they had left over was sold on a small scale locally.

Patience: The initial shift toward selling eggs commercially came in the 1970s, when many of the colony started investing in cages. This exciting new venture meant that each colony could suddenly accommodate more than five times the number of chickens they previously had.

Mike: Cage was an exciting venture for the colonies. Every colony had about 5000, average 5000 chickens then. Going from 700 or 600 to 5000,that was a big, big change.

Andy: With this major increase in their output of eggs, many of the colonies were fairly successful in selling them but they were, essentially, in competition with each other for the sale of their eggs.

Patience: The next major milestone for Mike and his colony came in the 1990s, when they began a sales partnership with Wilcox Family Farms out of Washington. Wilcox Farms urged the colony that in order to develop relationships with major national suppliers, they would need to have a gradings station with a USDA inspector on site.

Mike: I always said, “We got graders at all the colonies but they was obsolete, they was just small graders.” And USDA, was not, you know, you couldn’t afford to have an inspector on all the colonies for about 5000, 6000 chickens.

Andy: Having a USDA inspector was much too expensive for a single colony to afford. So, the colonies decided they would need to take a more collaborative approach if they were going to expand their markets. In 2006, 30 Montana Hutterite communities came together to form Montana Eggs LLC and they became USDA certified. So I guess, and I can’t believe I’m gonna say this, they put all of their eggs in one basket.
 
Patience: So at the same time the egg market was shifting, consumers now want to know more about their food than ever before, including where it comes from, how it was raised and under what conditions. Wilcox Farms was beginning to develop relationships with some major purchasers, like Costco and Albertsons, which were transitioning to selling cage free eggs to meet consumer demand.

In order to get in on these major contracts and partnership with Wilcox Farms, Montana Eggs would need to go cage free.

Mike: Wilcox Farms said, “Well, if you do that and if you go cage free, we could really… I’ve got markets for these eggs and it would be quite a bit higher than what you’re getting right now for caging.”

Andy: To Mike and many of the Hutterites, this seemed to be a step backward. But they heeded the advice of Wilcox Farms and committed to transitioning back to a cage free nesting system.

Patience: It turned out to be the right move. Today, more than a 160 major companies have announced that they will shift to cage free eggs, mostly by the year 2025, including, McDonald’s, Subway, Campbell’s Soup, ConAgra, Starbucks, Kellogg’s and Wal-Mart.

Wilcox Farms, ultimately secured a contract to supply eggs to Costco stores in Montana and Eastern Washington with Montana Eggs as the primary supplier.

Andy: So, how does Great Falls fit into this equation? When Montana Eggs set up its first state-of-the-art egg grading facility in 2011, it was with quite a bit of assistance from the Great Falls Development Authority or the GFDA for short.

Patience: To get the economic development side of the story, we spoke with Brett Doney President & CEO of the Great Falls Montana Development Authority. Brett is a seasoned economic developer who was recruited to Great Falls, 11 years ago. And Montana Eggs, was one of the first companies he met with on the job. Here’s Brett on GFDA’s involvement in the initial project.

Brett Doney (Great Falls Montana Development Authority): We had to bring water and sewer to the plant. We worked with a partnership with the city of Great Falls to have the city contribute money to bring water and sewer partway and then the project would bring it the rest of the way. We had to put a large gap financing loan. It was large for us at the time, it was kind of a bridge loan.

We did a million dollar loan on this egg grading equipment that they were bringing in from Europe. And it was quite a risk for us at the time, not in the company itself but in the collateral. Essentially, we were uncollateralized for a period of time. And then, we also did an SBA 504 Loan for that project and helped them with workforce recruitment and training.

Andy: According to Brett, it wasn’t just about showing up with a checkbook and an offer to assist. It was a long process of building trust with the Hutterite colonies that ultimately encouraged them to expand Montana Eggs in Great Falls.

Brett: It was a five year relationship before they did that expansion. Just checking in with them regularly, earning their trust and then looking at different ways. For that expansion, we had weekly meetings at their bank, working with the bank loan officer, working with the board of the company to try and figure out a way. Back then it was, you know, “Can we put this together?” So, it was over a year and a half process to put that project together.

Patience: In the five or so years, after the new facility was up and running, Montana Eggs grew its flock from 200,000 chickens to about 800,000. In 2016, they were ready to expand, yet again, with another state-of-the-art grading facility. But it wasn’t automatically going to be in Great Falls. Here is Mike, again.

Mike: Well, you know, there was also big controversy of where we build the grading station. We was thinking, the Shelby, Montana, there was a big warehouse there that was empty. And the Mayor of Shelby was really, really promote and wanting to do business in Shelby.

Patience: While neighboring Shelby made a strong play for the new facility, Great Falls ultimately won out thanks to the relationship they had built as well as the assistance GFDA and the city provided, and the Hutterites history in the area.

Mike: Great Falls is still center for most of the colonies and that’s when Great Falls’ developing. And city of Great Falls really, really got helpful, you know, working with us. And when it was all said and done, Great Falls Development won the contest, you know, it was a better choice for the colonies.

Andy: Given Brett’s wealth of experience in economic development, we wanted to hear from him about the experience of working with the Hutterite colonies versus other corporations.

Brett: When there’s a distinct population or neighborhood, you have to develop some trust and respect. You can’t jump right into a deal. It’s very similar to
foreign direct investment. You’re not going to go over to Japan and land a deal on your first visit. You have to develop that relationship so that then they will open up with you. And with the Hutterites, they have a long and rich history and some of it is quite tragic.

So, they are not always open right away to outsiders. I think it really helped the banker who was involved in that first expansion that we did, it really helped just to have weekly meetings and sometimes you’d think, “Well, we haven’t really accomplished anything but we had coffee for an hour and got to know each other a little bit better.” And sometimes, that’s the most important thing. We oftentimes want to jump right in and solve something. We have to step back sometimes and let the relationship evolve.

Patience: So, in many ways, would you say that this most recent expansion was, you know, 11 plus years in the making just because of the relationship that you’d built and the importance of trust to them?

Brett: Your typical overnight economic development success.
 
Patience: As for the future of Montana Eggs and Great Falls, Mike and his team anticipate that the company will continue to grow with the demand for Montana grown, free-range eggs expected to double over the next few years. Brett expects to continue to build the relationship with Montana Eggs as they grow and diversify.

Brett: One of the interesting things about the Hutterites is, they make their own clothes but they utilize the latest technology. So, they are the early adopters of agricultural technology and you go into this egg processing plant and it is the latest equipment. So, they spent a lot of time looking at what would work best, value engineering, what was worth the investment. And we have already been working for months on the next expansion opportunities, moving into other types of egg products.

So, it’s that continuing relationship. It’s not, you know, won and done, we did this project. We wanna see the company continue to grow and diversify. And along the way, we will reap the benefits of more higher wage jobs and increased tax base.

Andy: So, after talking about eggs for 30 minutes or so, we had one last question for Brett.

Patience: Okay, final question. Have you sampled the eggs from the Montana Eggs Facility?

Brett: There is nothing like stopping by the plant and getting eggs that are still warm. They’re delivered every day. And then what the, I mean, what this is fed by, the whole project is fed by demand. And these major companies like Wal-Mart and Costco, they have said that the Montana Eggs brand, this project, part of it is going all organic cage-free. And they’re branded Montana Eggs. So, if you go into the supermarket and there are, you know, several different suppliers of eggs, consumers will pick not only for the organic and cage-free but the Montana Egg brand. So, they are delicious.

Patience: So, there you have it, for our listeners in Montana, head over to Costco and you just maybe able to try some Montana Eggs.

Andy: So here we are, we’re at the take away portion of this episode. Patience, you spoke to both Mike and Brett, let’s start out, what stood out to you about the story?

Patience: I think the role that Trust played in this decision was something that stood out to me the most. And I actually, maybe, put the words in Brett’s mouth but I asked him if he could consider that this deal was actually 11 years in the making because, you know, he spent all this time getting to know the Hutterites. They had these weekly meetings with the bank during the initial expansion, just gradually kind of building their relationship and building trust with them.

And this is a group that hasn’t, you know, traditionally meshed necessarily well with government bodies and so, there was an element of making sure that they felt comfortable and that they were taken care of.

Andy: So this was a long process and once again, there was, like, an additional barrier to get over. And I don’t know the Hutterites, or the Amish, or the Mennonite communities but they have a reputation of being a little more closed off to the outside world.

Patience: Exactly.

Andy: But interesting though that they, at least from our episode here, they tend to use the absolute latest technology in the egg production that they’re doing.

Patience: Exactly, it’s this interesting contrast of, you know, they make their own clothing but then, they have the state-of-the-art agricultural processing technology in their facilities.

Andy: One thing that stood out to me, and just interesting to get your comments on it, so Brett said this was kind of like dealing with an international company. And I think he really was referring to the ability or the length of time it took to build trust. Did that stand out to you as well?

Patience: Definitely. And, I think, you know, it’s a great comparison because there’s a cultural barrier there. You know, even though they’re both in Montana, you know, you can’t just walk into a foreign market and strike a deal automatically. You need to, kind of, you know, let things marinate and make sure that you are understanding each other.

Andy: Yeah, I don’t know how well you were able to build trust with Mike on this phone call but do you think he will give us some eggs if we go to Montana?

Patience: I hope he will because according to Brett, they’re delicious.

Andy: All right. So, that is a wrap on episode 30 of “The Project, Inside Corporate Location Decisions.”

Patience: Special thanks to Mike Kleinsasser and Brett Doney for taking the time to speak with us.

Andy: The project is sponsored by DCI. We are the leader in marketing places and have served over 450 different cities, states, regions and countries. You can learn more about us at aboutdci.com.

Patience: We hope you will keep listening, there are many more projects to come.

 

Leave a Reply