A Houston company’s acquisition of Milwaukee-based Klement’s Sausage Co. Inc. comes at a curious time in which the processed meat industry is facing some significant head winds.
Tall Tree Foods Holdings Inc., a portfolio company of San Francisco-based Altamont Capital Partners, recently announced it has acquired Klement’s, a Wisconsin manufacturer of premium sausage.
Klement’s, founded in 1956 by brothers George, John and Ron Klement, has a portfolio of smoked, fresh and summer sausage, snack sticks and deli meats.
With the acquisition, Tall Tree adds to its stake in a declining industry.
According to U.S. Department of Agriculture Economic Research Service’s “Livestock, Dairy, and Poultry Outlook,” Americans will eat 500 million fewer chickens and 400,000 fewer cows than they did in 2006. Consumption of turkeys and pigs is also expected to drop significantly.
Meat consumption in the United States has been declining for nearly a decade, according to the research firm Packaged Facts. About 12 percent of U.S. adults strongly agree and 19 percent somewhat agree that “they are eating many meatless/vegetarian meals,” said David Sprinkle, publisher of Packaged Facts. Beyond the data, there are multiple signs that meat is falling out of favor with the public, for health, environmental, ethical and economic reasons.
The costs to produce sausage are rising because severe winters and summer droughts have caused the prices of grains to rise, thereby increasing the costs of livestock to produce beef and pork, according to Fritz Usinger, president of Usinger’s Famous Sausage in Milwaukee.
According to Fran O’Leary, analyst for the Wisconsin Agriculturist e-newsletter, high feed prices in 2012 and 2013 caused many Wisconsin beef producers to cut back or liquidate their herds and get out of the beef business.
“Ditto for farmers who raise Holstein steers. Many are finding the price of feed is just too expensive for those who have to buy it, and an increasing number of those who grow their own corn are thinking it may be more profitable to sell the corn rather than feed it to steers,” O’Leary wrote. “This trend didn’t just start because of the drought. It goes back six years to when corn prices spiked in the fall of 2006 due to increased demand for corn for ethanol, growing demand for corn and soybean exports and high demand for feed for livestock. So it should come as no surprise that beef production is down. But I was shocked to learn at the Wisconsin Ag Outlook Forum…that the beef herd nationally is the smallest it has been in 63 years.”
Texas, the largest cattle-producing state in the United States, is facing its fourth year of drought, pushing beef prices to record highs. Beef and veal prices spiked by 1.9 percent in March and now sit at 7.4 percent over the same time last year, according to the U.S.D.A.
The retail value of “all-fresh” U.S.D.A choice-grade beef jumped to a record $5.28 a pound in February, up from $4.91 at the same time a year ago. The same grade of beef cost $3.97 as recently as 2008.
Still, Klement’s will add to Tall Tree Foods’ stakes in the meat industry. In June 2013, Tall Tree Foods acquired the Blue Ribbon Bacon and Sausage business in southeast Texas and Richard’s Cajun Foods, a leading manufacturer of authentic sausage and ready-to-eat meals sold in Louisiana, Texas and other southeastern states.
Tall Tree chief executive officer Tim Bruer said the company plans to build upon Klement’s strong Wisconsin heritage.
“We are excited to expand on Klement’s successful history. Klement’s is a strong regional brand with the potential for growth in both its current markets and beyond,” Bruer said.
Ray Booth, the current CEO of Klement’s, will continue to lead the business along with the current management team, based in Milwaukee. The Klement’s plants and offices will remain in Milwaukee.
John Klement, former chairman and CEO of Klement’s, said, “We are pleased to have the future of the Klement’s brand in the hands of new ownership with Altamont Capital and Tall Tree Foods. I want to thank the many employees and other family members who have worked so hard to get the business to where it is today. We look forward to the future growth of the brand.”
Beyond an initial press release announcing the transaction, executives at Tall Tree are declining to answer questions about why they made the acquisition and how the Milwaukee operations will be affected by the change in ownership.
