The Gamble

What happens when a small, comfortable, family business bets everything on a grab for the mass market?

The place, a major eastern city; the time, March of this year. Listen: you can hear the drumbeats of an approaching marketing campaign.

Ba-boom. Business leaders and other influentials receive invitations to private dinners at some of the city's toniest restaurants. Once there, they're given artfully prepared samples of a new product and treated to speeches extolling its virtues. Reporters all over the region get glossy press kits touting the company behind the product.

Ba-boom. A series of high-concept 30-second TV spots begin appearing on the city's three network-affiliate channels. Posters bedeck retail stores, ads crop up in suburban weeklies. The city's largest newspaper sports a two-page parchment-colored advertising spread on successive Wednesdays.

Ba-boom. Around the city, numerous sales meetings take place. Some are intense bargaining sessions; others are relaxed, let's-get-acquainted palavers. The seller's delegation includes top management as well as newly hired regional reps. Samples are handed out. Numbers -- projected sales, potential margins -- are tossed around.

The occasion? Not Procter & Gamble's latest product introduction and not yet another big-time entry in, say, the cellular-phone business. Those drumbeats are the sound of a small, family-run business trying to get bigger -- a lot bigger -- in an industry that's hardly growing at all.

The Denver-based company's goals are simple: to leapfrog out of a limited distribution channel into the mass marketplace, where millions of consumers can sample its wares, then to supply those consumers with ever-expanding quantities of its product.

Getting there, alas, is more complex. The company must persuade high-volume retailers to carry a specialty item that many of them think won't sell. It must persuade recession-weary consumers to pay prices an average of 25% higher than what they're used to. Meanwhile -- and this was a surprise -- it has to fend off sniping counterattacks from its own industry.

Rarely does the business world provide so pure an example of marketing's role in quantum-leap growth. The company, Coleman Natural Meats Inc., has a product with demonstrated appeal, racking up some $23 million in sales last year. Its managers are seasoned industry veterans, most with decades of experience. Thanks to a healthy infusion of venture capital, money isn't much of a constraint.

So Coleman's jump into the mass market depends almost wholly on how well the company has planned -- and can execute -- its current campaign. This isn't Marketing 101; it's the real world, and a real company is at risk. It is, nonetheless, a textbook case.

Mel Coleman Sr., now 66, was brought up on the family spread in tiny Saguache, Colo., a dusty mountain settlement nearly 200 miles southwest of Denver. He was among the fourth generation of Colemans to live there, and the oldest of five brothers. Three went on to other pursuits, but Mel and brother Jim stayed in Saguache to run the ranch, trailing their cattle over more than 250,000 acres of private and leased land in the high mountains. Then in 1979, when Mel was in his mid-fifties, his daughter-in-law, Nancy, slipped a bur under his saddle.

The beef you could buy in the supermarket, Nancy Coleman observed, wasn't nearly as tasty as the home-grown beef Mel and his wife, Polly, served up on the ranch. It wasn't as healthful, either. Unlike a lot of ranchers, the Colemans didn't use growth-promoting hormone implants in their cattle. Nor did they feed them low-level doses of disease-preventing antibiotics. Both practices, though widespread, were controversial. Nancy figured there were plenty of health-conscious consumers like her who would pay a premium for "all-natural," hormone-and antibiotic-free beef. Besides, it tasted better. Why didn't Mel sell it?

Why not, indeed. Pretty soon Mel found himself heading up a company advertising all-natural beef. It was a down-home enterprise. Jim managed the ranch. Polly kept the books. Mel sold. And sold. He toured city after city in his pickup truck, calling on health-food stores, a Reagan Republican in a cowboy hat swapping curious stares with the stores' sandaled proprietors. Before long, common interest overcame cultural distance. He signed up Mrs. Gooch's, a California health-food chain, then Boston's Bread & Circus. Word in a small industry spreads quickly, and Coleman was virtually the only supplier of meat the health-food stores thought their customers might buy.

Small, however, was the operative word here. So long as he relied only on the modest health-food market, Coleman's company was precarious. His costs were high, mostly because all-natural cattle don't grow to market weight as fast as their hormone-treated counterparts. Yet his prices could be only so much more than ordinary beef, or the stuff wouldn't sell at all. Worse, only the better cuts of meat could be marketed easily at those premium prices. The rest -- something like 15% to 20% of the carcass -- had to be sold as regular beef on the commercial market. Net profits in a good year came to a minuscule 1% to 3%. A company that wanted to make money on such hairline margins had to be bigger.

But Coleman was pulled as well as pushed in the direction of growth. In 1986 the Grand Union supermarket chain had sought him out: the big retailer wanted a natural beef and within the year was ordering 500 carcasses a week, four times what Coleman had been shipping. Not long thereafter, Coleman signed up the Purity chain, in Boston, along with a few other supermarkets. Soon an enticing vision began taking shape. Sure, his beef was pricey and therefore not for everybody. But maybe he could reach 6 or 8 or 10 times as many customers, thereby creating a sizable -- and durable -- company. Coleman built up his management team, hiring an operations chief with 25 years in the business and putting son Mel Jr. on the payroll to oversee sales. He began lining up supplies from other ranchers who agreed to forgo hormones and antibiotics. He devised unique methods of tracking cattle and testing meat to make sure it is untainted.