It's late afternnoon in bucolic Bolinas, California, and Bill Niman has indicated that yes, he is willing to talk about his unhappy exit from the company he founded. But he has a lot going on just now. There are 78 heritage turkeys that are cackling, clucking, gobbling, and squawking as they fly into trees, jump up on fences, and generally resist the efforts of Bill and his wife, Nicolette, to herd them into their coop for the night. Meanwhile, over at the cattle barn, a grieving cow needs tending to. The cow recently lost a calf during birth, and Bill and Nicolette have a plan to unite her with another calf that has been rejected by its mother. As for the rest of the herd, it's spread out across Niman's thousand-acre ranch on the shores of the Pacific Ocean.
These days, Niman's ranch is called BN Ranch, mainly for legal reasons. Under the terms of his separation from Niman Ranch Inc., he is not allowed to attach his family name to any meat-selling venture, and he fully intends to sell as much meat from the ranch as he can. In addition to heritage turkey and grass-fed beef, he and a colleague are raising goats, and he is considering a partnership with farmers who raise all-natural, free-range, pasture-bred sheep and hogs. This time around, however, he is not looking to build a big national brand like Niman Ranch. Rather, he sees BN Ranch as a demonstration farm that will prove you really can make money and get the best-tasting meat by raising animals humanely, forswearing the use of hormones and antibiotics, and following the most environmentally sound farming practices.
Many would say Niman has already proved that, at least the part about the best-tasting meat. From the mid-1970s to the middle of this decade, Niman Ranch had a reputation for producing the highest quality, most flavorful beef, pork, and lamb anywhere. It was one of the first meat producers whose offerings were featured by name on the menus of the finest restaurants and in the refrigerators of high-end markets. Today, its brand is among the most recognizable in gourmet food.
But Niman no longer has anything to do with the company that bears his name. In the summer of 2006, a controlling stake in the business was acquired by Natural Food Holdings, a subsidiary of Hilco Equity Partners, an investment firm in Northbrook, Illinois. Niman soon decided he couldn't live with the changes that the new management team was making, and so, in 2007, he left, taking with him a cow, a steer, and his remaining stock in the company, which turned out to be worthless. Earlier this year, at a special meeting, the stockholders voted to accept an offer from Natural Food Holdings to buy the rest of the company. By the time the most recent investors were paid off, there was nothing left for the early ones and the holders of common stock, including Niman.
And so it was that after spending his entire adult life building a business, revolutionizing an industry, setting a new standard for meat quality, creating a famous brand, and racking up a couple hundred million dollars in sales, Niman wound up with nothing. Indeed, you might say less than nothing: His name is now attached to products that he doesn't believe in and won't buy. "I'm not willing to eat Niman Ranch beef myself," he says.
You can't help wondering how this could have happened. Niman has pondered the question in the two years since he left the company. Sitting in the living room of the modest, four-room house that he and Nicolette share with their son, Miles Robert, and their Great Dane, Claire, he explains why he couldn't stay. As he lays out his case, there's passion in his voice but also a faint smile on his face. He seems content with his lot.
And why shouldn't he be? He lives, after all, on a pristine stretch of Northern California coastline, is engaged in work that he loves, and has a happy home life with Nicolette, an environmental activist and author 22 years his junior, and their 2-month-old son. "Do I want to miss this?" he asks at one point. "Hell, no. I want to savor it." He pauses. "But knowing what's going on in the industry, how animals are being tortured daily, and having had the platform, it's hard not to have some feelings'¦" His voice trails off. The word regret is not spoken, but it hangs in the air.
It's obvious he hasn't put Niman Ranch behind him. On the contrary, Niman bristles at the suggestion that he seems at peace with his decision to walk away. "Do I?" he says. "What I feel is bitter disappointment. And I have to take responsibility."
Niman shares responsibility for many things, not least the general awareness that the quality of the food we eat is intimately linked to the process used to grow it. But that thought hadn't yet occurred to him when he headed west from his native Minneapolis in 1968. A young man with curly dark hair and a handlebar mustache, he opposed the Vietnam War and was mainly interested in avoiding the draft, which he was able to do by becoming a schoolteacher in a remote farming community in California's San Joaquin Valley. Back then, he would never have guessed that business lay in his future. Like Ben Cohen and Jerry Greenfield of Ben & Jerry's and Anita Roddick of the Body Shop, he was one of those 1960s counterculture types who wound up in business more or less by accident but, once there, discovered it could be an excellent mechanism for advancing the causes they believed in.
Niman was teaching in Marin County, about an hour north of San Francisco, when he got the first taste of what would become his cause, thanks mainly to a student teacher named Amy Gettinger, with whom he fell in love. A native of New York's Long Island, she was an expert horsewoman who yearned to live on the land and raise animals. Before they were even married, they bought 11 acres in Bolinas, where they began raising goats, chickens, and hogs while supporting themselves by teaching and working in a local restaurant. Gettinger also did some tutoring. In return for her services, one ranching family gave her gunnysacks containing six newborn orphan calves. In due course, those calves would bring forth the herd that spawned the business.
But it was another 10 years or so before the business acquired a name -- Niman-Schell. Orville Schell was a writer and a member of a local commune whom Niman had met during a battle against the building of a four-lane highway and a sewage-treatment plant in Bolinas. They became friends and began working together on the farm. One day in December 1976, they were castrating pigs when a riderless horse trotted by. A moment later, a neighbor appeared and asked Niman whether Amy had been out riding that day. Niman looked at the horse. "I guess so," he said. It turned out she had been thrown and badly injured. She died a week later.
"It was the darkest time of my life," Niman says. "Depressed is not the right word. I was in pain." The daily demands of the farm saved him, as did the support of his circle of friends in Bolinas. But the effects lingered. "Losing a loved one, you regret not saying certain things, and things you did," he says. "It changes your life."
Niman threw himself into making their farm a success. In the beginning, he and Schell focused on pigs, feeding them out-of-date Nancy's Organic Yogurt and used barley from the Anchor Brewing Company. They sold the pork to friends and neighbors, who raved about it. Then, in 1977, an opportunity arose to purchase a 200-acre ranch in Bolinas. They bought it, taking on a $300,000 variable-rate mortgage in the process. Because the ranch was better suited for cows than pigs, they shifted their focus to raising calves from birth and selling them to other ranches.
And that might have been the end of the story, were it not for a precipitous drop in beef prices in the early 1980s. Already struggling to cover their monthly mortgage payments -- their interest rate had risen to 18 percent -- Niman and Schell realized that it made more financial sense to keep the calves to slaughter and sell the grass-fed beef to local grocery stores. Though more expensive than supermarket cuts, it was delicious. Word got around and, after an article about the meat appeared in the San Francisco Chronicle, three top Bay Area restaurants started serving it. In a highly unusual move, they also put on their menus the name of the ranch it came from. Before long, Niman-Schell beef had a cult following in the region.
At the time, Niman didn't know enough to appreciate what the restaurants had just done for him. What he did know was that Niman-Schell Ranch was not even close to being a viable business. "We supported it by working outside," Niman says. "I was making $10 an hour in a construction crew." How long the business would have lasted is anybody's guess, but it was saved by a stroke of fortune. In 1984, the National Park Service decided to designate the ranch for inclusion in the Point Reyes National Seashore. It paid Niman and Schell $1.3 million for the land while granting them the right to live on it and farm it during their lifetimes and also allowing them to lease an additional 800 acres in the bargain. The windfall allowed Niman to quit his construction job and devote all his time to the business. A couple of years later, he and Schell persuaded Susie Tompkins Buell, a neighbor and co-founder of the Esprit clothing company, to lend them $500,000. With that loan and the money from the government, they were able to cover the ranch's ongoing losses for the next decade, as its reputation and its sales continued to grow.
And that became the pattern. Niman used his company to make the case for the humane treatment of animals, demonstrating that the meat really tasted better -- much better -- if you raised animals in the traditional manner, took good care of them, and did not pump them up with antibiotics and hormones to make them grow bigger, get to market sooner, and generate cash faster. He succeeded so well in making his case that he had to put together an extensive network of ranchers who raised cattle the same way and could help Niman Ranch keep up with demand. What Niman couldn't seem to figure out was how to make this business self-sustaining -- at least not on the scale at which he was trying to operate. But then, he didn't need to as long as he could get by with other people's money.
By 1997, however, that resource was running out, and the business was on the verge of bankruptcy. Right about then, Niman received a call from a Silicon Valley executive named Mike McConnell. McConnell had noticed the Niman-Schell name on the menu of a high-end Palo Alto restaurant and was calling to see if Niman had a job for his godson, who wanted to work on a ranch. "Bill said, 'Well, I don't really need people, but I've got a business opportunity,' " McConnell says. "He wanted to expand." Schell, on the other hand, decided to devote all his time to journalism. McConnell was looking for a new project, preferably one that would allow him to do some good in the world. He had already made a lot of money. He anted up $500,000 and became Niman's partner. A few months later, they were joined by Rob Hurlbut, a former Nestlé executive who also had seen the Niman-Schell name on a menu and contacted Niman seeking advice about a seafood business he wanted to start. Niman persuaded him to join Niman Ranch instead. The three of them ran Niman Ranch for the next nine years.
Back at the BN Ranch, I have just sunk my teeth into what is easily the best hamburger I have ever tasted -- so big, juicy, and flavorful that I wouldn't dream of spoiling it by adding, say, ketchup. The meat, of course, is from a cow the Nimans raised. It's actually part of a test to see how grass-fed beef tastes when you don't fatten up the cow on grain but instead allow her to graze an extra year. Bill is having a hamburger, too, but Nicolette passes. She's a vegetarian.
"One thing we wanted was the herd," Nicolette is saying, referring to the terms of Bill's departure from Niman Ranch. "They were descendants of the six in the gunnysacks."
"We offered an above-market price," Bill says. "Then we realized they had the perception we'd do anything to get the cows."
"What they wanted in the separation agreement was outrageous," says Nicolette. "They wanted Bill to never use the phrase Niman Ranch and to fine him $25,000 every time he did. We told their lawyer, 'We won't sign this deal. Take any cattle you want.' They took them all, except for an old cow and an old steer."
As I savor my burger, I'm thinking that the grass-fed beef experiment has obviously been a success. Apparently, the other experiments have been successful as well. I haven't sampled Niman's goat meat, but I've been told that the goat tastes like the best lamb you have ever had, only better. As for the turkeys, Niman sold about 50 of them at Thanksgiving through Bi-Rite Market, a specialty food store in San Francisco. Reports from customers were uniformly glowing.
Such high quality does not come cheap. Bi-Rite charges $105 for a 15-pound BN Ranch turkey; supermarket turkeys go for $15 to $25. BN Ranch goat meat runs from $14 to $26 a pound, significantly more than similar cuts of lamb. The beef won't be available in stores for another year or so, when about 30 steers will come of age, and so we don't know what the meat will cost. But having tasted the hamburger, I wouldn't be at all reluctant to spend whatever a retailer wanted to charge for it.
The question is, Can BN Ranch ever sell enough meat to be profitable when it costs so much, even if it is the best-tasting meat in the world? Niman isn't worried. "I believe there's a superpremium, quality-conscious upscale customer who will recognize the value and be willing to pay for it," he says. At the moment, most customers are restaurants. "Chez Panisse took six goats this week, Oliveto, Pizzaiolo," Niman says, dropping the names of some of the finest restaurants in the Bay Area.
But Niman wants more than to become the meat of choice in high-end restaurants. "I'm really trying to change things," he says. "We want to show what can be done on small homesteads and farms. The other thing is to have a viable, income-generating business, because we can't afford to fund operating losses with our own money, and I don't want to do it with other people's money this time. And any model for other ranchers and farmers to copy has to be income generating. So for both those reasons, we need to be financially successful."
And what could prevent him from being financially successful? "The only thing would be growing too fast and trying to get too big," he says. Which is, of course, exactly what happened the last time.
By the time McConnell and Hurlbut showed up in 1997, the business had been around for more than 20 years, sales were approaching $2 million, and Niman was desperate for help. "I was killing myself trying to do everything," he says. "Feeding the animals. Taking them to slaughter. Working with the butchers and the packers. Calling customers. Doing deliveries." He was the rare farmer who had a direct hand in every phase of the process -- from birthing the calves to butchering the meat to interacting with some of the greatest chefs in the country -- and the stress was taking a toll.
Aside from helping Niman carry the load, McConnell and Hurlbut brought a new dimension to the business. They weren't ranchers. They were businessmen, and what particularly fascinated them was the opportunity to create a nationally recognized brand in meat. Hurlbut had seen Nestlé do it with coffee. McConnell had access to the capital needed to pull it off.
Their arrival coincided with a development that would transform the company. Up until then, Niman Ranch had been known almost exclusively for its beef. Although it also sold some lamb and pork -- mainly in response to requests from chefs -- they were a sideline. Recently, however, Niman had begun working with an Iowa hog farmer, Paul Willis, who had his own vision of reviving traditional hog farming in the Midwest, where hundreds of thousands of family-owned hog farms had gone out of business or been absorbed into massive, indoor pig factories. Willis came to Niman looking for help. They soon began putting together a network of midwestern farmers who, like Willis, raised pigs the old-fashioned way.
The program was in its infancy when Niman Ranch got a call one day in 1998 from Whole Foods Market. "They said they wanted to buy pork from us," McConnell recalls. "We said, 'We're a beef company.' They said, 'No, you're actually the largest supplier of free-range pork in America.' I think we had 15 hog farmers at the time. We just looked at ourselves. It was the business opportunity of a lifetime."
The opportunity was big not just because Whole Foods would buy a lot of pork but also because pork has the potential to generate more profit than either beef or lamb. Pork has better gross margins than steak, and parts of the pig carcass can be used to make products such as bacon, sausages, and ham, whose gross margins far exceed those of the fresh meat. In addition, Niman Ranch was developing a business model for hog raising that was less capital intensive and potentially more profitable than the one it had for cattle. Hurlbut, who later became CEO, focused on the pork side of the business, working closely with Willis. Along the way, they put in place a set of strict protocols governing how the animals would be treated and what they would be fed, as well as an inspection regime to ensure the protocols were being followed and a rigorous tasting system. McConnell, meanwhile, was busy raising money.
It wasn't difficult. This was the era of the dot-com boom, and nowhere was the economy stronger, or the get-rich fever more intense, than in the San Francisco Bay Area. And Niman Ranch had all the hallmarks of a hot tech start-up. It was a fast-growing first mover with a strong brand and an apparently scalable business model. "It was a brand-new niche," says McConnell, who raised $11 million from 75 investors in three rounds from 1998 to 2004. Niman's share of the company shrank to about 12.5 percent. McConnell had a bit more, having persuaded his wife to sink the bulk of their savings into the venture.
"Suddenly, we thought we were rich," Niman says. "We stopped being careful and started spending money. I trusted Rob and Mike. I thought, What do I know? These guys are out in the business world seeing what other companies are doing. It must be the right thing. And I have to admit that I was seduced by the notion of becoming a really big company and having an impact on the industry. Right up to the end, the investment bankers were telling me, 'You'll probably get $30 million for your shares.' I was seduced by that, too. I was uninitiated and had to learn the hard way."
The new Niman Ranch is headquartered in a drab office building in Alameda, California, about a quarter-mile from the main runway at Oakland International Airport. Its offices are threadbare, perhaps because the senior executives are based elsewhere -- the CFO in Iowa; the vice president of sales in Colorado; and the CEO, Jeff Swain, in Pennsylvania. Swain happens to be in town the day I visit. A bearded fellow in a polo shirt, he seems on edge, and it's hard to blame him. Swain has sat through a number of interviews like this one, and he doesn't care for the articles that ensue, particularly those that cite Bill Niman's refusal to eat Niman Ranch beef. Nevertheless, he seems careful to say as little as possible that might appear to be critical of the founder.
"Everything we've done has been to preserve Bill Niman's legacy," Swain says. "We've brought practicality to his vision. We haven't touched the way the company does pork, lamb, or prepared foods. We've only addressed beef, because that was the crux of the problem." He insists, moreover, that he and his associates were absolutely clear about their plans before closing the deal to buy a controlling stake in August 2006. A majority of the existing shareholders, including Niman, voted to accept the offer.
The idea to acquire the company had been Swain's. He was a finance guy who later got into meat and poultry. After stints at Butterball Turkey and Foster Farms, he had become president and CEO of BC Natural Foods, in Golden, Colorado, and in that capacity helped orchestrate an industry roll-up of companies making "all-natural and organic protein products," as he calls them. One of them was Coleman Natural Products, a pioneer of the natural-beef business. From that perch, Swain became interested in Niman Ranch, which he regarded as unique in the industry. After leaving BC Natural, he teamed up with Hilco Equity Partners to make a bid for Niman Ranch.
The bid came in the nick of time. "We were at the cliff," Niman says. After eight years of pushing to increase sales and build the brand, the company had again run out of money. Granted, it was much bigger than it had been in 1997. Sales in 2006 were almost $60 million. But the net loss was more than $4 million. Swain says that, during due diligence, Hilco looked back five years, and Niman Ranch hadn't turned a profit in any of them.
But the brand had value, although how much the Niman Ranch board didn't know. In late 2005, its members decided that the time had come to find out. For the next six months or so, it entertained a parade of potential acquirers. All of them walked away except Hilco. So when it made an offer of about $5 million for 52 percent of the company and voting control, Niman, among others, was happy and relieved -- especially because the new owners and managers seemed to embrace Niman Ranch's values and philosophy. They even made his remaining as chairman and company spokesperson a condition of the sale. He agreed but negotiated an employment contract defining the terms under which he could later leave if he chose to.
Niman says he began to get a bad feeling about his new partners within the first month. By the following spring, he was shooting off memos warning that the new management team was putting the company's reputation at risk. What bothered Niman most was the decision to transport cattle over long distances, which he contends is inhumane. Close behind was the decision to approve the use in cattle feed of certain man-made antimicrobials. He also expressed concerns about the treatment of calves at one feedlot, the new practice of grading beef according to U.S. Department of Agriculture criteria, and on and on. The board looked into the charges. Its response, Niman says, was to bar him from staff meetings and forbid him from asking questions of employees or talking to customers without Swain's approval. (Swain denies this.) Niman quit in August 2007. "I said, 'I don't want to be the Colonel Sanders of Niman Ranch,' " he says.
Swain can rebut each of Niman's criticisms. And both McConnell, who is no longer affiliated with the company, and Hurlbut, now the CEO of Attune Foods, continue to believe in Niman Ranch products. "If the new guys have moved 10 degrees to the practical side," says McConnell, "Niman Ranch meat is still 79 degrees better than anything but meat from a local farmer."
Niman agrees -- to an extent. "I would say Niman Ranch is just as good as any other natural-meat company," he says. But coming from him, that's not exactly a compliment. "The people that are raising natural cattle are opportunists," Niman says. "They don't really believe in it. When a cow gets sick, Niman Ranch medicates it and takes it out of the system, so it's not sold as Niman Ranch beef. But then they implant it with hormones and sell it into the commodity beef market. To me, that shows they're not really opposed to using hormones. They just see hormone free as a marketing opportunity."
Swain bristles at such statements. "I spent a lot of my career working to make money," he says. "This is something else. This is about falling in love with a value scheme and helping the company to grow responsibly, with a firm financial footing." Niman Ranch, Swain adds, finally became profitable in February.
Back in Bolinas, Bill, Nicolette, and I head over to the turkey pen. "This is our first year with the turkeys," Nicolette says. "These breeds are unchanged since the late 19th, early 20th centuries."
"We picked these up in Kansas," Bill says. "We saw them as eggs on a Friday evening, and on Saturday they hatched. There were four crates of them -- 225 turkeys. They were in the back of our car. Thirteen percent died within two weeks. It was dispiriting."
"A baby turkey doesn't even fill the palm of your hand," says Nicolette. "We had to keep opening the boxes and taking the sick ones out, so that they wouldn't be stomped on."
Entering the turkey house, I almost choke on the smell of ammonia. A wire fence separates the males from the females, some of whom have jumped over it. Bill and Nicolette chase them back. "They're beautiful," Bill says. "But they're the meanest animals in the barnyard to each other."
We eventually wind up back in Bill and Nicolette's living room, talking about mistakes that were made on the road to the sale of Niman Ranch. "My biggest mistake was giving up control," Bill says. What would he have done differently? "I wouldn't have grown the business so quickly," he says. "I would have proved it first. We should have concentrated on tightening up our operations. Instead, we acted like Kraft. We were having strategic planning sessions with outside facilitators, and our staff was spending days in conference rooms at hotels. We should have used that money as a tool to achieve profitability, rather than as a tool for growth."
I point out that Niman Ranch was profitable on the pork side, while the beef business had consistently lost money -- mainly because Niman had insisted on buying cattle from his rancher network when they were ready for the feedlot. He had also insisted on owning the feedlot in which the cattle would be fattened up prior to slaughter. In contrast, Niman Ranch did not purchase pigs until they were slaughtered and then bought only as many as it could sell. On the pork side, the company avoided having capital tied up in inventory for long periods of time. But on the beef side, it had cows, barns, real estate, and feed, not to mention exposure to the risks posed by inevitable fluctuations in the prices of all four. Hurlbut and McConnell had argued that Niman Ranch could become profitable just by applying the pork business model to beef. Indeed, that's essentially what Swain has done. Looking back, did Niman wish he had relented and let Hurlbut have his way?
"That's a really tough question," he says. He pauses. "Considering how much the values and ethos of the brand have changed, yeah, I think that would have been a better outcome. Rob would have done a better job of maintaining the values. Would I have been able to stay with it? I don't know."
Why not? "Well, remember I got into this because I had a ranch and needed to sell my livestock profitably. I really didn't want to be in the meat business. As advantageous as it might seem on a spreadsheet to divest all the agricultural parts of the enterprise, that was not appealing to me. I also thought that our standing in the marketplace came from our involvement as ranchers. I wanted Niman Ranch to be the gold standard."
He pauses again, and his mind wanders. "Yes," he says at length, "if I had it to do all over, I wouldn't have given up control, that's for sure. How did it happen? Little by little, led on by delusions of grandeur and a big payday." For a moment, he seems lost in thoughts of what might have been.
Bo Burlingham is an Inc. editor-at-large.