Coleman Natural Products, Inc. Business Information, Profile, and History

Company Perspectives:

By understanding our customers, we will define and lead in the profitable marketing of superior quality, certified natural and organic meat products, raised and produced using ecologically focused principles.

History of Coleman Natural Products, Inc.

Coleman Natural Products, Inc., is the leading U.S. supplier of natural beef and the first company to ask for and receive a USDA "natural" label. Coleman beef is produced from animals that have been raised from birth without the use of antibiotics or growth-promoting hormones on a 100 percent vegetarian diet. Coleman ranchers, feeders, veterinarians, and truck drivers sign affidavits verifying that the animals have been raised, transported, and handled safely and humanely, according to Coleman's strict guidelines. Humane treatment includes expanded space to reduce stress and prevent disease, as well as special shipping requirements to minimize overcrowding and exposure to vehicle exhaust fumes. Coleman has animal science/meat science Ph.D.'s on staff to advise in the areas -- of animal handling, nutrition, and animal welfare.

1979-90: Steady Growth of the Natural Meat Industry

In 1979, Mel Coleman, Sr., founded Coleman Natural Meat after his daughter-in-law complained that she couldn't find any hormone- and stimulant-free beef in Boulder, Colorado's health food stores. Coleman, a fourth generation rancher whose great grandparents had arrived by covered wagon in Colorado in 1870, had been president and chief executive of Coleman Ranches Inc. since 1968. He and his wife, Polly, had ranched on about 250,000 acres of private, state, and federal lands on both sides of the Continental Divide in the San Luis Valley. Coleman Ranches didn't turn a profit from 1974 to 1979 when Coleman decided to pioneer the production and marketing of natural beef raised humanely and with respect for the environment.

Coleman broke new ground for the beef industry in 1980 when he urged the U.S. Department of Agriculture to develop a new "natural" classification for beef. The following year, Coleman Natural Meats instituted stringent protocols governing every aspect of the company's beef production. That same year, it earned the first "No Antibiotics Used From Birth" USDA-approved label. Later, in 1999, Coleman trademarked its meats with the phrase "No Antibiotics, No Added Hormones ... Ever."

Coleman's protocols differed markedly from the industry's norm. According to the Union of Concerned Scientists, the majority of conventional beef producers in the United States added sub-therapeutics levels of antibiotics to their animals' feed or administer them through direct injection. Coleman opposed these practices, widely accepted as necessary for disease prevention and to increase growth rate and weight, based on the growing evidence that antibiotics kill off only the weaker, susceptible bugs in animals. This situation, it was argued, left the strongest to reproduce and make their way into human bodies and increase bacterial immunity to drugs used to treat human illness. Coleman's position was supported by the World Health Organization in 1997 and 1998.

Coleman--and later, Coleman Certified Ranchers--practiced sustainable agricultural methods, including rotational grazing, a rangeland management system that Coleman Ranch had utilized since 1960. Rotational grazing employed a series of fenced pastures to prevent overgrazing and allowed for more moisture seepage and germination of grass seed. Coleman's ranchers also promised to practice humane animal care, raising their livestock in low-stress, animal-friendly, ample feedlots with plenty of access to clean water and natural feedstuffs in. Calves spent the first eight to ten months of their life with their mother. After weaning, they fed on a vegetarian diet consisting of grains and grasses tested regularly to ensure they were free of prohibited substances. Unlike conventionally ranched cattle, Coleman cattle were raised from birth without antibiotics and growth-stimulating hormones.

All Coleman beef came from the family ranch in Saguache, Colorado until 1984 when the company needed additional ranchers to meet demand for its product. Coleman, who then had about 50 head of cattle, was able to enlist the aid of like-minded ranchers, who agreed to raise animals the "Coleman Way"--without hormones or feed additives, and the company established the Coleman Certified Rancher and Feedlot Program. With this program, another of Mel Coleman's goals became reality: to provide additional income opportunity for small family farmers and ranchers.

Growth in the 1990s

Throughout the 1990s and especially in the latter half of the decade, the popularity of organic foods soared. Natural and organic products were increasingly available in conventional supermarkets and their sales increased more than 20 percent each year. By 1996, Coleman Natural Meats was distributing its meats through the nation's largest natural food supermarkets, such as Whole Foods Markets, Wild Oats, and Alfalfa's stores, benefiting from the growth of the natural foods industry and increased demand for "natural" products. Some conventional grocery stores also carried Coleman's products, contributing to its profits of $620,000 on sales of about $43 million in fiscal 1995. Lee Arst, president and chief executive of Coleman Natural Products since 1994, was quoted in the New York Times in 1997 as saying, "This is not a fad ... It is a cultural change that is going on. It's a lifestyle ..."

However, only about half of the states in the country regulated organic food, with standards varying widely, and any producer could label a product organic. After years of ignoring the organic food industry, the USDA stepped in with a sweeping set of proposed regulations in the late 1990s--rules to define exactly which products, whether raw or processed, might be labeled organic. The Department also set standards for the production and handling of organically grown crops and organically raised meat and poultry. Only raw products that were 100 percent organic--grown and manufactured without the use of added hormones, pesticides, and synthetic fertilizers--and processed foods that contained 95 percent organic ingredients--could bear the organic seal. Soil had to be free of unapproved synthetics for three years before a crop could be called organic.

However, the government backed down from its original stance on and ultimately allowed the use of hormones and antibiotics in organic meats and the introduction of genetically altered seeds. Coleman Natural Products and other companies committed to alternative production methods were outraged. Arst and Mel Coleman, Jr., traveled the country speaking out against the proposed regulations for organic farming and food production, which finally became law in October 2001.

Coleman continued to grow at a steady rate through the end of the 1990s. By 1999, Coleman processed all of its own meats at its at own slaughtering facility in Limon, Colorado where lactic acid washes were used to help eliminate bacteria. Animal carcasses were transported to the company's Denver facility for "fabrication." Coleman's protocols required a statistical sampling of incoming as well as finished product for bacteria contamination. The company grossed about $50 million annually by the end of the decade, saw an almost 20 percent increase over its revenues mid-decade. By 2001, it contracted with 700 ranchers and brought in about $70 million a year.

In 2000, while the proposed regulations governing organic meat were being reviewed by federal agencies, the organic and natural products markets were faster growing than ever--a $25 billion a year industry. Coleman's, whose meats still fell in the natural category--cattle raised without hormones or antibiotics, but fed non-organic feed--Coleman, which by then processed about 52,000 head of cattle a year, reported being ready to move into the organic field and began test marketing its organic beef in 39 Food Emporium stores in New York around the turn of the century.

The reason for the company's caution in going strictly organic was that organic feed cost significantly more than non-organic feed: $800 a ton for organic soybean meal, for example, compared to $200 a ton for conventional feed. In fact, it cost more overall to produce organic than non-organic meats. Without the addition of growth-inducing hormones, cattle weigh anywhere from 150 to 250 pounds less at slaughter than their hormone-injected counterparts, and without prophylactic antibiotics, feedlots have to be kept cleaner to reduce the spread of pathogens.

Then in 2001, the federal government passed into law its revised regulations government organic farming and food production. These no longer included "the big three" and other inappropriate additions to which Coleman, the Organic Trade Association, and many other advocates of organic foods had objected: -- genetically manufactured organisms (GMOs), municipal sewage sludge, and antibiotics in livestock production. -- Commenting on the rules in the Denver Post Mel Coleman, Jr., said, "We're very pleased with the new USDA organic standards ... It will bring parity to labeling, which will allow us to communicate better with out customers."

By 2002, Coleman Ranches owned or leased more than 200,000 acres of certified organic rangeland, accounting for almost one-half of the nation's total inventory of organic pasture. And a 2002 study by the Food Marketing Institute showed that about 60 percent of people in the United States had sought out and purchased products labeled natural. company his father had founded whose products then sold in more than 1,700 stores in 17 western states.

The Early 2000s: A Subsidiary of BC Natural Foods

Mel Coleman, Sr., died in February 2002, and Peter Pappas became interim head of the company. Coleman had been an advisor to the Humane Society, and had served on the boards of the Organic Trade Association, The Nature Conservancy, and on the Humane Sustainable Agriculture Advisory Board. The governor of Colorado had appointed him to five consecutive terms on Colorado's Brand Board which regulated the state's beef industry.

Coleman's legacy continued to shape the direction of the company. In 2002, Coleman Natural Products launched a line of natural franks, Coleman Natural Uncured Beef Hot Dogs, containing only beef, seasonings, and water, using one of Mel Coleman, Sr.'s recipes. An earlier foray into the beef hot dog market had ended because of the 14-day shelf life of Coleman's wieners. Now new packaging methods allowed the dogs to stay fresh in the refrigerator for 30 days or more, and their popularity grew.

In late 2002, BC Natural Foods purchased Coleman Natural Products. BC Natural Foods owned Petaluma Poultry, and also bought B3R Country Meats LP in 2002. Mel Coleman, Jr., remained at head of the company his father had founded. Coleman's products then sold in more than 1,700 stores across the country with beef sourced from more than 800 ranchers in 17 western states.

In 2003, Coleman offered a full line of beef cuts, a ground beef program, hot dogs, patties, Coleman Natural lamb and pork. The company also launched into the foodservice channel, providing the official ground beef of the Colorado-based quick-serve chain "Good Times Burgers & Custard," which at the time had 35 restaurants. Good Times branded the Coleman logo on their menus, marquees, and packaging.

In 2004, Coleman's foodservice channel continued to expand with CB Potts of Colorado and Lucky 32 chain of North Carolina adding Coleman branded entrees to their menus. Coleman also began its Certified Angus Beef CAB LLC in partnership with B3R Country meats, adding a natural product line to the world's leading beef brand--CAB Natural Products. With demand for natural products steadily on the rise, the company, which had maintained nearly double-digit growth during most of its years, seemed assured a prosperous future.

Principal Competitors: Niman Ranch Inc.; Laura's Lean Beef Company; Cooperative Regions of Organic Producers Pool.

Chronology

• Key Dates:
• 1979: Mel Coleman, Sr., founds Coleman Natural Meat.
• 1981: The company becomes the first to receive USDA approval for use of the term "natural."
• 1984: The company establishes the Coleman Certified Rancher and Feedlot Program.
• 1985: Coleman begins to sell lamb products.
• 1994: Lee Arst becomes president and chief executive officer of Coleman; Coleman becomes chairman emeritus of the company.
• 1999: Coleman trademarks its meats with the phrase "No Antibiotics, No Added Hormones ... Ever."
• 2001: Arst leaves his position as president and chief executive officer of Coleman.
• 2002: Mel Coleman, Sr., dies; BC Natural Foods, Inc. purchases the company; Peter Pappas is hired as interim president for one year; Mel Coleman, Jr., is named chairman.
• 2004: The company partners with B3R Country Meats to start Angus Beef CAB LLC.