Big Gain, Inc.

Photo by Kris Kathmann

Mark Hinton and Elton Klaustermeier stretch their definition of “customer service” miles beyond smiles. To them, the term means much more than common courtesy or on-time delivery.

Perhaps that’s why the “broken-down mill” they bought in 1973 survived to thrive as Big Gain, Inc., a major regional manufacturer of livestock and poultry feeds. Today Big Gain’s more than 100 employees formulate, manufacture, sell and deliver feed to dealers and beef, swine, dairy, sheep and poultry producers in Minnesota, Iowa, Wisconsin and South Dakota.

Headquartered in LeHillier, just west of Mankato, Big Gain also operates research facilities near St. Peter, Good Thunder and Rapidan and runs three smaller mills at St. Charles, Plato and Jackson. The LeHillier plant runs around the clock, churning out a variety of feed to fill Big Gain’s 22 delivery trucks.

But Klaustermeier and Hinton insist that they’re not in the feed business. “We’re really a management company,” Hinton said. Although the company is “strong on research and development,” and the partners are proud of the quality products they formulate, what they sell is service. “It isn’t the product that makes the difference,” Klaustermeier said. “It’s the service and the people who come with it.”

Big Gain offers a variety of support beyond traditional training for dealers and on-farm service for producers. Being a “management company” means working with producers on issues ranging from nutrition to record-keeping. “We get into cash flow analysis with farmers, help them build barns, work with bankers, help them market their products. I probably spend more of my time doing that than anything,” Hinton said.

The point of providing this kind of consulting advice, of course, is to insure that the company’s customers “stay in business. “We don’t want them doing something that’s not good for them financially,” Hinton said. “It’s the toughest area, but the one with the most opportunity, because this is where the greatest need is. In effect, we become a partner to the farmer.” Big Gain gladly invests in these “enhancement services,” according to Hinton and Klaustermeier. “Our philosophy is that if our customers do well, we’ll get along OK,” Hinton said.

When Big Gain personnel work with producers, however, they virtually insist that these customers keep detailed financial and production records, if they aren’t already doing that. “That’s the only way we can help. It’s hard to fix something if you don’t know what’s broken,” Hinton said. “Elton has preached that around here for a long time. He says ‘if you don’t know where you are, how can you tell where you’re going?’ Our books are done by the 15th of every month. Elton gets on his ‘high horse’ if that doesn’t happen.”

Klaustermeier maintains that “not keeping records is like playing a football game and not keeping score. Farmers can be very efficient, but their weak point sometimes is not knowing their exact costs of production. They know if there’s money in their checkbook, but they may not be sure where they made it, or how they compare to other producers.”

Big Gain offers producers a standardized record-keeping system and will key their data into a company computer if they don’t have their own PC, but most do. The company keeps profiles on hundreds of producers so individual customers can see how they stack up. (Numbers are shared, but not names, just as is done in many farm management classes.) Detailed financial records also come in handy when producers need operating or expansion capital, according to the partners. “When you walk into your lender, and your records prove you’re in the top 20 percent, they’re more likely to go with you,” Hinton said.

“Our goal has been to keep the family farm competitive with the other producers out there by having efficient records, using the best technology and by finding markets for them,” Hinton said. That most often means helping sell the hogs of several small producers, gathering them into a marketing group. “The nutrition’s all the same and the genetics are comparable, so we can meet a certain standard that the packer wants,” Hinton said. “We do that primarily for swine, but we’re moving into beef and dairy.”

In 1998, “when hog prices went down the tube, our producers were more efficient and lost less, and we helped them market their products. We got them the best price available,” Klaustermeier said.

Klaustermeier and Hinton instituted their expanded definition of customer service not long after buying the mill in 1973. “We went into it big time about 1975 and developed one of the first management programs in the hog business. We called it ‘Plan-a-Pig.’ We figured out their production and gave them reports, including a financial analysis,” Hinton said.

This level of customer service enables Big Gain to swim upstream against industry trends. “It’s a mature industry,” Klaustermeier said. “Many major feed companies have been sold in the last 10 years. There are less tons of feed sold today by commercial feed manufacturers than 20 years ago. Oodles and oodles of feed mills shut down in recent years.”

Manufacturers sell less feed these days because extremely large operations, particularly in swine and poultry, manufacture their own. But Hinton and Klaustermeier believe family farmers can remain competitive with such giants.

“Our customers can actually be the most competitive, efficient producers in the industry,” Klaustermeier said. “They furnish their labor to a large extent, and labor makes a big difference. They produce their own corn and roughages. They can use their own manure for fertilizer. They’re the owners and have personal pride. They have a stake in it.”

Although Klaustermeier believes “a certain amount of volume is associated with efficiency, that doesn’t mean if you’re bigger, you’re better. A guy with 50 dairy cows can be just as efficient as a guy with 1,000. In our system, the family farm is not fading because we’re putting them together as a group and helping them to be more efficient. Just because you don’t have a thousand cows doesn’t mean you can’t make a living milking. We don’t feel that size or volume have anything to do with success. Some people have the opinion they can’t compete with big producers, but my answer is they can.”

The two men believe that “plenty of opportunities” exist for producers today. “There are going to be more people in this world, and the Midwest can be the lowest-cost producer (of livestock and poultry) because of the feed ingredients,” Klaustermeier said. “We can grow the corn and alfalfa. We have the lowest-cost corn and soybeans in the U.S.”

Both Klaustermeier and Hinton seem ideally suited to running Big Gain. Both have farm backgrounds, both sold feed for a larger company and both wanted a business of their own.

“My dad had five sons and he couldn’t put us all in farming. But because we have a farm background, we have a lot of empathy for the producer,” Klaustermeier said. Hinton said his father advised him against farming because “he said he never made any money. He didn’t know if he was making money. No one helped farmers keep records at that time. That’s probably why Elton and I keep going back to the need to keep good records.”

The two became acquainted in 1960, when Klaustermeier lived in Worthington and sold feed for a major brand. He often called on the elevator at Round Lake, where Hinton trucked and sold feed. “I’d go out and call on customers and Elton would help me.”

That relationship continued for five years. Then Klaustermeier’s employer moved him to Mankato and Hinton went to work for the same firm. “We weren’t unhappy with our employer, but everybody likes to get in their own business, so we started looking around for opportunities,” Klaustermeier said. “We found this old, broken-down place right under our nose. If we would have known anything about a feed mill, we wouldn’t have bought it, but it’s served the purpose.”

When the partners took over, the old mill had a full line of feeds but sold almost exclusively to turkey producers. “We knew we had the majority of the turkey feed business in Southern Minnesota, so if we were going to grow, we had to expand into other classes of livestock,” Klaustermeier said.

Their first big decision was whether to sell direct to farmers or set up dealerships. “We decided to set up a dealer organization because we couldn’t serve individual producers, “Klaustermeier said. Hinton concentrated on marketing, finding and training dealers and salesmen, helping them sell to producers, while Klaustermeier stayed at the mill. “I did everything in the office here. I was the truck router, the production superintendent, nutritionist, janitor, whatever needed doing,” he said.

“I came to work one morning when it was about 20 below and our two mill men were sitting on a couple of bran sacks, not making feed, because the oil in the drive was so thick that it wouldn’t turn,” Klaustermeier recalled. “So I was the guy who climbed 100 feet to the top of the mill and changed the oil.”

The original crew included one trucker, two mill workers and an office girl. “Our wives were the bookkeepers,” Klaustermeier said. (Gloria Klaustermeier and Janet Hinton remain active with the business.)

Despite the cranky old mill, Hinton and Klaustermeier brought zest and energy to their new enterprise. “We changed the company logo, put out brochures, published a price list, offered a full line of other products and went from plain old brown bags to nice white bags with the new logo,” Klaustermeier recalled.

Big Gain also started a profit-sharing plan for employees that first year. “Not all 100 employees can own a feed company, but if we can reward them with a share of the profits, it’s human nature for them to care more,” Klaustermeier said.

“After the first year, the business was going pretty good. Elton would run the plant in the day while I was out selling,” Hinton said. “Then we’d both come in at night and manufacture. We didn’t have enough business to justify a night crew, so we’d work until we had all the orders filled. Then at midnight we’d go out for hamburgers. It was a lot of fun.”

A night crew was added about 1976. The old mill, which could produce about 20,000 tons a year, lasted until 1981. Then the partners put up a state-of-the-art computer-operated mill, jumping annual capacity to about 170,000 tons. “It wasn’t that we had a bunch of money laying around. We borrowed it,” Hinton said. “We felt we had to be efficient in production, just like our customers.” The new mill ran at only 20 percent of capacity when it opened, but now it’s operating three shifts a day.

The corporate culture the partners created at Big Gain requires close contact with customers. “All of our management people spend at least 50 percent of their time out in the country, so they don’t get ‘brain dead’ with what’s really going on in the industry,” Klaustermeier said. “It helps them stay up to date with what people need and want. That’s our best source of information. When they come in here and say ‘we need this or we need that,’ we understand what they’re talking about because that’s been our whole life.”

Klaustermeier, 67, and Hinton, 58, aren’t worried about Big Gain’s future. “We both have sons who know the business from the ground up, all the way from manufacturing to driving truck to working with farmers. They’ve both worked for other ag companies, both have animal science degrees, they’ve both been out in the field, they like it and they’re very good at it,” Klaustermeier said. Kurt Klaustermeier specializes in dairy and management, while Tim Hinton’s forte is swine and marketing.

The partners are also confident about the future because “we have a lot of employees who’ve been here for a long time, they’re part of our management team, and they have a lot of input,” Klaustermeier said.

Hinton stresses that Big Gain “isn’t just Elton and me. It’s all our dealers and employees and producers. We hope the company will continue to be of service to people, so we can all move ahead. I really like the idea of watching people grow and the company doing better, doing what I can to help.”

Klaustermeier shares those feelings. “This morning I came in and my son said ‘remember that 300-cow dairy herd? They were at 74 pounds of milk and now they’re at 87!’ That’s the kind of stuff that’s fun. If we can be part of helping people, that’s what turns our crank.”

©2000 Connect Business Magazine