Does market demand match your vision for company growth, but exceed your ability to supply the product?
Such was the case for Black River Produce’s dream of delivering local and natural Vermont-raised meat products to the northeast corridor.
The facility vision
Chefs and retailers demanded a large volume of Vermont- and New England-raised meat processed with consistent quality, and often, in custom cuts not available elsewhere. Buyers wanted to know the livestock was grass- or grain-fed, pasture-raised, or raised without hormones or antibiotics. They also wanted to know that every cut of meat was properly raised and handled at each step in the process.
Black River Produce established Black River Meats in 2009, to begin to address the market demand by connecting livestock farmers with six different meat-processing plants in the region. But delivering a large volume of locally raised meats with consistently high-quality cuts required a dedicated single, specialized facility — and more livestock farmers committed to supplying Black River.
Black River has strong relationships with its farmers, and knows how to sell local food and serve its customers. But could they fill a market gap in the availability of high-quality, locally raised meats as they originally had for fresh produce? A technically and financially capable facility needed to become the backbone infrastructure to deliver local and natural meats to chefs and retailers. Could Black River transform an abandoned Ben & Jerry’s plant into a state-of-the-art 50,000-square-foot meat processing facility to provide market opportunities for Vermont farmers?
Sean Buchanan, president of Black River Produce/Black River Meats, recalled the predictions of industry experts: “Too much risk” and “You guys will be in trouble.” Black River co-owners Mark Curran and Steve Birge had traveled the country consulting with universities and industry associations, exploring potential models for what they wanted to accomplish — and the negative consensus opinion did not deter them.
Then Black River discovered the $9.5 million costs to renovate and equip the facility far exceeded the $2.5 million projected value. Bank financing was capped, and Black River Produce was stuck looking at a multi-million-dollar gap. (Traditional lending is limited when standard loan-to-value ratios are not met, and risk is considered to be too high.)
Closing the financing gap: Vermont Rural Ventures
“We couldn’t have done anything without Vermont Rural Ventures,” reported Buchanan about partnering with Vermont Rural Ventures to use its New Markets Tax Credit allocation. Vermont Rural Ventures’ investment brought in over $2.9 million of equity to fill the gap, along with People’s United Bank, Vermont Economic Development Authority and owner capital.
The Vermont Rural Ventures financing also helps to safeguard Black River Produce’s on-going financial stability. By preserving critical working capital and financial ratios, the company is well positioned to take on future developments and expansions.
In addition to bringing 70 jobs into the low-income community of North Springfield, the Black River Meat facility and equipment leased by Vermont Packing House supports ancillary jobs, job retention, and wealth generation on farms through increased local meat production.
As a further benefit to the community, Black River Meats shares a percentage of its net profits with producers to help them expand or improve infrastructure; funds scholarship awards for Vermont Technical College, Howard Dean Educational Center and Hannaford Career Center students; pays for on-site internships; and donates to the Vermont Food Bank and other community organizations.
Financed in part by Vermont Rural Ventures using a portion of its New Markets Tax Credit allocation, the Black River Meat facility has fulfilled the vision of serving as core infrastructure to grow the market for livestock farmers. From the initial market gap in the supply of local meats, there is now a line of farmers eager to bring their meat to northeast markets.
Beth Boutin is the senior investment officer of Vermont Rural Ventures, a community development entity that uses New Markets Tax Credit allocations for community investments throughout Vermont. Vermont Rural Ventures is a subsidiary of the nonprofit Housing Vermont.