Entrepreneurs had a little help along the way
By Terry Lehrke, News Editor
“I never in a million years thought that everybody would like it. I still haven’t taken all that in,” said Tom Smude, who, with his wife Jenni, owns Smude’s Natural Sunflower Oil in Pierz.
“I never thought that it would take off. It’s been two years and we’ve doubled our sales from 2010 – 2011. I’m guessing we’re going to quadruple it this year,” said Tom.
Not that the process has been easy.
It was in 2008 that the Smudes began looking for a drought-resistant crop. Their corn and soybeans hadn’t weathered the drought well, and they lost money for a couple of years.
Tom said he was looking for additional ways to make money to feed his “farming habit” which included growing crops and raising 400 head of beef cattle. And just maybe, earn enough to buy a new truck.
He was also (and still is) employed at Evergreen Equipment in Little Falls, owned by his father; Jenni was employed with the Soil and Water Conservation District.
After much research, Tom began looking at the idea of growing sunflowers, at first to use the oil to produce bio-fuel.
“We figured we were going to raise sunflowers, maybe we could crush the sunflowers for biodiesel fuel,” he said. However, “There was no money in biodiesel at all, so we changed direction.”
In talking with other people, Tom learned that years ago sunflower oil had been on the market. He found there was no sunflower oil on the shelves, but lots of olive oil.
He continued his research, and couldn’t find anything that indicated there was anything that was not healthy about sunflower oil.
Tom found there were many varieties of sunflower oil and learned high-oleic sunflowers contained the most healthy monounsaturated fat.
In 2009, Tom found a producer in Southern Minnesota who was bottling sunflower oil.
“The guy was doing the same thing I was trying to do, so I brought that bottle home and Jenni said, ‘Really? You really want to do this, huh?’ I said, ‘Let’s just try it,’” said Tom.
“She liked it — it tasted just like butter,” said Tom. That’s when the couple decided to move forward.
“I carried that bottle around saying, ‘This is what we want to do.’ That’s how we kind of got rolling,” said Tom.
Tom put plans together, trying to use as much of what they already had on the farm as they could, to help reduce costs.
“We didn’t want to buy another bin or a lot of extra stuff to get it going,” said Tom.
Nearly everything they needed was on the farm, except the production plant and the pressing equipment, which would eventually have to come from Germany. It would be one of the only things not purchased locally.
He planned the building over a beer, using a napkin and a pencil, he said.
But, when Tom went to the bank for a loan, “They said ‘no’ — that we’d have to get a business plan together,” said Tom.
“Everyone thought we were crazy,” said Jenni.
The banker suggested they go to the Small Business Development Center (SBDC) at Central Lakes College in Brainerd, to get help to put together a business plan.
Julie Anderholm at the SBDC helped the Smudes put a business plan together.
“We went back to the bank and showed them and they still said we were still going to need someone like Carol Anderson to help finance some of the things,” said Tom.
Anderson is the executive director of Community Development of Morrison County. She called the Smudes “true entrepreneurs.”
Community Development of Morrison County, the Initiative Foundation, North Central Economic Development Association and the United States Department of Agriculture (USDA) Farm Service Agency all became gap financing sources for the Smudes. It was with this help, that the Smudes could put the business plan created with the SBDC into place.
“So there were four lending institutions and three private investors that helped us build the building, because we couldn’t go through the bank,” said Tom.
Construction started in August 2009, and the shell of the building was up before winter with three men working — Jeremy Virnig, Adam Foss and Tom.
And then it was “Back to the napkin,” Tom said, as he had to figure out how to run all the augers and conveyors to make sure everything would flow correctly. “Where it would all go,” he said. “There was no book on how to do that.”
Farmers, all within a 20-mile radius, had grown sunflowers so production could begin.
Finally, Jan. 1, 2010, the first bottle of Smude’s Natural Sunflower Oil was rolled out into the market. But all did not go well the first few months as the kinks were worked out. There was no book to do that, either, and Tom was afraid they’d lose more money than they’d ever make.
Eventually, the kinks were worked out and production began flowing smoothly.
The United States Department of Agriculture awarded the Smudes a $298,000 value-added matching grant this February.
Anderson encouraged the Smudes to apply for the grant and brought a USDA representative to their plant in 2010. The SBDC helped the Smudes write the grant. Jenni left her job in June 2011 to work full-time in the business, and she finished the grant.
The grant is a matching grant, with money to be used solely for marketing the product. Scott Saehr of Pierz, a graduate of St. Thomas College, is now working to market the product, one more person hired because of the grant.
“It cost a lot of money to do this grant, but it was exactly what we wanted,” said Tom. “Taking our product from the farm to the shelf.”
The goal of the grant is to help build the rural community — a local product to aid the local economy.
“And job creation is kind of number one,” said Tom. “That’s the whole concept of the grant. But basically, we had to spend $600,000 to get the grant — it’s a 50/50 — if we spend $600,000 to make our business better, we get the grant money back. People think they come with a basket of money, but that’s not how it works.”
The grant money cannot be used on buildings or equipment. It must be used to promote the product. “Anything needed to make our brand a household name. Like for instance, ‘Doritos,’” Tom said. “When you hear ‘Doritos’ you think ‘chips.’”
Someday perhaps, with the right marketing, when people hear “Smude’s” they’ll think “sunflower oil.”
The Smudes have 14 employees. Part of that is due to starting a couple of businesses, in addition to the sunflower oil business. They had to do this to keep operations separate and to keep “the tax man and the bank” happy, Tom said.
The businesses the Smudes now run, in addition to sunflower oil, include:
• Midwest Sales and Construction LLC — Erecting grain bins and hoop buildings. “We travel Minnesota, Iowa and North and South Dakota,” said Tom. A crew of six is employed in that business, with plans for another crew of six to begin this year. It only made sense to Tom to start the business, when the Smudes themselves needed another bin to hold the sunflowers.
• Smude Farms — the Smudes’ Angus beef cattle operation, part of Tom’s “farming habit.” The beef benefits from the by-product of the sunflowers. The quality of the beef went from 86 percent choice to 94 percent choice in one year. “The only thing I did differently was to add the by-product from the sunflowers into the feed mix. It’s kind of a win-win. Nothing is wasted and the cattle benefit,” said Tom.
• Smude Gravel Company — The Smudes bought the gravel company that had been in Jenni’s family for generations. She is now the fourth-generation of her family to own the business.
• Smude Trucking LLC — Hauls grain, like sunflowers.
“We went from sending out zero W2s to 14 W2s,” said Tom. “I’m guessing we’re going to double that again this year, the way it looks.”
Product use increases
“What surprises me the most about this, is how people like the oil,” said Tom. “I’ve never been that excited about a product that I go tell 50 people … people literally come up to me and say ‘This is the best oil I’ve ever had.’ I can’t believe it.”
The Smudes spend weekends at different trade shows with their product, as well as at three or four farmers markets several times a week in the summer.
Individuals are attracted to the oil because of its buttery taste, the fact that it is all natural and high in the monounsaturated fats that are healthy. Tom is considering an organic line as well.
The oil is sold to a distributor and goes to a lot of fine restaurants in the Minneapolis area, said Tom. “It used to be one pallet every six months, Now two pallets every month — it’s taking off. “ A pallet holds about 40 cases of five-gallon jugs. — 400 gallons a month.
Customers use the oil in different ways as well. Several massage therapists use it as a base oil. Some people use it to make soap.
Expanding the line
The Smudes are looking into new ways to market the oil. They are working on a crouton product and infusing the oil with flavors such as garlic, basil and oregano.
They have done it in their own kitchen, but to market that type of product, they will need a license. And a certified kitchen.
For that, they want to build a plant in the city of Pierz in the future. And will need to hire more employees.
The export market is being explored — with company in Texas planning to send a semi-load to New Zealand.
The product may be local, but the market is much bigger.
Tom said he is fond of saying of his ideas, “It could be big.”
“People just laugh at me when I say that,” he said.
The Smudes didn’t know how “big” the sunflower oil idea could be.
“I just wanted to get a second job to get a new pickup. I always wanted a new pickup,” said Tom. “All this and I still don’t have new pickup.”
Tom said he and Jenni are proud of the fact that their two children, Katelyn, 10, and Mitchell, 6, are being raised in a farming atmosphere. Both came from a farming background, where their parents both farmed and worked off the farm.
“They (Katelyn and Mitchell) know where their food comes from,” said Tom. And the work it takes to get food to the table.
Tom said the family spends time together as they visit the different trade shows and farmers markets.
In fact, Katelyn told her parents she’d like to start selling vegetables at the farmers market, too. After all, mom has a garden.
Dad is working with her to produce a marketing plan to do just that. Katelyn has agreed that Mitchell can be recruited as her employee.
It could be big.
See more about Smude’s Natural Sunflower Oil online at: www.smudeoil.com