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The Economics of the Other Half with Jim and Mark Kleinschmit
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Regenerative agriculture isn’t just about how we raise animals. It’s about whether the entire system around them makes sense.
Smaller, regenerative producers with meat businesses, have traditionally lacked an economic outlet for hides and other byproducts. That missing piece can be the difference between a system that works for regenerative farmers and one that doesn’t.
Jim and Mark Kleinschmit are working to rebuild that piece. Through Other Half Processing, they’re creating new pathways for regenerative hides and reconnecting ranchers to a leather economy that reflects the full value of the animal.
In this episode, we dive into:
• Why whole-animal thinking is essential to regenerative systems
• How value from hides and byproducts has been pulled out of local economies
• What that means for the economics of regenerative ranching
• What it takes to rebuild regional leather and processing infrastructure
• The role of tanneries, brands, and partnerships in closing the loop
• Where they see real opportunity to make these systems work again
More about Other Half Processing:
Jim & Mark Kleinschmit. Brothers that grew up on a family farm in Northeast Nebraska. Raised by parents who were early adopters and champions for sustainable and regenerative agriculture.
OHP works directly with farmers/ranchers and small and medium sized meat processors to verify and buy traceable hides and other meat processing byproducts from regeneratively raised, organic, grassfed and other ethically raised animals. We aggregate and sell raw and finished products to apparel, food and pet sector companies.
Their business model is centered on providing shared economic returns to producer and other value chain partners, and fair pricing for customers and market partners.
Agrarian Futures is produced by Alexandre Miller, who also wrote our theme song. This episode was edited by Drew O’Doherty.
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Transcript
Identifying Problems and Opportunities
00:00:02
Speaker
What we did here is we saw both the problem and opportunity in this space. We've had to learn all the leather stuff from scratch. What are you good at? What are the things you care about and that you have you bring from a skill or background perspective? And then find that spot. There's a lot of those naughty problems out there, but if you can solve them, that's the opportunity for a business, for a new position, for a role.
Introduction to Agrarian Futures Season 2
00:00:30
Speaker
In season two of Agrarian Futures, we're starting with a simple question. How did we get here? Farms are disappearing. Land is getting harder to access. Rural economies are hollowing out.
00:00:42
Speaker
But there are people building better ways forward. Join us as we investigate what's broken in our food system and what it looks like to build something better.
00:00:56
Speaker
Jim and Mark, welcome to the Agrarian Futures podcast. I'm really excited to be talking to you guys today.
Meet Jim and Mark from Other Half Processing
00:01:02
Speaker
a few weeks ago, i had the privilege to talk to Kate from Range Revolution, who I'm sure you know, and that really opened my eyes up to this whole part of the supply chain, the tans, the hides, the bones, that the other half really that no one really thinks about and that even people in the regenerative agriculture space have probably never really looked into or thought about. So you guys are pioneer in that space. In 2017, you founded Other Half Processing.
Understanding 'The Other Half' of Animal Value
00:01:37
Speaker
So to get us started, could one of you basically just tell me what is the other half? Sure, sure, Emma. I'm happy to do that. Mark and I will go back and forth, obviously, on a lot of these questions. But the other half is really everything but the meat. And it's surprising to a lot of folks that it actually makes up a little more than half of the animal, all the things, especially if you get the bones out and everything. You're really talking almost 60% of a cow, for example, is what is considered byproduct to the meat. So guts, intestines, blood, hides, all the other stuff.
00:02:11
Speaker
That's what we're talking about.
Backgrounds and Opportunities in Regenerative Farming
00:02:12
Speaker
And could you tell us a little bit about how you came about to found the company and what were you seeing happening in the in the supply chain? Absolutely. Absolutely. You know, we we come from a background in regenerative farming and actually grass-fed beef sales ourselves. You know, we raised animals on our family farm in Nebraska and we went and got animals slaughtered and then basically went and took the meat and sold it out. And we realized from that experience... That other half, the stuff I just talked about, even though it goes to lots of good uses, right? To leather, to pet food, cosmetics, industrial kind of lubricants, all kinds of uses. We've always made value from these things. In today's world, we're not getting value. And that's especially true from the really medium and smaller size slaughter plants where they aren't collecting as
Economic Challenges in the Byproduct Industry
00:03:00
Speaker
much of it. And The industry that used to collect it, the rendering industry, the hide industries, has consolidated along with a lot of other agriculture. And that means that it becomes less economical for those companies to go farther distances to pick up stuff that has lower value.
00:03:16
Speaker
What used to be a ah really big part of the value of that animal, those parts used to pay for the processing of a cow traditionally. All of that just being sold paid for all the costs for processing. So you could get your meat back. Now that was turning into a cost for the slaughter plant, which then gets passed back to the producers to the point where our family, our own experience was that even though we were selling organic grass-fed beef at a value-added price, the total amount our family got back for that animal often was pretty similar to what we'd get if we'd taken it to one of the big packers where they were still getting a lot of that drop value. So we saw that was a problem, not just for us, but for anyone trying to slaughter and especially the small, medium sized meat companies, the regenerative and other meat companies out there that are taking these animals in and paying for these fees and not getting the value. back
00:04:07
Speaker
Just to chime in on the on the other half story, I think Jim had the original insight that as grass-fed beef, grass-fed milk became a thing, we didn't see grass-fed leather, for example. right So we're like that seems like a missed opportunity. And then as we dug into it, we determined we found out not only was it a missed opportunity, but it was a real problem.
00:04:29
Speaker
It wasn't even the conventional value anymore.
Business Opportunities in Regenerative Leather
00:04:31
Speaker
So then we're like, well, this is this is definitely something to focus on because this is an important piece for the regen story. And it's a great business model to jump in and and try and do some good.
00:04:42
Speaker
That's right. It wasn't for our family. It wasn't just at our scale. It was even to the larger scale meat companies that you see all already see in your co-ops or Whole Foods or others that they were having the same problems that we were having as individual producers. So yeah, it was both a problem, but a huge opportunity, we hoped.
00:04:59
Speaker
So it sounds like a ah kind of double-sided problem. on the On the one hand, you have all the large companies that source leather in the U.S. basically sourcing from international places, from Brazil, from from Argentina, back into the United States for their leather bags, all that kind of stuff. And on the other hand, you have all these like small and medium scale ranchers that are sending their animal to the slaughterhouse and basically having to pay for this other half, just basically having to get disposed.
00:05:31
Speaker
That's right. I mean, I will say the U.S. beef industry and hides are very high valued and they're considered know some of the best in the world. But those are coming from the the four packers, the large kind of feedlot beef that's being produced across in most of the country, right? So those were still getting sold.
00:05:45
Speaker
But what you're saying is still true. They were getting shipped somewhere. They're getting shipped somewhere else generally to be tanned or turned into products and then coming back. It's those small to medium-sized plants that local economies, local... If you want to take a cow in and get it processed for yourself, that's those plants all the way up to the medium-sized ones were the ones that were really being disadvantaged in this space where it really was hurting their profitability and they have to pass that back to producers. So it was a problem. But we saw the opportunity because we knew those animals were raised better.
Farm to Tannery: Ensuring Quality
00:06:16
Speaker
And if people wanted to buy the meat or milk from those animals, we'd hope they'd want to buy... They'd want to wear things made from those... from the skins of those animals in leather.
00:06:24
Speaker
So enter other half processing. Could you walk us through what the process is from the slaughterhouse all the way to the end consumer?
00:06:35
Speaker
Mark, why don't you go ahead? Yeah, sure. It starts with the the farmers and ranchers. We identify the farmers and ranchers that are doing the practices and getting regenerative results on their property.
00:06:47
Speaker
And they've got audits to prove it. So then we talk to them, we have relationships with them, we know when they're slaughtering, where they're slaughtering. And then we work out with that location, okay, how do we get those hides and those other byproducts? How do we keep them separate and then transport them to a tannery? in Or sometimes it's to a tannery in the U.S. before it it leaves the country. Sometimes in in Kate's example for Range Revolution, we just get the hides cured, preserved in salt, because that's the the typical way to do that.
00:07:17
Speaker
and then get them to the tannery of her choosing, where she can turn them into leather herself. And we've got all the paperwork to show that these are the hides that came from the right farms and ranches that are doing the regenerative practices.
00:07:29
Speaker
In another podcast that you guys did I heard you talk about like what goes into making a good hide. There's a process to that. Could you talk a little bit about that?
00:07:40
Speaker
Sure. What's interesting about regenerative animals is they have a life. They've really lived a good cow life. That leaves marks on the hide. And that's a little different than the big conventional where they they can spray the cows and stop all the bug bites. And they're more blemish-free because they're more protected.
00:07:58
Speaker
Our cows live a good life. And it shows. And typically, our customers are okay with that. But what we really need is the small slaughterhouses to take them off carefully, which was something new because if it's not worth anything, which it hasn't been, you're not good at taking it off in a quality way.
00:08:15
Speaker
So we come in and say, we're going to give you good money for these things, but we really need you to remove them carefully. Don't make any holes, don't cut them, and then preserve them. You need to get them chilled and into salt or some preservation technique very quickly because all the bacteria that were on the outside are now on the inside going to work, starting to to degrade
Adapting Production for Unique Hides
00:08:35
Speaker
the hide.
00:08:35
Speaker
So those are the two critical things that we work with, slaughterhouses, and we work with hide processors to stop the decay as fast as possible and then get them into tanning really as fast as possible too.
00:08:48
Speaker
And something I heard, I think it was you, Jim, say on another podcast somewhere, which I thought was very interesting, is that just like with local food, if you want to be really sourcing in an appropriate way from from kind of regenerative, place-based beef farmers – you kind of need to think about how to adjust your your process to kind of fit the type of hide that you're getting. Not every hide is going to be exactly the same. You can't necessarily just, you know, have your leather boot that's always done this way and then just plug and play hides from anywhere in the country.
00:09:26
Speaker
you need to kind of start with like in an ideal world, at least you would start with like the hide that you receive and then you would make it into what best fits its characteristics. Yeah. That's exactly right, Em. I mean, we we want you know that chef approach, right? we we We know with food, what changed things with local food was exactly what you said, right? it know It wasn't just taking an ingredient, saying, I'm going to make this thing no matter what, and then these ingredients are going into it.
00:09:50
Speaker
it was the reverse look at your ingredients what's seasonal what looks good what doesn't how do you adapt to that and exactly is what we're hoping here where we really want to be talking to designers and others as early in the process as much as the sourcing material and the sustainability people for this very reason because if they have an application they're hoping it to go into that that really requires blemish free you know pure leather look Our leather probably isn't the right application for that, but it's fantastic for
Collaborating with Timberland
00:10:20
Speaker
many other things. So our our hope is always that we have an integrated approach with any apparel or or you know accessory company where they're starting from looking at that and recognizing that those blemishes and character aspects of the hide can give can can give them something else. But they have to you know look at that before they decide what they're making to make it work.
00:10:41
Speaker
And so other half processing, you guys source from, well, you start with the farmer, you kind of provide this like guarantee of a certain regenerative practices. You get the hides from the slaughterhouse, you connect them with tanneries, and then you connect with some of the larger brands in this country. From my understanding, one of your first clients that really helped you get off the ground was Timberland.
00:11:04
Speaker
Could you tell us little bit what that process was like? Happy to. And I would just like kind of looking it up. And, you know, we founded the company in 2017. Really, by 2018, we had gotten connected through our friends at Pure Strategy, actually, Tim Greiner, with Zach Angelini, who was one of the lead people at Timberland focused on bringing regenerative in.
00:11:24
Speaker
And so we spent two years working with them. and we And we started here in Minnesota where I'm based because we were lucky to have pretty great resources here. We have one of the best meat processors in the country, Lawrence Meats here, that handles a lot of the regenerative cattle. We have Thousand Hills Cattle Company, one of the leading regenerative meat companies here.
00:11:44
Speaker
So we talked to Zach and the folks at Timberland about that and about what we could find as sourcing here. And we worked with Thousand Hills to make sure we could get their hides. We worked with Lawrence to do the segregation.
00:11:56
Speaker
And it was really this shared process at a very small level where we started with, you know literally hauling 40 hides from that plant in a yeah U-Haul trailer behind my pickup up to Milwaukee to get it going.
00:12:08
Speaker
mean, think about this for like a company like Timberland that that works at such a global scale. The fact they were willing to kind of start from that scale with us to start getting hides that were traceable, collected, and grass-fed. And regenerative into this space was kind of extraordinary.
00:12:23
Speaker
And they also helped us and in the other way was really we worked with them to figure out how we could get enough hides because 40 hides isn't going to make too many pairs of boots, right? So our goal was how to identify and verify regenerative. in a way that allowed a lot of diversity out there and matched what was happening with the meat companies, really credible certifications and verifications, but in a way that at the end allowed us to collect a lot more hides from around the country under savory EOV and American Grass-Fed and Audubon and other kinds of verification programs that allowed us to get to still a shared regenerative claim that Timberland can make around those boots, if that makes
Benefits and Challenges with Large Corporations
00:13:04
Speaker
sense.
00:13:04
Speaker
It was a couple of years of work with them and it was essential as well was their tannery ISA. Tantec really was willing to work with us to grow from 40 hides to where we actually got in 22 to 35,000 hides we collected around the country.
00:13:19
Speaker
So we went up pretty fast relatively, but a lot of it was based ah on Timberland and that first booth that came out in 2020. Just to chime in, when we first started working with Timberland, I was sure that this tannery was going to kill this little pain in the ass project. Because like Jim said, when when you're shipping you know millions of square feet, trying to get 40 hides through your system to... But Timberland was an important customer. So ISA...
00:13:43
Speaker
was was supportive. And then they flipped around. So they're such a proponent that they kept going with this and said, we need to make this available to other clients because this is such an important program, which, and it's always been our goal too. We want to support Timberland as much as we can, but it can't just be Timberland. You know, we want the whole industry to benefit from this kind of sourcing.
00:14:03
Speaker
And it sounds like you guys really had an amazing relationship with Timberland and they were incredibly helpful to get you going. How is it like working with some of these larger buyers in general, you know, the Ralph Lauren's and North Faces? Because, I mean, I can only imagine that it must be quite challenging having to plug into their large-scale supply chains.
00:14:27
Speaker
It is challenging, but it's been amazing. mean, this is really true. They've been amazing. Like all of them as far as how much they facilitate and recognize, you know, that we weren't at a scale like them. The the terms, they the payment terms and other things they worked out with us were really beneficial. You know a lot of people, what that you would expect with large companies, they they really were great.
00:14:48
Speaker
Like, frankly, and I think a lot of it's because we were bringing something to them that was new, that they were very interested in, that could meet a lot of their internal goals and they hope could meet external demand and marketing needs because they they saw the same.
Role of Tanneries in Local Supply Chains
00:15:01
Speaker
They got the regenerative kind of religion as well. A lot of the folks at each of those. And and so...
00:15:07
Speaker
So having champions at those brands, and I think we have champions at every single one, for sure, who have wanted to carry this forward, really is why it worked okay. Mark has more experience in big business than I did, but I think it would have been a lot harder for us to try to navigate on our own if it wasn't for the fact we had these champions within the companies who just helped kind of facilitate things and even help us avoid steps that I think would generally have been the case.
00:15:31
Speaker
We learned in the process, you know, our connections are with the sustainability folks at these at these brands. And of course they love Regen, but they don't get to make the purchasing decision by themselves. Going into it, we didn't realize the importance of having a partnership like we have with ISA, where they take care of all of the supply chain logistics. They do the pricing.
00:15:50
Speaker
They talk about what leather can they make, can they not? Because we don't we're not tanners. We need a tannery partner like ISA that can then communicate, do all the day-to-day work with the brands, the purchasing departments and all that. And we just focus on the sustainability folks to make sure that they're getting what they need because that's really the motivation. They're paying more for this leather than they have to if they've opted into regen.
00:16:10
Speaker
And so it's just important that everybody's aligned on the reasons that this organization's doing this. And it's been it's been a great partnership. Yeah, and it seems like the tanneries are a key part of your whole story. You guys are working with ah a few tanneries, from my understanding, in the Milwaukee area.
00:16:26
Speaker
You know, 50 years ago, there were a lot more tanneries than there are today. We've seen a so a secular decline in the number of tanneries as more and more has been offshored. Could you talk a little bit about the importance of tanneries and what that ecosystem looks like today?
00:16:41
Speaker
Yeah, and this is just what I've learned by getting to know these the people in the community. It's a very small community now in the U.S. And they all know each other. And tanning is an art as much as it is science.
00:16:55
Speaker
And so tanneries tended to focus on one thing. and really do that because just doing one thing right takes all your organization's time. The survivors in the U.S. tanning industry relied on the small surviving American manufacturers that just had those relationships and continued to support these tanners. When you get plugged into the network, they do help you saying, okay, if you need a liner, go talk to them. If you need lining leather, if you need footwear, these are the people to talk to.
00:17:22
Speaker
you know They know each other. They don't tend to step on each other's toes. They've been very supportive of this. And the current tariff situations have actually been a real positive for the American tanning industry, I think, because all of these international brands are now realizing, okay, we can't put all our eggs in a basket overseas because if something could happen. So they're benefiting from that as well. But they've they've been very supportive. They love to have us...
00:17:45
Speaker
you know, be part of their supply portfolio when a customer needs something like this or wants something like this. It's always been very supportive from the tanning community as well. And I think it's been really cool because like, obviously ISA is ah i mean, working with Timberland and other, you know, some of the larger, yeah the largest footwear companies, but we've also gotten connections from
Market Challenges and International Trade
00:18:04
Speaker
the very beginning. The very first tanner we met was Herman Oak down in St. Louis, a fifth generation veg tan place. That's really, if you're into Western and bridles and saddles, you know, Herman Oak, Horween in Chicago. I mean, we've been really lucky to make connections and a lot it's through Mark and his, you just going and seeing them too, but we've, you know, I think where we're at now is what Mark said, is that our goal is that we can bring Regen Leather through all these different specialty tanneries. And we definitely love working as much as we can with domestic tanneries and in Mexico too. Because i mean, I think the North American system needs to be strengthened. And so wherever possible, if someone's looking especially among the smaller makers and others, if they're looking for US made and tan leather, the nice thing is we now are able to do it even on small batches through relationships with these groups. So we didn't know how they would respond to us bringing this new kind of new supply space because there's not a lot of, there wasn't necessarily that much innovation happening in this area. And I feel like everyone has embraced it in a really cool way from the smallest tanneries to the biggest ones so far. So we've been pretty lucky about that.
00:19:07
Speaker
I think in ah in a similar way that for regen leather to work, you have to flip the process and say, we're starting from the material and then we're finding the product that suits this material. Tanners tended to keep all of their supply chain.
00:19:20
Speaker
That's their business. And their customer just gets leather and don't ask questions about that. So there was initially some concern, hesitancy, you know, wait a minute, you're talking to, if I'm a tannery, my supply guy is talking to my customer, you're going to screw me up on pricing or something. I don't like this. I like having control of everything in my supply chain.
00:19:41
Speaker
But then they saw that they didn't, they either couldn't or or didn't want to do all the legwork that Jim and I do, that OHP does to track down the supply, make sure all the paperwork's right. So now we're we're just a value-added supply partner for them.
00:19:54
Speaker
And where are you guys at today? You mentioned you you started, you know, grew from 40 hides to, i think you said 30,000 within a few years. Where are you guys at today?
00:20:04
Speaker
We're up around 45,000 a year and we're still growing. There's still a lot of hides. It's actually gotten so much worse. The hide market, the tariff situation, as I said, has been good for American tanners, but has absolutely cratered the the hide market because the overseas, the export market tanked and that just brought everything down with it since a lot of US hides were going overseas.
00:20:27
Speaker
So a lot of the hides are and worth negative value at small processors. Almost all. But the regen program makes that hide worth something again, worth the preservation, worth the truck to go pick it up and bring it to the tannery.
00:20:40
Speaker
So I think there are more hides that are more available now. more They're more interest potentially than there was before because there's there's that big of a swing. And hopefully more people are getting on the regen bad wagon. But then we get into the whole discussion of the current cattle market in the US. And that's ah that's ah another podcast.
00:20:56
Speaker
Yeah. so So tell me if I'm getting this correctly. Currently, like a lot of hides from American ranchers in general are being exported abroad.
00:21:07
Speaker
And the tariffs has kind of tanked that market. That's right. On the other hand, tanneries in the U.S. that were kind of in this decline as most hides were getting exported abroad and probably sent to tanneries and in in countries with a lot ah cheaper labor and environmental regulations and and and everything else, they're also getting hit by tariffs. So the U.S. tanneries are benefiting from that. So it's it's that kind of two-way thing happening at the same time. That's right. That's right. Of course, the problem is that, you know, that, that impact from the exports, I mean, one out of two U.S. beef hides used to go to China is what we've heard.
00:21:45
Speaker
And of course, with the tariffs, they don't, just like with everything else, they can choose where they buy some of their hides. So I think we, we think, I mean, it seems like some of that, the price has gone down partly because they've obviously chosen not to buy them or they're charging, you know they're, they're asking for the price to be reduced because of tariff impacts. And so that has impacted all hide prices regardless across the U.S., So while the tannery uptake is is good, and we definitely know when talking to the different U.S. tanneries that they are getting more business and they're getting busier, it isn't returning a higher price to producers still because they're still using that commodity
Storytelling and Value Proposition in Regenerative Products
00:22:20
Speaker
price. So our goal, like with all of regenerate, right, is to get out of that commodity space.
00:22:25
Speaker
you know, the whole point is here, we have a story, there's a differentiation with these hides. Therefore they shouldn't be treated as just, you know the lowest cost commodity. Cause that's, that's impossible at this point. Like Mark said, it costs more to have that hide be able to be turned into leather to reserve it in a way than it's worth to sell. so you know,
00:22:45
Speaker
economically, obviously, you're not going to do that. So you'll throw them away. So if we're not buying the hides that we get, they're being either transported at a loss or thrown away. Sometimes they are still going to tanneries, but the the processor is paying for them to be delivered there just to get them off out of their plant. So it's still a loss to them, you know but better than throwing them away, I guess.
00:23:05
Speaker
You guys obviously kind of pioneered this starting in 2017. i imagine that it's still today, obviously, a small piece of the overall leather market in the US. Like if I go to a Ralph Lauren and want to buy a bag, I'm guessing that all else equal, it probably is not coming from American produced leather.
00:23:26
Speaker
Where are we at with respect to kind of adoption at a national scale? It's very low, as you said. I mean, it's like, I mean, not to say, I mean, Ralph Lauren, maybe there is American leather. They do, you know, one would say that it's not American, but as far as regen, any verified regen leather out there, you're not going to find that easily in the market. It's a very small percentage. And of course,
00:23:47
Speaker
we feel there's been, I feel, back to the questions earlier, like there's lower enthusiasm right now, unfortunately, because of all of these forces. And some of that's because the apparel and footwear industry is so globalized and things move apart, not just to get tanned, but then they go somewhere else to be manufactured and somewhere else. And so the worries about where they may have extra costs there make them less willing to spend even a little bit more for regenerative.
00:24:16
Speaker
So we think there's been a dampening of enthusiasm there. And then overall, obviously, there's been a pushback. We've seen a lot of pushback on on valuing of regenerative and climate ah considerations in investors and SEC and so on. So we think there's an impact from the businesses see there. So they're not as enthusiastic.
00:24:35
Speaker
But that said, we've had buyers continue at least all the way through. And we're seeing them doing it more from ah meeting their own goals, They're still committed to regenerative. They support it. They support farmers and soil health and all of that, but they're not telling the story externally. So that's what we'd like to see more of is where we are seeing branded leather coming out because there is some of that leather in those some of those shoe companies and some of those shoes maybe, but they maybe aren't telling you even if they're telling their if they're telling it in their corporate reporting, if that makes sense.
Luxury Markets and Regenerative Storytelling
00:25:07
Speaker
Yeah. Right. And that's what's so exciting about like Range Revolution. Exactly. Exactly. Regen is Range's and Kate's identity, yeah know, and so she's never going to deviate from that.
00:25:18
Speaker
Ralph Lauren, Coach, Timberland, they're going to do what they can, but it's, they're just so big. It can't be their only thing. So we'd love to see more, more leather goods makers like Range come out where that's just kind of foundational.
00:25:32
Speaker
And not just regenerative on practice, right? Core to regenerative to us is that the producer gets a benefit out of this. Back to not commodities. And that's something Kate is very clear about and we're very clear about. We have to make changes to keep this stuff profitable, but we are insistent on that there's some premium that goes back to the owner of those animals for what they've done and for for sharing the information they share.
00:25:54
Speaker
I think there's been a a number of reports that have come out recently about how much less of each dollar produced beef ranchers are getting every year. so I mean, I think this is, you know, obviously a big part of the the story as well. As a big buyer, as a Ralph Lauren, as a North Face, as a Timberland, if you want to source hides from other half processing versus your normal kind of commodity supply chains, how much more expensive is it?
00:26:21
Speaker
I'm not sure exactly. Like I said, because the tannery really dictates the price, but I think it's in the neighborhood of like a dollar and a half of a square foot. So as a percentage, if you had to make a guess, and I'm sure it's contextual to some extent, but how much more than?
00:26:38
Speaker
I'm guessing like maybe 25, 30%. So that's not insignificant for obviously these these large brands. Right. Yep. Yep. There has to be a value proposition for that. Like yeah But it also lines up pretty well with what we see for regenerative meat and other kinds of premiums out there. So we feel like it's in that right space, but we want to give that full value, like like Kate's getting with the storytelling and and the impact.
00:27:03
Speaker
Yeah. And I mean, at least what one thing that's, I i think, promising for for leather is the fact that it is inherently a more luxury good that people are already willing to see as a kind of special purchase that that has purpose and is worth spending on, which is different than for maybe, you know, like beef the kind of more base product that you buy for your everyday consumption. So it feels like a good entry point for, you know, customers to kind of really value that extra regenerative claim and kind of identity
00:27:36
Speaker
Yeah, that's our hope too, exactly, that we feel like once you, like to have a, like like anything, to have a story behind it that you can tell that this, not just that you have a beautiful leather bag, but it's a leather bag that comes from US producers, ranchers who've done, who've raised animals in a better way and have helped, you know, all the stories that go with regenerative, right? We do think that's, that's worth ah a premium.
Utilizing All Animal Parts to Reduce Waste
00:27:59
Speaker
And our hope is that, you know if it's, if that story is told that most consumers would agree, especially when you're talking about these kinds of, legacy purchases too. Jim, where where did you get invited over to give a presentation to Italian luxury Chanel.
00:28:12
Speaker
Yeah, we talked with Chanel a little bit. We've talked with others about it. And that was kind of the idea was the question of what and what they wanted was the story to talk about. And I don't think our leather match basically, frankly, matches their products very well, because it's not even beef leather in the same way always. But it was interesting that they literally wanted to hear from us about this. So this this demand for this kind of storytelling and these impact reporting and the stuff we provide with our leather, because I think the storytelling about the producers, the the farmers and ranchers is one thing but I think where OHP has had success and why we're able to work with these larger companies well is because we do know how to talk carbon and standards and the kind of things that that the sustainability people need you know to to back up that story mean storytelling is data as well right and I think that's the key thing is we do have data collection with all of our
00:29:01
Speaker
all of our supply chain. And that's how you you make sure that story is real and why there's a value proposition there, you know, beyond marketing, but internally. And I think in the in the broader leather industry, leather use is going down generally. You know, automakers have opted out of seats for a lot of reasons, mostly cost, but that's just flooding the world with a bunch of synthetic plastic stuff that we we all know we need all the plastics we can get, right?
00:29:26
Speaker
But so if you've decided that leather is foundational to your brand and and your identity, this is the best leather story you can tell because these cows have done everyone a bunch of good while they've been around.
00:29:39
Speaker
And this is the best way to to honor them and pay respect for them and support more of these cows as environmental service providers. Absolutely. And we've been talking a lot about hides. Obviously, you guys are other half processing. So there's a lot of other byproducts as well. Could you touch a little bit on some of the other byproducts and where they're going?
00:29:58
Speaker
our goal has always been full valuation, utilization, respect for the animal, which means nothing ends up in a bucket in the back is the goal that gets you know thrown away. So we always joke that you don't want to necessarily look through our our camera pictures too, you know without warning, because you're going to see some things as we take go in the back of slaughter plants to see what what they have and don't have. But I think our biggest focus has been with you know helping with organs and other pieces that they haven't been able to sell. We work with a raw pet food company where we're getting them tripe and other stuff. We've been working to try to get bones into a bone broth, but we still run into challenges with some of these. And Mark can talk probably more about that.
00:30:40
Speaker
When we've been trying to get hides out of these plants or out of these slaughterhouses, it's always a different puzzle to solve, but it's a problem that they really want help with. So you tend to get a lot of alignment. When you're talking about the stomachs or the lungs that tend to not get collected, it's a harder sell to say, okay, you need to put in the extra effort now to grab that stuff, freeze it, have freezer space for it, store it until we can get it together, and then we'll pull it out of there.
00:31:04
Speaker
that has been a tougher lift just because they have to dedicate new resources. they have to hire basically for that job. And if it hasn't been your focus, it's really hard to keep that prioritized because, okay, we were doing great. We're collecting all the tripe.
00:31:18
Speaker
Oh, we didn't collect any tripe this week because something happened on the meat side of the business. And so that resource got pulled off and they're working on the front because that's, that's the most important. That has been a tougher thing to solve.
00:31:29
Speaker
But like Jim said, there's an even bigger value proposition potentially on this because of the better nutritional profile of regenerative beef and byproducts that would apply for people or pets.
00:31:41
Speaker
We just found that pets aren't as squeamish as people can be about some of these items. So that's kind of been a focus. Yeah, i mean, the organs, the heart of that, that's where a lot of the you know best nutrition is in the cow, right? Oh, hands down.
00:31:54
Speaker
Well, especially, and this is what talk about, like there's this focus on, you know, organs, on tallow, on all these things. And from our perspective, that that's a huge opportunity. But we have to be clear that these are things that, it will but liver, or stuff like that that, kidneys that filter.
00:32:13
Speaker
Our filters, body filters, and then you know fats are where stuff gets stored. So you really want that from healthy animals. You want it from regenerative animals. You want it from animals that have eaten the right things and eaten the things they're that they're supposed to eat And so for us, it's a huge opportunity in these spaces. And we're seeing you know increasing uptake of those of the offal, of the organs and stuff into the human side, which is fantastic. So that's exactly, that's why we're trying to push people.
00:32:41
Speaker
We're trying to push for these other proteins and other ingredients from these animals for pets, where it's not taking stuff out of the human food chain. Because I think, I know I saw a stat somewhere where our pets are in the top 10, US pets are the top 10 human grade meat eating countries in the world.
00:32:59
Speaker
it So it might it's pretty high up in the top 10. I don't think it's in the top five. i think it was like six or eight or something like that, but it was kind of crazy. Like just the human grade. That's not all the other stuff. Yeah, I saw a stat like that too, that pet food as a market is like top 10 food market in the world in terms of dollar value, which is insane.
00:33:21
Speaker
Right. I won't name name their names, but a friend of mine worked for a big food company. And she told me that they would compete with Purina.
00:33:32
Speaker
for a lot of beef items. There's definitely a crossover point where the pets or people are are both going after the same tier in that in the market for these proteins. And so we think there's a bunch of these proteins that are not competitive that we need to apply if we can just get the right collection system in place that keeps the cost at an appropriate level.
00:33:50
Speaker
And so just just so I'm clear, currently these medium-scale slaughterhouses are just kind of wasting, just like throwing out the bones, the the organs, all of that stuff.
Challenges in Local Food Systems and Slaughterhouses
00:34:01
Speaker
No, no. I mean, organs are almost, this is one thing, organs are almost always bought by somebody, right, Mark? Hearts and livers. let's We got to be really specific. Yeah, very specific. Those are of value. The other stuff usually still, it depends on how big you are and where you're located, you know? So if, you know, the other stuff will be collected by a rendering company, you know, who basically takes it and turns... it into pet food and other materials. Fats are very valuable right now, more because of the California renewable fuel standard than anything else.
00:34:32
Speaker
So animal fats are a high priority feedstock for that and get really good scoring. So the value of rendered fat from animals is very high. But the other stuff is not. But between them, if there's a company nearby that can pick it up and will pick it up, they'll still grab it.
00:34:51
Speaker
We've heard from the slaughter plants, it's kind of a black box. Sometimes they'll get paid. Sometimes they'll get a bill. They have no idea which will happen on a given moment because they don't control the pricing. But when you're talking about the smaller ones or really remote ones, yeah, any of that other stuff is either going, hopefully being composted, but often going to the landfill.
00:35:11
Speaker
Right. and And to help the the listeners kind of visualize it, a rendering is really taking a big bucket of guts and blood and all this stuff, put it in a big vessel, cook it, and out the other end comes ah fat, liquid fat and protein powder. Yeah.
00:35:28
Speaker
Separated, yeah, it separates. And they get paid, the slaughterhouse will probably get paid after they cover all the freight charges and everything, you know, dollars on the ton. You know, you get paid by the ton on what produced. Our goal is to say, if we can get you 50 cents a dollar a pound for keeping the tripe out for the feet for this, then that's a much better return and much better use than putting it through that big cooker where it's just this, the very definition of a commodity product. that actually cost a lot more than it did at the big at the big slaughterhouses. So again, you're you're on you're underwater before you even start.
00:36:00
Speaker
I mean, this is the example we started with is we want differentiated, right? Just like the leather. Because if you don't, I mean, what happens right now within renderings is one thing we knew that they're fat, right?
00:36:13
Speaker
And that thin plastic wrap, that you know cellophane wrap that's over meat and everything, they go liquid about the same temperature, apparently. And our understanding is that from you know grocery stores and stuff like that, they're not necessarily unwrapping the old meat when they're throwing it in the bucket.
00:36:32
Speaker
So there's just a tolerance in industrial tallow for a certain amount of plastic. That was the idea, not for food grade, of course, that's not that stuff, I'm certain, but the idea that that there was so little differentiation, they're they're taking the same stuff from the grocery stores and these and these slaughter plants and mixing it together more or less, at least in the market, if not in the cooking, that that's what you got no matter what. And we're like, God, there has to be companies that want clean, verifiable,
00:37:01
Speaker
you know, sourced tallow and other kind of fats rather than going through this undifferentiated cooker, like Mark's saying, where you're by definition going to have a lot of stuff in there that you maybe don't want always. But that's the stories we've heard, at least.
00:37:15
Speaker
Fascinating. Yeah, it's just such a commodity system. Everything. Right. And we know commodities are really efficient what they do, but they generate a ton of waste. And then they have all these knock on effects where local food systems just have a hard time surviving as as everything scales up, you know, in a small slaughterhouse cannot operate if someone doesn't come collect this stuff, you know, at a certain scale, because everything just gets too expensive or the environmental regulations. We talked to one small slaughterhouse in North Carolina, where their renderer said, we're not sorry, we're not picking up anymore.
00:37:46
Speaker
And luckily, he had political connections and called the Secretary of Ag and said, you know, by law, you can't stop. You can't shut me down. This was during COVID, I think, too. So he got going again. But they're they're all at risk on these on these external industries that they they really don't care about them because they're just ah they're just a pain now. they're They're a higher cost thing they have to they take care of or not. so But we all want these to we all want these local systems to survive and continue because it's it's good for all of us.
Supporting Regenerative Agriculture with Personal Skills
00:38:15
Speaker
And I guess maybe to finish this off, I'm surrounded and with ah you know a lot of people that currently stuck in in these types of corporate jobs and you know also thinking about how you know how they could, in some capacity, probably not as a farmer, but in some capacity, like support the regenerative agriculture space.
00:38:32
Speaker
What would be your guys' words of advice? That's tricky. Don't quit. First thing is to to support the people that are doing it. You know, where your food comes from really matters to your health and and voting with your dollars. So if you can find the regenerative producers and you always can. Anybody can Google it and find the the farm that's going to sell you the really good regenerative turkey, chicken, beef,
00:38:56
Speaker
there Especially in San Francisco, you've great options. But almost anywhere you can find that. Because people come to us and say, can we get some beef from your farm? Yeah, but that's eight hours away. why don't yeah Why don't we go an hour away? There's some great people right here in Wisconsin.
00:39:11
Speaker
I think that's the first thing is let's support the people that are doing that. It's rewarding. It's good for your health. it's just It works all the way around. it is It is more expensive by far. So get ready for that too. But once you make that connection, hopefully that'll be...
00:39:25
Speaker
Okay. Jim, you have any ideas for people to change careers? I guess find your niche, right? I mean, bring your skills to bear. I feel like there's so many, what we did here is we saw both the problem and opportunity in the space.
00:39:38
Speaker
We obviously had a background in farming, but that doesn't help a lot with leather. We've had to learn all the leather stuff from scratch. But Mark had brought, you know, supply chain management, ISO standards, you know, business, you know, administration and management stuff in. i bring you know I've had a lot of work on regenerative systems, practices, standards, all of that.
00:39:59
Speaker
It wasn't all regenerative originally, but the stuff we've learned have helped us be in this place after we identified this as as an issue that needs addressing and has real opportunity around it. and i think I think a lot of people have those skills in different ways. There's marketing skills, communication skills. There's you know finance. Finance is a huge thing in this space. I feel like there's a lot of ways that people could dig in. What are you good at? What are the things you care about and that you have you bring from a skill or background perspective? And then find that spot because this is a still growing space and there's a lot of those naughty problems out there. But they're also, if you can solve them, that's the opportunity for a business, for a new position, for a role. I mean, a lot of the people we work with come in with, you know, what can you bring to the table? What can we work with you on? How do you bring...
00:40:51
Speaker
your best self into this space because that's what we want. So I think it's really looking internally and externally. It's like, what what what do you have that you love to do? And then how where does that fit within the regenerative puzzle?
00:41:05
Speaker
Because the economy, the production system, all of it needs work. I love that. I love that the idea of the regenerative puzzle because farming, it really is an entire ecosystem and you need you knowt need the farming, but you you need the the financing, the marketing, the products, so many things. And so there's you know so many ways to to bring your skills in in the ecosystem that surrounds farming that can help farmers be
Future of Regenerative Leather and Audience Engagement
00:41:32
Speaker
better farmers. I love that framework.
00:41:34
Speaker
I think of when where we met ah at Marbleseed, the organic, that Moses meeting when it first started, i remember going into like the trade show area. And there was just yeah there were a few vendors. There weren't very many, but it was you know there were some.
00:41:48
Speaker
And now you go in there and it's full, right? There's all of this built in, whether it's fencing people or ag tech or you know smart kind of kind of you know nutrient kind of additives for grass-fed beef or whatever. just There's a whole industry that's blossomed around organic and local food that has filled in so many. mean, it's so much easier to think about going and setting up a regenerative farm right now because there's all these assets and technical resources and knowledge and a supply chain to meet it compared to 20, 30 years ago. So I would hope people could see that same kind of growth in the regenerative space.
00:42:25
Speaker
I'm going to double down on this idea of getting to know, like, if you can start with ah with a regenerative farmer, and actually get to know them if you can if they can find the time, develop the relationship, and that'll get you plugged into the community.
00:42:37
Speaker
And then as people get to know each other, they help you find a place where you can contribute. Somebody knows somebody, and then you need the community to help you figure out where you can add value, because you won't know out at the outset, because you don't know what that space looks like, and they won't know either until they get to know you. But eventually, somebody's going to know where you could really add some value, and and hopefully that would work out.
00:42:57
Speaker
And to my Bay Area out friends, it might not be technology. Yes, we'd agree with that.
00:43:11
Speaker
That's true. That's true. Jim and Mark, thank you so much for joining me today. I really enjoyed the conversation and learning about what you guys are doing at other half processing and excited to see the space continue to grow. And yeah, one day, hopefully all the leather that we buy in this country will be coming from regeneratively sourced hides grown on small scale ranches.
00:43:33
Speaker
Yeah, that would be great. Yeah. Thanks so much for having us on. Yeah. Really great conversation. Appreciate it. Thank you.
00:43:43
Speaker
Agrarian Futures is produced by Alexander Miller, who also wrote our theme song. If you enjoyed this episode, please like, subscribe, and leave us a comment on your podcast app of choice.
00:43:53
Speaker
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