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Monroe, N.H., Farm Bet on Organic Eggs and Won Big

  • Rebecca Phelps, of Monroe, N.H., performs her perimeter check of the fencing and chickens for one of the two barns she oversees at Pete and Gerry's Organic Eggs in Monroe, N.H., on Thursday, Sept. 27, 2018. Around 80,000 free range chickens live on Pete and Gerry's Organic Eggs farm, but eggs from them only make up about two to three percent of the farm's production. (Valley News - August Frank) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

  • Chris Hood, of North Haverhill, N.H., carries several packages of eggs between conveyer belts in the processing room at Pete and Gerry's Organic Eggs in Monroe, N.H., on Thursday, Sept. 27, 2018. (Valley News - August Frank) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

  • George King, of South Ryegate, Vt., pulls a crate of eggs fresh from a farm inside the nest run cooler at Pete and Gerry's Organic Eggs in Monroe, N.H., on Thursday, Sept. 27, 2018. Approximately eight to 12 million eggs from family farms located anywhere from Missouri to Maine are contained inside the room. (Valley News - August Frank) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

  • Jennifer Bedell, of Monroe, N.H., places eggs in a stack in the processing room at Pete and Gerry's Organic Eggs in Monroe, N.H., on Thursday, Sept. 27, 2018. From the processing room eggs will be loaded into packaging. (Valley News - August Frank) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

  • Chickens feed inside one of Pete and Gerry's Organic Eggs onsite barns in Monroe, N.H., on Thursday, Sept. 27, 2018. (Valley News - August Frank) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.

  • Jesse Laflamme, president of Pete and Gerry's at his office in Lebanon, N.H., on Sept. 26, 2018. (Valley News - Jennifer Hauck) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.



Valley News Staff Writer
Saturday, September 29, 2018

Monroe, N.H. — Shortly after Jesse Laflamme moved his business’s corporate offices into the Dartmouth Regional Technology Center in Lebanon, the building held a mixer for its tenants. Those who work at the biomedical companies, high-tech startups and laboratories at DRTC in the wooded enclave of Centerra Resource Park in Lebanon were curious to know what business their new co-tenant was in.

“Eggs,” Laflamme said.

“No kidding! What kind of eggs are you cloning?” came the excited response.

“No,” Laflamme explained. “Just eggs.”

It may not be as trendy as a tech startup, but eggs have been golden for Laflamme.

Laflamme is the 40-year-old “chief executive farmer” behind Pete and Gerry’s Organic Eggs, the northern Grafton County egg distributor that is now the No. 1 organic egg brand in the country. The company, which was teetering on bankruptcy 18 years ago, today wholesales some 40 million eggs annually to supermarkets around the country and is breaking into overseas markets like China.

With net sales this year expected to reach $197 million, Pete and Gerry’s has become the single largest agriculture enterprise in New Hampshire and exceeds in size the state’s combined dairy, livestock, hay, vegetable, apple, maple syrup, honey and berry industries, according to state’s Department of Agriculture.

The foundation wasn’t always so promising.

“My parents discouraged me from going into this business because the prospects were so low,” Laflamme said about when he joined the family’s Monroe, N.H., egg business in 2000. “They knew they were in a downward spiral with the conventional egg business.”

Breakthrough

At the time the family farm had a mini flock of 20,000 hens and was being squeezed by factory-style farms with million-plus flocks that dominated the egg supply business. In a gambit to counter industry trends, the family decided to pivot and adopt the then-novel concept of producing organic eggs, catering to a niche of the market that wasn’t being served.

Enter Laflamme, 22 years old at the time, who, after briefly toying with the idea of working on Wall Street, came back to the farm the day after he graduated from Bates College in Maine with a political science degree.

Business had intrigued the St. Johnsbury Academy alumnus ever since he had enrolled between his junior and senior year at college in Dartmouth’s Tuck School of Business Bridge program, which introduces non-MBA students to an intense course in finance.

Laflamme said that the Tuck program provided the tools to apply professional management techniques to the struggling third-generation family farm. He spent the first couple of years working in production with the farm’s 40,000 hens and delivering eggs to markets in the Twin States. Shortly before Laflamme returned home, the company got a boost when Hannaford agreed to carry Pete and Gerry’s for its New England region.

Demand skyrocketed, so much so that the family farm in Northern Grafton County couldn’t supply enough eggs and had to turn elsewhere to fill in the gap.

Farming Out

In 2003, Pete and Gerry’s enlisted its first contract farm — in Pennsylvania — to supply eggs. Within three years, Laflamme realized the family’s 200-acre Monroe farm had no more room to grow — it had already reached more than a half-dozen structures and barns — and the company would need to significantly expand its network of contract farms to fill the orders in its distribution system.

The idea actually runs counter to what every business school student is taught: Consolidate and centralize operations to lower costs and increase efficiency. Industrial farming is built upon that principle.

But outsourcing production to a network of small family farms helped Pete and Gerry’s crack two yolks from one egg: It catered to those consumers who wanted to avoid industrial-scale farming eggs while also identifying the Pete and Gerry’s brand as a supporter of small farmers.

“Even though this would be a less efficient operation, it felt right with what our consumers wanted,” Laflamme said of the cooperative-like model he adopted for the company.

To be sure, sourcing egg production from organic and free-range hens is a higher-cost proposition and the retail prices reflect it: Pete and Gerry’s eggs — free range and organic — average $5 to $6 per dozen, and sister brand Nellie’s eggs — free range but not organic — average $4 to $5 per dozen.

“The dollar difference between the two brands is all related to the cost of organic feed,” said Paul Turbeville, the Tuck and West Point-educated vice president of marketing at Pete and Gerry’s.

By comparison, a dozen conventionally raised eggs at Walmart in West Lebanon last week ran $2.11.

Controversial Practices

Some in the sustainable farming community contend Pete and Gerry’s and other large-scale organic and free-range egg distributors, even though they meet government and trade association standards to carry the “organic” and “free range” labels, nonetheless share more with factory-style egg production than the public is generally aware. A barn containing tens of thousands of hens is still a sea of clucking chickens crammed together like a feather carpet. Moreover, organic and free-range hens are still “debeaked” to avoid damage to the flock from pecking, a practice that some animal welfare advocates decry as cruel.

Under the “Certified Humane” guidelines that Pete and Gerry’s subscribes to, hens are forbidden to be “debeaked,” although “beak trimming” is permitted. Pete and Gerry’s chicks are trimmed at the hatchery using the infrared technique: a chick’s beak is placed in a holder and an infrared beam is trained on the beak, which weakens the structure, causing it to deteriorate and fall off within a couple weeks. Although the procedure involves some discomfort for the chick, experts consider it a lot less cruel than the “hit blade” technique that had been the industry’s standard procedure.

Laflamme said the average family farm has 4 to 5 acres of fields and dirt for the hens to roam, although he said typically about 20 percent of a flock doesn’t leave the barn. At the company’s own farm in Monroe, the hens have 20 acres of fields to roam, but most tend to stay within a hundred yards or so of the barn.

One thing that has proved a source of frustration from Pete and Gerry’s, however, is that it has received a “3-egg” rating — for “very good” — on a scale of 1 to 5 from the Cornucopia Institute, a national food and farm policy watchdog group that promotes organic farming and other sustainable practices. The ratings is compiled from a score of 28 different farm practices, including space, flock size, lighting, manure handling and death loss rate.

Laflamme treads carefully when discussing the Cornucopia Institute rating and the company’s website addresses the issue at length. Pete and Gerry’s contends that when the initial rating was given in 2010, Cornucopia did so only after a brief visit to the farm’s offices in Monroe and didn’t visit any of the barns or pasture area. Moreover, Pete and Gerry’s said the organization didn’t inspect any farms in the company’s supply network, where it gets the vast majority of its eggs.

“It’s been very frustrating,” Laflamme said. “I don’t think it’s an accurate portrayal and is not really indicative of what our traditional family farms look like,” adding “we’re in dialogue with them.”

He said he hopes Pete and Gerry’s will receive a 4-egg grade when the next rankings are released.

Suppliers in Demand

A typical contract farm in Pete and Gerry’s network has about 18,000 hens compared with 250,000 to 500,000 hens on a conventional caged hen farm — some exceed 1 million.

Becoming a Pete and Gerry’s farmer is not dissimilar to becoming an operator of a franchise business: The business owner puts up the capital to build the infrastructure — barn and pen for chickens to roam — but gets the chicks and feed from Pete and Gerry’s.

Importantly, some of the farms are operated as supplementary income for the families, whose members rely upon other lines of work or jobs for their primary income.

Tom Giovagnoli, a retired as a diesel mechanic for the state of New Hampshire, bought a 200-acre woodlot in Boscawen, N.H., three years ago and took out a $680,000 loan to build a barn to house his flock of 20,000 hens. The hens are laying about 18,000 to 19,000 eggs daily — output rate declines as they age — and the operation is grossing $120,000 annually, he said.

The loan payment is $9,000 monthly, and Giovagnoli has additional expenses of electricity and taxes, but once the loan is paid off in five more years — “it’s aggressive,” he said — Giovagnoli expects to be earning a decent retirement income.

Nor does it require more than himself to operate.

“The barn is fully automated — lighting, feeding, watering,” he said. He works about four hours getting the eggs ready to be picked up by Pete and Gerry’s trucks, which arrive once a week.

“The only thing I regret is I didn’t have the opportunity to do this earlier when my kids were younger,” said Giavagnoli, who raised two sons as a single parent. “I would have been able to spend more time with my boys. But now it’s an excuse for them to come over.”

A Lot of Eggs

The growth in contract farming has led, a dozen years later, to Pete and Gerry’s becoming essentially a marketing and distribution brand and something of a factory-like processor itself of organic and free-range eggs. In fact, less than 3 percent of the eggs sold under the Pete and Gerry’s and sister brand Nellie’s are raised at the Monroe farm.

Today, Pete and Gerry’s enlists a network of 130 organic egg farmers and another 70 farms that raise organic-bred chicks across 10 states, mostly in the mid-Atlantic “egg belt” region, that account for a total flock 3.2 million free-range hens.

The eggs produced by the network of farms are trucked to one of two processing and distribution facilities in Monroe and Greencastle, Pa., where they are sorted, washed, dried and packaged for retail distribution. About 70 employees work at the Monroe farm and facility, which processes up to 1.5 million eggs daily, and 150 employees work at the Greencastle processing facility, which processes between 2 million and 2.5 million eggs daily. The facility was acquired in 2014 from organic salad packager Fresh Express.

Signaling just how far Pete and Gerry’s has come from its roots in Monroe, the executive and marketing offices are now located in the Dartmouth Regional Technology Center, where a team of 11 employees, some at stand-up desks, work in front of double flat-screen computers all day poring over sales analytic data, bar charts and email communications with retail outlets.

The company’s Pete and Gerry’s brand eggs are available in 53 percent of the country’s 40,000 supermarkets, including the chains Albertson’s, Safeway, BJ’s Wholesale, Walmart and Whole Foods, according to company data. The Nellie’s brand eggs are available in 33 percent of stores.

“The goal is we’d like to be a $500 million company in five years,” Laflamme said.

John Lippman can be reached at jlippman@vnews.com.