Virus Crisis Check-In
Interview with Beecher’s founder Kurt Dammeier, April 2020
Kurt Dammeier, with his famous mac ‘n’ cheese
To hear an entrepreneur as successful as Kurt Dammeier speculate warily on his businesses’ chances of survival is a sobering reminder of the coronavirus crisis’ potential long-term impact on the world of fine cheese and dairy. The founder of Beecher’s Handmade Cheese, whose holding company Sugar Mountain operates eight heavily restaurant-oriented food businesses, harbors no illusions:
“At this point, I’m quite optimistic we’re going to survive,” he said. “But I can’t say it’s positive. We’re mostly above the scale line where retailers never really stopped buying our products. Mostly we make cheese that’s durable. The negative for us is we have all these food service operations, which are just black holes of cash.”
Overall, Dammeier has seen his bottom line cut in half. When the stay-at-home order was issued for New York City, he closed the Beecher’s cheesemaking facility in the Flatiron District while leaving his Seattle one open, cutting total production by about 60%. At his restaurants, he furloughed 350 of 425 workers.
How has the virus crisis impacted your bottom line?
Our business is roughly a third restaurant-retail, a third Wagyu beef wholesale and a third cheese and frozen entrees [macaroni and cheese, etc]. Restaurant-retail is practically zero across the board. We’ve got three businesses operating, two Pasta & Co shops and the Butcher’s Table restaurant doing takeout at a nickel on the dollar. That’s it. We closed the restaurants and retail, including the cheese shops in New York and Seattle. We also have two stores in airports; no one’s flying anywhere, so they’re closed.
When do you think you can reopen?
Our functional target date is June 1. We’ll look at the cheese shops and see if there’s any opportunity for shoppers. It’s hard to understand how the steakhouse comes back and when. We’ll respond to demand as it changes. Our beef business was 50% food service, which is virtually gone. We still have some export and processor sales, for example to make beef jerky. Retail sales have been way up one week and zero the next. It’s just a bucking bronco. Net-net, it’s off by 50%. Our cheese business had a big burst for the first few weeks. Now it’s back to normal, minus food service, so it’s down about 25%. So we’re kind of better off than most in our food service category but we’re still just devastated. It’s a cash flow question: Can you really afford to put money into cheese now you’re not going to sell for two years?
How about online mail-order sales?
Online is up a lot. Easter sales were up five- or six-fold over prior but it still only adds up to three good days at our Pike Place Market store. It’s a dollars for dimes kind of thing. Online is not the panacea. We appreciate that people are doing that. It’s not what’s going to save our cheesemakers, but it helps.
As Dr. Fauci says, the virus makes the timeline.
There is a whole school of thought that vaccines aren’t the only way of innovating ourselves out of this problem. This week we’re supposed to have a test for the antibodies ready to go. We don’t know negative things. We don’t know positive things.
I spoke with Mateo Kehler at Jasper Hill Farm who told me they’ve had to furlough their cows.
Drying up the cows—man, that’s a big deal. It’s one thing if you’re Mateo and you lend them out to somebody else. Jasper Hill has a lot of other business, with all the cheeses they’re ripening in their cellars. Their biggest seller is probably the Cabot Clothbound Cheddar. Then they’ve got their luxury soft cheeses like Harbison, which are icing on the cake. If you’re just a dairy farmer or a farmstead cheesemaker, drying up your cows is devastating. Drying up your cows, you’re basically talking about going to subsistence farming. Dairy cows can come back in a year, but making your payments during that time is the hard thing. Hopefully you can make your payments on the land.
There was already a crisis in dairy farming and the virus has made it worse.
It’s a real existential dilemma. People are going to eat at home; the problem is they’re eating very differently. I think they’re more likely to eat beef and dairy in restaurants than they are at home. Not necessarily as fluid milk but as dishes that are made with milk or dairy. People aren’t eating the same as they were. That is causing big shifts in the pricing of commodities like fluid milk. We still haven’t seen how that shakes out. In that initial panic bump, milk sales went way up, then they went down. The cheese business was up then back down. Now, it’s below where it was, off about 25%.
Slinging curds at Beecher’s, Seattle
There are so many ripple effects. When cheese sales go down, cheesemakers cut production and they’re forced to cut their milk orders from the farms.
Our farmers in both Seattle and New York were getting paid extra for making great milk for us. It was a good situation. Like any business in the world, we’re having to make choices. We turned off production in New York. The health consequences for our cheesemakers there could be pretty bad, having them go into work, having them travel back and forth. Our dairies there had a ready outlet for their milk; they belong to a coop. It’s been painful but not devastating. In Seattle, the outbreak was early and it seems to have calmed down. But the dairies don’t have an outlet for their milk. If we stopped buying from them we’d be giving them death sentences. Every business, every cheesemaker has to try to survive. We’re having to make these kinds of Sophie’s choices. To come out on the other end, that is certainly not assured for us and probably for most cheesemakers. Having to make decisions that might be morally devastating or really hamstring you long-term, this is what everyone’s having to do.
What permanent changes do you see in the business of fine cheese?
The reality for all of us is that it’s going to be dimes on dollars. I worry that the landscape of cheesemaking coming out of this is going to be so different and devastated. When I first opened Beecher’s 17 years ago, there were maybe 10 American cheeses west of the Mississippi. In the last 17 years that situation flipped so much; now you probably had 100. It’s hard to figure out what you’re not going to see. I’m fearful we’re going to lose that landscape of American cheeses of the soft-ripened, fresh character, which are sold entirely through food service and specialty cheese cases. In the virus crisis, specialty cheese sales, the more expensive cheeses, have gone up a little but not much. The big percentage increases are in commodity. Grocery stores just don’t have the ability right now to deal with that many particular fussy little cheeses. You can’t really fault them; they’ve got less people. Grocery store workers are practically like first responders right now. I can’t have anything but admiration for what the retailers are doing through this. The fact that some of them have to make some tough choices… it’s the same thing all of us are having to do.
How about your meat business?
Expensive steaks, which is what we sell, pretty much go only to high-end food service, top steakhouses, Thomas Keller-style places and Las Vegas. All that is absolutely gone. Consumers who are willing to buy a $100 steak at a steakhouse, they’re not going to buy it at a grocery store for $50. That piece of our business is broken for now. We’re having to sell off fully grown or almost fully grown Wagyu cattle into the commodity market. Sometime soon, you might see Wagyu being sold as premium beef at Costco. American Wagyu beef was really and truly one of the biggest categories in the sector. I don’t think that comes back to where it was till probably this time next year. It’s been growing at 35% a year. That growth probably doesn’t come back.