Niman Ranch founder challenges new owners BITTER FEELINGS OVER NIMAN RANCH / Special Report

Bill Niman and his wife, Nicolette, with their cows in Bolinas, Calif., on January 29, 2009. Bill Niman founded Niman Ranch meat company. Bill Niman and his wife, Nicolette, with their cows in Bolinas, Calif., on January 29, 2009. Bill Niman founded Niman Ranch meat company. Photo: Craig Lee, The Chronicle Photo: Craig Lee, The Chronicle Image 1 of / 4 Caption Close Niman Ranch founder challenges new owners 1 / 4 Back to Gallery

Bill Niman built a $65 million empire on a simple idea that revolutionized the food world - that meat could be more than just what's for dinner. It could be raised naturally, humanely and sustainably, better for people and the planet. Niman knew success would take time, but believed his methods would prove profitable.

But in nearly 30 years of existence, despite becoming the darling of high-end chefs and turning the brand into a household name, Niman Ranch never did turn a profit. In fact, it was broke. To save it from Bankruptcy Court, the East Bay company merged last month with its chief investor, Chicago's Natural Food Holdings LLC, and Niman was officially out.

The 64-year-old Bolinas man said he can live with losing the business he built from scratch. But he can't stand quietly by, he says, while the new owners fundamentally change the brand that influenced an entire food movement. He refuses to eat their products.

Officials from the company argue that the integrity of Niman Ranch's meat program has never been better.

"We believe that our protocols are stronger, the auditing of the protocols more rigorous, and the current business model is more financially viable," said Niman Ranch CEO Jeff Swain.

Still, it prompts the question: Can idealism ever pay?

Many say Niman is the epitome of an idealist, whose mission was to change the way people eat and encourage them to think ethically about their food.

"He showed you can raise farm animals with commercial success, without resorting to exceedingly cruel practices," said Wayne Pacelle, president and CEO of the Humane Society of the United States. "There are some people in the humane movement who don't think there is any such thing as happy meat. But in the larger vision, Bill Niman led the pathway."

Commercially, Niman's methods were unorthodox, the ideals of a hippie who had moved out West during the Vietnam War to avoid the draft by teaching school in the heart of farm country. Unlike mainstream producers, Niman forbid growth hormones, used antibiotics only when an animal became sick, and demanded that the livestock be raised on the open range and readied for slaughter in an uncrowded, Niman-owned feedlot.

Most commercial beef producers send weaned calves to a feedlot to grow and be finished on grain, but Niman's cattle grazed on grass - virtually unheard of in the 1970s. Although standard beef cattle are most often slaughtered between 12 and 14 months, Niman didn't slaughter them until 20 to 24 months, moving them at 14 months to his own feedlot where they were fattened on a vegetarian diet of grain for four or five more months.

"It's almost double the cost to do it the way we were doing it," said Niman, who believes his results - perfectly marbled beef - were unrivaled.

Ken Bentz, an Oregon cattleman who has been ranching since World War II and subscribes to the same natural methods, wonders if it wasn't a bit over the top.

"It was more extreme than what I would have done," he said. "He went far beyond what was expected because he was a fanatic for flavor. But it showed. He produced the best quality beef in the world."

Niman didn't grow up on a farm. Still, he knew a thing or two about food. His father owned a grocery store in Minneapolis. Niman spent his youth shopping with his dad at farmers' markets, and worked weekends stocking shelves and operating the cash register. By 21, he had earned a degree in anthropology and was enrolled in law school. But the Vietnam War was raging and Niman knew it was just a matter of time before he would be called up for duty. His college roommate had already been killed in the war he fiercely opposed.

He learned that he could get out of the draft if he volunteered to teach middle school as part of President Lyndon Johnson's 1965 program to wipe out poverty in the United States. By 1968, Niman was teaching science to students in a poor cotton-growing community of the San Joaquin Valley. Eventually, he went back to school to get his teaching credential and got a school job in West Marin. It was there that he met his first wife, Amy Gettinger, who would later die in a horse-riding accident.

Spread in Bolinas

The couple decided they'd like a few acres to raise a couple of goats, chickens, hogs and horses. So they bought 11 acres in Bolinas for $1,800. Financially it was a stretch for the two teachers, but they made up the difference by moonlighting at a local cafe.

A cattle ranching neighbor, who had spent generations perfecting his livestock's bloodlines, gave them six orphaned calves. Those became the foundation of the herd that would later become Niman Ranch.

Niman subsequently gave up teaching to work on his small farm, making his living by doing construction. He had also become politically involved in the small seaside town that was attracting intellectuals, writers, artists and others caught up in a burgeoning back-to-the-land food scene. He became friends with Orville Schell, a Bolinas activist and writer who would eventually become dean of UC Berkeley's Graduate School of Journalism. Schell temporarily moved into Niman's chicken coop, and the pair bought hogs to raise and sell to friends and neighbors. Word spread quickly of their delicious pork, raised on pasture land and fed a steady diet of Nancy's organic yogurt that was past its sell-by date and barley.

In 1977, Niman and Schell bought 200 acres on the Bolinas coastline and began running cattle. In the beginning they were focused on breeding, shipping off the weaned calves to other ranches to be readied for slaughter. But in the 1980s the price of beef bottomed out under a government program to reduce an oversupply of dairy products on the market, which included buying up milk cows for slaughter. So the two decided to mature their cattle on grass for the gourmet market.

At the time, they called it Niman-Schell Ranch. But by the mid-1990s they were squabbling. Niman said it was over distribution of work and money.

"The problem was that he had it and I didn't," Niman recalled, now chuckling.

Schell declined to comment.

In 1997 the two parted ways, and Niman took over the business. But even before they split, their all-natural meat was getting lots of buzz. Three of the Bay Area's top restaurateurs - Alice Waters of Chez Panisse in Berkeley, Judy Rodgers of Zuni Cafe in San Francisco and Margaret Fox of Cafe Beaujolais in Mendocino - began serving Niman meat. The women took Niman under their wing, coaching him on what chefs looked for in a truly good cut of beef.

"We were very interested in organic and sustainable products and were fascinated by what Bill was doing," said Fox, now culinary director of Harvest Market in Fort Bragg. "We could taste the difference in the meat. It was incredibly delicious."

Switching to Niman was risky. "It was significantly more expensive than the other meats we were buying," Fox said. But she took a chance. Then she did something rarely heard of back then: Fox put Niman Ranch's name next to the meat dishes on the menu. And diners were eating it up.

Soon, other restaurants were doing it - first with Niman Ranch, then with the names of farms that provided their produce. Despite the retail price for Niman Ranch products, sometimes twice that of supermarket meat, demand spread from top-drawer restaurants and specialty stores to national supermarkets and eventually even the fast-food chain Chipotle Mexican Grill.

Spent more than it made

Maybe it was too much too soon, because the company was spending more than it was taking in. Demand required that Niman form a network of likeminded ranchers and farmers, who raised their beef, pork and sheep naturally on pasture. He chose them based on their protocols, and spent much of his time visiting farms and ranches to ensure that everything was up to snuff.

But by 2006, when Chicago's Natural Food Holdings came in as chief investor, taking four of the seven seats on the board of directors, Niman Ranch was losing somewhere close to $3 million, said CEO Swain.

"I consciously deferred profitability to expand the brand," Niman said, adding that he was on a mission to change people's eating habits and the wider and faster he could spread his message the better. He also wanted to give young people, who were gung-ho about the sustainable food business, a place to grow with the company. But looking back on it, he said, it was a "strategic error to defer profitability for as long as we did."

Many thought it was Niman's beloved cattle business that was draining the company. The pork division was thriving.

"The beef industry is very tough," said Rob Hurlbut, Niman Ranch's former CEO, who left the company three years ago. "It operates on vast numbers of livestock and a low profit margin - only 1 percent to 2 percent. And that's for the factory meat industry. It's even more challenging for people like us who were doing it all."

Niman insisted that all the cattle come from either his herd or his 35-ranch network. Unlike their hogs, raised by Midwestern corn and soybean farmers until the day of slaughter, the cattle were taken from ranches around the Northwest to Niman's feedlot for finishing. The system was time consuming and costly.

But, according to Niman, he couldn't cut corners if he wanted to ensure that his beef was all natural.

Hurlbut locked horns with Niman, trying to convince him that streamlining the cattle operation in the same way they did the swine line would make the business profitable. But Niman wasn't budging.

"He suffered from classic founder syndrome," said Guy Muzio, an early investor, who wound up walking away after the merger with only 12 1/2 cents for every dollar he put into the company. "He was resistant to change."

For an old-timer like Bentz, who owns one of the cattle ranches that provided Niman Ranch with some of its beef, the error was in taking money from strangers. There were too many investors.

"I learned a long time ago that where the money comes from, so do the orders," he said.

Looking back on it now, Niman is circumspect. "I needed the money," he said. But that didn't keep him from fighting the board when they made changes with which he disagreed.

After Natural Food came on the scene, they sold the Niman Ranch feedlot and began finishing the cattle in commercial lots. Niman complained that there was no way to guarantee that Niman Ranch's cattle weren't eating the same food fed to other cattle, raised on a less stringent protocol.

"The company-owned feedlot was sold in 2008 because it was not financially viable," Swain wrote in an e-mail to The Chronicle. "The feedlots we work with today are required to follow the same high animal husbandry practices for our cattle as those followed in the previously company-owned feedlot."

Use of antimicrobials

Niman also battled with the new management over the use of antimicrobials, drugs that kill bacteria. While the substances are not classified by the USDA as an antibiotic, Niman says they work in the same way and are not natural. Under his leadership, they were never used.

"The bottom line on this point is that we once had the strictest feed standards in the industry as well as the highest humane animal treatment protocols," Niman angrily wrote the board in a 2007 memo. "Our standards were always based on several major concerns including: the health and well-being of the animal, human health and the environment."

But Swain disagrees. "It is our opinion and the opinion of leading experts, that it is better animal husbandry to use them (antimicrobials), than not to use them."

In another 2007 memo to Swain, Niman charged the company with treating the cattle inhumanely, including transporting them nearly 1,300 miles, forcing them to stand in cramped quarters for more than 24 hours, to the slaughterhouse. He said they had lost at least six cattle on those trips.

"The time an animal spends in transit is well under the guidelines adopted by USDA and our goal is to minimize shipping distances," Swain countered in an e-mail, adding that it would be rare that they would transport their animals 1,300 miles. But "cattle shipped over 500 miles are shipped a day earlier and upon arrival are put on feed and water for 24 hours to rehydrate and rest."

Swain said the six cattle that died were not Niman Ranch's, but those of ranchers asking to borrow space in their trucks.

Swain not only swears by the integrity of the program, but says that since Natural Food took over the company, it's making $7,000 a week, rather than losing $10,000. All it took was some streamlining. But at no time, he said, have they ever deviated from the company's original mission.

"I think idealism can pay," he said. "But it has to be couched with practicality."

Niman's faith in the company that will still bear his name is gone, but his faith in raising food sustainably, and for profit, has never been stronger. Besides raising grass-fed beef and goats, he and his wife, Nicolette, whom he married in 2003, think heritage turkeys just might be the ticket.

Last year they carted 225 poults (baby turkeys) in the back seat of their car from the Midwest to start their breeding flock. By Thanksgiving they'll be in business.

"Frankly, we think it might be the most profitable enterprise so far," Niman said. As for Niman Ranch: "I'm proud of it. It was a pioneer effort that changed the way people think about their food."