In the early 2000s actor Kevin Costner developed Tatanka, a tourist destination near Deadwood, South Dakota, that told the story of the bison in relation to the Plains Indians. 5 In 2004, when Costner and his local
investor group decided to bring in a Native American to run the operations, Laura got a call:
I was still teaching entrepreneurship at a university not far from Tatanka. I went down there and was really in- trigued. This was an interpretive center built around an authentic mid-1800s Native American camp. It was a living museum with everyone in period dress and in character—much like Plimoth Plantation in Massachu- setts. I decided to take the job, and set up a leave of absence from my teaching duties.
The gift shop, of course, sold bags of their fry bread mix, and the restaurant offered Lakota Hills luncheon tacos. 6 The spike in sales that summer caused some
grumblings from her two boys, who by their late teens had grown very tired of the kitchen production and packaging drill. Laura explained that on balance, her sons had a wondrous summer as one of the main attrac- tions at Tatanka:
Michael and Matt, who have been riding horses almost before they could walk, were our painted warriors on the hill: shirtless with buckskin pants, riding bareback and hol- lering war cries. By the end of that summer they were able to throw spears and shoot a bow and arrow while racing by the viewing area. They had quite a fun time with it.
In the summer of 2004 fry bread sales topped $58,000—a somewhat modest figure that Laura knew reflected their in-home manufacturing setup and their limited market reach. 7 In early 2005 Laura decided it
was time to move out of the kitchen:
We could see that the coming summer was going to be our best year yet for fry bread sales, and that was going to create a major disruption at home. I also wasn’t sure whether our credit line with a bank in Laramie would cover increases to our preseason production costs.
Laura turned to Mark Wills, the Tatanka investor who had recommended her for the job:
Mark had founded Greenhill, a small venture capital firm in Spearfish [South Dakota] that works with Native American entrepreneurs. They are willing to go out there on the edge to help businesses that might not usually attract venture capital.
5 Tatanka: Lakota for a bull bison.
6 The restaurant staff prepared a batch of measured dough balls. These
were fried on order in the same oil used to fry the onion rings and French fries. A tent card was displayed on every table describing the history of fry bread and the story of the Lakota Hills family business.
7 In 2005 the Lakota Hills mix was sold in eight tourist destination gift
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our poly bags was 500,000, and we also ordered printed shipping boxes to match that inventory at 6 units per box.
To introduce their product to major grocers, Laura par- ticipated in a very focused and intense trade show in Atlanta, Georgia:
I had found some info about a show called ECRM [Efficient Collaborative Retail Marketing]. They facili- tate sourcing reviews called Efficient Program Plan-
ning Sessions for retailers all over the country. 9 We
were in their specialty/Hispanic/ethnic food show in August.
It was very expensive—over $13,000 for the event. It starts with an evening reception where you mingle with the buyers. Over the next two days—from eight in the morning to six at night—you have 20-minute appointments with major supermarkets. It was very rigorous. They loved our packaging, our story, and our fry bread. It was very exciting to make so many great connections with so many significant buyers and brokers.
floor displays, sell sheets, and other marketing collateral. When that was ready to go, she was going to need to find a co-packer with the machinery and capacity to serve that channel.
Working with a local photographer, and using feed- back from friends and family, Laura spent the spring and summer designing a new look and feel for Lakota Hills. The retail unit weight was trimmed by a third to 16 ounces, and the package—now a full-color poly bag designed to work on a high-volume heat-crimp produc- tion line—featured recipe suggestions and a history les- son (see Exhibit 2 ). Sell sheets, a basic Web site, and other collateral were color and concept coordinated. Laura said they also found a co-packer with a willing- ness to invest:
John Gower has a pretty big kosher-certified dry mix operation in Laramie. He has lots of equipment like huge rotary mixers, augers, and bulk storage systems. He believed in our company and believed that we were going to have enough volume to justify his purchase of automatic bagging machinery that he tweaked into his
system. 8
We talked a lot about where we had to be with our pricing, and his delivered price was based on our ramp- ing up sales pretty quickly. The minimum order run for EXHIBIT 1
Excerpts from the Lakota Hills Executive Summary
The Opportunity
This business promises to be successful because of the in- creased demand for specialty food products, and the interest in Native American products in particular. Based on current market trends and statistical data, bread and dessert mixes have been on a steady growth curve since 2004. Lakota Hills has been selling its fry bread since 1993, and positive consumer, distributor, and food broker feedback demonstrates that it has a quality product in the marketplace.
Competitive Advantage
Our primary competitors are Wooden Knife Fry Bread Mix, Crow Fry Bread Mix, and the Oklahoma Fry Bread Company. Wooden Knife Fry Bread has been in operation for over 15 years, while the other two companies were started less than 2 years ago. None of the three companies have improved their packaging design or have been aggressive in their market- ing approach to meet the consumer’s needs. Wooden Knife Fry Bread is the only company selling their product outside of their local area. Since 2004, they have been aggressively marketing their product throughout the Midwest, and primarily in supermarkets and tourism-related outlets.
Lakota Hills has a competitive advantage in the taste of our product versus the taste and texture of our competitors. Wooden Knife Fry Bread Mix adds a traditional Native American root called “timsula” that is very bitter in taste. The other two com- petitors are both powdered milk and yeast recipes, which impart a different taste and a tougher texture to the product.
Pricing
Wooden Knife Fry Bread Mix sells their 1.5-pound box of fry bread mix on the retail shelf in the range of $3.50–$7.00. The Oklahoma Fry Bread is priced for an 8-ounce bag of fry bread mix for approximately $3.20 retail. A 1-pound bag of the Crow Fry Bread Mix is priced at $6.00–$7.50. The key to success for Lakota Hills is to keep our pricing consistent in the marketplace. Our 16-ounce retail package will have a suggested retail price of $3.69.
Wooden Knife Fry Bread Mix is our only competitor in food service. They have frozen fry bread patties: 25 per case. They also have a 5-pound bulk dry fry bread mix. Both products are priced at $1.90–$2.25 per pound. Lakota Hills offers a 25-pound bulk pack at $1.40 per pound.
8 The cost of the fill and heat-sealing additions to the plant equipment
was approximately $42,000.
9 In 2007 ECRM held more than 45 EPPS events. Planning sessions in-
cluded every major supermarket category: hair care; pharmacy; personal care; cosmetics, fragrance, and bath; cough and cold/ analgesics; private-label health and beauty care and food; general merchandise; sun care; grocery; snack, and beverage; cosmetics; vitamin, nutrition, and diet; school and office products; household products; health care; candy; photo; frozen foods; and international.
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78 Part I The Founder
In school, and in football, there was always a clear and concise learning environment. The professor or coach would lay out their expectations, and let you know what you can expect in return.
Working with buyers is a very different experience. They don’t call back, they aren’t there to take your call when they say they will be, samples get lost, samples get eaten. . . . After many calls to people who seem almost ready to buy, suddenly they’re not even sure if they can use the product.
I have an undergraduate business degree, and I’ve just enrolled in a one-year MBA program—and I can tell you, nowhere in all of that education is there anything about the food industry—and more importantly, the grocery industry. There is a lot of terminology you have to learn, and it takes experience to know how to work with buyers and brokers. For example, you don’t hear no very much in this business. Instead you get a lot of “I’ll get back to you” and “we’re getting close.” In some ways that’s harder to deal with than straight rejection because there is a lot of running around chasing leads that ultimately won’t pan out. You have to be very persistent.
Laura, who was still working leads as well, offered her assessment of the challenge:
At the food shows, you get a lot of interest when they try the product, and you collect tons of cards. They get home to their regular work where they are sampling dozens of products a week, and they push it off and push it off until they forget how good it was and what it tasted like.
Hearing how well the show had gone, Laura said their co-packer took it upon himself to see what the new equipment could do:
John’s a really nice guy, and I think he just wants to see our business make it. In late August he filled 300,000 bags, boxed them all up, palletized them, and then said, “I hope you can sell these” . . . Oh my gosh!
Knowing that they were not going to move close to 2,600 pallets of product in short order, they shipped the inventory to a dry storage warehouse in Chicago—a professional facility that was accustomed to working with large-scale overland transport. With their date stamp giving them just 18 months to clear out the inven- tory, the clock was ticking.