University of Wisconsin Center for Wisconsin
Rural Cooperatives, September/October 1999, p. 8-12.
Published by the Rural Business and Cooperative Development Service
Taking Flight: Sioux Honey cooperative finds sweet success in new products
By Pamela J. Karg
Honey mustard dripping from honey-grazed pretzels with a tall, cold glass of honey beer. Honey-nut cereals. Honey-glazed chicken. Honey barbecue sauce and meat marinades. Tea, cough drops and power drinks with honey. There's raw honey and spun honey. And then there's all those flavored honeys— such as clover, cranberry, orange peel and apple blossom—produced from bees pollinating specific types of blossoms or by adding a second product.
Take a look at the latest product introductions at the supermarket or in the food service industry, and honey is all the buzz. It's no accident that this food, cherished since ancient times, is finding new ways into today's consumer marketplace.
"Honey is a unique item to sell," admits Jim Powell, vice president of sales and marketing at Sioux Honey Association, Sioux City, Iowa. "Honey is a mainstream product, but it's not used in every meal, and it's certainly not used the same way it was just a generation or two ago. People today don't know exactly what to use honey in, and we know they're not using it in cooking and baking like they used to."
So the Association—with its familiar Sue Bee Honey brand name—is in a continual quest to find new ways to get consumers worldwide to increase honey consumption. The co-op's marketing and research teams are busy as the bees their members keep producing new products, building a quality reputation and finding new efficiencies.
Beekeepers meet needs with co-op
With $200 and 3,000 pounds of honey, five beekeepers located near Sioux City formed a marketing cooperative in 1921, and named it after the city it was founded in. The cooperative was designed to help members market their honey at greater profit by providing service and equipment, processing/packing facilities and complete marketing and sales operations.
In the early days, honey was marketed under the Sioux Bee label, but was changed in 1964 to Sue Bee in order to facilitate the correct pronunciation. Over time, other lines of honey were added and now include Clover Maid, Aunt Sue and Natural Pure North American brands.
Previously, honey was delivered to one of seven packing facilities located in Sioux City, Anaheim, Calif.; Waycross, Gal; Temple, Texas; Umatilla, Fla.; Lima, Ohio; and Wendell, Idaho. As transportation improved, honey-producing areas moved westward and the association streamlined operations. Today, only the Sioux City, Waycross and Anaheim plants serve the cooperative.
With a 17-percent share of the U.S. honey market, Sioux Honey is the largest honey marketer in the world. There's only one company—in Germany—that comes close to capturing as much market share as does the cooperative.
Currently, there are some 340 members, most of whom live in the western two-thirds of the United States, with others in Florida and Georgia. The membership is organized into 13 districts, with a director representing each of these member areas.
"We had up to 1,200 members in the 1970s," explains Mark Mammen,
vice president for member relations. "But apiaries have grown, consolidated and modernized like the rest of most agricultural businesses. Our membership numbers are down, but the amount of product marketed grows."
A changing membership
A majority of the operations were originally small. Today, the cooperative's board puts a priority on accepting commercial members who market at least 40,000 pounds of honey annually. In fact, 45 percent of the membership markets less than 40,000 pounds of honey annually. They account for only 5 percent of the association's annual crop. The bulk of the membership— about 43 percent—markets between 40,000 and 250,000 pounds annually. They account for 45 percent of sales. The top 12 percent of members, 41 farmers who market over 250,000 pounds annually, account for 50 percent of the crop sold through the Sioux Honey Association.
Dale Bauer, a Sioux Honey member since the mid-1970s, is a commercial operator near Fertile, Minn. In 1951, then 16-year-old Bauer needed a job and went to work for a local beekeeper. After a few years of military service, the Nebraska native and his wife, Lois, moved to her neck of the woods in northwestern Minnesota. Beekeeping seemed as good a job as any other did, and the couple went at it with enthusiasm.
"From 1957 to 1974, we were private. We weren't members of the cooperative because we were buying an operation and trying to pay it off," Bauer explains, almost apologetically. "We needed every dollar we could get, and the marketing fee you had to pay as a co-op member cut into that money. I'm not so sure it was the best way to go, but you gotta do what you gotta do at the time."
Bauer has served on the Sioux Honey board for 21 years, the past eight as vice chairman. He's also currently a member of the National Honey Board.
The Bauers, their son and their daughters' families are involved in the operation. Every last drop of the golden nectar is marketed through the cooperative. They are paid year-round, though honey production is a seasonal operation.
"Many people think beekeeping is a hobby. I can tell you it's not. It's been my life's work," Bauer explains.
While the family home and honey extraction and spinning operations are located on a seven-acre parcel, the Bauers' 8,000 hives are spread across the countryside, where the bees feed on alfalfa, sweet clover and sunflowers. Every two weeks or so, the Bauer crew makes the rounds of hives placed at least two miles apart. They check the wooden structures, the bees and the honey. Bees, like people, are vulnerable to diseases and parasites, sometimes at epidemic proportions. Bauer says it takes a trained apiarist eye to catch and address problems early and avert disaster.
The farmers who own all the fields where the bees do their work are paid in honey at the end of the year. Since honey is a natural product, the type of flowers from which bees gather nectar, the geographical region and the weather influence its flavor. The presence of hives in any given area is a win-win situation for both Bauer and other farmers.
"A lot of people don't realize there's a greatest demand for commercial beekeepers than ever before," Bauer says. "Without pollination offered by commercial beekeepers and the millions of hives they haul to places like California, you wouldn't have almonds, melons or cucumbers [among dozens of other crops]. There aren't the big, natural hives I remember seeing in the woods as a kid. So now agriculture has to depend on commercial beekeepers to pollinate so many crops."
The National Honey Board estimates that there are 211,600 beekeepers in the United States who tend some three million honey-producing colonies. The average worker bee makes only one-twelfth of a teaspoon in its lifetime. Bees visit 50 to 100 flowers during one collection trip, tapping two million flowers to produce one pound of honey. U.S. per capita consumption of honey is just over one pound.
A worker bee's entire existence revolves around pleasing a queen bee, which lives about 50 times longer than a worker bee. Therefore, beekeepers and the industry invest a lot of time and effort into queen bee production.
To produce queen bees, beekeepers take a worker bee egg and graft it into a cell cup. The hive is queenless and the worker bees pay special attention to the egg in the cell cup, feeding it royal jelly to help it grow big and strong. It's the queen bee, the only sexually developed bee in the hive, that lays all the eggs to re-populate the colony.
Some keepers select their queens based on hygienic qualities or bees that don't make much propalis, the substance bees use to seal the cracks of their hive. The Bauers select their bees for production and gentleness.
The bees and hives are at peak production rates right around the last week of June in northern Minnesota. From then until the first frosts, the Bauer family is busy. The sealed honeycombs are collected and the wax is cut. In a centrifuge, the comb is spun to separate the wax from the honey. A second centrifuge spins the product again, removing more of the wax. There's one pound of wax for every 100 pounds of honey. The wax is sold for further processing into candles or floor wax and cosmetics.
The Bauers and other cooperative members are responsible for supplying the association with honey extracted from the honeycomb. This liquid product is most often shipped to processing plants in 55-gallon drums, which contain approximately 650 pounds of honey. Collectively, the membership produces about 40 million pounds of honey annually but markets as much as 60 million pounds around the world, Powell says. The difference is made up through non-member honey purchased by the cooperative to meet customers' needs.
At the Bauers' operation, the honey is loaded onto 50,000-pound tankers and shipped to the Sioux City plant. Two to three tankers leave the family operation every week.
After unloading at the plant, the honey is melted for easier handling. From a large inventory, Sioux Honey follows sophisticated blending techniques to assure consistent flavor and appearance. In the processing facility, there are flash heating and cooling units, filter presses and pumps that deliver the finished product to the packaging line. These packaging lines include bottle cleaning, filling, capping, front and back labeling and group packaging. All finished goods are delivered to storage areas by a system of conveyors. The completely automated, high-speed packaging lines produce up to 8,000 cases of finished product in eight hours.
Still, the cooperative is constantly upgrading automated production equipment and maintaining stringent sanitary conditions, Powell explains. Vast warehouses with computer-controlled inventory facilitate quick-filling and shipment of orders for all products packaged by Sioux Honey. Warehouses are strategically located, which guarantees easy delivery to customers anywhere in the U.S. and throughout the world, he says.
Research and development
Besides its familiar brand name, Sioux Honey has several claims to technological fame: exclusively designed equipment and top-notch laboratory facilities. The cooperative's spun honey spread mixing tanks and seed grinders were developed by the co-op's research staff and are found nowhere else.
Yet it's the product quality that is the foundation of the cooperative's success, and the success of its members.
"Color, flavor and moisture are the qualities we constantly need to monitor," Powell says. "We also need to look at contamination by antibiotics or even pesticide residues picked up in fields by the bees."
Samples of honey coming into any of the three plants is tested and graded for clarity, type, flavor, moisture and color. The most advanced methods and the most exacting standards are used to assure that every grade of honey packaged under the Sue Bee label is the finest available anywhere, he says. Members are paid color and moisture bonuses.
"Quality is the utmost concern because we have such a natural product to begin with," adds Bauer.
On a random lot basis, the cooperative will test a member's honey for sugar syrup adulteration, miticide residues or any other adulterant that may cause financial damage, explains Mammen. If something is found, the member is notified and the quality control department of the cooperative must give approval before any payments are issued for a member's honey production. Any member whose honey causes further contamination is responsible for reimbursing the Association for all damages resulting from the contamination, or the person loses his or her membership, he adds.
Finding new industrial markets
Once the Canadian cold fronts slide south and the fall season ends, the Bauers pack up their bees and move south. Their son, Daniel, daughter Tammy and son-in-law Brad Campbell manage the hives that are placed in Texas for the winter. Daughter Jodi and son-in-law Darren Straus manage the hives the Bauers place in Mississippi. The Bauers make their winter home in Texas and keep track of both operations.
"When our children were young, they'd spend the first semester at school in Minnesota and the second semester at school in Texas. When they got to be seniors, though, we let them make a choice. All three graduated in Minnesota," Bauer explains.
In fact, the greatest amount of honey that's marketed through the cooperative comes from Minnesota and North Dakota. Other top-producing states include California, Montana, South Dakota, Texas, Idaho and Nebraska. So the Bauers and many of their fellow beekeepers in Minnesota and North Dakota could see each other for most of the year—north or south.
The Bauers count themselves lucky. Not only do they escape the blizzards, sub-zero temperatures and frozen engine blocks of the Minnesota winter, but they also have children who are interested in beekeeping. That's not necessarily the case across the industry.
"There aren't a lot of young people going into beekeeping right now," Bauer says. "I don't think too many can see the nature of it and how it can be a full-time career."
Just like their shifting members, Sioux Honey is also eyeing places it can move its products. Its global presence extends to the Middle East, Far East, Europe, South America and Central America. But new product development occurring in the United States through retail and industrial sales show promise.
The cooperative's advanced processing technology allows it to produce honey by the bucket, by the barrel or by the tanker truck for industrial use. Its transportation network ensures prompt delivery of honey, which is used in a variety of products—from cereals and baked items to brewery and meat products.
Honey usage in manufactured food and beverages is at an all-time high. Consumers associate honey with naturally good quality, boosting the image of products containing it.
A sampling of companies that have recently introduced new honey-flavored products to capture the imagination of health-focused consumers include: Celestial Seasons of Boulder, Colo., which has an herbal tea sampler that features Honey Lemon Ginseng; Caffe D'Amore of Pasadena, Calif., which has eight new teas that blend together black tea, honey, creamers and spices; and Oregon Chai of Portland, Ore., which has introduced Oregon Chai Charger, a caffeinated tea featuring honey, to an existing line of organic chat, which is a type of tea. The Sue Bee logo also appears on some Arizona brand beverages.
Strong sales, weak prices
The cooperative's ability to create demand for honey is essential because it's been a tough market in recent years for beekeepers such as Bauer. According to Powell, the honey industry experienced major changes in the past three years. Most of those changes center on price and production—basic supply and demand economics.
"Three years ago, there was an undersupply of honey throughout the world and, because of that, it forced prices up," Powell explains. Prices are now only about half that amount.
Those drastic price fluctuations are not taken lying down, however. The co-op is responding by concentrating on industrial and food service markets, both here and abroad, to fuel demand and maintain stable prices to members.
Bulk sales of honey have increased and Sioux Honey Chief Executive Officer Gary Evans says the association intends to continue the pursuit of sales in this area because of the potential for greater growth.
"Areas of manufactured food and food service open opportunities for honey markets that, heretofore, we have not fully exploited," he says.
"The cooperative is the way to go," Bauer adds. "Consumption may not being going up as much as we'd like to see it go, but working together through the cooperative to expand markets is a good way for a bunch of people to kind of control their destiny."
As he sits on the board, Bauer watches directors and staff who try to get the best money for the farmer's product. He witnesses the pooling of resources from individual farms and the job the cooperative's employees do, day in and day out, to sell members' honey.
"This cooperative's strengths are its honesty, integrity and impeccable reputation for quality," Bauer adds. "It's given me peace of mind since I started to market through the cooperative rather than worrying about doing it on my own. Now I can concentrate on the bees and knowing my cooperative is doing an excellent job in marketing."