They’ve Got the Beef

Cutting Edge

“My motive for starting the company was to have a different place to work from the environment I came out of,” recalls Bob Hageman (Mike’s father) about his 1979 decision to cofound J&B Group. That environment was John Morrell & Company in Sioux Falls, South Dakota, where he’d worked for 17 years. His last job at Morrell was as the sales manager covering the northwest metro area.

One of his customers on that route was Joe Dehmer, who owned a butcher shop in downtown St. Michael (it’s still in operation). Hageman, who’d become fed up with what he perceived as the transformation of Morrell from an employee-friendly company to one more fixated on the bottom line, proposed joining forces with Dehmer to start a meat distribution business.

“My partner and I started out with a sophisticated business plan for J&B—it took about a quart of brandy to work it out,” Hageman jokes. Hageman raised $15,000 with a second mortgage on his house that he and Dehmer cosigned and got hold of a secondhand delivery truck. All that in place, J&B opened for business, selling and delivering meat products (using freezer space in Dehmer’s butcher shop for storage) throughout the northwestern suburbs of Minneapolis.

At the time, the meatpacking industry was undergoing major changes. Instead of shipping directly to customers, packers were beginning to distribute via big warehousing companies. Warehousing offered many advantages to retailers, such as reducing the size of inventories at individual stores and consequently reducing their losses from spoilage or changes in consumer demand. But big warehouses naturally like to work with big orders, leading them to focus their business on the most popular products. That left a niche for distributors that offered smaller shipments of more specialized products. It was a niche that J&B began to fill well enough that it could afford to build a modest 3,000-square-foot cold-storage space adjacent to the butcher shop in 1981, a facility J&B still uses.

During the ’80s, the company grew rapidly, adding revenue, facilities, and employees along the way. In 1985, J&B began construction on the first phase of its current headquarters on the western edge of St. Michael; the following year, it added a cow-boning operation to the production line. (Mike Hageman was added to the roster of employees that year, too. His first job was cleaning restrooms, part of his father’s plan to make sure he learned the company from the bottom up. After stints in sales, production, and operations, he was promoted to president in 1998.)

By 1989, J&B had reached nearly $55 million in sales, more than 50 employees, and a major fork in the road. Bob Hageman wanted the company to keep growing and become a major player in the Upper Midwest food industry. Dehmer had a different vision, so Hageman purchased Dehmer’s share of the business. The next year, J&B’s sales were just shy of $80 million, and the company opened the first in a network of regional facilities with a sales office in Fargo.