Worms Deep in the Heart of Texas

Worms Deep in the Heart of Texas

“It’s really kind of comical how we got into business,” Mertz said. “For years I designed commercial buildings, supermarkets in particular, around the country. I got tired of traveling and decided to stay home. We decided we would like to grow commercial organic produce and began studying the soil.” One valuable source of information Mertz recommends is the monthly publication Acres USA.

“We’re all learning. “I’ve been in this industry for several years. Do I have all the answers? Ain’t no way! We started the rabbits years ago as an FFA project with our son and we’ve basically gone from there.”

Mertz reveals genuine transparency by his candor and shows a generous spirit in his willingness to share financial aspects of his business in great detail. “The first thing people want to know about is finances. We can talk about how to do this all day long, but if you don’t make any money, what the heck are we doing it for? It’s a great hobby, but we really need more than a hobby.”

Mertz revealed a detailed log of his sales and expenses for nine months of the 2003 calendar year—a Profit and Loss statement from January 1^st to October 3^rd.

Perhaps the most striking thing about this so-called “worm farmer” is that he really is not in business to sell earthworms. “We’ve only sold $5,340 of earthworms for 2003. This has been the worst year for earthworm sales we’ve ever had. But even last year, when we sold $14,000 of earthworms, we didn’t have any competition. Competition is rising. When we first started, we might have had the only ad for earthworms in Texas Gardener magazine. Now, in the spring, you might find seven ads in the same magazine. Organic Gardening magazine is the same situation. We could probably sell a lot more earthworms if we wanted to advertise a lot more. One worm farm in Georgia probably spends about $1,500 a month in advertising. But you’d better believe they’re making a lot more than that in sales if they’re willing to spend that much in advertising. The worms are [merely] one of the ways for us to get there.”

Mertz reported that his sales of worm castings for the first 9 months of 2003 have amounted to $23,471, which is 5.5% of his overall sales. However Rabbit Hill adds anywhere from 15-20% earthworm castings to its complete line of Soil Products, and sales of its complete line of soil products in the first three quarters of 2003 totaled $142,310, an amount representing 39.3% of its total sales volume. “We concentrate on quality and production, not volume,” Mertz emphasized. Judging by the figures Mertz presented, Rabbit Hill Farms finds its greatest volume of sales in the soil products (i.e., soil blends) category, while sales of earthworms and earthworm castings represent a smaller fraction of overall sales.

To make many of his products, Mertz spent $62,294.53 in compost and other soil products ingredients. To produce the earthworm castings he sells, Mertz spent $10,387.40, an amount that was more than doubled in castings sales. Another significant portion of Mertz’s castings were added to his other soil products.

Rabbit Hill Worm Farm found nearly 16% of its sales in private labeling for Redenta’s Garden, a chain of retail garden centers in Texas. Three of these stores rank within the top five in sales volume in Mertz’s Top Ten list of Texas stores, averaging about $20,000 in product sales for each of the three stores.

Rabbit Hill’s total sales for the first nine months of 2003 amount to $361.886.46. Total Cost Of Goods Sold was $179,601.30, an amount that is 49.6% of total gross sales. After $84,917.58 in expenses were deducted (23.5%), Mertz was left with $97,367.58 in net profit, 26.9% of total sales.

“We don’t do newspaper advertising and we don’t do radio advertising,” Mertz reports. “We’ve got Howard Garrett, the Doctor of Dirt. A one-minute commercial on his radio program is $430. I’m at the point where I’m turning down new customers. Why do I want to give Howard Garrett $430 of my net profit? Ain’t gonna happen! I don’t have to do it. But you’ve got to take all of those things into consideration. What you do want to do, if you can, is become a guest on a radio talk show. We also publish in little regional magazines. None of this ever hurts. We do a lot of vermicomposting and soil lectures. Earlier this week I spent time with some Dallas area garden club officers. We had 82 ladies there and we had the wildest time you’ve ever seen. And we always donate products.”

“We don’t have our own website, but we have it reserved,” Mertz admits. “Other people mention us on their websites. The Arlington Organic Garden Club www.aogc.org uses our products in their raffles and our potting mix for their plant sales. They’ve been responsible for a lot of business coming our way.”

Mertz cautioned that it was important to play by the rules. “It’s amazing to me how many folks don’t think you have to pay payroll taxes, get a federal identification number, etcetera, etcetera. You’d better have them or they’re going to get you. Our payroll expenses are over $35,000 this year.” Of his $97,000 in net ordinary income out of $300,000 in sales, Mertz felt, “that ain’t bad. Yeah,” he said, “I gripe about what I have to pay the government. They didn’t have to get out there and shovel any manure to get that.”

This income represents the earnings of Mertz and his wife Joanne together. She is not on the payroll, but works in the business. “Let’s face it,” he continued. “What she’s capable of doing and the things I used to do, we could probably make more money than that together on an annual basis. But I feel like, most importantly, we’re leaving this earth a lot better place than we found it, and maybe, thank goodness, for whatever reason, I am not profit-motivated. When we come up with a formula, I don’t look at it and see how much profit I’m going to make. I look at it and ask, Am I doing the best thing for the soil and for the plant. Profit takes care of itself.”

Jay has a list of his Top Ten customers, stores throughout Texas that carry his products. Leading the list is Green Mama’s, a store that waited eighteen months to get Mertz’s blends. So far, this year, they have purchased $44,314.81 in Rabbit Hill Worm Farm inventory. Mertz has found outlets from Austin to Dallas-Fort Worth, making deliveries himself and picking up payment in full upon delivery.

“We’re delivering to about 55 nurseries, 15-20 farmers and 12-15 landscapers,” he reported. “We will lose a couple old customers a year if they go out of business. The nurseries are not raving about how great their overall business is in this present economy.”

Mertz returned to the issue of how he got started in the worm business. “When we started this, we were going to do fishbait,” Mertz began. “But we figured out real quick, gasoline is expensive to make that route around the lake. But, by the same token, fishbait might work for you. But I could tell real quick that wasn’t going to be my thing. So we kept digging and reading. Then we stumbled across a radio program one Sunday, Howard Garrett the Dirt Doctor. He had a radio talk show on Saturday and one on Sunday mornings that lasted for four hours. I’ll tell you what, if it wasn’t for Howard, we probably wouldn’t sell 25% of the total products in the market that we sold. He has been tremendous for our growth.”

Then Mertz found he could favorably compete with another product by visiting a retail outlet one day. “A friend of ours, Patty, had a store and we were talking to her about supplying her with organic produce starts and organic herb starts,” Mertz said. “We looked over on her store shelf and noticed a product, Wiggle Worm worm castings. “Patty, is that product any good?” I asked. “I don’t know,” she said, “but we sell quite a bit of it.” “Let’s look at it,” I said. So we opened up the bag. We saw black peat and a little bit of grain added to it—they leave the worms in it for about fourteen days, screen it off, bag it and call it pure worm castings. “Hey, we can do this. In fact we can give you one that’s better.” So now, all of a sudden, with produce starts and herb starts, we’ve got worm castings and potting mix. Today that has reached the point where we have 24 products that we utilize in other products that we bag with the Rabbit Hill label on it. We actually have 23 products that we blend at our facility in Corsicana. We have another 15 products that we distribute for other companies and we’re private-labeling for two companies. And that gets us up to where we are today.”

Mertz then turned toward the issue of what to feed earthworms. “You’ve got to figure out what you’re gonna feed them critters,” he began. “People who call me today who want to get into this, the first thing I tell them to do is to look around to see what they can get to feed their worms for free. Can I haul in horse manure or dairy cow manure? What can I get that’s not gonna cost me a lot of money? In my case in Corsicana, you’d think I could get the slop from the restaurants and the waste produce from the grocery stores. No. I’d get shot about the third day by a hog farmer. We’ve got loads of hog farmers that pick up that stuff and feed it to their hogs, even though they’re not supposed to. We purchase all our raw materials to feed our worms, other than the free leaves we get every fall from the City of Corsicana. They will bring us out about 60 large dumpster loads of leaves. We blend five manures: rabbit, horse, sheep & goats, dairy cattle, and a little bit of poultry manure. Along with the five manures we include peanut hull because it’s really good at growing fungi. We feed cotton waste material from the cotton gins, oak leaves, some shredded cardboard, and some chopped hay. We add humate, we add molasses, we add Agrispon, and we add Montmorillonite. That goes through about 5 heating stages. Then we take it down, and it’ll usually heat up one more time when we move it, then we let it cool, then it goes on the worm beds, six inches to start with, and then each week, a one-inch layer. And then we leave it on the worms anywhere from 45 to 60 days. In the winter time we’ll usually leave it on longer.”



Figure Jay Mertz among his manure producers at Rabbit Hill Worm Farm

Mertz told about the requirements that various states have with respect to labeling. Due to the differences in requirements, Mertz has decided not to export his products to nearby states, saving himself the headache of dealing with the changing complexities of state codes.

Mertz recommended that folks start with a Business Plan, even though he did not. “Did I ever do one?” he asked. “No, not really. We just took it a day at a time. When we first started this, we could make our deliveries from the back of a Dodge minivan. From there we went to an old 1968 Dodge pickup and then to a pickup with a trailer. Then we went to a flatbed. Now we’re using a one-ton Cummings diesel Dodge with a flatbed with a trailer that can handle 22,000 pounds. Typically we go out six days a week with 12,000 to 18,000 pounds on that trailer.”

Mertz also talked about screeners he uses as well as other equipment, including a tractor, front-end loaders and forklifts. “We have a 15-acre site,” he said, “but only utilize about 5 acres for the business.”

What kinds of things might help Rabbit Hill market its products in the future? “Right now,” Mertz said, “what we’re getting requests for are Rabbit Hill Farm T-shirts. All the clerks in all the stores want us to get them Rabbit Hill Farm T-shirts and they all tell me they’ll sell twice as much of what they’re selling.”

For those just starting out in the business Mertz recommends, “Start slow, stick with the basics, and K-I-S-S….Keep It Simple, Stupid. Go out and look at the nurseries in your area. What are the organic opportunities? Do you have an intelligent radio talk-show host who knows what organics are? Can you visit with him a little bit, maybe give him some product so that he can promote you a little bit. Walk in that nursery, look on the shelves, see what they’ve got. Before we started making rose fertilizer we manufactured for another company. Then we decided we could do the same thing by changing the formula. We added worm castings and rabbit manure and, by golly, we’ve got a winner. Observe. Be very observant. Don’t go in that store like you’ve got all the answers, because you don’t. I still don’t. Know your product. If you need to give a store owner a sample of your material, for goodness sake, don’t hesitate. Work with a local garden club. Become a member of a local garden club. Get them to use some of your products. We get more new customers from individuals walking into a store who say, “You don’t have Rabbit Hill Farm? I want Rabbit Hill Farm!” I don’t make sales talks. I really don’t know how to give a sales talk. I just don’t do it. I haven’t from Day One. They come to us. We’ve built a name and a reputation and they come to us.”

Mertz refuses to submit his products to a soil laboratory for testing. “I don’t have my products analyzed ,” he stated. “My laboratory is my customer. If my product wasn’t right and if it didn’t work, would I still have Peggy Lancaster from Texas Blooms and Ruth from Redenta’s after 12 years? Now you might get asked for that, and you may have to go to a laboratory to get that done. But I don’t do it. I’ve never done it and I don’t know that I ever plan to. I may be forced into it someday, though.”

Shipping costs have kept Mertz in the wholesale side of the business that he prefers to being a retailer. “If you ship a ten-gallon bag of worm castings to a customer, it will cost them as much in shipping as the wholesale value of the product they’re buying. We sell a one-gallon bag of worm castings wholesale for $2.20 a bag. They retail it for $3.95 a bag. We sell a 10-gallon bag for $11.20. I guarantee you that to put it in a box, it’ll cost you $11.00 to ship. So we basically try to stay in the wholesale business.”

Mertz has found that it pays to offer a wide variety of products. “We put our name on more than 20 different products,” he claims. “If we’re bringing in cottonseed meal to make products out of, why not bag that cottonseed meal? Why not bag the soft-rock phosphate? Why not bag the dried molasses? And so we do, and it really helps add to our sales volume. And we really are not fancy. When we make our fertilizer blends, they are so alive, we have to let them go through a curing period. When we mix the rose food, it has to go into larger sacks and it has to age for about a week and a half before we can bag it. It’ll crank up to about 140 to 150 degrees.”

Mertz believes part of the secret to his success is that he doesn’t look like one of the Big Guys. “Labels are made on a copy machine. We buy inexpensive but quality plastic bags that aren’t easy to break. Those labels are laid on a special cellophane tape. A little glue is sprayed on the back and then applied to the bag. We save a lot of money by doing our own labeling. We use clear bags because the customer likes to see what is in the bag. We keep it as primitive and simple as we can.”

And he insists that marketing a wide-range of products is the only way to go. “God help me if I ever decide that all I’m going to do is market worm castings,” Mertz exclaimed. “How many more stores do I have to call on, how much larger an area do I have to market to, if all I’ve got is one or two products? That’s why we’ve got over 20 products! That’s why we’ll add another two to three this next year. I want to keep adding products and increasing my individual customer’s business.” (Bogdanov, 2003)References

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Through its internationally acclaimed website, vermico.com VermiCo has established a highly regarded earthworm products enterprise from 1996 to the present, offering new vermicomposting products and information resources such as books, e-books, a newsletter and DVDs. VermiCo’s conferences and seminars, including its Best Management Practices in Vermicomposting seminar, have attracted over 1,200 persons from some 30 US states and over a dozen countries outside the US.