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The average American eats almost 300 eggs per year. But how much do you know about where they come from? What actually makes an egg organic? And could better eggs be better for you?
Host Greg Schonefeld is your resident Egghead and digs into topics like egg nutrition, cage-free farming and what it takes to build an egg empire. From egg-onomics to chicken genetics, Eggheads crack open the unexpectedly fascinating world of eggs.
Jacques Klempf: Agriculture should be taught in elementary school. It should be taught in junior high school, high school, and even college, so that they have some knowledge of farming. I mean, most people go to the grocery store and they just see all these great products. They have no clue how it got there or what a farmer had to do to get it there.
Greg Schonefeld: Welcome back to Eggheads. I'm Greg Schonefeld. Today's episode will give us a window into a true legacy of eggs or egg-a-see. Nevermind. A legacy that spans generations from a grandfather who started with a small operation to a father who built on that foundation, and finally to a son who led the company to new heights. It's a story of tradition, innovation, and unyielding commitment that goes into producing the eggs we often take for granted at the checkout counter. We have a guest today who practically received his education in the egg world.
Jacques Klempf: I'm Jacques Klempf. I started out selling eggs in a little red wagon and graduated to tractor trailer loads.
Greg Schonefeld: Jacques knows the egg industry inside and out because he spent most of his life in the business. He officially entered the egg game in 1979, building on nearly 70 years of family history in the egg business. Jacques has seen it all, from the early days of egg distribution to the cutting edge technologies that drive production today.
Jacques Klempf: My grandfather Jacob came across from Poland in 1920. He was 21 years old, didn't speak good English, but his first job in the city was an egg candler. He sort of learned the egg business just keeping his eyes open and ears open, and eventually migrated to Wisconsin with his wife and family. Started buying eggs from all these wives that tended the layers in Madison, Wisconsin. Then he would bring the eggs back to his little processing plant, package and then resell and redistribute the eggs into the markets, whether retail or food service. My dad always told the story about how he would be in school and his father would come to the school and say, "I need my son." And he was embarrassed and the teacher would say, "Well, your son is here learning school." And he goes, "I need my son more than you do."
Greg Schonefeld: So Jacques father got a good bit of his education in the egg world, which after serving in the Merchant Marines is where he would eventually return. His journey took him through Jacksonville, Florida. It was here that he saw an opportunity to sell eggs from cold storage at a lower cost, which quickly turned into a successful business. And in 1948, he founded Dixie Egg Company. The business was initially focusing on egg distribution, but later expanded into egg production and processing. After a challenging partnership with Purina, they parted ways and Dixie Egg became fully integrated, owning its feed mill and production facilities, and that's where Jacques joined the family business, at least formally. As far back as Jacques can remember, he was also selling eggs.
Jacques Klempf: When I was nine years old, I had a little egg route and a little red wagon in our neighborhood. So every day my dad brought home jumbo eggs. He sold them to me for 65 cents a dozen, and I delivered them for 75 cents a dozen. It was pretty good income. I wasn't very smart at the time because I shared the profit with my brother who'd never did anything. He said that he owned the red wagon and that he was leasing it to me, but we worked pretty good. It was a nice little gig.
Greg Schonefeld: So you did grow up exposed then?
Jacques Klempf: Yes.
Greg Schonefeld: At that point, had your dad already taken things fully integrated?
Jacques Klempf: Yeah, so in the early 70s, he became involved in production, again initially with Ralston Purina. Just as I was in college going into my third year, I came home for a summer break and my dad said, "Look, I really want you to come to work for the company." He said, "I'm going to teach you a lot more than you're learning at school." He said, "Look, there's going to be a day where people aren't going to be able to buy a house or buy a car or buy furniture or even buy clothes." He said, "But the last thing they're going to give up is food." And he says, "We have a great product, a great opportunity to grow and provide this great food to people in our area." He said, "I've got a management position. It's wide open for you." I was 21 and at the time... And I asked him, "What's the position?" It was night shift processing manager from three to midnight.
Greg Schonefeld: He wanted to test you.
Jacques Klempf: Oh man, that was a test too. But we had a good time. I had a good crew and we were able to operate pretty effectively in Jacksonville. We eventually shut it down and moved it to where our offline processing plant was in Blackshear, Georgia.
Greg Schonefeld: And then you took over the company at one point?
Jacques Klempf: Yeah.
Greg Schonefeld: So you went from the processing. I guess what was your progression to the point of finally taking over the company?
Jacques Klempf: Yeah, so when we shut down the processing in Jacksonville, I went right into sales. I was 23 and started opening up other markets around us, Brunswick, Gainesville, Ocala, Orlando, Tampa, and eventually really started picking up other markets and a lot of distributors.
Greg Schonefeld: But after the sudden loss of their general manager due to illness, Jacques needed to step into managing operations all while continuing his role in sales. He also recognized how the industry was shifting and move the company from direct sales like restaurants and little grocery stores to working exclusively through large distributors like Cisco and US Foods. This allowed them to focus on volume sales through distribution channels rather than individual sales. This approach laid the foundation for their continued expansion.
Jacques Klempf: I went down to South Florida and everybody sells their eggs on the Urner Barry market, but I came up with sort of an interesting dynamic of how to sell eggs and give the customers a rebate based on market fluctuations. And I picked up a big Cisco account in South Florida using like four trailer loads a week, and I came back to the office. My dad said, "You need to be president of the company." He was still chairman and CEO, but at that point, we started really growing our company and we were the model, let's get the customer first and then build the production.
Greg Schonefeld: And part of that growth strategy included a significant move in 1988 when Jacques became an original franchisee of Eggland's Best, then known as CRX, short for cholesterol reducing eggs. It was an attempt to directly combat negative press around egg cholesterol at the time. A topic we addressed in our episode on navigating nutrition confusion. Although the name had to change due to regulatory concerns, the unique product formula, which included sea kelp, distinguished it from generic eggs on the market. Jacques foresight in embracing this brand helped solidify the company's presence, not just locally, but across Florida, Georgia, Alabama, and even in international markets like the Bahamas and Puerto Rico. By the time Jacques sold the company in 2016, sales had skyrocketed from 12 million to $130 million with Eggland's Best being a cornerstone of that success.
Everything you've just said here makes it really clear some of the marketing opportunities or some of the networks or the channels you could find. What about on the production side of things? Was there a lot of change there or anything you were doing special there?
Jacques Klempf: Yes, because as mentioned earlier, we had built high rise houses, which are basically conventional cages with litter pits on the bottom, and a typical house could have 90 to 100,000 layers in a conventional system. Back in 2008 and '09, I heard about these stack houses and how these stack houses are changing the industry. So I visited two or three egg producers that had these stack houses. This one, he had a techno house that had 500,000 layers in it. It looked like the Titanic on a farm. It was just massive. And I'm just like, God, how do you even populate 500,000 layers? And all these questions. But the production that they got out of those stack houses was amazing, and I could see the handwriting on the wall.
Greg Schonefeld: To increase efficiency, Jacques collaborated with industry experts and traveled to Italy to explore advanced cage systems. He then upgraded his farm with state-of-the-art inline processing, including robotic packers and palletizers, recognizing risks of processing eggs on the same site where you produce them, such as biosecurity constraints. Jacques also maintained an offline plant as a safeguard, allowing for continuous processing even during disruptions. This dual approach created minor additional costs, but provided critical flexibility, a feature that proved invaluable when you later sold the company to Cal-Maine, the largest egg producer in the US.
It sounds like you were really early to adopt technology on the production side, whether it was kind of the new system that was on the market for managing the birds or the production processing, that whole process you were investing in the technology on those fronts.
Jacques Klempf: Yeah, I embraced it. Again, at the end of the day, it's math, so you can do the math and you can buy a $2 million processing machine and pay it off in two and a half years just with the extra eggs that you're able to sell.
Greg Schonefeld: Can you talk some to the challenges during your time? I mean, you mentioned avian influenza for one, and I mean that hit really big. I don't know if you were impacted.
Jacques Klempf: 2015 was the first year really hit hard. 30 plus million layers had to be euthanized, and we were never affected by avian influenza, and we did have biosecurity at the foreign level to monitor trucks coming in, trucks going out. But even today, after we've experienced... This year, I think there's 25 plus million that have been euthanized and what it's doing to egg markets are crazy. I think the egg market today in the Southeast is around $3.88. I mean, if you don't have avian influenza, you're printing money at the egg farm.
Greg Schonefeld: Can you talk a little bit what that means for an egg farmer? What goes through a farmer's mind?
Jacques Klempf: So first of all, it's a devastating event for the farm. I mean, on every level. Immediately you are out there trying to find trailer loads of finished product that you can buy to supply your customer, and it's got to be one of the more difficult things. I mean Herbruck's, and I'm good friends with Greg and Steve and their family, they had, I think it was 6 million layers go out. And I'm like 1 million layers is 15,000 cases a week, so that's 20 trailer loads. So 6 million is 120 trailer loads. I mean, how do they supply that? And that's what makes the market go up because you take the supply out of the equation and the demand, you can't fill orders. And Urner Barry eventually, he's a little slow, but eventually... I've always said he's slow on the up and fast on the down. Rick Brown and Randy and I have had, I don't want to say knock down drag out, but pretty close in the way they quote the market because they're just so slow on the up.
Greg Schonefeld: And contracts are tied to that too, so it has a big impact, right?
Jacques Klempf: It does, yeah. It's a certain percentage under the quoted price or it might be a cost plus. There's a lot of different ways to sell eggs on the Urner Barry or not. But yeah, it's a devastating event. Now, the government does indemnify the farm once you report it to the state veterinarian. They quarantine the farm. I think it's a six mile quarantine around the farm. They come in with their team, they dig trenches on the farm, and they euthanize the flocks and bury the birds, and then they get everything cleaned up. And I've talked to some of the producers that have been indemnified by the federal government. It doesn't really... It's not a full indemnification. There's some things that are not included. It does help, but still to jump through all the hoops to try and find the supply to service your customers, meanwhile, you've got all these employees-
Greg Schonefeld: Yeah, I was thinking about that.
Jacques Klempf: That you don't need. I mean, once a farm is contracted with avian influenza, to get it back up, best case scenario, four or five months, it could be six or eight because you've got to buy your baby chicks and they've got to put more in the incubators. I mean, everything has got... The flock flow is just... It messes it up like nobody's business.
Greg Schonefeld: And meanwhile, you're at risk of losing key people that go find something else and then you try to get them back and all those things.
Jacques Klempf: I mean, it was reported that when Herbruck's lost that many layers, they had to lay off like 400 employees.
Greg Schonefeld: Wow. Quick side note here. I know we've been talking a lot about avian influenza lately, but it truly is the X factor. Jacques is right, it's absolutely devastating for farms. When an outbreak hits, it wipes out an entire flock, brings operations on that site to a grinding halt and creates a ripple effect across the industry. That's not lost on us. We just want to say we're deeply aware of the impact it has on farmers, their families, and everyone connected to the supply chain. It's a crisis that doesn't just affect production, it affects lives and livelihoods. We're all in this together, and the resilience of the farming community is something we're committed to highlighting and supporting.
Man, first I've learned a lot. I'm really having fun here.
Jacques Klempf: Thank you.
Greg Schonefeld: Yeah. And so I feel like I have a good picture of Dixie Egg during this time. What are some just general market trends you've seen during your time or since exiting and selling Dixie Egg? Can you speak some to that?
Jacques Klempf: There's been a lot. Obviously, I think Eggland's Best is the mother of all the specialty egg brands. Eggland's Best came out with these specialty eggs, again, enhanced through our feed, and we're getting a price much higher than the commodity price. So that spurned a lot of folks to come up with their own specialty brands. And I think that's the trend that is out there now that is pretty incredible really. Pete and Gerry's is doing a nice job. Vital's doing a nice job. Handsome Brook is doing a nice job and some other smaller brands. What's interesting is their model. I did some consulting for one of the brands, I don't want to say who here, but they had very few assets, very few. They have a brand and they're marketing this brand and getting a premium price and making maybe... Well, let me back up a little bit.
Greg Schonefeld: Sure.
Jacques Klempf: In 2015, the industry financed and supported this study called Coalition for a Sustainable Egg Supply. It was a huge study, Cargill, McDonald's, American Egg Board, and some other folks funded, I think 30 or $40 million to do a two or three year study on what is the best way to raise hens using all the various benchmarks, food safety, sustainability, hen health, worker health. At the time the industry was going through this PETA and they were wanting us to go cage-free.
Greg Schonefeld: We are going to be throwing around a few acronyms today. Likely you're familiar with PETA or People for the Ethical Treatment of Animals. PETA was founded in 1980 and is still very active today.
Jacques Klempf: Interesting though they were all about the enriched cage system. They were holding our hand and saying, "Okay, we're going to add this to the farm bill and we'll go with enriched cage systems," which you're probably familiar with.
Greg Schonefeld: Yes.
Jacques Klempf: And it was like a compromise for PETA. But what happened was when this coalition for a safe egg supply came out with their results, and you can look it up, it's all documented. I mean, we knew what the answers were going to be, but this was a study done by world renowned scientists in the US and abroad, and the results were crystal clear. A conventional cage system produces eggs, better, cheaper, more economical, better for the hen health, better for the farm worker, better for consumers on every level. Next was the enriched colony system, and then next was cage-free. And the cage-free, the mortality is twice as high, the cost is a lot more. But again, PETA was really pushing hard for retailers and food service operators to commit to cage-free knowing it was going to take time. So the real turning point in this study was that at the time, McDonald's, their CEO was a guy named Steve Easterbrook, not very smart. He said, "We're disappointed in the results of the Coalition for a Sustainable Egg Supply, and we are going to commit to cage-free based on consumer perception."
So when he said that, I'm thinking if we can't depend on science and math on how we're going to raise our livestock, I've got to figure out what consumer perception is and then invest millions and millions of dollars whose mind could change tomorrow...
Greg Schonefeld: Is that what led to you exiting the business or was that a big part of it?
Jacques Klempf: So that was one of the reasons. PETA came out with a commercial and it showed people getting into an elevator and then more people getting into an elevator and even more people getting into an elevator. And then they were stuffed in there, and then the doors closed, and then the doors opened. And when it opened, it showed a conventional cage system with all these hens in cages. And PETA said, "Public, please go cage-free." And I was done. I mean, I was done.
Greg Schonefeld: Jacques hit on a real difficulty for a farmer, if not an impossibility. How do you make a 20 to 30 year investment based on consumer preference, which can change at the drop of a dime? Whether you go cage or cage-free, you're making a multi-million dollar commitment in either direction that cannot be reversed. Meanwhile, people want eggs and your job as the farmer is to provide them some type of egg. What or who drives consumer demand in the first place and what's at the heart of the true problem?
Jacques Klempf: The real crux all comes down to something that I've been saying for years is that the consumers are uninformed and it's not their fault. In my opinion, agriculture should be taught in elementary school. It should be taught in junior high school, high school, and even college, so that they have some knowledge of farming. I mean, most people go to the grocery store and they just see all these great products. They have no clue how it got there or what a farmer had to do to get it there. And so not having this knowledge... When a vote comes on a referendum, well, yeah, cage-free sounds like it's better than conventional. It just sounds better. The hens happier. By the way, they've never done a psychological test on hens to determine if they're happy or not. It's pretty much a human emotion. What science does tell us is that hens that are in production laying eggs on a regular basis, they feel safe, they have all the food and water, that they're happy.
Greg Schonefeld: No, I think that's really interesting. And I like your thoughts there about education because we all eat. So how many things do we learn about that are detached from things we actually end up experiencing? And I wonder maybe on top of the education, is there something that industry can do or farmers can do?
Jacques Klempf: Yeah, so I was former chairman of American Egg Board and was on their board for 18 years. And the egg industry is on a checkoff program. And basically for every case of eggs that's produced, they provide 10 cents per case to the American Egg Board. The American Egg Board takes that money in, and they do try and educate healthcare professionals, consumers, and they do work with schools, but their budget when I was there was around 20 to 23 or $24 million a year. That's not enough to move the needle. It just isn't. So while the egg industry is doing something, really, it has to come, in my opinion, in the education system. There needs to be an ag course, which quite frankly, I think it would be very well received if done right in elementary school, junior high school, and it needs to be a course that you pass, that you learn and you get tested and it'll just help you down the road when you have to vote or maybe you're in the industry.
Greg Schonefeld: I was just out with my three boys the other day, just me and them, and a lady kind of stopped and talked to me. She had three boys and one thing she said leaving is you have to get your kids in FFA. And she did say whether they do the farming or not, there's a lot of great programs. But that's an example of something you have to elect to do. You have to-
Jacques Klempf: Correct.
Greg Schonefeld: You have to know about it, where it could be something that's more baked into the system. I mean, maybe that's a model that already exists that could just be baked in.
Jacques Klempf: It is. But you're in a rural part of the country. I say rural as it relates... New York City and Boston, there's not much FFA going on in the city, in New York City or in Boston. There's none.
Greg Schonefeld: It's true. For listeners unfamiliar with FFA, it stands for the National FFA Organization, originally known as Future Farmers of America. It was created in 1928 to support agricultural education by connecting students, teachers, and agribusiness. These days, FFA is all about helping students develop leadership skills and career success through the lens of agricultural education.
Jacques Klempf: It's so limited. I think, in the public school systems and these land-grant universities, why not put an ag course in there as part of your basic curriculum that you have to go through? It can't hurt, but I don't know what the reasons are.
Greg Schonefeld: Is there something to just the way eggs are marketed in general? I mean, if you talk about you're going through these layers between the farmer and the consumer, is that maybe part of the dynamic? Maybe there's a lot of good reasons for that dynamic, but maybe adds to some of the challenges when it comes to this.
Jacques Klempf: Well, yeah. Every egg producer in the US is a generational egg farm pretty much other than Vital and Pete and Gerry's and those guys. So it's family businesses that have grown from generation to generation, and typically you don't have a lot of interaction with the consumer. You just don't. You take a Sysco foods that's in Orlando that can take four trailer loads a week and go to 10,000 customers. There's just not a mechanism to provide that education to consumers through the farm.
Greg Schonefeld: Jacques makes a compelling case that there's a fundamental problem that one, the egg industry has been driven by consumer preference, and two, the consumer is uneducated. We hit on that with Tara where she pointed out that only 2% of the population farms today, a trend that leaves most consumers disconnected. Maybe he's right that it ought to at least partially be addressed through our education system. After all, we're all consumers of ag products. When it comes to the debate at hand, conventional, cage-free, free range, pasture raised, there are a lot of variables. And what does Dan Wilson call them? Oh, yes, trade-offs. An educated consumer understands those trade-offs, whether it's animal welfare, egg cost, bird nutrition, or perhaps even the feeling of culture and trustworthiness of the farms who raise the birds. People buy products for lots of reasons. With better understanding comes better ability for the consumer to make decisions, taking into account their own personal beliefs and preferences, which may ultimately lead to a variety of options on the market.
Though Jacques is technically retired, it's clear that his passion for the egg industry hasn't faded one bit. He's still very much an egghead, constantly thinking about how the industry could evolve. Lately, he's been thinking about the potential role of private equity in the future of egg production. And bear with us. We get a little into the weeds here, but in getting to know Jacques, that's where he's comfortable. And frankly, I can relate to that. He's definitely graduated from his little red wagon back when he was nine.
Jacques Klempf: So the industry has been consolidating for the last 20 years. If you look at Cal-Maine, they've purchased 26 egg companies since 1989, including mine. And nobody says, "How much did you get per bird?" But if you look at what they paid per bird or per layer, it ranges from $15 a layer to let's say $30 a layer. I don't think they ever paid that much, but maybe. So then if you look at Cal-Maine stock or their market cap, let's just say their market cap is $3.4 billion. That's their market cap. They've got with their latest acquisition of ESA up in Maryland and South Carolina, I think they're around 45 million layers. So if you divide their 45 million layers into a 3.4 billion market cap, their layers are worth $70 a bird. And that's the rub.
And so what I've been trying to do, and I've not been able to do it yet, is to get private equity to try and buy using the Cal-Maine template and model, to buy at a fair value, continue to add on, and potentially be the next public egg company and get a Cal-Maine valuation. That's the deal. And if private equity was willing to invest, then you've got the perfect model to compare what your company should be worth.
Greg Schonefeld: So you're seeing the biggest constraint as capital because if these birds are basically worth double or more than what they can be acquired for, more people are not duplicating what Cal-Maine's done because they don't have the money behind it. And that's where private equity comes in.
Jacques Klempf: Pretty much. It's a very capital-intense industry. I mean, we were building stack houses for four and a half million dollars that held 237,000 birds, but they're hard assets. If you have hard assets, you can sell it at some depreciated value to someone as opposed to a brand that may or may not be worth what it is. It may not increase in value.
Greg Schonefeld: And if you get bigger... So if you're adding more birds to your operation that way, I guess first of all, if you're just getting a good price, which it sounds like that's part of it, so there's value created there, but then by getting bigger and more consolidated, is that better for you as a farmer? Is that better for the market in general?
Jacques Klempf: Yes. There's a lot of synergies for Cal-Maine and for potentially for private equity as you add on to your first acquisition. You obviously can consolidate HR and accounting. You can also bundle your packaging. So there's a lot of synergies there. Certainly synergies and logistics where you can have some company that's traveling too far and maybe the other company you've got can service it on a more economical basis. So yeah, there's lots of synergies that are gained through this consolidation, and that's why Cal-Maine's done it very effectively since 1989.
Greg Schonefeld: So consolidation may be a continuing trend, or at least there's opportunity that it could be.
Jacques Klempf: Oh, yeah. And the reason it's a continuing trend, there's a lot of reasons. First of all, a lot of these generational egg farms, the CEOs and the presidents, they're getting older and they may not have that next generation in place to take the farm to the next level for the next 30 years. And so we're seeing a lot of that. And then there's a lot of people that they just want to take some of their chips off the table after three generations of growing the business.
Greg Schonefeld: Do you see any downfalls to that trend?
Jacques Klempf: Well, I mean eventually there's going to be just, I don't know, 20 or 30 large egg companies in the US controlling all the egg supply. So I don't know if that's not good or not. I mean, I look at the Cal-Maine model and they've done a fantastic job of managing their operations and trying to be efficient at every corner, and they can do it better than a lot because of the synergies that are gained through acquisitions.
Greg Schonefeld: Maybe the only problem is then we just have to educate more people because fewer people are farmers, right?
Jacques Klempf: Yeah. The interesting thing is the average age of a farmer is like 58. And in the egg industry, it's even higher, it's in the mid-60s.
Greg Schonefeld: Unbelievable.
Jacques Klempf: So it's a really different dynamic than a lot of other industries.
Greg Schonefeld: It was a great opportunity to learn from Jacques, through his family's legacy and his own egg adventures, he has seen all the major trends of the commercial egg industry over the last 70 years. Jacques paints a clear picture of the strategies it takes to lead a modern commercial egg farming operation, as well as some of the challenges, whether it's avian flu, market dynamics at play or consumer disconnect. Jacques rode the evolutionary wave of egg production starting first with finding the customer. He had a knack for finding what the consumer wanted and jumping on the next trend. During his time at the helm, he met challenges head on and seized opportunities to adopt new technologies. In every aspect, Jacques showcases the adaptability and resilience of egg farmers.
And yet with all the advancements, there's something enduring about the image of a young Jacques with his red wagon peddling eggs around the neighborhood. Much like his father, he received his education in the egg industry at an early age. It served him and his family well, and his passion for eggs clearly remains. The future of the egg industry will be shaped by those who like Jacques are willing to jump in and learn at the ground floor, then innovate while honoring the legacies that brought us here.
I'd like to thank Jacques for sharing his story with us and providing us with at least the beginnings of an education. Be sure to check back for more episodes of Eggheads. If you're liking the show, please follow Eggheads on Spotify or Apple Podcasts, Instagram and LinkedIn. And if you're a true Egghead, show us some love by dropping a five star rating on your favorite podcast app. We appreciate your support. As always, I'm Greg Schonefeld, and thank you for listening to Eggheads.
Jacques, how do you like your eggs?
Jacques Klempf: So I'll say I love them over easy. Because I love the runny yolk and dipping my toast in it, but I'll eat eggs any way. I mean, I love scramble. It's sort of like Forrest Gump, there's a lot of ways you can fix it. I'll take them poached, I'll take them fried, I'll take them over easy, even eat them raw from time to time.
Greg Schonefeld: I love that Forrest Gump reference. I've thought about that. I wanted to do a whole segment on it, a little shtick.
Jacques Klempf: You know there's an interesting thing. If you ever see the chefs with their hats that they wear, apparently there's a hundred pleats in that chef's hat, and that is supposed to be that there's a hundred different ways that you can fix eggs.
Greg Schonefeld: Oh, man. We're going to have to do a whole episode on that.