#65: Michael Kiolbassa – CEO & Owner of Kiolbassa’s Smokehouse
Michael Kiolbassa Podcast Transcript
Neil Dudley: Ladies and gentlemen, welcome to the Pederson’s Farms Podcast. We are so excited you’re here. We appreciate you joining us. And we look forward to sharing these conversations with thought leaders from our industry. They’re going to paint a picture from every perspective, consumer, customer, vendor, employee, and peer, that I think is going to be super valuable and we’re really excited to share. So thanks for tuning in. Remember, don’t tune out and grab life by the bacon.
Okay, everybody, I get my hat right. For anybody out there on YouTube that’s watching this video, I want to have my head on straight because today’s conversation is important. It is with a guy who’s built a great business, a family business. And well, they’re a peer of ours in the industry. And they keep us on point in trying to just stay in the game. So I want to welcome Michael Kiolbassa to the Pederson’s Farms Podcast. Michael, thank you so much for allowing us this access to your thought process, your company, and how you guys do things. I think our audience is going to find a lot of value in that.
Michael Kiolbassa: Well, thank you, Neil. It’s a pleasure to be here. And I’m honored that you would want me on your podcast.
Neil Dudley: Well, I just think it’s incumbent on me, on Pederson’s as a company to share these truths. I think a lot of people are not fully aware of where their food comes from and how this whole system works. And there’s a lot of valuable insight and education in these conversations that just helps somebody understand, oh wow, that sausage doesn’t just kind of magically appear, it goes through a lot of people and companies, and the network of this economy is super reliant on animal agriculture, food production, all those things. Now, I’m already off into the meat of the conversation. But I want everybody to get a chance to hear your, just quickly, two or three minutes about you and the company, Kiolbassa.
Michael Kiolbassa: Yeah, so Kiolbassa started with my grandfather in 1949. He unfortunately passed away. I never really met- I never met my grandfather. He died before I was born. And my dad literally dropped out of college to run our family business. And back then, we were just a small little mom and pop sausage company. My dad expanded us into cattle and hog slaughtering in the 70s, and that’s the business I grew up in. And then I joined the business in 1987 after a couple years in the banking industry, and I really wanted to come back. I kind of had an entrepreneurial spirit about me and wanted to come back and help build the sausage brand. And that’s what I’ve been doing for the last 35 years.
Neil Dudley: All right, great. I already wrote six notes. I mean, because there’s so much that we could talk about. First thing that hits me is how easily the word slaughter rolls off your tongue. And I think in today’s world, there’s a lot of times we’re all trying to say harvest or soften this truth about where meat comes from, that it’s animals and they die. What do you think about that? How do we communicate that with the listeners who may be sensitive to that truth? That we’re not trying to make it more dramatic, but it is still a reality. What’s your take on that?
Michael Kiolbassa: Well, that’s a great question. I’m looking at our family values here, which we really spend a lot of time on. And transparency is one of ours. And the fact that you can call it whatever you want to call it, you can call it harvest, you can call it whatever you want to call it, but you’re slaughtering an animal. And it is what it is. I don’t want to get off on a tangent, but I mean, that’s just the hierarchy, the way God made us. I don’t know.
Neil Dudley: The tangents to me are fun. They’re part of the real conversation a lot of people don’t get to hear. The fact is, I think about it. I feel accountable and responsible for killing that animal and then using it as nutrition for my body. It means I have to be a good person. It means to you, from what I’m hearing, you have a list of family values you feel responsible to.
Michael Kiolbassa: Yeah, I’ll tell you a quick story. When I was a young man or young boy, really, I was fishing with my grandfather, my maternal grandfather, and I caught a big fish. And he said- and so my mother was cooking it for us one night. But she cooked me a hamburger. And my grandfather looked at me and he said, “Michael, why aren’t you eating your fish?” And I said, “Well, I don’t like fish.” And he said, “Well then, I’m never fishing with you again.” I said, “Why?” And he said, “Michael, if you kill something, you eat it. You don’t just kill it to kill it.” And it taught me a real valuable lesson. By the way, I started eating fish right away.
Neil Dudley: Because you didn’t want to lose grandpa.
Michael Kiolbassa: There’s a responsibility there. You just don’t slaughter something, you don’t kill something just for gratuity. You kill it because you’re going to eat it. It’s going to give nourishment to your family. It’s going to give you some value, and you’re going to treat it with respect. I’m a hunter, and I’m a fisherman. And we don’t kill anything we don’t eat. And it’s just part of the I think honoring the animal, if you will, in an odd- maybe some people might think it’s odd, but it’s the circle of life. I don’t know how you want to put it. But it’s part of life.
Neil Dudley: That’s it. That experience, I think, I can’t understand certain things about this world because I don’t have an experience with it. Like, I don’t have an experience with ice skating, really. I mean, there’s certain things I don’t understand, you just have to tell me what it’s like because I don’t know, it’s not my- I think a lot of people, their experience with animals is their pet dog or pet cat. And I understand that because I’ve had those things. I cried when my dog got ran over on the highway. I took him to the backyard and buried him and found that super sad. But I also lived in a truth where I was raising beef cattle, and I watched a baby calf be born, grow up, fed out, slaughtered, and then ate. I mean, I experienced that. So it made sense to me. It was just part of how my life evolved and came about. Other people don’t have that experience. So this is part- I want to share these conversations with them. I can’t say 100% I’m right. I’ll only know the best that I know. And I feel pretty good about it.
Michael Kiolbassa: I think intention is a big part of it too, right? I mean, it’s what the intention is. Your intention when you were raising that calf and growing it was to take care of it, nurture it, and make it the best animal it was, and then part of the process is, part of the lifecycle is to harvest it and then make good use of it.
Neil Dudley: I just think it’s really interesting you grew up in that business. Okay, so now let’s kind of about face and talk about banking a little bit. So you went into the banking. What made that your first kind of step as you’re growing up in the meat business and then you go into banking? Was that encouraged by your family? Or were you just kind of innately interested?
Michael Kiolbassa: Yeah, it was highly encouraged by my father. He said, “I didn’t send you to college to come work here. And so go work someplace else.” And keep in mind, he didn’t have a choice in what to do in life; his hand was forced early on with the death of my grandfather. So he wanted me to experience other things. But that was surely one of the best experiences of my life. I learned so much in that two year period because what I learned is that all companies or most companies need capital for growth, or, well, some need capital for growth, some need capital to stay alive. And so I got to see, I got to really experience and analyze two different kinds of companies. And it really shaped the way that I approached our business when I came back into our company in 1987. Because I understood how bankers think, I understand how money works. That helped me not be afraid of debt but respect it at the same time and understand how to use it to help grow our company.
Neil Dudley: Oh my gosh, I want to put- like, I have the guy that helps me produce this, he’s got a little sound effect. It’s yeehaw. Like, pay attention, people. What Michael just said is a very valuable truth. And I don’t represent that. Like I almost hate bankers because I feel like they’re always up in my business and always want to- like, they don’t want any risk. They only want me taking all the risk. Those things are not really fair for the banking community, the financial community. The facts are businesses don’t operate without that banking, debt structure that is behind it. Banks are a great support to our business. I just didn’t work in the banking industry. I don’t understand it very well. And so, then I feel kind of at odds with them more than in partnership, and that’s not good.
Michael Kiolbassa: It’s not unusual. When I had my first expansion, I told my dad he needed to send in his financial statement. He liked looked at me like are you kidding me? You’re not unusual in that respect. But it was a great experience because it did teach me to understand how bankers think and that’s a valuable asset.
Neil Dudley: I think for small businesses that are raising their kids up in the business, their kids are showing some interest in the business, send them to be a banker to start. I think that was a great foresight in your dad to know, to kind of think he’s going to need this when he’s running this thing. So I’m going to have him go work in that industry. There’s no better way to learn it than to go work in it. I didn’t know one thing about making bacon, sausage, or ham until I worked in the business. Now 20 years in, I got about 50% of the knowledge I need.
Michael Kiolbassa: It’s a marathon, not a sprint.
Neil Dudley: That’s right. That’s totally right. Okay, so let’s talk about brand building. Even early on, this conversation went to a bit of a dangerous place for brand building. When you start talking about slaughter and these things, it is a sensitive topic. And I know that my wife who’s kind of in charge of the brand at Pederson’s, she gets a little nervous when I just start off on these tangents about things that people don’t understand and they have very strong feelings about. So branding, how did you build a brand? And why would you decide that was worth trying? Did y’all already have one?
Michael Kiolbassa: Well, so when I got here, we had a reputation, I’m going to say. I wouldn’t say we had a brand. We had a strong reputation. My father was a great businessman with a lot of integrity. And he had a reputation within the meat community and the grocery community. So when I decided that I wanted to start building a brand, when I would go to grocery stores like HEB or whoever and show them my product, all of the market managers knew exactly who we were because my dad had done a great job of building a great reputation. When it came to really building a brand, I’ll tell you a funny story. It was 1989. And I was in five HEBs at the time, and I wanted to expand but I couldn’t. But the buyer said like I got no room for another brand in these stores, I’ve already got a lot of SKUs. So he said, come back in six months and keep doing what you’re doing. I was handing out samples in the stores on the weekends, and people were giving me great feedback on the sausage, telling me it was the best they’ve ever eaten. And anyway, I went back in six months, and the buyer told me, “Look, I love what you’re doing. But I still don’t have any room.” And so, I called a guy on a radio station. His name was Cark Wigglesworth, and he was on WOAI in San Antonio at the time, and I was listening to him. He had a talk radio program in the afternoon. And I said, Carl, look, this is who I am and this is what I do. I’d like to invite you to come down to the plant, and I’m going to show you how we make sausage. I’m going to give you some sausage. And then I want you to tell me if this is something that you can sell on the radio. And so, Carl came down and he met my dad, he met Eli our sausage maker, and he took the tour, and I gave him some sausage. And he called me the next day and he said, “Michael, this is the best sausage I’ve ever eaten. I could sell this.” And I said okay, Carl, here’s the deal. I can only afford to buy three spots on your radio program each week. I want to buy one on Thursday and two on Friday, because that’s when people grocery shop for the weekend. And I want you to talk about the family, you can talk about Eli, you can talk about all that stuff. But here are the two things that I want you to hammer home when you’re talking about our product. And the number one thing is if you buy a package of our sausage, and it’s not the best you’ve ever eaten, call Michael and he’ll give you your money back. The second thing I want you to hammer home is that if they can hear your voice, they can find it at their local grocery store, which was a bold faced lie. I was in five HEBs. And so, my dad wanted to fire me. He’s like if we don’t go broke refunding everybody sausage, by the way, Michael, there’s a lot of great sausage made in this area of Texas – and there is – we’re going to make our biggest prospect upset and they’re going to let us go. And I said look, Dad, we got nothing to lose here. I’m not making any progress, just trust me. And so sure enough, we started running the ads. And a couple weeks later, I get a call from the HEB buyer and he’s like, “Man, I don’t know what’s going on, Michael, but I’m getting a lot of requests for your product. Can you handle these stores?” And he gave me like 15 stores. I’m like, sure. And then a couple weeks later, he called me and said, “Man, I don’t know what’s going on. But I’m going to give you all of San Antonio, can you handle it?” And I’m like, sure I can. Keep in mind, I’ve got about a tiny little single chamber packaging machine that I’m working on, I’m packing. So anyway, a couple weeks later, he said, “Man, I’m getting calls from Kerrville and Corpus. I’m just going to authorize you for the whole company. Can you handle it?” And I’m like, “Sure I can.” And that’s how we got started building the brand. And really, Neil, it’s all about the promise. A brand is nothing more than a promise to your customers. And that’s what we built the brand on is that promise of quality and integrity. And when you buy a package of our product, you’re going to- it’s going to be the best you’ve ever eaten, or I’ll give you your money back. Simple as that.
Neil Dudley: Okay, so this is the million-dollar question. How many of those refunds does your gut say you ever had to make good on?
Michael Kiolbassa: Oh, gosh, we started getting calls pretty soon after we started running it because I think people wanted to just call my bluff more than anything. And so I’d take these phone calls, and I would listen to their comment. And I’d say, look, I’ll tell you what, I appreciate it. Number one, thank you for calling me because if I don’t hear about it, I can’t do anything about it. But I’m going to give you- I’m not just going to refund your money, I’m going to double it. I want you to buy another package on me. And they were blown away that I would actually not just refund their money but double it. And we weren’t sending coupons. We were sending a check. And it was powerful. And we still put it, the guarantee is on every one of our packages today. And we might get, I don’t know, half a dozen or so calls a week, but we’re selling in all 50 states, and that’s a pretty good batting average.
Neil Dudley: That’s right, that’s a very small ratio. I just wanted to highlight, if you know your products good, which you do because you were demoing it in the stores, you were putting it in people’s mouths and getting that direct, immediate feedback. So you knew, you had total confidence in it. Most of the people that are asking for their money back, I mean, look, you can’t make 100% of everybody happy. And those who aren’t happy, you still want to give them their money back, so they’ll tell their friend like, look, that sausage is crap, but if you don’t like it, they’ll give you your money back. So then somebody’s liable to try it. And then that person probably thinks, I don’t think it’s bad, I love it. It’s just not a very big risk.
Michael Kiolbassa: It’s a gift. It’s a true gift when people call you with a complaint. I tell our customer service team, now we’ve got a team, a group that handles our calling, but I used to handle all of them. But the first thing I would say when someone called me, I said thank you, because we don’t know there’s a problem, we can’t fix it. And so many people don’t even call, they just quit buying. And that’s the worst thing that can happen for you.
Neil Dudley: Yeah. Gosh, you should just go on the road telling this story because it’s such a great illustration of how to be successful in business. You guys have built it. Now you’re on another level. You’re not grinding it out of the dirt, I’d say. At least every day, there’s still parts of your business I’m sure feel like grinding it out of the dirt because you’re always kind of leaning forward. You just strike me like that kind of company, that kind of culture. But there’s somebody out there right now today starting a little sausage company, and I hope they listen to this because it’s a great illustration of how to be successful. All right, so now I want to ask marketing or sales? Which one would you prioritize? Is there a difference? How do you think about those things?
Michael Kiolbassa: Yeah, well, that’s a good question. I would say that I was a sales guy early on. I’m a marketing guy now. Depends on where you are and the scale that you’re working at. When we were just starting out, I was selling every single market manager individually. And I had to convince the- I used to tell people I had to make three sales – I had to sell the buyer, I had to sell the market manager, and I got to sell the consumer. And so, I was always selling. We didn’t have a big marketing budget, so I wasn’t able to do a lot, but I was selling hard. I don’t think you ever quit selling to be honest with you, to that point. But marketing does play a bigger role. And we’ve grown our marketing team. And what we’re trying to do now, honestly, Neil, I told our team a few years ago that I want our brand to be as well known for the culture of our company as our products. And that’s a big ask. But I think that people don’t buy what you do as much as they buy why you do it. And we just happen to make sausage. We’re really in the business of enriching lives. We just happen to make sausage. And we want to get that message out, if that makes sense.
Neil Dudley: I love it. I think it’s very similar to what Pederson’s wants. I mean, it’s going to be similar to what any brand wants because if you’re a brand, you are most likely not the cheapest product someone could buy. So there has to be value within the structure outside of ingredients. So that’s part- And I, as a consumer, like to do business with brands that I feel akin to. And I just know other consumers feel the same way.
Michael Kiolbassa: Right. I couldn’t agree with you more.
Neil Dudley: Yeah, why sausage? Why sausage?
Michael Kiolbassa: Well, my last name is Kiolbassa. It was kind of teed up for me. But yeah, that’s what my grandfather did. That’s what I grew up doing. I mean, I grew up working in this business. I have a passion for food. I have a passion for the craftsman nature of our product. I mean, we still literally make it in the exact same batch size that my grandfather and my dad did. We make a lot more of it every day, but it’s in the same batch size that my grandfather and my dad did. We still use the same ingredients. It’s really, we’ve kept the craft nature of the product intact as we scaled the business, which is really just a testament to our culture.
Neil Dudley: How do you keep away all those venture capital guys that call?
Michael Kiolbassa: Oh, we- you know.
Neil Dudley: I mean, I know they are. Listen, the only way I know this is because they’re out there looking all the time. There’s money that wants to go play and find a good return. So they just they look around, they see successful brands. It’s not hard to tell Kiolbassa is successful. Anybody that shops anywhere in Texas is going to know it for sure. I know they’re calling. Why don’t you take that? Because owning a business is a lot harder than taking a big check.
Michael Kiolbassa: I think you bring up a really good point here. I mean, scaling a business is not easy. I tell my family, I said, I’ve been at the Texas Hold’ em table all in for about 35 years, every day. Every day, you keep investing in the business, you keep growing it. Neil, there will be a time, I’m sure, I don’t know when, but there will be a time when that capital becomes something we would look at. I don’t know when. But I will tell you when it does happen, it’s not going to be, for us at least, it won’t be how much, it’ll be making sure that the values alignment are there. Because I’ve worked in this business long enough, I know the importance of values alignment within an organization from the ownership to the board to the management to the team. And that alignment is very, very crucial if you’re going to continue to grow the brand. And so that will be the most important element of the deal, if that ever happens.
Neil Dudley: Sure. I mean, I know we get those calls. We just say not interested. We want the business. The exit was never the idea. Like a lot of companies, you’ll see that the exit is why they even start. I mean, that’s- and that’s one way to do it. I’m not throwing shade on that. It’s a way that business gets done. It is a way companies get built. For us and I think for you guys, that was never the plan. The plan was to build a thing your family could have a good living off of, you could support other- I imagine you feel a huge amount of love for all those people on the Kiolbassa team, and you want to see them thrive and their kids grow up and come to work there. You probably already have some of those truths. That stuff’s really fun. That’s a different kind of business than growing a brand for exit. Back to why sausage, I wonder if people understand, like if you’re in a slaughter business, sausage becomes a sustainability play because there are pieces of those animals you need to find a value add for. Am I just kind of fishing in the dark here, or is that part of the truth?
Michael Kiolbassa: Well, when I got here, the slaughter side of our business was about 90% of our revenue and the sausage was about 10. I didn’t particularly like the slaughtering side of the business. And so, we exited that in 2003 and expanded. By that time, we built the sausage brand enough to where we could exit and it was okay and we basically expanded our sausage capacity with that footprint. But sausage is just a great product. I mean, people love sausage. We’re really on a mission to reintroduce people across the country, not necessarily in Central and South Texas where there’s a whole lot of great sausage made, but you go to a lot of places in the country and there’s not great sausage available. I mean, I’m talking about old fashioned pork and beef, coarse ground sausage that people grew up on 100 years ago.
Neil Dudley: I don’t think they were making chicken sausage 100 years ago. That’s a very prevalent kind of product these days. I think it comes from a lot of the just maybe evolution of medicine and nutrition over time. People think, they say beefs bad. Well, uh-oh, maybe that’s not true. We all just have to learn as we go.
Michael Kiolbassa: But we’re really on this mission to reintroduce people to authentic sausage the way it was made 100 years ago. And it’s amazing when people try our product for the first time. The people, they’ll call me, and they’ll go, “Wow, I haven’t had sausage like this since I was a kid.” And that’s what gives us energy. That’s what gives us a lot of excitement. But we just think it’s a great- this is what we know. This is part of our heritage, and we’re just giving it back.
Neil Dudley: One of my most fond memories of my mom’s dad was he would make a venison and pork sausage, and it was just if I could have that sausage again- But it’s kind of like whatever his trick was died with him. I’m not sure anybody can make it just like that, or it is this feeling you get because your granddad made it that’s part of the thing that you just can’t replace.
Michael Kiolbassa: Sure. Yeah, absolutely. But we get into- we’ve gotten into other things over the years. We’re into hams. My dad introduced hams a long time ago. We kind of exited that. We’re in bacon, we make bacon. There’s a lot of things we make, and who knows what we’ll come up with in the future.
Neil Dudley: Well, we’ve already zipped right up to 30 minutes. And I know you’ve got other things to do, so I don’t want to just keep asking question after question. But I do want to say, we’re going to put links to all of the Kiolbassa social media platforms, your website in the show notes so anybody and everybody can go check out Michael, his company. Shout out to the team over there. I went to the top of the chain for the interview just because we happen to know each other, and we’ve been at enough food shows together that I bumped into him and he said, sure, I’ll do it. But the group that works over at Kiolbassa, they’re all just really top notch. That’s kind of another testament to Michael. Well, let’s just touch on that real quick. How do you build a team? Like, how did you put that team together? That’s not easy, either.
Michael Kiolbassa: Neil, this is a longer story.
Neil Dudley: That’s fine. We’ll go a little long.
Michael Kiolbassa: But about 12 years ago, I had a, I call it a spiritual awakening. I was really almost at the verge of burnout. I was running the business the same way I’ve had run it 20 years ago when I started. And I had a conversation with God one morning. I said, look, I’ve done it my way for 22 years, I’m going to give you a shot at it now. And it was a moment of surrender, and there weren’t any lightning bolts or anything like that that went off right away. But I did open myself up to new ways of thinking, and I had a wonderful man come into my life, a coach, a mentor, that helped me shift my thinking from working in the business to working on it. And I started working on our culture. And I introduced values based leadership and open book management to our organization and really developed a strong culture that has just been a magnet for talent, a magnet for talent. I’ve got more people- I’ve surrounded myself with people who are so much smarter than me, it makes my life really, really fun to watch them. I get out of the way.
Neil Dudley: That’s a very tough transition. Like you’re saying that in about two minutes, but it has to almost be that spiritual awakening where something just slaps you hard enough that you realize you can’t do it all. And matter of fact, you can’t be very good doing it all.
Michael Kiolbassa: I was pretty poor at doing it all. And it is, I mean, surrender is a good word for it because you’re surrendering your ego. You’re surrendering your ego to a higher power, and you’re getting out of the way. It’s the hardest thing I ever did. But it’s also the best thing I ever did. And it’s the reason we’ve been able to grow this. It is the reason we’ve been able to scale this company to the point where we are today.
Neil Dudley: Yeah, I hope the listeners are paying attention to that. I know there’s some listeners out there that are- it’s hard to know when that day comes because as you’re building it, you have to do it all. I mean, there’s nobody else there to do it. And then at some point, somewhere in there, it’s a hard place to just- I can’t tell you where that is. Michael couldn’t tell you where it is. But there’s a place where you have to change what you do from work in the business to work on the business. And you’ll find- you’ll probably know when you’re about ready to quit. That’s when you kind of know, uh-oh, it’s time to change.
Michael Kiolbassa: Yeah, that’s a great point, Neil, when you’re about ready to check out, that’s a good time to let go.
Neil Dudley: Totally. So if that happens to be you, if you feel like you want to check out, you can’t do it anymore, think about hiring some good help and give them the space to go do the thing that they know how to do.
Michael Kiolbassa: Look, Neil, I’ll make this offer. If any of your listeners out there want to call me directly and hear the story and talk to me about it, you just put my name and my phone number and my contact on your website, and I’ll be glad to talk to them.
Neil Dudley: I appreciate that. Now, folks, I would take that serious and I would use that opportunity. He was talking about a coach that came into his life – Michael might be that coach you’re looking for, you’re needing, I mean, just one conversation, whatever it is. So Michael, that’s a huge offer. I hope the listeners who need it pick it up and run with it. I don’t even know what else to say but thank you. This has been a pleasure for me. I’ve learned something. So in my own selfish way, you’ve made me better. So thanks for the coaching.
Michael Kiolbassa: Well, thank you, Neil. It’s an honor to be on your show. And I’m very grateful for the opportunity. And y’all are great friends, and we love you guys a lot.
Neil Dudley: Yeah, that’s right. I mean, good friends are good- I love wrestling with my friends. I mean, that battle, it’s fun. There’s enough opportunity out in this world for everybody to succeed. Somebody else does not have to fail for me to have success. We can all succeed. All right, so come back for the next show, folks. We’ll have all these show notes there. Go follow them. And Mr. Kiolbassa, thank you so much, and we’ll see you at the next food show.
Michael Kiolbassa: Thank you, Neil.
Neil Dudley: Hey, everybody, thank you so much for listening to this episode of the Pederson’s Farms Podcast. It’s been a blast bringing this to you. And I sure hope you enjoyed it and found value. If you did, tell a friend, share it out on social media, hit that subscribe button or go check us out at pedersonsfarms.com. We sure hope you do. And thanks for being here.
Visit us online: www.PedersonsFarms.com
(0:30) – Introducing Michael
(1:53) – Michael background and his company: Kiolbassa
(2:53) – Why do we as an indsutry try to soften the term ‘slaughter’?
(7:19) – Why did you decide to go into banking?
(10:44) – How did you build your brand?
(18:09) – Would you prioritize marketing or sales?
(20:22) – Why sausage?
(21:14) – How do you keep the VC money out of your business?
(23:51) – Sausage as a sustainability play
(27:29) – How do you build a team?