Lexington, KY - Since Robert Hall Jr. purchased Farmers Feed Mill in the 1960s, Lexington-based Hallway Feeds has been witness to the ever-changing landscape of Kentucky's agriculture and equine industries. Business Lexington writer Kara Keeton recently interviewed the company's vice president, Lee Hall, to get his perspective on his business and his home state.
Most people in the agricultural community know quite a bit about Hallway Feeds. Can you offer some history for readers who may not be familiar with your company?
LH: Absolutely. If they are from Lexington and the Bluegrass area, they may know our company first as Farmers Feed Mill. In 1964, the company was bought by the current ownership and was really a company that was very small but servicing predominantly the livestock industries in Central Kentucky. The early '70s brought a time where there began to be an interest in improving what we know today as equine nutrition. (These feeds) needed to be custom manufactured and we had the capability, the equipment, to be able to do that.
The Hallway Feeds marker was developed in 1983. We felt like we needed a brand, because we felt like we were beginning to do some proprietary-type products. We needed a brand that would allow us to expand the products' identity outside of the local market. If you go a 50-mile radius outside of Lexington, nobody knows Farmers Feed Mill. I mean, there are probably a 100 "farmers feed mills" around the United States, but there is only one Hallway Feeds. So outside of this market that is really what has allowed us to expand that name.
Tell us more about the ownership of Farmers Feed Mill and Hallway Feeds. It is a family-owned operation?
LH: That is right. That is something that we are really proud of. In fact, we are the only remaining and largest family-owned and locally operated full-service feed operators dedicated to the Thoroughbred industry.
There are a number of small operations here in Central Kentucky who have less capabilities. There are other companies that have the capabilities to do what we have, but they are not locally or family owned anymore. So that makes us really unique in terms of our competitive situation here locally. We are the only people you pick up the phone and you are going to get somebody that will make a decision that will be made right there at the local level.
And then nationally where we compete, we are the only one because we are competing with brands that are owned by publicly traded companies, large corporations that don't have the same commitment to the industry, the same ties to the heart of the Thoroughbred industry that we do. So yes, it is a very unusual position we are in.
What is it that makes Lexington a unique location for Hallway Feeds?
LH: I think there is something about having Lexington, Kentucky on a package. If you are a horseman in Florida, California, New York or wherever you may be, "Lexington, Kentucky" is automatic credibility to your product. Because Lexington - I don't think it is really arguable - has been and still is fortunately the heart of the North American thoroughbred industry.
...Having Lexington, Kentucky, on your business card when you introduce yourself, you are automatically a credible person in the industry. Then it is up to you to prove that you can deliver on the commitments that you make. Fortunately, I think we have been able to do that because of the growth and success we've had in our business.
Hallway has grown overseas and has expanded beyond the United States. Tell us how that growth has developed and how many countries you are working in now.
LH: We had the opportunity about ten years ago to make some contacts with a manufacturer in the United Kingdom that wanted to expand their professional Thoroughbred line. They had the capability of making very high-quality feeds, but wanted to become more of a force, more of a player in the professional area of horse feed manufacture.
We were fortunate enough to be introduced. They saw some real synergy in the types of products we were making that were new and different to the Anglo horse community. So we took those products and we did Anglicize them a bit to make them look as though they were English products. So what we've been able to do as a small family-owned company with limited capabilities in terms of budget and promotional dollars, is we've said to them, 'Look, you are going to manufacture the product - not the brand, but the product.' So for instance, in the United States, our Mac Daddy racing feed is called Race 13, it is Hallway Race 13. In England, (it is) Saracen Race 13; in Ireland, it is Bluegrass Race 13; in New Zealand, it is NRM Race 13; and in South Africa, it is Capstone Race 13.
So we've tied the company's brand name to a particular product name and then, typical of the old Kentucky Fried Chicken model, they pay us a royalty for the "seven herbs and spices" we ship to one of these overseas venues. We provide formulas whereby the products are made, and the impetus to market the product falls firstly on the company whose brand name is tied to the product, and secondly on us to support them. So it has allowed a small company to grow its brand, rather than moving into England to sell Hallway Feeds. We aren't doing that. We are selling a Hallway idea, but we are making it an English product, or an Irish product, or a Kiwi product, or South African product, and that has really allowed us to have a neat business model.
We are looking at other countries. Currently we are exploring some opportunities in Turkey, and then outside of that, we ship a significant amount of product overseas. I would say 5 to 10 percent of our total tonnage is shipped overseas, with Japan being our largest market. We are also shipping into a number of European countries and the Middle East. So there are probably eight or 10 countries we are shipping into out of Lexington pretty regularly, so that is exciting as well.
Talking about overseas and the role of Lexington in the horse industry worldwide, the World Equestrian Games are coming to Lexington next year. Do you see this as another opportunity to reach out to a new customer base?
LH: I think, long term, the ancillary benefits of the World Equestrian Games being here will be more important to us than the short-term benefits. What you are going to find is that these are highly professional teams and riders. They aren't going to want to change a lot.
They are going to bring their own veterinarians, they are going to bring their own feeds even. They are going to ship them into the United States from the venue they are coming from because (if) you know you are coming to compete in a world competition, why are you going to change your nutrition program at the last minute? But it will give us an opportunity to introduce ourselves to some professional folks: the riders, the consultants and the veterinarians from around the world, and let them know about our capabilities.
Long term though, and I think what Lexington is going to see are going to be the ancillary benefits of the World Equestrian Games being here. Firstly, the Horse Park is being improved dramatically and is being afforded a significant amount more areas and facilities where they can have competitions on a weekly basis. Then you are going to have people that are going to start coming into Lexington who might be looking for a company like ours that can supply them with something back on their home turf. But the average Lexingtonian is going to benefit from the ... development, the road infrastructure, and all the things that are going to be here after the two-week period when all these international visitors are gone.
What do you want people to know about the role the equine industry plays and how we should support it here in the state?
LH: I think regardless of who you are, whether you have been a native Kentuckian like we are or you have been here a short period of time, you realize that a signature industry in the commonwealth of Kentucky is the Thoroughbred horse industry. It has been here for 200 years, since the state was founded. Hopefully it will be here for our families to enjoy.
I'm afraid that as a state though, it is pretty obvious to a lot of people in the local area here that we are not doing a good job to support it. ...We need support from our state legislature in terms of alternative gaming. I know there are lots of people that are opposed to that on moral grounds. I'm not a gambler, but I see the benefit of this when I look at the other venues that we sell horse feeds into.
Thirty-five to 40 percent of our production goes somewhere else in the United States. A significant amount of that is supported by purse structures from alternative gaming we are losing ground to. And our breeders are losing ground as a result of that. Kentucky will continue to be the heart of the racing industry as long as the stallions we have today stand here. But when you need to move a stallion from Kentucky to another state to take advantage of dollars being provided by state breeder incentives that we are not providing, then the flood gates will open and we will rue the day that happens in Kentucky.
I would encourage everyone to be encouraging their representatives, their state senators. And hey, I know there are people that are opposed to expanded gambling, but give those folks who want to have this as something they want to spend their leisure dollars on the opportunity to do it. It is a business decision now. We are sending, what, three quarters of a billion dollars out of the state of Kentucky to Illinois each year? Indiana, and now Ohio, are putting video terminals in. You've got West Virginia. You are building their roads, you are building their schools, you're supporting their tax base, and we really need to do that at home.
Is there anything else you would like to say about the equine industry or Hallway Feeds and where you see your future going?
LH: We are very excited about the future of our company. We are a very small company in terms of the number of employees we have, we are a very nimble company. We are one that is able to move toward opportunities, and we have been given a lot of those opportunities.
The short term (success) of our business is going to be driven by what is going on here in the next few weeks with our legislative leaders in Frankfort. In the long term, we will figure out ways to make that work. We may have some ups and downs depending upon what the commonwealth does, but we'll get through that.
We are seeing phenomenal opportunities out there for us, for the reputation we've created for our brand and our company, the job our great group of employees do every day. You know we'll find ways to persevere and improve our position as a company. I just want to see it done with the support of the commonwealth and with us being a commonwealth of Kentucky business - one that we can always have an address here.