Iotron Technology Inc.


000914 Red Oak Hereford Farms Beefs Up Investor Relations

September 18, 2000

Red Oak, IA - Founded in 1997, Red Oak Hereford Farms, Inc. is a developer and marketer of premium, branded, fresh beef and premium precooked products to retail, food service, mail order and e-commerce markets. As Red Oak progresses from development-stage to revenue generation as an international presence in the value-added consumer food product category, the company has retained Jordan Richard Assoc. to launch a North American investor relations campaign.

Red Oak Hereford Farms is the first company to pursue a “branded premium beef consumer strategy,” using fresh-cut, precooked and deli beef from Hereford and Hereford-English cross cattle, known the world over for superior eating. “Making solid inroads into the domestic market, with recent product placements in retail chains and wholesale club stores, Red Oak has also seized upon significant opportunity in Europe, capitalizing on a window that appears to be wide open,” says Madeleine Franco, president and chief executive officer of Jordan Richard Assoc.

What's Your Beef? Shouldn't It Be Red Oak Originating in England, Hereford cattle, easily recognizable by its characteristic white face, and renowned for a consistent genetic profile that delivers superior eating quality, has been the hallmark of the American West since the early 1800s.

A number of years ago, lifelong cattle producers Gordon Reisinger and John Derner, recognized that in many ways beef producers had lost their focus on providing consistently flavorful, juicy, and good-eating beef for the center of the plate. In cooperation with the American Hereford Association and world- renowned meat scientist Gary Smith of Colorado State University, they set out to change this disturbing trend. The Certified Hereford Beef Program was born, and for the next two years much work and capital went into developing a program that became well recognized in the industry. Subsequent market research identified Red Oak Farms, perceived as being more “wholesome,” “natural,” and “healthy,” as having significant consumer appeal as a brand name.

Red Oak Hereford Farms, Inc. previously entered the marketplace through the marketing distribution, and promotion of Red Oak Farms' Certified Hereford Beef, the CHB name, logo and program for which were created by and are the property of the American Hereford Association (“AHA”). In the fourth quarter of 1999, the AHA engaged in unacceptable competitive action, and the company experienced erosion of its customer base as a result. Red Oak responded by executing a plan to increase its own brand equity by instituting a proprietary United States Department of Agriculture (USDA)-certified program-Red Oak Farms Premium Hereford Beef-for its fresh boxed beef product, changing the name under which the product is sold to “Red Oak Farms Premium Hereford Beef.” The Red Oak Farms retail label is the outgrowth of this program.

The same commitment and desire to see BEEF regain its former status is a major driving force behind the company and its product development and marketing philosophy. As a result of extensive research and development by Red Oak Hereford Farms, and the company's stringent quality control efforts, new and innovative beef products are finding their way to consumers under the label of Red Oak Farms. Its precooked and specialty snack products now having garnered awards from the American Tasting Institute for three consecutive years, Red Oak Farms is rapidly becoming the standard by which others are judged.

Vertical Integration And Accountability Ensure Quality Red Oak Hereford Farms, Inc. currently operates six subsidiaries engaged in the beef and branded consumer product marketing business. The company develops, markets and sells Red Oak Farms Premium Hereford Beef and Red Oak Farms premium food products. Additionally, it sells and distributes the award- winning beef jerky -- My Favorite Jerky. Through Red Oak Hereford Farms Europe, the company engages in international commerce, manufacturing and distributing My Favorite Jerky Beef Sticks, smoked salmon and other gourmet-quality seafood and precooked products.

The company's core strength is a unique, vertically integrated, beef procurement/management process that differentiates Red Oak from other beef and premium food marketers. This vertical integration is based upon accountability and helps ensure consistent quality throughout the entire procurement, production, processing and distribution stages.

The company procures cattle through Midland Cattle Company and monitors the feeding of cattle, according to a strict quality-control regimen, through a network of associations with cooperating feedlots and farmer feeders. Red Oak Farms then oversees cattle from harvest through fabrication, to delivery to value-oriented, upscale retail supermarkets, high-end restaurants, export accounts, and direct sales through premium mail order and Internet channels.

While Red Oak began as a wholesale meat purveyor, the company is placing new emphasis on branded marketing by providing attractive point-of-purchase materials and new beef counter organization methods, and bringing to market an additional line of processed products intended to serve the precooked, home meal replacement (HMR) and convenience food lines, all of which are rapidly expanding in the U.S. and abroad.

A Menu For Success

Red Oak's existing product categories include fresh boxed beef (branded, unbutchered primal cuts); fresh cut beef (Red Oak Farms Premium Hereford Beef Steaks); value-added precooked entrees (family and/or club sizes as well as individual-serving packs of various favorites including Pot Roast, Bar-B-Que Ribs, Bar-B-Que Beef Brisket, Beef Tips and Gravy, and Sirloin-Tip Roast); specialty snacks (My Favorite Jerky and Beef Sticks), and a deli line. In addition, Red Oak Farms is the exclusive U.S. distributor for the Royal Salmon of Norway brand of premium smoked salmon.

And Now... Presenting The “Best Of Show” In recent product demonstrations, the company's precooked beef entrees were exceptionally well received among consumers. In-store consumer sampling of the company's precooked beef entrees invariably yields a plethora of positive commentary and brisk product sales. The company's in-store taste of success comes on the heels of Red Oak Farms Beef Ribs and Pot Roasts having won "Best of Show" 2000 awards from the prestigious American Tasting Institute (ATI) at an awards presentation held last March at New York City's Carnegie Hall. This year's field of entrants was the largest held in 14 years-with 56 national brands competing along with 84 regional brands.

Consumers consistently cite the excellent flavor and texture of all four product offerings, with the Red Oak Farms single-portion items (4 individually wrapped 6 oz. portions) garnering rave reviews among senior citizens and singles for convenience and ease of home preparation. Red Oak Farms entrees go from refrigerator or freezer to hot and ready to eat in as little as four minutes. Consistent with the ATI's verdict, many barbecue aficionados have commented that the lean rib meat cooked with Cookies Barbecue Sauce was the best that they had ever tasted.

“We have always believed that the quality and taste of our products speak for the care that goes into them, and that if we could get people to try them even once, they would become buyers,” said Gordon Reisinger, president and CEO of Red Oak Hereford Farms. “With that philosophy in mind, we are exceptionally pleased with these initial product introductions, which we think make a strong statement for the company's potential and our ability to differentiate ourselves in the marketplace,” he said.

Coming To A Store Near You

The company's precooked entrees are currently available through several supermarket outlets and wholesalers, primarily in the Midwest, including SuperValu, Associated Wholesale Grocers, Fleming, and PDI, and the list keeps growing.

Red Oak also recently began shipments to approximately 57 Midwest and Northeast division Costco clubs of its precooked beef entrees in specially designed club-sized packages for busy families who enjoy great-tasting beef. Award-winning Red Oak precooked beef entrees available through the company's program with Costco include Red Oak Pot Roast (32-oz.); Boneless Beef Ribs with Cookies Barbecue Sauce (24-oz.); and Sirloin Tip (24-oz.). Costco in-store product demonstrations, partially sponsored by the National Cattlemen's Beef Association, which has endorsed Red Oak's precooked products with its quality mark, are supporting the roll-out.

Red Oak Farms precooked items are now slated for introduction throughout the Costco system, which currently operates 306 warehouse clubs, including 232 in the United States, 59 in Canada, eight in the United Kingdom, three in Korea, three in Taiwan, and a warehouse in Japan; as well as 18 additional warehouse clubs in Mexico with a joint venture partner. The company also operates Costco Online, an electronic commerce web site, at

With initial shipments having been made to a number of regional Costco “club stores” and large retail supermarkets, Red Oak Farms precooked entrees have made their appearance in packaging custom-designed for the wholesale club and warehouse store environment.

In The Bull Pen...

Having increased its ownership in My Favorite Jerky (“MFJ”) from 80% to 100%, Red Oak has completed development of a 4-oz. bag MFJ and entered into a production agreement with an established co-packer. Initial shipments of its new MFJ specialty beef snack product to the retail supermarket and mass retail trade classes are planned during the latter part of the third calendar quarter.

The European market represents 375 million consumers and, like the U.S., is characterized by major chains controlling large segments of the retail distribution channel. Red Oak has reorganized its European subsidiary, positioning Red Oak Farms Europe B.V. to capitalize on a burgeoning European economy. Recently having returned from visits to Holland, France, Belgium, and Spain John Schiering, Red Oak's chief operating officer, indicates that the company has made excellent progress into the European market, targeting such notables as Royal Ahold (Holland), Carrefour (France), and Campo Frio (Spain), to name a few. Red Oak will be introducing five precooked entrees overseas in October at the Sial Global Food Markplace Exposition (Paris), including three beef and two pork entrees.

The company has also arranged for the sale of Royal Salmon of Norway by Red Oak Farms Europe, with the expectation that smoked and marinated, farm-raised, premium quality salmon products will be in test-market stores during the fourth quarter.

Financial Results

For the second quarter ended June 30, 2000, the company posted a net loss of $1.6 million or $0.10 per common share on net revenue of $18.2 million versus a net loss of $832,952 or $0.06 per common share on net revenue of $16.7 million for the comparable quarter of 1999.

For the first six months of 2000, the company posted a net loss of $2.8 million) or $0.18 per common share on net revenue of $29.7 million versus a net loss of $1.8 million or $0.12 per common share for the first half of 1999.

Having invested nearly $20 million since inception, the company allocated considerable resources during recent periods toward supply chain and product development and package design, as well as initial costs associated with product launch and marketing support. This includes the establishment of inventory levels adequate for product roll-out and national distribution.


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