Turkey IN THE Raw.

Shelton's Poultry -- always ahead of its time -- began selling organic products in 1924 and now has a growing niche in the natural foods industry

SHELTON'S Poultry Inc. did not just jump into organic and natural foods.

Back at the company's founding in 1924, the Shelton family avoided pesticides and chemicals because it interfered with the raising of its prize-winning turkeys. Now the Pomona firm is one of the nation's largest producers of organic poultry products, distributing to natural-food stores and upscale restaurants.

As Thanksgiving approaches, it's obviously a busy time for Shelton. But whole turkeys make up only one-fifth of the business. The rest is chicken and related products, like chicken broth or turkey sausage that can be used year-round.

Owner Gary Flanagan's message is simple. Turkeys that roam around the farm and are fed with natural grains are happier and healthier -- and therefore taste better -- than their counterparts caged up on turkey farms.

Flanagan operates the business with five of his brothers and sisters. The Flanagan family, which had been the major egg distributor to Shelton, bought the business in 1969 when the last Shelton family heir died. The Flanagans stuck with the pesticide and chemical-free environment. (A few years later, they bought a nearby chicken processing plant.)

"We started marketing our chickens and turkeys as natural foods 25 years ago, back in the days when natural foods usually meant nothing more than pill parlors," Flanagan said.

With 50 employees and $12 million in sales last year, Shelton doesn't raise the turkeys and chickens or slaughter them. The company contracts with a turkey farm in the Fresno area and a slaughterhouse in Turlock, near Modesto.

Upscale clients

In L.A., its products can be found on the shelves of Whole Foods Market and in high-end restaurants like the Pacific Dining Car.

Shelton's operation goes beyond the now-popular "free-range" concept. The poultry it sells is "natural" in that no animal proteins are injected into the food supply and no antibiotics are used. Also, Shelton does not use hormones and preservatives on its turkeys or chickens. They are "certified organic," which means no pesticides are used either at the poultry farms or at the facilities of suppliers.

Flanagan is the first to concede that raising poultry this way is far less efficient and more expensive than traditional poultry farms. That's why, barring a huge change in the American consumer mass market, Shelton is unlikely ever to compete head on with, say, Tyson Foods. An organic turkey costs about 30 percent more than a traditional turkey.

But within its niche of organic and natural poultry products, Shelton is a major player, according to Alan Richman, editor of Whole Foods Magazine in New Jersey. Richman put the natural and organic poultry market at $100 million, which would put Shelton's share at more than 10 percent.

"There are thousands of players in this market, but our surveys have found most are extremely small, with sales under $10,000 a year," Richman said. "Shelton's is one of the few major players."

Major challenge

The biggest challenge confronting Shelton and other industry players is growing the market. "Most people don't know that these kinds of meat and poultry are available," Richman said. "They don't know about the differences between free-range and regular poultry, between organic poultry and poultry using pesticides."

A federal law passed two years ago allowing meats and poultry to be certified as organic should help, but that may take years to have a sizable impact.

In the meantime, Flanagan relies on word-of-mouth.

Mike Green, general manager of the Pacific Dining Car, says his customers notice the difference in taste and texture right away. "If you put Shelton's side-by-side with turkey or chicken from one of the mass-marketers we used prior to the switch 15 years ago, the difference is unmistakable, even if it is more expensive," Green said.

Flanagan has already ordered 200,000 turkeys for this Thanksgiving. If they're not sold, they will be frozen in the company's storage shed near its Pomona headquarters. Which raises another challenge: finding enough capital to expand Shelton's physical plant.

"We're really squeezed in tight here, without proper offices, break rooms, and the like," he said. "We have the business to support the hiring of more people, but we've got nowhere to put them if we did hire them."

The Flanagans have been planning to build a larger facility, but are unable to obtain the $5 million in up-front capital cost to finance the expansion. "We hope to get that off the ground in the next year or two," he said.

Spotlight

Shelton's Poultry Inc.

Year Founded: 1924 (Under current family ownership since 1969)

Core Business: Procuring, processing and selling of "free-range" and organic poultry products.

Revenues in 1993: $8 million

Revenues in 2000: $12 million

Revenues in 2001 (projected): "On track to equal or better last year."

Employees in 1993: 40

Employees in 2001: 50

Goal: To continue to diversify product offerings and grow the market

Driving Force: Gradually increasing consumer awareness of natural or organic products