Cashing in on Chaga; small business gains from foraged wood product

Dugan is the co-owner of Icecube Enterprises, Inc., a small business situated in Remer, 26 miles southwest of Grand Rapids.

We know there is money to be made in the forests of Minnesota, but who thought it would be through a mushroom growing on birch trees? Its scientific name is inonotus obliquus, the Ojibwe call it wabadoo but to the growing number of harvesters that comb through the woods, the growth is known as chaga.

Most commonly consumed as a tea, chaga has been used in Russia, Asia and Scandinavia for centuries and is known for its anti-inflammatory properties. As a natural immune stabilizer, it supports the body to heal itself. Aside from anti-oxidants, chaga contains cholesterol lowering betulinic acids and disease preventing phytonutrients.

The mushroom itself can be found throughout central and northern Minnesota. It grows as conks on either dead or dying birch trees and arises from a wound in the bark. Convex in shape, the conks can be  anywhere from 1 to 30 inches long and present themselves with a pitted, cracked and charcoal like exterior. Force is necessary to remove the robust growths from the trees, and foragers typically use hatchets, hammers or mallets. The inside of the mushroom can range in color from light yellow to deep gold or reddish brown.

Folks who don’t want to venture out and pick their own chaga can buy the natural remedy pre-packaged from Icecube Enterprises, Inc. The business is situated in the tiny town of Remer, 26 miles southwest of Grand Rapids, and is co-owned by Ted Frick and Shane Dugan. Here, chaga is offered either chopped or ground, and as of late, in the form of triple-extracted tinctures. The tinctures themselves are infused with blackberry and paired with other natural health supplements such as resina calendula, pumpkinseed and plantain. 

Frick and Dugan ship their chaga globally and destinations include China, the Philippines and Japan. The company also found a consistent market in the Netherlands, Finland and Norway, where local chaga is largely diminished or contaminated with pollutants. The owners say they had their chaga tested and compared twice through independent laboratories, which confirmed that the mushrooms foraged in the pristine forests of Northern Minnesota are the purest available. And the cheapest. While European chaga sells for $70 per pound, Icecube Enterprises’ chaga retails for $25 per pound.

Diminishing resource

While the chaga harvest is possible year around, it is much easier during the winter months due to the lack of foliage and bugs. Five foragers supply Dugan regularly with chaga, but he knows this will soon come to an end.

“We know eventually chaga will be hard to find. The growth is so slow, it takes 15 years for it to mature,” he said. To guarantee the longevity of his business, Dugan needs to stretch his resource, hence the development of the tinctures. He’s able to produce about 5,000 tinctures out of 50 lb. of ground chaga and is experimenting with ways to preserve his present supply.

Resource supply preservation is of the essence as chaga sales are steadily climbing. Icecube Enterprises sells its product online, through their storefront in Remer and as a wholesaler to two large pharmaceutical companies. They also supply regional health food markets.

Angie Fox, manager at Life Preserver Natural Foods in Baxter, carries Icecube’s chaga in her store and can’t seem to keep it on the shelf.

“(Chaga) sales have escalated in the last year. I’m guessing they have more than tripled.” She also values Icecube’s foraging principles. “They take a lot of care in how they harvest the chaga, protecting the trees and protecting the existing chaga so it will continue growing.”

As the number of chaga consumers is on the rise, so is the number of chaga harvesters. State foresters attest that the foragers are making a noticeable impact as chaga is increasingly hard to find. Cheri Zeppelin, information officer with the Department of Natural Resources-Northeast Region, explains that individuals are allowed to harvest a small amount of chaga for personal use without a permit. As soon as larger amounts are collected and they have an intent to sell it, a permit needs to be obtained. Minimum permits are available for $25; up to 100 pounds of chaga can be collected with it.

The DNR does not inventory the amount of existing chaga, but experienced foragers estimate that the current supply in nature will last for the next 7 to 10 years.

Quality guaranteed

Dugan can identify four top reasons why people consume chaga: to counteract arthritis, high blood pressure, high cholesterol and diabetes.  Some consumers even take it to treat cancer. While Dugan is a chaga-evangelist, who consumes it regularly and swears by its healing properties, he is also careful to disclaim that the product is not intended to diagnose, treat or cure disease.

It does however comply with all aspects of the Minnesota Department of Health, meaning the production facility gets inspected three times a year, and is licensed by the Minnesota Department of Agriculture. That distinguishes Icecube’s chaga from 99 percent of the product that gets peddled on various classified sites online.

Obtaining certification was a lengthy and costly procedure, partly because it was unprecedented. Dugan and Frick viewed it as a fundamental step nevertheless since they are hoping to grow this part of their business substantially in the next years.

Growth potential

Icecube Enterprises, Inc., in itself is a conglomeration of multiple ventures: Antique store, furniture restoration, online auctioneer and of course, chaga distribution.

It started out as an online business in 1997 when Ted Frick, at that point Remer’s postmaster, began to sell coins and collectibles on eBay. As sales increased and storage capabilities at home ran low, he joined forces with postal carrier Dugan, who happened to be skillful at furniture restoration. Together they morphed the business into a brick-and-mortar presence on Remer’s Main Street in 2012. Asides from the owners, Icecube Enterprises has four full-time employees.

“In Northern Minnesota, you must be diverse. You cannot rely on foot traffic in our little town to sustain you through the winter,” Frick said as he described the basket of niche markets he serves.

When asked how the Chaga business got started, Dugan recalled that as a postal carrier he periodically encountered 50 lb. boxes going out, which listed the mushroom as its content. Curious about the matter, he researched the subject online and found a wealth of information. But most importantly, he had the Eureka moment: “I got this stuff on birch trees in my back yard.”

Frick, who recognized the potential for a successful business opportunity, encouraged Dugan to pursue it. He guaranteed financial support during the start-up phase along with the promise that Dugan “will work his butt off for at least five years and make no money,” but as a result will create the greatest business venture of his lifetime. 

Frick and Dugan’s chaga revenues have risen steadily at 20-30 percent for the past years. It currently  generates only about 5 percent of Icecube Enterprises’ total revenue, but it has the highest profit margin of all its products. With consumers constantly looking for natural alternatives to pharmaceutically engineered medicines, those proportions are sure to shift in the future.

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