Iowa Public Television


Grocery Store Chain Enters The Cattle Business

posted on January 24, 2003

Industry analysts project total meat production will decline for the first time in 22 years. The biggest drop will be in the beef sector. A combination of burdensome supplies and last year's drought culled herds and is curbing production. Beef output is expected to decline 5 percent in 2003.

Markets have responded with higher prices, although levels in recent days have retreated. And therein lies the lesson for many producers. Markets can be fickle and high prices may not be available when cattle are ready for slaughter.

For that reason cattlemen, perhaps more than producers of any commodity are becoming adept identifying markets into which they can sell their branded products. Nancy Crowfoot explains.


Grocery Store Chain Enters The Cattle Business

It is no longer a generation that cooks a roast in the oven for 3 or 4 hours. However, today's cooks can still savor such an entree … or a brisket … or even pot roast … but they now come partially or fully cooked and are ready in minutes rather than hours.

More than 470 new beef products were introduced last year, in what seems to be an attempt by the beef industry to regain decades of a lost market share due in part to busy working consumers who no longer had time to cook.

Also, many health conscious consumers had migrated to perceived leaner entrées, especially to chicken … which also came in customer friendly cuts including, boneless and skinned.

Over the years, consumers have spoken with their pocketbooks … as the beef industry watched demand for its product drop more than 40% in the past 20 years. The National Cattlemen's Beef Association, concedes the beef industry was a bit slow to respond to the changing times.

Mark Thomas, VP of Consumer Marketing, National Cattlemen's Beef Association: "We were a commodity business and the mentality of the beef industry, or the go-to marketing strategy, was ‘we'll produce you, you buy it.' That doesn't work anymore."

"And we in the beef industry probably ignored the demand side of the equation for too long of a time."

"The demand side of the equation" is now such a popular place to be, that every segment of the beef industry is vying for a market share.

For example, many ranchers are raising antibiotic-free, naturally fed cattle and selling direct to consumers.

They eliminate the middleman and earn a little more return on their initial investment.

Meatpackers are developing their own branded products … often providing stores with pre-packaged, case-ready products.

Livestock breed associations, including Angus … and Herefords, have their own certified programs touting that consistent breeding traits in their animals results in a consistent final product.

The "new" beef may be a response to consumer demand, but the growth in branded products – as well as restaurant orders -- has put a strain on a part of the beef business still seeking quality commodity beef – some retail grocers.

Ken Chapin, Meat Director, Yokes Foods, Spokane, Washington:

"I started 30 years ago in the meat business and over these 30 years, I've seen the quality of USDA choice meat, the standards, dropping.

Over the last few years, especially when the branded programs became available to other companies and other stores, I noticed that commodity beef standards were becoming secondary. They were sorted at the processing plants. We were getting the leftovers."

Tired of being stuck with the "leftovers" forced Yokes Foods of Spokane, Washington … to look into branded beef programs the grocery chain was reluctant to join.

Ken Chapin "There's been branded beef products on the market for several years and growing continuously. We have chosen to not go on those products of the extent of a price increase that would have to go to our customers.

I was uncomfortable with raising the price and not being competitive with other markets around us."

However, Chapin says the store did hook up with a branded product through the American Hereford Association's, Certified Hereford Beef program.

The program insured competitive retail pricing … and also allowed the store to buy its own livestock from local Hereford ranchers. Yokes then started it's own cattle company.

Ken Chapin, Meat Director, Yokes Foods, Spokane, Washington:

"Getting into the cattle business for Yokes was a side step from what we were originally trying to do. We were trying to get the best beef for our customers at competitive prices. As we began the Hereford program and realized how much Hereford beef was raised in this local area in the Northwest we wanted to buy that beef.

That way we can keep our hands on, all the way through the process."

They can also promote that process as being "homegrown."

TV commercial: "Raising our own local herd of the finest Hereford beef cattle in the country on ranches right outside Spokane."

Yokes Foods bought its first 215 head of cattle in August of 2001 and has gradually increased its purchases with the goal to fill its entire retail need.

It is an investment in time and energy, but well worth it says the National Cattlemen's Beef Association. The Association is confident branded products … as well as the new convenience packaged meals … will be around for a long time … even if consumers must pay a little more for some of the products.

Mark Thomas, National Cattleman's Beef Association: "For the last two years, we've seen an increase in consumer demand for beef, which means that consumers are willing to spend more for beef. It is a real success story.

The trick in the industry is going to be, can we keep that demand picture rolling?"

The trick Thomas says, is to continue developing and marketing more specialized products. He estimates that 15% of all beef produced is used in branded products. It is a niche, he adds, with room to grow ... if the once "commodity" mind set of a multi-faceted, yet historic, industry can learn how to work together for mutual benefit.

Mark Thomas, Vice President of Consumer Marketing, National Cattlemen's Beef Association "In the beef industry, because we are a land based industry and there are almost a million individual beef producers, I don't believe we'll ever get to vertical integration. I don't think it's possible.

But we can communicate better between segments."

Thomas calls it "vertical coordination" -- creating partnerships between producers and grocers for example -- and it's already occurring.

TV commercial: "Aww, the Yokes meat cutters come out to help out every once in awhile, but they ain't real cowboys. "Ain't it about time you guys went back to the store?"

But only time will tell if such promotion – and changes in the way the beef industry operates – will spell long-term success for the cattle producer …the processor … and the retailer.

For Market To Market, I'm Nancy Crowfoot.


Tags: agriculture animals beef cattle groceries livestock meat news