The ventures come in various forms. Some involve a heavy commitment of capital, sometimes requiring outside investment to build processing plants and other infrastructure. Others are almost virtual entities, utilizing marketing strategies.
As Producer David Miller explains in this profile, sometimes such strategies can be triggered from a considerable distance to the benefit of the producer, retailer and consumer.
03:08:31:04George Shadbolt, Shadbolt Cattle Company: " ...we didn't know what the end user wanted. We didn't care what the end user wanted. We were producing a product for a cattle feeder. His demands and requirements were very different than what the retailer and consumer want. So, our goal was probably, not what it should have been. We weren't focusing on the end user."
But ten years ago that all changed when Shadbolt was asked to raise animals according to a specific set of production rules. Those rules were not set by the feed lot or the packing plant but by the customer. In this case, the customer was Ukrop's, a small grocery store chain based in Richmond, Virginia. When all was said and done, the meat from cattle produced by Shadbolt ended up in the cooler 1300 miles away with a Ukrop's label on the package. Over time, this relationship with Ukrop's has become one of interdependence that stretches from his pasture, through the packer, and on to the grocer.
The basis for this customer-driven branded meat line has its roots in the diet of consumers of the early 90s. Consumption of red meat was in decline and much of the population was searching for a leaner product. Consumers had also begun to purchase protein commodities with less of a health stigma such as chicken or fish. At the same time, Jim Ukrop, the chain's chief executive officer, was concerned about the inconsistency of the beef being sold at Ukrop's 27 stores.
Al Oliver is Ukrop's Director of Perishables.
03:03:38:26 UKROP03Al Oliver, Director of Perishables:" So, I guess, in a selfish way, we wanted to resolve the issues we were having with meat suppliers and consistency and yields in our beef products, we also, wanted to provide our customers with a healthier product. "
For this "healthier" product Ukrop's turned to PM Holdings, also based in Richmond, which at the time was not the grocer's meat supplier but its seafood vendor. PM already had created a line of branded shrimp that was grown to Ukrop's specifications and then packaged as a case-ready product with a store label on the wrapper.
With the same quality standards in mind, PM created a set of production rules to guarantee taste, tenderness, and texture. Among other things, a limited number of cattle breeds would be acceptable; animals had to be selected and sent to the feedlot before a certain age; and before processing, all the animals would be fed a corn ration that included vitamin E to increase shelf life and maintain the meat's color after cutting. After processing the meat would be aged and sent to a central production facility where it would be easier to ensure consistent portion size. To guarantee the standards were met, rancher and processor alike would be required to keep meticulous records. This information would allow Ukrop's and PM to trace any piece of meat from grocery store display case back to the newborn calf.
Once Ukrop's gave its approval, PM began a search for producers who were willing to raise cattle to the program's exacting standards. In 1992, Ukrop's became one of the first grocery store chains in the country to have its own branded product created under what is now known as PM Beef Holdings "Ranch to Retail" program.
Today, fifty producers from Nebraska, South Dakota, Minnesota, and Iowa raise animals for the program that supplies one other grocery store chain besides Ukrop's. Of that group, 25 help meet orders on a full-time basis while 25 more are called upon as the need arises. Shadbolt is one of the 25 full-time producers. 75% of the animals he sells help meet Ukrop's annual meat demand of 8 million pounds. The Virginia grocer was so impressed with the results of the program it became partners with PM.
Because of the exacting standards and precise record keeping, the USDA allows all meat produced under the "Ranch to Retail" program to place a "process verified" seal on the product label.
Bruce Brooking is Vice President of PM Specialty Foods.
02:11:20:22 02:12:45:29 [00:01:25:07] UKROP02 Bruce Brooking Vice President PM Specialty Foods:" But this product is very similar, when we process it...That's one of the biggest things that happens, is almost you can set a rib-eye, next to a rib-eye, next to a rib-eye, etc....and see the same product, time and time again. "
The price producers receive for each animal can be locked-in months in advance, allowing ranchers to show bankers a more complete balance sheet, or they can be paid based on the 5-day futures price from the previous week. And every producer receives a minimum premium of $3 per hundredweight. The program also pays dividends by providing producers with carcass data gathered as each animal is processed.
So-called commodity beef is available at all Ukrop's stores but the bulk of the sales are made with the store's branded product. The extra work does tack a few pennies more on to the meat case price but Ukrop's reports that customers do not mind paying the difference. And Ukrop's is so convinced of the quality of the meat they support it with a money back guarantee.
For Ukrop's the relationship with PM has produced a satisfied customer. For Shadbolt, the relationship with PM, and ultimately Ukrop's, has yielded both a satisfied customer and a change in production philosophy.
03:15:41:04 UKROP06 Shadbolt: " I think that as a producer you'd better have an end user in mind when you start your production. You need a program like this to do that. The days of producing a commodity product are probably in the past. "
For Market to Market, I'm David Miller.