Working hard for the money

Apr 3, 2009



Working hard for the money

What has the Cattlemen’s Beef Board (CBB) done for you lately? “As much as they possibly can,” would be the answer. With cattle prices trading on the low end of the modern trading spectrum, it’s assuring to know that CBB is still keeping beef in front of consumers.

However, the ground beef market is where most consumers have found their comfort level. The good news is we’re selling more ground beef for more money than ever. The bad news is that ground beef isn’t what drives the beef cutout value and ultimately raises the price of cattle. The premium cuts simply aren’t selling as well, and that is where a lot of carcass value lies. Chucks and rounds are trading well, at least in relationship to the middle meats.

So what’s CBB doing about it? Actually quite a bit. With the limited dollars they have to run the beef promotion operation, they have done a great job leveraging the “Beef It’s What’s For Dinner” slogan with other food manufacturers.

Kraft Foods, A1 Steak Sauce, Sutter Home’s “Build a Better Burger” contest, and Anheuser- Busch are all helping sell beef through cooperative marketing programs. There are a host of other partnerships in the works and most of them don’t cost anything other than lending them the “Beef It’s What’s For Dinner” slogan, which has developed a lot of brand equity. Many of these manufacturers attach a coupon providing a discount on beef products and, fortunately, pay for the coupons out of their own pocket. CBB is also expanding their discount coupon programs with the help of these partners.

They will be distributing 60 million coupons for beef this year which is five times more than a year ago. CBB is also working with retailers and attempting to teach them better ways of selling beef. I spoke with Don Stewart, CBB board member and a beef importer. He was careful to point out that his company sells 90 percent domestic product while importing some lean manufacturing beef mostly for foodservice.

Anyway, Don said that today, beef cattle are bigger and therefore produce large traditional cuts which may not be consumer friendly. Those 16-inch ribeyes are more difficult for retailers to sell. He said they have a new program they call Beef Alternative Merchandising. They teach retailers how to cut more appealing portions. For instance, they will show retailers how to peel the cap off the ribeye and cut the loin down the center. Then they can cut smaller but thicker steaks. The finished product is more like a tenderloin than a rib steak.

He also said they are teaching retailers how to sell middle meats again through a retail price matrix program that illustrates what kind of yield and gross margin they can expect on the primal. When the middle meats were more expensive, retailers couldn’t sell them very aggressively. Now that the middle primals are at very low values, retailers can sell them with extremely good margins. The problem is that many retailers forgot how to market the products.

Another CBB promotion is teaching consumers to buy whole primals and cut them on their own. This is how I’ve purchased beef for the past 15 years. Today, you can buy a top loin for $4.75 and cut your own steaks that would sell for $12 in the retail meat case. This saves a lot of money, gives you a better product, and has very little waste.

CBB is also continuing their research in muscle profiling, which is how they came up with the Flatiron Steak. These new cuts from the chuck and round have added quite a bit of value to the beef carcass. Don told me Kroger Stores, one of the nation’s largest food retailers, test-marketed the Flatiron Steak in one region and liked the results so well that they offered the cut on a national basis. I suppose it’s like anything in business, show someone how to make a buck, then let them run. One thing that is reassuring is that beef has held its market share, claiming 52.7 percent of all meat sales. However, half of all beef sold is ground beef, which is essentially the lowest value product on the carcass. These value-added cuts that have been developed are one of the best things CBB has done. With their investment power reduced by inflation, these guys have to be creative with their spending. If the project is a success, which I believe it is, the industry shouldn’t have any problems funding the program with a couple dollars a head more. When consumers are ready to spend again, this cattle market could get awfully good. — PETE CROW