The prospects for the retail-beef business look bright even with a dim economic outlook, experts say.
As global financial bells signal warnings of alarm, U.S. beef consumers want the basics — price, quality, consistency and convenience. That was the resounding message from a group of retail-food experts during a panel discussion at the 2008 BEEF Quality Summit in Colorado Springs, CO.
“There's no question consumers are facing difficult times,” says panel moderator Matthew Enis, fresh market editor for Supermarket News. “It's been a brutal year for many Americans — whether or not they've taken a direct financial hit.”
Enis says consumers looked at what's happening on Wall Street and immediately tightened their budgets. He notes supermarkets are better positioned to survive prolonged recession than many other foodservice businesses, in part due to the modern supermarket's wide array of service areas.
“Sales in prepared supermarket foods, especially the deli section, have held steady,” Enis says. “This is a sign people still want convenience.”
But the convenience offered at the local supermarket deli might be coming at the expense of foodservice. Ennis says family-type restaurants, in particular, are taking the brunt of the blow as discretionary spending dries up and consumers balance their food and entertainment budgets.
Base is commodity beef
Kelly Mortensen, corporate meat, deli and seafood director with Associated Food Stores in Salt Lake City, UT, says his stores sell nine varieties of beef with 157 different slot offerings. These include brands like Certified Angus Beef®, Maverick Ranch natural beef, and Creekstone.
This past year, 56% of the sales were USDA Select beef, with 13% Choice, and 28% “specialty beef” with about 3% organic. “Commodity beef still remains our base,” he says. “I doubt that will change anytime soon.”
Mortensen says that while meat cutters in their stores are professionals, it's a workforce that continues to dwindle. This creates problems in finding trained and experienced workers to fabricate cuts for the meat case, as well as providing shoppers with knowledgeable advice on cooking and serving trends. He says dependable in-store assistance is critical to helping people with their buying decisions.
“Compared to the other meats, beef is quite technical to cook,” he says. “If you don't cook it right, you're in trouble. And if it's cooked wrong, it spells trouble for everyone in the beef-supply chain. The more education about beef we can get out there, the better.”
Mortensen says his store managers work hard to meet the constant informational demands from shoppers, but it takes an experienced pro to answer the barrage of questions they receive. “We give them all the information we can,” he says. “But doing so takes time, which is money to us.”
The beef checkoff has been a tremendous help in raising consumer awareness of beef selection and preparation, he adds. He considers the beef industry's “Beef Made Easy” program brilliant.
And, Mortensen says, outdoor grilling isn't just for summer anymore. This is a trend in beef merchandizing — a direct result of the maturing “baby boom” generation — that the beef industry as a whole needs to watch.
“Even in northern climates, grilling is a 12-month event for most American households,” he says. “And, beef is the meat of choice for the grill.”
All beef not equal
Randy Ong, director of meat/food service, Sunflower Farmers Markets, says beef merchandising is all about the end user. His stores specialize in selling “natural” beef products from California's Harris Ranch.
“Even with natural-beef customers, it's all about value — quality vs. price,” Ong explains. For his customers, though, there's a great deal of confusion about the different levels of “natural” — a definition Ong says eludes the customer. Meanwhile, there's a demand for transparency as consumers want to get beyond the advertising and marketing rhetoric while continuing to question what's in a food product and how it was produced.
“What they're really looking for is some kind of third-party verification or assurances to back up the production claims made,” he adds. “It's all about getting more information about the product.”
He says this verification must go all the way back to the individual producer. The typical natural-beef customer wants to know the “story behind the label” — more so than a commodity consumer.
Ong says that educating the consumer on how to prepare and cook beef is very important. There's an increasing need for more information at the store level, he says. “But, we have to prioritize what's on the labels, which are getting too crowded,” he says.
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Ground-beef demand growing
Randy Irion, director of retail marketing, National Cattlemen's Beef Association, worked on the 2007 National Meat Case Study. This landmark study examined the U.S. fresh-meat case to identify trends and changes as well as areas of opportunity. It included more than 123,000 meat packages in 121 retail stores in 48 key metro markets across 34 states.
Irion says that while the average number of beef stock keeping units (SKUs) per supermarket decreased 3% from 47.3% in 2004 to 45.8% in 2007, the average number of ground-beef SKUs per supermarket increased 9% from 12.1% in 2004 to 13.2% in 2007.
He says beef and ground beef's shares of self-serve meat case linear feet remained steady at 19% and 8%, respectively, from 2004 to 2007, and total fresh beef packages account for 27% of linear feet in the self-serve meat case.
Natural beef is still a small but growing share of the total beef market. “The percentage of ground-beef packages with natural claims on the package increased 257% (from 7% to 25%) from 2004 to 2007,” Irion says. The percentage of whole-muscle beef packages with natural claims on the package increased 100% (from 2% to 4%) from 2004 to 2007.
He added that antibiotic-free, hormone-free and vegetarian-fed are the three most common natural claims on beef packages.
The meat case survey shows store brands of both whole-muscle beef and ground beef make up a significant part of the meat case.
Meanwhile, some large retail chains are seeking a stronger identity by embracing private-label meat brands.
“There was a decrease in supplier-branded whole-muscle beef cuts while supplier-branded, ground-beef packages remained steady,” Irion says. “A brand can become shorthand for a promise to consumers, such as having a specific quality of tenderness.”
The case-ready portion of supermarkets also increased — 27% of whole-muscle beef packages were case ready, up from 23% in 2004, and 67% of ground-beef packages were case ready, up from 66% in 2004.
He adds that consumer information is vital in any economic climate to help communicate the many benefits of beef and to improve demand.
Clint Peck is director, Beef Quality Assurance, Montana State University.