Meat Matters

Gourmet Burger Boom Offers Big Opportunity

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I recently visited my son in Southern California and he took me to Father’s Office, an upscale pub in Santa Monica. The place was jammed with people mostly his age (late 20s), but what hit me was the smell of great food. It seemed everyone was eating burgers, so I ordered the Office special. It was delicious. It cost $12 but I felt it was value for my money.

Millions of Americans are having a similar experience. The gourmet/specialty burger business is booming. Relatively new chains such as Five Guys Burgers and Fries, independent eateries and even white-tablecloth restaurants are using high-quality patties with exotic additions to create upscale sandwiches.

These sell at much higher prices than the basic sandwiches offered by the fast-food giants, with prices up to $15/sandwich. Consumers appear happy to pay such prices, as they regard gourmet burgers as “indulgence on the cheap.”

The new specialty chains share some common components. Most use fresh (never frozen) beef and cook to order. Many use a combination of trim and end meats, rather than just manufacturing beef. Other eateries – from micro-breweries to upscale restaurants – offer gourmet burgers that rival a fine dining experience, but at an affordable price.

Briskets, short ribs, rounds, sirloins and Wagyu beef are being used more and more in these hamburgers. One result is that some hamburger chains have taken patronage from casual dining chains such as Applebee’s, Ruby Tuesday and Chili’s.

Americans’ love of all types of hamburgers continues and consumption has risen sharply in the past two years. Hamburgers represented a real value to consumers during the recession and still do.

You may have read stories about how more consumers turned to hamburgers to keep getting their beef “fix” and be able to afford it. Now the evidence is out.

Hamburger consumption has gone up considerably since 2009, says a new study by research firm Technomic. Its study shows that about half of today’s consumers eat a burger at least once a week, compared with 38% two years ago.

Burgers’ continued prominence on value menus is one reason behind the increase, and the value menu is a big part of the increase in burger consumption, says Technomic’s Sara Monnette. There are other factors at work, as the specialty burger craze has driven growth in a way that is almost defiantly separate from pricing, she says.

The better burger restaurants in the fast/casual segment have put the burger top-of-mind for consumers. Even the quick-service chains have begun to respond and focus portions of their menus specifically on quality perceptions, she says.

Some of the newer specialty chains have ambitious expansion plans and are taking business away from casual dining chains, says Bloomberg News. Five Guys, founded in 1986, for years, had just one restaurant in Arlington, VA. Its owners in 2002 decided to expand through franchising.

The chain now has 800 stores in more than 40 states and four Canadian provinces and intends to add 600 locations in the next two years, says CEO Jerry Murrell. Five Guys uses only fresh ground beef, largely an 80/20 mix (beef and fat) and mostly a mix of trim and end meat. It is also renowned for the quality of its French fries.

Another specialty chain, Smashburger, based in Denver, was founded in 2007. It has 100 stores and is looking for new locations in Miami and Los Angeles, says CEO David Prokupek. Smashburger uses only fresh Certified Angus Beef®.

All this is great news for the beef industry. Producers involved in specialty beef programs, be they grass-fed, organic or natural, now have even more ways to get higher returns for those parts of the carcass that go through a grinder.

Steve Kay is editor and publisher of Cattle Buyers Weekly (www.cattlebuyersweekly.com). See his weekly cattle market roundup each Friday afternoon at beefmagazine.com.

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Steve Kay offers a unique, big-picture perspective on the North American meat and livestock industry.

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Steve Kay

Steve Kay is editor and publisher of Cattle Buyers Weekly (www.cattlebuyersweekly.com ) subscription newsletter, the number-one marketing and business newsletter for the meat and livestock...

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