Imagine selling more beef and getting paid more for the beef you sell. Imagine selling beef so fast that demand runs ahead of supply.
This fantasy is already daily reality. At least it is for some branded programs that are rapidly growing loyal demand within a shrinking industry by giving consumers exactly what they want - first time, every time.
"The industry is starting to realize that there is no one customer. One way to expand the market is to focus on these different customers," says Laura Freeman, president and CEO of Laura's Lean Beef (LLB). Ironically, Freeman has grown her company by serving the needs of consumers who rarely eat beef because of diet-health concerns. Her customers seek lean, all-natural beef.
Conversely, Certified Angus Beef (CAB), undeniably the most prolific beef brand, accounts for approximately 6% of this nation's fed cattle market by serving consumer desire for beef taste.
"The answers are all there. All we have to do is listen to the consumer," says Mick Colvin, CAB executive director. In 1990, licensees moved about 85 million lbs. of product. By 1998 volume grew to 411 million lbs. marketed in 44 countries.
"The industry keeps looking for a silver bullet to satisfy consumers, and to me that silver bullet is taste," says Colvin. He explains their customers want taste first, then tenderness and juiciness. "The main part of that equation is consistency for all of those things."
Likewise, David Hall, senior vice president of branded beef at Farmland National Beef (FNB) says, "We're trying to provide restaurant quality beef to consumers they can have any day of the week ... the bottom line is taste and tenderness, the overall eating experience." FNB began marketing branded beef in 1994. Since then, Hall says branded sales have grown at a 25% clip each year.
Coleman Natural Products (CNP) also guns for the taste buds first, but they do it with a twist. "Our beef tastes good because it's raised differently. From birth, cattle receive no hormones or antibiotics (all-natural)," explains Lee Arst, CNP president and CEO.
Targeting the natural market, Arst says sales have grown every year since the company began in 1979. Sales last year, mostly beef products, were $55 million.
Each of these programs has established carcass specifications to build a consistent product for their target consumer. As an example, CAB carcasses must grade mid-Choice and higher, Yield Grade 3.9 and leaner, and fall within USDA's youngest age classification of 9-30 months. Carcasses must be from cattle whose haircoats are at least 51% black.
On the other side of the marbling fence, Charlie Peters, LLB regional procurement director explains, "About 80 percent of the people who buy our product are not regular consumers of red meat. They are users of pork and poultry, or hardly any meat at all. The other 20 percent are what we call prescription eaters. They like beef, but for health reasons are looking for a lean product."
These customers want lean and all-natural first, followed by uniformity and consistency, palatability and price. That's why LLB puts a premium on heavy muscled, Select quality grade, Yield Grade 1 and leaner, all-natural carcasses, he says.
"We focus on one customer segment, that's all we do," emphasizes Freeman of Laura's Lean. She founded the company in 1985 after her doctor told her to quit eating beef in order to lose weight after giving birth to her daughter. As a seventh generation Kentucky cattle producer, that didn't sit very well with her.
Build The System "Our same-store sales grew 20 percent last year. Our target for growth in 1999 is 40 percent," says Freeman. Annual company sales grew 35-40% the past few years on the way to $50 million in 1998. "It's all because of our consumer focus," says Freeman.
Once consumer targets are defined, consistently hitting the bulls-eye is no accident.
"The reason our product continues to perform is our science-based specifications," says Colvin. "Every pound is monitored for the performance and integrity of that product, from grading to consumer."
In fact, some all-natural programs monitor cattle all the way back to individual cows and the feed used to grow them. "We know the source of all of the cattle in the program, when they were born, where they came from, how old they were going into the feedlot and heading to harvest. We know what health treatments cattle have received at each stage of their lives," says Peters. The folks at Coleman can tell you the same.
The crux of specifications and elaborate monitoring systems is consumer trust. "The consumer wants something she can trust. That's the advantage of a brand," says Arst.
Hall adds that a brand with integrity is really a promise to the consumer. Providing a consistent product is delivering on that promise. "It's not enough to throw a high quality product out there, but when you can bring it with a name the consumer knows and trusts, it will drive purchases."
So, building consumer trust is all about understanding their needs. Now and in the future that means understanding the value of time and convenience.
"A lesson we have learned from our licensees is that consumers want a meal that is quick to prepare, but they won't sacrifice quality to get the product," says Russ Johnson, CAB's retail value-added products specialist. He says the growth in value of added product sales has been phenomenal. In the last four years, sales of value-added products have increased over 1,790%.
Colvin emphasizes the need for quality in tandem with convenience. He says, "We compare and test a lot of pre-cooked products. There are some very good products out there, however, we have found a wide range in quality and desirability among the products we have tested."
Reap The Reward If you can serve them, consumers are willing to part with some extra cash.
For instance, Arst explains, "We sell a premium product. If consumers didn't like it, they wouldn't pay a premium price." As it is, Coleman customers will pay 25-100% more on different beef products, compared to conventional beef. Other programs can command similar premiums.
"Consumers are willing to pay a premium for any product," says Hall. "In the grocery trade, premium products can capture 30 percent of a category. What you're doing by adding a high-end product like ours is trading up consumers." In other words, rather than cannibalizing sales, he explains premium products add margin to every segment.
That's why each of the branded programs mentioned here offers some sort of economic incentive to pull the product consumers want through the system. Some are tied to a grid or live premium, while others negotiate a price with feeder and fed-cattle suppliers. LLB goes so far as to pay a bonus to the cow/calf producer who raises the calf but decides not to retain ownership, in addition to premiums for the calves and the fed cattle coming out of the lot.
Another thing these branded programs share is a singular focus on what they're doing, rather than worrying about the competition. "CAB is not about volume. It's about doing things right and maintaining focus on integrity and quality, and the volume comes from that," says Colvin.
Peters puts it this way: "Everything we do is driven by the consumer. If customers said they want beef from purple cows, we'd figure out how to get that done."