Branded-beef marketers see good and bad in today's economy.
Changes in consumer spending and a troubled world economy would make any marketer nervous these days. Those marketing branded-beef products, however, are focusing on silver linings and opportunities the market may present.
“In some ways we've actually benefited from the economy,” says Charlie Bradbury, CEO of Nolan Ryan Beef in Huntsville, TX. Bradbury says the economy is causing more people to eat at home, and his company, which has 70% of its sales based in retail, is seeing some gains as a result.
“There's a real return to the beef case,” Bradbury says. Companies like Nolan Ryan Beef, which provide retailers with displays, recipes, point-of-sale materials and food demonstrations, can assist first-time cooks and help move more beef. “Consumers want to know, ‘what do we do with it?’” Bradbury says. “We're all about providing a lot of support.”
A regional brand in Texas, Louisiana and parts of New Mexico, Nolan Ryan grosses $20 million in annual sales and processes about 1,200 head weekly. But like larger brands, its marketing doesn't focus on what the product costs. Especially in this economy, Bradbury says, consumers focus on quality and value rather than just price.
Certified Angus Beef® (CAB) utilizes the same philosophy. “Consumers don't want to gamble with their dollars,” says John Stika, CAB president. He says companies that reduce risk to consumers by providing higher quality have seen growth, because “consumers still want to reward themselves and put a quality product on the table for their families.”
Stika says the economy hasn't caused CAB to shift its marketing messages but has made them more focused in their strategies. In fact, the new economy has “given us a stronger platform from which to communicate our quality message,” Stika says. “And we're communicating that with more conviction, supported by actual consumer activity.”
These days, consumers are less likely to buy products on a whim, even for quality, Stika says. “Consumers are using a lot more discretion on what they're spending their money on,” he says.
CAB's increasing sales success confirms that. Product volume sales for fiscal 2009 (Oct. 1, 2008, to Sept. 30, 2009) topped 663 million lbs., beating its 2008 record by 4.6%. About 52% of CAB's sales are in its retail division, which had its best year ever — 343.5 million lbs. sold — a 7% increase.
Even the brand's Prime line, traditionally popular with food-service customers, was more successful with retailers, increasing 7.5% for 2009. Consumers are looking for more restaurant-quality items in stores, according to CAB officials.
Tom LeBeau, COO of Certified Hereford Beef (CHB), echoes that need to focus on value in these tough economic times. “Anyone can sell price; we sell quality,” he says.
LeBeau wouldn't share CHB sales figures but says its retailers “are very happy with the program. We're holding our own on volume and revenue.”
Bradbury, too, believes that quality is paramount for branded products. “Before you can do anything else, you have to have a quality product,” he says.
Merchandising is key
Bradbury, whose company began operations in March 2000, also says when times are tough economically it's up to the branded products to differentiate themselves. “This is where we separate the good merchandisers from the rest,” he says.
Of course, Hall of Fame pitcher Nolan Ryan, who owns 2,000 cows, plays a large part in the marketing strategy. He also has name recognition.
“Consumers know who Nolan Ryan is, and have a very high opinion of him,” Bradbury says. “They can put a face of a respected beef producer on the product.” Bradbury says using Ryan in radio, television and print advertising and marketing makes a big difference. Ryan's reputation allows the company to use a “pull-through” strategy to encourage consumers to ask for the product.
The Nolan Ryan brand began as a way to market regional cattle and a guaranteed-tender product. In addition to its quality focus, the brand has been successful in targeting upwardly mobile shoppers looking for local producers and perceived “sustainable” operations that are more local.
“These people feel better about what we're doing for them,” he says. “It's something a smaller company can do.” But, even national chains are becoming interested in purchasing more local products, he says.
He stresses, however, that marketers need to remember: “You can't be everything to everybody.” More than anything, he says, it's “what you have that's different than the guy next door.”
For CHB, LeBeau says it's the brand's history — the American Hereford Association is the country's oldest cattle association, started in 1881 — and genetics provided by about 5,000 ranchers nationwide that set it apart and give the product a strong identity.
The CHB brand is also taking a new approach in how it goes to market. “We need to add value to the new items we've developed,” says LeBeau, with ground-beef patties, case-ready products, corned-beef brisket, hot dogs and other convenience products faring well with their customers. “You need to think out of the box to survive in this economy,” he says.
Meanwhile, with three decades of branded marketing experience, CAB has established itself as the largest, most recognized — and copied — fresh beef brand. Stika says CAB strives to sell a quality product, merchandised and sold by quality people. Customer trust is huge, Stika says. “For us, it's not just the message; it's the brand power.”
Stika says CAB is remaining focused on purchasers of premium products, who are 35-55 years old and about 80% of whom are female. He also says its customer base is broadening, “serving the multiple demographic groups looking for quality.”
Though marketers sometimes use a long-term approach with their products, Stika says he understands the retailer needs to address short-term sales, too. For example, CAB encourages retail partners to use “shadow marketing” for merchandising their premium products.
Shadow marketing maintains the same price spread between commodity beef and same-cut CAB items by putting both on sale at the same time, rather than solely featuring the commodity item. Stika says research shows even though CAB items will cost more, consumers will trade up about 30% of the time when the price spread is kept constant.
“We suggest to our retailers that they not risk a self-fulfilling prophecy of reduced sales,” Stika says. “The message is, let the consumer decide.”
CHB's LeBeau says retailer private label Choice, Select and Angus brands have challenged their business, with “some retailers preferring to go on generic programs under their own names and playing the market.”
To add to the industry's challenges, consumers aren't only trading down to less expensive beef cuts, they're opting for less costly proteins. “There's been an overall decrease in consumer demand (for beef), and that's been difficult for branded products, too,” he says.
Citing the price of feed, unemployment and other factors, Bradbury says, “There's a tremendous amount of uncertainty out there.” If demand returns, he says, the price of the product could jump significantly.
“You could go from an affordable product to a much more expensive product,” he says. That's creating a lot of caution in the marketplace. “The attitude is, let's not do something we'll regret later.”
Premium-branded products are obviously not immune to a struggling economy, but they've demonstrated their staying power. It's a matter of figuring out how, in an economy-focused market, to not let marketing become economy-driven.
Walt Barnhart is a freelance writer and communications consultant based in Littleton, CO.