Increasing demand has been a major challenge of the U.S. beef industry over the past 25 years. And the proliferation of branded-beef products and program-production systems is testimony to the industry's response to the competition.
“Developing brands for retail beef may be one means of increasing beef demand,” says Clem Ward, Oklahoma State University (OSU) Extension economist. “We know consumers want producers and food companies to provide a consistent, tender and high-quality product.”
Little has been understood, though, about the value that consumers place on retail brands, special-labeled products, and other retail beef attributes, such as fat content or grade and packaging alternatives.
Consumers also have expressed concern about the use of hormones, steroids and antibiotics, as well as bacterial contamination and health risks associated with red-meat consumption. Again, little is known about how much consumers are willing to pay for program beef relative to generic or commodity beef.
So, OSU, with support from the Oklahoma Beef Commission, initiated a study of the value that consumers place on several descriptive characteristics of fresh beef, including brands and labels. Primary data were collected from 65 grocery stores in three metropolitan areas — Oklahoma City and Tulsa, OK, and Denver, CO.
A higher percentage of branded steak products were found than roast or ground products, which was expected because steaks are higher-value cuts. Generics accounted for 75.4% and 78.4% of ground chuck and ground beef products, respectively, while generics accounted for only 37% to 50% of steak offerings.
Beef brand results
“Information generated from this project can be useful in designing and developing an effective retail beef marketing and branded beef marketing program,” says Jennifer Dutton, OSU graduate research assistant.
There was some evidence that retail beef brands command a price premium compared with unbranded, generic products, Dutton says. “However, the cost of producing and processing beef products for branding and developing a branded-beef program would need to be addressed to determine if price premiums are sufficient to make beef brands profitable.”
In the study, branding programs classified as “special” (i.e., no antibiotics, no hormones, all-natural) offered the largest price premiums, but “other” types of branding programs offered them as well.
Premiums for brands were found but weren't consistent for ground products, roasts and steaks. All branded ground-beef products were priced higher than generic products (30¢ to $1.45/lb.).
For steak, no price difference was found between generic and store brands. Premium prices were found for special and program brands ranging from 71¢ to $5.82/lb. No price differences were found for branded or generic roasts.
“Source-verified” steaks commanded an average price premium of 50¢/lb. compared to products without a special label. “Without additional information though, one can't determine whether this reflects a potential preference for source-identified labels,” Dutton notes.
Ward says the study shows considerable room exists for more branding of beef at retail. “But premiums and discounts for special-labeled products varied widely,” he says. “No consistent pattern was found for products labeled as no antibiotics, no hormones, all-natural, quality-guaranteed or source-verified.”
The skinny on implants
The European Union banned use of growth hormones in 1985. The issue of added growth promotants in beef production has since become one of the most contentious in the livestock industry.
Growth hormones increase weight gain in cattle by 5-20%, feed efficiency by 5-12%, and lean meat growth by 15-25%, compared to untreated cattle.
But research shows the preference for steaks from cattle produced without the use of growth hormones over steaks from cattle administered growth hormones is similar across France, Germany, the United Kingdom (UK) and the U.S. The question becomes: How much are consumers willing to pay for this preference?
Labels that were statistically significant were “No hormones,” “All natural,” and “Source verified.” The “No hormones” label had a negative relationship with retail price, averaging $0.22/lb. less than steak with no special labels. Previous research found consumers in France, Germany, the UK and the U.S. were willing to pay premiums of 92¢, 82¢, $1.22, and $2.63/lb. respectively for steaks produced without growth hormones.