Value-based marketing alliances appear to be becoming more alike than different.
More alliances are marketing more cattle for similar premiums, but reported requirements are loosening, and more are reaching back to the cow-calf producer to source the cattle their customers want.
Taking a read on the evolution of beef alliances is akin to charting the stars with a rubber band and thumbtack. Distance, dynamics and proprietary information mean you can't ever be sure about what you're seeing, yet the process can confirm previous conjecture and uncover new ideas.
There is nothing scientific about the alliance information presented in these annual BEEF Alliance Yellow Pages. The various programs participate if they want and provide the information they choose. Considering the information compared to the past, however, does serve up some observation and speculation worth tracking.
Based on the information reported by 34 consumer-based alliances this year compared to that reported by 36 organizations last year, here's what we're seeing: (BEEF's observations are in italics):
A total of 4.7 million head of cattle were marketed through alliances in 2001, a 20% jump over 2000. This number includes 2 million head reported by Certified Angus Beef.
That's certainly in keeping with the increased volume of cattle trading away from the spot cash markets, as well as the growth of branded beef products.
Twice as many alliances (10) marketed 100,000 head or more.
As major retailers begin establishing partnerships with supply chains, volume becomes its own reward.
A total of 38% of the alliances participating in this year's BEEF Alliance Yellow Pages report offering some sort of post-harvest premium to cow-calf producers who raise the cattle that ring the performance bell. This is regardless of whether or not those same producers retain ownership in their cattle through the feedlot.
A couple of years ago, only a couple of programs offered economic incentives ahead of the feedlot. The growing use of this tool underscores how much added value the right kind of cattle in the right situation bring to the equation.
The premiums cited this year represent a dramatic widening in the range of value. The top premium cited this year is $270/head, compared to $60/head last year. Take a couple of these stratospheric premiums out of the mix, however, and the premiums are virtually the same, ranging from about $10/head to $60/head.
On the extreme end, it makes sense that cattle that must fit a tighter window should be worth more. A similar range across years might underscore the fact that there's a point at which cattle aren't worth any more, no matter what you do to them.
A total of 44% of the alliances this year cite a minimum number of cattle as a requirement, compared to 53% last year.
Rather than moving away from the efficiencies of moving loads of cattle, this might indicate more pooling and commingling of calves so that operations of all sizes have more opportunity to participate.
Of this year's programs, 56% cite some type of management or identification requirement, compared to 65% last year. Of those, 37% require that cattle be managed to meet natural beef specifications.
While the numbers are similar, possibly some requirements once deemed as an added-value luxury, such as health management, are becoming a standard of admission.
A total of 82% report offering pricing grids — either yield-based, quality-based or both — compared to 94% last year.
Certainly, there seem to be more systems transcending pricing models based in the commodity market and moving closer to the consumer; typically working more closely with the packer and retailer to determine value.
Choice Yield Grade 3 is cited by 63% of the programs as the par point in their pricing system, compared to 56% last year.
True to the past, this continues to be the middle ground of value for the majority.