Ken Stettmeier is passionate about his work — and that passion has translated into a lot of meat passing through his hands. He's responsible for merchandising $5.3 billion in fresh meat annually — half of which comes from sales of 1 billion lbs. of beef cuts and ground beef.
Lately, Stettmeier's been on the road selling more than beef — he's selling the Wal-Mart way. That's not always an easy task when you're pitching your meat business model to livestock producers.
Wal-Mart doesn't think of itself as a food or general merchandise business. Wal-Mart's model is to be a purchasing agent for the customer.
“We don't sell to you — we buy for you,” Stettmeier says. “In doing so, we are always pushing suppliers to be more efficient while we're also looking internally to be more efficient.”
In sitting down with BEEF recently, Stettmeier says he's committed to supplying more beef to Wal-Mart customers by breaking down today's merchandising paradigms.
BEEF: What trends are you seeing in beef demand? What forces impact how much beef you sell? What's it going to take for you to sell more beef?
Stettmeier: Don't misinterpret supply with demand — beef supplies are down and prices are up. Our beef sales today are not what they were a couple of years ago due to price.
More and more, beef demand is driven by the economy. The more disposable income, the more beef people will buy.
We're especially concerned about the impact of current energy prices on consumers' disposable income. Another factor is consumer perceptions about beef. We're still trying to recover from the impact of the Washington state BSE case. We've recovered some from that, but still not to the point we enjoyed prior to December 2003. What really doesn't make sense is ground beef sales went up, while sales of whole-muscle cuts dropped.
BEEF: So you're saying that, contrary to what we hear within the industry, beef demand isn't increasing?
Stettmeier: Academia may be telling you one thing — I'm telling you another. Demand is not as great as they say. At Wal-Mart, we get our answers from our customers. Chicken had a fantastic year last year — pork was flat. I see it every day. And, I'm concerned about this because whole-muscle cuts of beef are what really ring the cash registers.
BEEF: Wal-Mart specializes in case-ready fresh meats, which eliminates the need for in-store meat cutters. What's the future of case-ready beef?
Stettmeier: We can gain market share if we can get your product in front of the customer faster. One thing case-ready provides is in-stock product 24 hours, seven days a week.
Case-ready is a system that replenishes itself instantly. If someone's buying a package of strip steaks right now, we can replace them within 96 hours.
But, a 96-hour turnaround from processor to checkout counter isn't good enough for us. We need 48 hours, and we'll get there. If we do that, we can get more exact orders and more shelf life for the customer.
We're always looking to improve the distribution system. When we find them, we can be more profitable.
BEEF: What's the producer's role in your model of beef merchandising?
Stettmeier: Consistency of carcasses would help a lot. It's hard to merchandise beef if carcasses range from 650 to 1,100 lbs.
For instance, if we have a carcass with larger muscle size and we can only fit three ribeyes in a package rather than four, the customer sees all the space in the package and thinks they're getting less meat. Plus, we leave $2 on the table because that package will sell for $18 instead of $20 for the four-pack.
Customers expect consistency in muscle size. Our specifications are very detailed in what we expect from our processors. If someone doesn't want to meet those specs, we'll find someone who will.
We get criticized by producers who think we're forcing them to make their beef fit the box or the tray size. That's not really the case. If they give us a consistent product, within reason, we'll adjust our tray size to fit the product.
Producers can also help by giving all injections in the neck to reduce lesions.
BEEF: Would a comprehensive animal ID system help you merchandise beef?
Stettmeier: It all comes back to the consumer. Animal ID and traceability are imperative because of consumer confidence.
Wal-Mart supports a voluntary animal ID program. We'd eventually like to see DNA markers and radio-frequency ID used to track animals that produce the best beef.
Animal ID and traceability should go back to premise of origin. This is different from meat traceability, which also can be accomplished. It has to come from the producer level but they have to be paid for it.
We think ID should be voluntary. If we let the federal government do it, we might get a program we don't like. We don't need all the answers now. We can begin building it today and make it better as we go along.
BEEF: What about country-of-origin labeling (COOL) for beef?
Stettmeier: Wal-Mart will obey the law, but we think it's an onerous law for the retailer. Wal-Mart will go to our suppliers and ask for proof of the origin of the product. We're telling our suppliers like Tyson, Cargill and National Beef to protect us, to have affidavits in place proving what's on the label. We feel it should be voluntary and that is should also include beef sold through hotels, restaurants and institutions.
At the end of the day, the customer is the judge; they rule with their pocketbook. But, I don't think that we'll sell more beef for more money if we put “Made in USA” on the package.
Labeled beef will be higher priced. Don't be fooled by what people say in a focus group — once they get in front of the meat case, they'll buy the cheaper product as long as it still meets their quality expectations.
The financial impacts to the beef industry, and the direct costs to the cow-calf sector, will be huge. I always say be careful what you ask for — COOL is one of those things. Are cattle producers around the country really ready for COOL and all that's behind it?
BEEF: How much of the beef in Wal-Mart's meat cases is of foreign origin?
Stettmeier: All the beef we sell in our meat cases is USA beef. There's no Canadian boxed beef sold in our stores. Nor is there any South American beef in Wal-Mart's case-ready beef.
Stettmeier at a glance
Ken Stettmeier's career began as a journeyman meat cutter at Giant Foods in Landover, MD. He later worked for Price Club where he helped to revolutionize the retail meat industry by developing and introducing a case-ready meat program in 1991. In 1994, Stettmeier accepted a position with Issaquah, WA-based Costco Wholesale where he quickly assumed leadership of the beef and ground beef department.
He relocated his family to Bentonville, AR, in 1997 to head the Sam's Club meat program. After four years, Stettmeier's success landed him at Wal-Mart, managing the Wal-Mart Super-Center deli meats department.
Wal-Mart introduced its case-ready meats program in spring 2000. With his background in case-ready merchandising, Stettmeier was promoted to meat merchandising manager.