The Consumer and the Beef Industry

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The Consumer and theBeef Industry

• Scott P. Greiner
• Extension Animal Scientist, Beef
• Virginia Tech

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Current Beef Industry Issues

• BSE
• Animal ID
• Beef Check-off
• Market Share/Demand
• Alliances
• COOL
• Price Reporting
• Captive Supplies
• Packer Concentration
• Food Safety

• Antibiotics
• Growth Promotants
• Animal Welfare
• Irradiation
• Environment
• Public Grazing
• Beef Labeling
• Diet and Health

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Annual Per Capita Meat Expenditures
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Beef Demand Index3rd 4th Quarters 1995-2003
Source Dr. Wayne Purcell
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What supermarket shoppers want in their food

• Taste
• Nutrition
• Product Safety
• Price
• Storability
• Ease of Preparation
• Preparation Time
• Recyclable Packaging

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Todays Beef Consumer

• 70 of women are in U.S. work force
• 28 cite lack of time to cook
• 58 cite too busy schedule to cook
• 2/3 of dinner decisions made same day
• 73 of dinner preparers dont know what theyre
  having at 430 p.m.
• 50 of consumers lack cooking knowledge for
  certain beef cuts

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Our Dining Habits

• OPEN a carton
• OPEN a box
• OPEN a can
• OPEN a bag
• OPEN a phone book

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Why did beef lost favor with consumers?

• Lack of Value
• Lack of further-processed, convenient meal
  choices
• Product inconsistency
• Tenderness
• Overall palatability
• Diet/health issues

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A couple of facts to remember about beef
consumption

• Over 50 of beef is consumed as ground beef.
• Approximately 50 of beef is consumed away from
  home.

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Consumer market- trends

• Hamburgers or other ground beef entrees represent
  80 of the more than 7 billion foodservice beef
  servings
• Top 10 grocery chains control 50 of retail sales
  with Wal-Mart leading pack
• Case-ready beef is impacting carcass
  specifications
• Branded beef products create demand for
  specification cattle and allow for the sale of
  more beef at higher prices

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Retail Grocery Sales
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Factors Influencing Consumer Demand for Beef

• Quality
• Consistency
• Convenience
• Safety
• Caring Attitude

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Quality

• Taste
• Tenderness
• Preparation
• Attractiveness
• Storage stability

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Consistency

• Appearance
• Palatability

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Convenience

• Preparation time
• Multiple meal choices
• Quality

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Safety

• Bacterial
• Chemical

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Caring Attitude

• Environment
• Animal care

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What do we know?
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Carcass Value Determinates

• Carcass Weight
• Cutability - Red Meat Yield (Yield Grade)
• Quality (Marbling)

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Yield Grade 2 Beef Carcass
Carcass weight 750 pounds External fat 0.3
inches Ribeye area 13.9 sq. in. KPH 2.0
Yield grade 2.0 Retail Product 67.3
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Yield Grade 4 Beef Carcass
Carcass weight 750 pounds External fat .8
inches Ribeye area 11.5 sq. in. KPH 4.0
Yield grade 4.5 Retail Product 56.5
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Quality Grade

• 1. Maturity
• 2. Marbling

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Marbling
Moderate (Choice )
Abundant (Prime)
Slightly Abundant (Prime -)
Modest (Choice)
Small (Choice -)
Slight (Select)
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Quality Grades
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Marbling Palatability?
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83
source Texas AM, Colorado State
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Our Industry is Changing...

• More retained ownership by cow/calf operator
• Value based marketing a reality
• Increased demand for source verification of
  cattle
• Market segmentation into specific target products
• Growth in production/marketing alliances
• Shift to a bimodal or two-tier market structure

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Grid Pricing
YG 1 2 (-) (-)
YG 3 Base (-) (-)
YG 4 (-) (-) (-) (-) (-)
Prime Premium Choice Low Choice Select Standard
Carcass Weight 900 (-)
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Drivers of Change

• Growth of Branded Programs
• Development of Markets Targets
• Proliferation of value-added products

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Branded Beef Programs

• 47 USDA Certified Beef Programs
• Only 19 initiated prior to 2000
• 32 have black requirement
• 32 are Angus in name
• 20 require avg. CH or higher QG
• 14 accept Select QG
• Examples
• Certified Angus Beef
• Certified Hereford Beef
• Excel Sterling Silver
• Harris Ranch Natural Black
• SYSCO Butchers Block

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CAB Growth
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Market Targets for Beef

• Mid-Choice and higher for upscale restaurant and
  export 25-30 of market
• High Select and Low Choice for supermarket
  50-55 of market
• Young, very tender beef with acceptable
  tenderness 15 of market
• Niche markets (organic, natural) 5 of market

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Value-Added Products
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Forces Driving Alliance Formation

• Branded products
• Need for information transfer
• Improved end product consistency
• Source verification
• Value-based marketing
• Seedstock marketing
• Need to match supply and demand
• Controlling price risk
• ADDED VALUE!!!!

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Alliance Components

• Retained ownership to some extent by feeder
  cattle producer
• Value based marketing on carcass grid for
  specific target
• Sharing of risk and profit
• Transfer of health, feedlot, and carcass data
  back to the cow/calf operator

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Consumer
Beef Industry Production/ Marketing Chain
Retailer
Packer
Feedlot
Information Flow
Backgrounder/ Stocker
Cow/calf
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Source Verification

• Defined origin
• Documentation of various forms of information as
  the animal moves through the production chain

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Why Source Verification?

• Information leads to predictability, uniformity,
  and consistency.
• Value captured through accountability and
  reputation
• Vital for true value-based system

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Source Verification

• Genetics
• Health
• Nutrition
• Management
• Environment
• Animal Well-Being

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Alliance Carcass Targets

• Quality
• Upper 2/3 Choice
• Acceptable Cutability (YG 3 or better)
• Red Meat Yield
• High Cutability (Muscle and Leanness)
• Acceptable Quality (Se or better)
• Blend
• High Ch-
• High YG 1 2

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