Commentary: An inside look at natural beef
The “natural” concept in the beef market has evolved in the United States and continues to gain popularity. Because of recent concerns about the adequacy of program controls and breed claims, verification requirements are closely regulated.
The U.S. natural-beef market has gone through transcendental changes that will redefine the future. The definition of “natural” these days can be open to debate, but according the U.S. Department of Agriculture, Food Safety and Inspection Service, the majority of natural-beef companies have exceeded the requirements set by the USDA definition of “natural” and have incorporated other dimensions related to health, nutrition, environment and animal welfare. Food safety, health, lifestyles and values of the new generations are driving the changes seen in the beef marketplace.
The emergence of E. coli outbreaks, Salmonella, Listeria, mad-cow disease and hoof-and-mouth disease opened the door for another marketing opportunity: clean, safe beef. Further, concerns about the use of antibiotics and hormones in animal growth have increased in the American population.
For example, several years back, McDonald’s Corp. informed its suppliers it would buy meat only from animals fed antibiotic-free feed, a production practice that is generalized in the United States and approved since the mid-1950s. Additionally, several fast-food chains announced all burgers would be natural and supplied by natural-beef suppliers. Today it is becoming more frequent that restaurants base entire menus on beef from animals raised without the use of antibiotics and hormones.
Another issue challenging the U.S. population is obesity. More than 25 percent of the American community is considered obese. The condition is seen more in children and low- and medium-income segments. Diet is a hot issue and top concern in social and political spheres.
Finally, changes in private and public standards have propelled demand for “clean beef,” with retail chains such as Whole Foods, Costco and Wild Oats specializing in natural and organic, and food distributor Sysco announcing it will offer natural and organic beef. These companies have taken a strong position in leading consumers’ educational campaigns and have developed rigorous production standards for natural beef.
In the public scope, the final rule was established for the National Organic Program. This program established national standards for the production and handling of organic food products, including a national list of substances approved for and prohibited from use in organic production and handling. The USDA Agricultural Marketing Service in 2002 established the standards for using claims regarding antibiotics, hormones, etc., in the marketing of meat.
Time to define
According to the Food Safety and Inspection Service (FSIS), “natural” may be used on a label for meat and poultry products, provided the applicant for such labeling demonstrates that:
The product does not contain any artificial flavor or flavoring, coloring, ingredients or chemical preservative (as defined in 21 CFR 101.22), or any other artificial or synthetic ingredient; and
The product and its ingredients are not more than minimally processed.
The above definition is wide and the way in which companies align their marketing programs to the “natural” definition varies. The definition does not consider the way in which animals were raised and fed. Numerous companies, whether beef producers or retailers, have gone beyond that concept and added other components to their value propositions. Many have begun communicating with consumers what natural means for their product. Their reputation, particularly in the case of supermarkets, is now behind those programs.
Are you a potential investor, rancher or producer considering the potential economic opportunity in the “natural” trend? Consider the following data:
A recent marketing survey in Midwestern and Western states shows that of the 1,400 survey respondents, 521 consumers (38 percent) were willing to pay $5.49 (10 percent price premium) for natural steak and 197 consumers (14 percent) were willing to pay $5.99 (20 percent price premium). At $1.89 (12 percent price premium), 912 consumers (67 percent) would buy natural ground round, and at $2.09 (23 percent price premium), 403 consumers (29 percent) were still willing to buy the natural ground round. For ground beef, we can see that respondents were willing to pay at most an 83 percent premium, while no steak consumers were willing to pay more than a 50 percent premium.
Whether steak or ground beef, the difference between the two samples (all consumers and those who purchased natural beef in the past) declines as the price level rises. Finally, past natural-beef consumers make up a significant share of the consumers who would pay the highest premiums for the natural ground beef.
One may assume those who shop in specialty food stores would be sensitive to additives and production methods that detrimentally affect the environment. Yet the survey indicated even shoppers who make most of their purchases at traditional grocery stores ranked such attributes highly.
While America’s beef farmers and ranchers stay focused on rebuilding their herds and continue to raise quality nutritious beef that consumers want, they value the partnership of the businesses that can identify creative and effective ways to leverage the strong demand to sell and market the products the consumers desire.
Are consumers more loyal to some branded meat products than others? How much of a premium are they willing to pay for their preferred brands?
These recent surveys have shown dedication to juicy, tender and flavorful all-American beef.
Production to definition
For beef to compete in today’s marketplace, both domestic and export, cattle breeders must better understand marketing. Meeting the needs of the consumer is something that every successful business must continually strive to do. Producing a product for a defined market and trying to find a market for product already being produced are two distinctly different propositions. The latter is the area most beef producers have participated in rather than the former. For success in the remaining portion of this century, and for survivability for the next, cattle producers must target the market more effectively and alter breeding and feeding practices to ensure compliance with consumer demands.
Beginning in the 1990s, the U.S. beef industry, through the leadership of the National Cattlemen’s Association, has focused its attention on quality. “Quality” is many things to many people, but in the manufacturing sector, it means freedom from defects, consistency and compliance to manufacturing specifications. Quality from the rancher is innovation and leadership, sustainable ranching practices, transparency through the supply chain, genetics, animal welfare, herd health and feeding.
U.S. livestock and meat industries have made progress in making value-based marketing a reality. The work from producers will serve as a springboard to a viable, value-based marketing system for the next century. Marketing, for managers of beef-cattle enterprises, means two things: First, it is using market information, such as prices and trends, to direct and provide information for good business decisions; and, second, exceeding the expectations of customers.
Today’s leading beef producers realize the consumer expectation is transparency throughout the industry and are paying close attention to product claims such as natural and organic. Total traceability back to the cattle on the ranch, monitoring of animal handling throughout the process and food safety in production are the standards on which the successful leadership of the beef industry will focus.
I have observed what I would determine are the highest quality “natural” beef roaming in the pastures and the handling practices adhered to by these cattlemen. I’ve seen the high-quality, all-vegetarian diets that finish these animals and the calm, docile attitudes as these cattle are moved. I also see a significant difference in the day-to-day commercial beef as these cattle are processed in the packing houses.
I see the value and quality present in the finished product, and flavor coming off of the grill. So, as the old saying goes, “You get what you pay for.” NP