If you're a little guy who frequents bars, you learn pretty quickly to take a big guy with you — especially if you're not much of a fighter.
That same mentality works when you're a modest-sized manufacturer trying to get shelf space at Wal-Mart supercenters and other retail giants, says Bernie Hansen, Alma, KS. And it's a strategy the beef industry should embrace, too.
Hansen is president of Alma-based Flint Hills Foods, which manufactures all of Hormel's pre-cooked, ready-to-eat entrées like beef tips and roast beef au jus.
“It's just next to impossible for somebody small to drive a product into the marketplace,” Hansen says.
The biggest challenge isn't just figuring out what consumers want and making it; it's proving that point to large, consolidated retailers, he says.
The five largest retailers — Kroger, Albertson's, Safeway, Ahold USA and Costco — control 41% of all food sales, according to Dairy-Deli-Bakery Digest. All of them charge entry fees to get a product on their shelves. Those fees can range from $1,500 to $2 million/product or more, depending on the market and the number of stores. In exchange, they force distribution through their stores and offer favorable in-store placement and promotion of the product.
Even if the product is a sure bet with consumers, those fees make negotiating with retailers an uphill battle for a mom-and-pop outfit, says Hansen, who knows the challenge firsthand.
In 1989, Flint Hills began working with food scientists at Kansas State University to develop a pre-cooked meat product for the foodservice industry. By 1993, they were selling homestyle, pre-cooked pot roast to restaurants and institutions.
The product was an instant hit with consumers, but getting it on grocery store shelves was a saga.
“We didn't know it, but what we were really doing was, in essence, knocking our heads against the wall,” Hansen says.
Long story short: Same-store sales doubled when Flint Hills partnered with Hormel in 1999 and put Hormel's name on the product.
Combining Hormel's brand strength with Flint Hills' product did the trick. Now, Flint Hills does the product research, development and manufacturing. Hormel handles the sales, marketing and distribution.
“Hormel at least has the clout to work with these retailers and say, ‘We own market share with the consumers. You better have our product in your store or you're missing sales.’ That's all it comes down to,” Hansen says.
“Now that we have that brand power on there with Hormel, we're seeing this category grow, and other products are coming into it,” he adds.
Heat-And-Serve Is Surging
Private industry is investing significantly in the heat-and-serve beef category, says Mark Thomas, vice president of consumer marketing for the National Cattlemen's Beef Association.
Three years ago, only one major company, Harris Ranch Beef, was in the category. Today, Hormel, IBP, Farmland Foods, RMH Foods and Smithfield Foods also have introduced products.
“In the past 24 months, I've seen more change in the beef industry in product development than I've seen in the last 25 years,” Thomas says. “This industry has woken up.”
Hormel is the “category captain,” the undisputed leader of the heat-and-serve category, Hansen says. Over the next two to three years, the company plans to expand the category with many more beef entrées, and Flint Hills will develop them.
Some folks project that in seven years, 80% of the meat case will be pre-cooked. “Probably all you can take from that is that it's really going to grow. It's going to be a huge category,” Hansen says.
“We're going to see dynamic changes in the positioning of beef as a convenience product, which just wasn't thought of a few short years ago,” he says.
Another promising convenience product is jerky, which some are calling the fastest growing snack food category in the U.S. Sales of jerky and beef sticks grew 32% in 2000, according to the Snack Food Association. In response, several companies, including national brands like Jimmy Dean, have launched products in this category.
Besides convenience items, beef products that guarantee tenderness — like Cattlemen's Collection® from Rancher's Renaissance — are also advancing, says Thomas.
But even with products that offer consumers so much, the fact that beef is not an essential food is still a marketing challenge.
“People don't need beef,” he says.
So the beef industry must continue to rise to meet consumer wants. And it can't do that alone.
For beef products to get and keep the attention of consumers and retailers, the beef industry must align with food marketing companies, Hansen says.
Those companies know how to sell to the retailer and market to the consumer, he explains.
“That shelf-space battle,” Hansen says, “is going to be fought out with those big retailers and big food processing companies.”