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Beefing up the price vs. value equation for consumers

Angus steer
Beef consumers have always been quality-conscious. Now beef producers are, too.

“When the consumer is sending a signal, we know how to deliver on that economic signal.”

That observation by John Stika, CEO of Certified Angus Beef (CAB), pretty well sums up the history of the beef business for the past 30 years or so.

“Producers didn’t willingly decide to take their eye off the consumer in the 70s. The economic signals told them to,” Stika told me during the recent CAB conference. The signals at the time told us to produce a cheaper, leaner product that could take on boneless, skinless chicken breasts at a lower price point, and that could fit some of the dynamics going on in the world of human nutrition with the war on fat.

“Those were economic signals sent to the producer. It wasn’t a decision to move away from quality.”

READ: Beef quality matters, but is that enough?

We’re getting different signals now. The consumer is telling us that quality matters, that a truly enjoyable eating experience is important, and beef is the meat of choice.

Using CAB as a proxy, we can see that in motion. Ten years ago, less than 10% of all fed cattle harvested qualified for the CAB brand. Today, it’s 18.5%. More telling, Select has fallen to 17.7% of the fed cattle harvest. Last year, packers certified 5.2 million carcasses as CAB. That’s 100,000 a week.

“Certified Angus Beef pays a significant premium coming back from the packer and producers are responding to that. We see it on Prime. We see Prime increasing at a dramatic rate because of the economic signal that’s there.”

Stika says there’s always been some quality beef in the industry, but the industry hasn’t always been as quality oriented as it is today. There was a point where the industry struggled to hit 50% Choice. Now we hit 70-80% Choice on a weekly basis.

“So the consumer never changed their preference for quality. I would tell you they’ve always had a preference for quality. That’s what’s allowed this brand to grow during the early years while the industry as a whole was losing market share to other proteins,” he says.

Related: Beef quality matters: Top end gaining market share

“And it’s price versus value. Go back 10, 15 years. We weren’t putting a very good product out there necessarily all the time. But we weren’t charging them as much as we are today.”

Now, with the proliferation of brands available, led by CAB, we’re asking the consumer to pay more and we offer them more.

“I think today consumers are willing to pay a reasonable amount for beef in general, as long as it delivers on that value. Maybe one of the reasons they’re pushing so hard for quality today, they haven’t necessarily changed their preference for quality, but if you’re going to charge me more for your product, you better give me more. From a consumer perspective, it’s price in relation to value,” he says.

“I think producers are just doing what they do so well—tell me what you want as a consumer, send me an economic signal back and I’ll produce it. And that’s what we’re seeing.”


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