During BEEF magazine's BEEF Quality Summit last November, a panel of the top purchasers of U.S. beef addressed the crowd of 160 attendees. Moderated by Oklahoma State University's Brad Morgan, the trio included Rob Cannell of McDonald's, Tony Ribble of Wal-Mart, and David Burns of Outback Steakhouse. Here is a review of some of their comments:
Rob Cannell is chief beef and pork buyer for McDonald's, which today sells about as many hamburgers in one day — 15 million — as it did in all of 1953. Serving 25 million customers daily in its nearly 14,000 U.S. outlets, the McDonald's menu has grown greatly, but beef remains the core of the firm's success. McDonald's is the single largest beef purchaser in the U.S., nearly 1 billion lbs., at about $1.3 billion in value annually.
“The only thing we buy more of than beef in the U.S. is potatoes,” he says. McDonalds is also the nation's largest U.S. seller of chicken strips and sandwiches.
Cannell says McDonald's built its success on an unchanging commitment to beef quality — “100% beef, always has been and always will be. We also offer the taste our customers want, and high-quality products they can trust as safe and wholesome — the sort of products they'd serve to their families.”
Q: Does McDonald's see an all-natural burger coming soon to either its menu or that of a competitor?
“At this time, I don't think we have that quantity of all-natural beef available (in this country). But just like we've done with every other product over the years, if our customers ask for it, we're going to respond.”
Q: Do you see age- and source-verification and national animal ID as being intertwined programs, or are they separate?
From McDonald's perspective, we're not the right people to construct, or be architects of, the right system for the beef industry. We're not experts in the cattle livestock industry, the feeding industry, or the packing industry.
“What we care about from our perspective is that there's a system in place and that it's useful. If we can ID cattle when necessary, that ID data can be used to protect our industry — that's really our ultimate desire.”
Q: What percentage of the beef you each serve is of overseas origin?
Up until three years ago, all the beef we used came from U.S. source plants, until there was an extreme shortage of lean beef in the U.S. for grinding. It was a difficult decision for McDonald's.
We import some beef raw materials from Australia and New Zealand. And those plants have to meet all our same requirements that we hold our U.S. plants to; which includes animal welfare and food safety, testing — everything. Currently, the usage percentage is less than 10% but varies by availability.
Steak makes up 60% of the Outback Steakhouse mix, says David Burns, joint venture partner with Outback Steakhouse restaurants in Oklahoma, Arkansas and Kansas. Outback's top-selling steak is the sirloin (35% of sales) and the firm is the largest retailer of Choice beef among U.S. restaurants.
Burns began his career with Steak & Ale in 1982 and started with Outback in 1993 as a managing partner in Lubbock, TX. After 10 years of consecutive sales growth, he was promoted to his current position as joint venture partner for the Heartland Region.
“As a company, we define ‘quality' as always working to improve, attention to detail, exceeding and meeting our customers' standards. Our customers define it as a thick ribeye, or a thick, high Choice sirloin that's tender and has a lot of flavor,” Burns says.
He says Outback customers want “great, high-quality Choice, thick steaks with a lot of marbling; and they want it fresh, of course.
“Our customers depend on us to serve them a great product and make sure the safety procedures are in place. They want great quality beef at a reasonable price,” Burns says.
Q: How many questions do you receive concerning growth promotants, antibiotics, etc., from your customers?
I don't recall ever getting a question about that from a consumer. Most of them feel pretty confident about what we're selling them.
Q: What is Outback doing in light of increasing carcass weight to maintain their portion size?
With the ribeye, we're obviously taking off the tail so we can get a bit of a thicker cut. On the prime rib, we're doing the same thing. We're trimming a little more — trying to do a 90% lean. It's just a matter of shaping it and making sure that we get the most bites out of it.
Q: Is beef the profit driver of your business? And how does it compare in profit to other meat items?
I think people definitely go out for beef — everyone loves steak. It's the gold standard. You don't ever hear anyone saying they want to go out for a nice piece of chicken; they all say they want to go out and have that steak. We sell a fair amount of seafood and chicken, but 60% of our menu is in beef items.
Even though from a cost standpoint, beef is the highest-priced item we have, I want to sell a lot of beef because those are the dollars we're taking to the bank. Chicken might be the most net profitable item, but I'd just as soon sell a $15-20 steak as a $9-10 piece of chicken.
Q: What do your customers think is a reasonable price at Outback restaurants?
I wish I knew the answer. It depends on the restaurant, the cut and other variables, but the overall consumer perspective is that beef prices are reasonable right now. Any higher, however, and our fear is consumers will switch to some other protein, be it pork, chicken or fish.
At Outback, we haven't raised our prices in more than a year; in fact, we lowered our prices.
Q: How is the aging demographic changing the restaurant business?
Some consumers are trending down a little bit on portion size, and we're trying to give the consumer exactly what they're asking for. That's one reason we've added a smaller sirloin to the menu, and a smaller filet.
Tony Ribble, senior buyer and beef category manager for Wal-Mart Supercenters, joined Wal-Mart in 1999 as a beef buyer when it had 12 grocery distribution centers and about 700 locations with fresh groceries. Today, the Fayetteville, AR-based retailing behemoth boasts more than 2,300 Supercenter and Neighborhood Market locations and 37 perishable grocery distribution centers, and will add another 290 Supercenters and/or Neighborhood Markets and two distribution centers this year.
The firm boasts 1.8 million associates (employees) serving 176 million customers weekly worldwide. In the U.S. alone, 1.3 million associates serve 127 million customers on a weekly basis.
Ribble says the average Wal-Mart customer is a married female, young to middle age, a high school graduate, employed full-time, owns a home, and lives in an average household of three people, with an average annual dual income of $49,000.
Based on focus groups, Ribble says Wal-Mart beef purchasers are looking for “a good red color. Some of our customers look for marbling, though it's not very prevalent criteria cited in our focus groups.” Wal-Mart consumers also dislike “too much fat cover,” he says, and monitor sell-by dates of the product to make sure it's fresh. “They also like clean packaging — they don't like blood on the outside of the package.”
Wal-Mart's core beef program is USDA Select or higher. Everything is case-ready, pre-cut and prepackaged at five centralized cutting locations with product provided by Tyson, National and Excel. Products are enhanced with a solution “to achieve a level of consistent quality,” and marketed in high-oxygen packaging.
Wal-Mart is testing three new products. Currently available in about 1,000 stores is a Choice branded Angus product called Genuine Steakhouse; available in about 200 stores is an all-natural product — Coleman Natural. He says Wal-Mart is also engaged in a 50-store test of Laura's Lean beef.
Q: Do your consumers demand country-of-origin labeling on the meat they buy?
We potentially will have a few consumers ask what country the meat comes from, but as far as the consumer demanding it, no.
Q: What is used to enhance your beef products? And when you do use it, does it affect the natural beef label?
Actually, we don't claim to have all-natural beef. We don't put that on our label. The enhancement is a solution of water and salt, sodium phosphate, and sometimes a beef flavoring.
Q: Regarding carcass and portion size, if cattle size is such a problem, why aren't they discounted more in the marketplace?
Wal-Mart doesn't buy carcasses, we buy cuts of beef, but carcass size is a problem in our company. For example, if you take a ribeye that's 16-17 lbs. and try to put four of those in a family pack, which is our normal specification, it doesn't work because it doesn't fit. So we end up having to put three in the package and reduce the size of the package. That costs us sales.
How much did beef sales decline in your operations immediately following the announcement of BSE in the U.S.?
Tony Ribble — We initially saw a 10-15% decline in the first few weeks, but after that beef came back right where it was.
David Burns — For the first few days, beef sales did decline, but it was surprising how fast consumption recovered from the initial news.
Rob Cannell — We saw a slight dip the first day or two, but it came right back. We credit USDA and America's animal health professionals for taking the right actions and getting out the right messages. Those steps assured consumers that someone had it sorted out. The messaging was, in our estimation, just right; it really supported consumers' faith in U.S. beef.