Top-Down Value Sharing

Ranchers Renaissance teams up with Excel to offer consumers a guaranteed tender product and producers a chance to tap the retail dollar. It's easy. Give consumers exactly what they want, and they will boost your profit potential by demanding more of your product more frequently. Producers will tell you, however, that making that happen in the multi-segment beef business where turf protection and natural

Ranchers Renaissance teams up with Excel to offer consumers a guaranteed tender product and producers a chance to tap the retail dollar.

It's easy. Give consumers exactly what they want, and they will boost your profit potential by demanding more of your product more frequently.

Producers will tell you, however, that making that happen in the multi-segment beef business where turf protection and natural cattle variation have been standard operating procedure has been tough.

“The ranching community felt it was making efforts to improve the product through genetics and management but wasn't really being rewarded for those efforts,” says John Butler. That's how Butler, the CEO of Ranchers Renaissance (RR), describes the frustration that led to formation of this innovative cooperative in 1996.

Plus, Paul Hiemenz, vice president of New Product Initiatives for Excel Corp., points out that although beef demand is increased, much of the fuel stems from a steaming national economy.

“The last two years showed us demand can be positively affected. On the flip side, demand was not affected because of any industry initiatives,” he says. “Prior to 1999, significant fresh beef volume was lost because producers, packers and retailers alike failed to develop a comprehensive consumer responsive solution to optimize beef consumption.”

In other words, the cooperation required across segments to react quickly to consumer desires and create a consistent product tailored to those desires has been more lip service than reality.

“When you think about it, in most every other system, the profit comes from the packer enterprise,” explains Jim McAdams, manager of Spade Ranches at Lubbock, TX, a founding member of RR. It's not that all the profit goes into the packer's pockets, he says, but that any premiums paid to the producer have started and ended with the packer as the ultimate customer.

It Starts With The Consumer

But, with RR, Butler explains, “We started with the consumer because we want part of the retail dollar. We took a systems approach to beef production. The concept was to align with each segment of the beef system in order to do the things we couldn't do on our own.”

About that same time, Hiemenz explains, “Excel began a unique research and development project with selected beef alliance partners. The goal was to develop a farm-to-fork consumer product solution that would deliver a consistent and tender beef product.”

Missing, he says, was the cooperation needed between the various segments to get it done.

Excel found the solution by forging a relationship with RR, Caprock Industries and the Beef Advantage Project as primary suppliers for production and feeding, and Kroger on the retail side. The result was the launch of Cattleman's Collection in May by Excel and its partners.

Hiemenz describes Cattleman's Collection as, “a fresh beef line designed to deliver not only more tender but more consistently tender beef, while not detracting from premium beef sales.”

Hiemenz says independent research routinely underscores the fact that as many as 90% of all meat consumers would buy more fresh beef if they could be guaranteed that it would consistently meet their needs. Cattleman's Collection is designed to offer a consistently tender eating experience at an affordable price.

“This is not just another beef product. It's an entirely new entry into the category,” says Hiemenz. He says the tenderness, consistency, eye appeal and overall quality are made possible by this producer-to-consumer partnership, exclusive proprietary patent pending processes devised by Excel and Kroger, and a commitment to 24 different quality checkpoints stretching from live production to the meat case.

So far, Kroger is test marketing the product as a total case replacement in all 123 of its Colorado King Soopers and City Market stores to rave reviews. That means these stores carry Cattleman's Collection — a complete array of beef cuts for everyday consumption — as the dominant offering, along with a premium beef line Hiemenz describes as special occasion beef.

For the record, Butler points out the type of cattle that fit the system are not needles in a haystack. “Generally, we're looking for at least half-blood English cattle with no more than 50 percent Continental breeding and less than three inches of hump height.”

While they won't divulge all their specifications, Hiemenz says Cattleman's Collection carcasses are 600-900 lbs. for carcass weight with a rib eye area of 10-14.9 sq. in. and are at least Select quality grade.

As for the tenderness, Butler says, “None of the things we do to verify tenderness is rocket science. But, we utilize all available technology and research to ensure consistent tenderness.”

So, presumably, rather than merely age, electrically stimulate and the like, Cattleman's Collection tenderness is borne out of a mixture of all of the industry's common tenderness technologies.

As simple as all this may sound on the surface, imagine the trust required of such a true inter-segment partnership. Rather than the feeder telling the cow/calf producer what he wants and what he'll pay — based on what the packer will pay, based on what the retailer will pay — these folks start with the consumer and then build the product.

That means they've thrown open their books to each other. Every partner can see what value is being added where and how much added value there is to divvy up across the system.

“We're completely transparent,” says Butler. “Everyone sees everything. We're all committed to pulling cost out of the system and adding value to it.”

In fact, that's one reason the public has heard next to nothing about RR, even though it's been rolling along for almost four years. Each partner has trusted the other to hold his cards close until all the system pieces were firmly in place.

“To me, that's the unique thing about Ranchers Renaissance,” says McAdams. “We put our faith in receiving our profits from the end-product, and faith in our partners to produce that product, and faith in the fact that we'll come up with a fair method of sharing the profits of that product.”

The specifics of the value-sharing system are confidential. Butler describes it as a market-based model that allows each partner to receive market value for the products and services they provide, then participate in the value each adds to the equation.

“It takes some patience and a learning curve,” says McAdams, because a true partnership requires a different mindset than many producers are used to. He says the goal is not to maximize the return on any one calf or set of calves, but to maximize returns across the system and the years.

“We know that by doing this we'll smooth out some of the peaks, but we will also smooth out some of those valleys,” McAdams says.

Independents Acting Jointly

McAdams says one reason Spade Ranches chose to join RR is it allowed them to play the vertically integrated and branded beef game while still doing the things that make sense to them at home.

“We probably have more autonomy and flexibility than any other alliance or system out there,” says McAdams. “We leave it up to each producer as to how they'll meet the end target. As a result, we've been reluctant to get into best genetics and best management practices unless we know they'll ensure the safety and wholesomeness of the product and increase the odds of hitting the target.”

The results make the strategy tough to argue with. Butler says 91% of RR cattle qualify for a premium branded beef or hotel, restaurant or institutional program (65% qualify for Cattleman's Collection).

“We harvested 125,000 head in 2000 and believe the potential for growth could be exponential to that based on consumer acceptability,” says Butler. “We want to be a significant participant in the supply side of Cattleman's Collection.”

Moreover, RR, like Excel, wants to be a significant player in the branded beef arena.

“A brand makes a promise and delivers on it all the time. A brand is a handle consumers can easily remember,” says Hiemenz. “The consumer comes in looking for Cattleman's Collection to deliver on the promise of consistent tenderness.”

He says each Excel brand introduced since 1991 was spawned by customers like Kroger asking for products that offer consumers specific value traits.

“Clearly, a brand differentiates you from a commodity, and there is value in that, and it creates a sense of pride for producers,” says Butler. “The other issue is that you can verify that the cattle are delivering on the commitment you made and you can achieve the consumer awareness that brings them back to buy more of the product.

“A coordinated systems approach is going to happen in this industry, it's evolving that way. I hope we get there. It will mean a more satisfied consumer across the board,” Butler adds.

For more information about RR, call 303/662-1945.