I get excited when I get to hear from ya’ll because together – with the feeder, packer and retailer – we make an industry.”
That’s how Scott Nettles, senior perishables director with United Supermarkets in Lubbock, TX, opened his remarks at the Southwest Beef Symposium recently. Addressing a room of ranchers from West Texas and New Mexico, Nettles gave producers a behind-the-counter glimpse of the beef business from a meat man’s perspective.
That chain from rancher to retailer makes a significant industry indeed. United Supermarkets is a regional chain with 52 stores in 30 Texas cities ranging from the Panhandle to Dallas. Total sales are around $1.5 billion annually and the meat market accounts for about $230 million of that. Of the total meat market sales, beef is the leader, accounting for a third of all sales. That means, he says, beef alone accounts for $75-$80 million in sales.
“Ground beef makes up 40% of all beef sales,” he says, but it’s not the largest. “The largest segment of my business is our Select program. We call it Genuine Texas Beef.” The product comes from cattle that were fed and processed in Texas. “It was a way to brand our Select program,” he says. “It improved our Select sales about 8-9% when we first kicked it off and it’s been really successful.”
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But he sees some signs in the numbers that cause him concern. “Sales (based on dollars) are up 4.8%, but our tonnage is down, and that’s alarming. As you all know, cost of beef continues to rise and it’s harder and harder to push more pounds of beef through the register. Sales look good, but when that tonnage number is down, that means people have left the beef counter and are moving over to the pork and chicken counter. And that’s not good for any of us. Any time you start messing with the big gun, that throws a red flag up to me,” Nettles says.
So United has added a wide range of products to appeal to about any customer niche including Choice, Natural and Prime programs, all Certified Angus Beef. Even though ground beef and Select make up the vast majority of sales, he says the fastest growing segment of the beef case is Natural. “The growth rate is over 100%, and we’re charging an average of $14/lb.”
However, what’s taken the brunt of that growth is not ground beef and Select, but organic and grass-fed. “Organic has kind of run its course,” he says. “I think they (customers) see natural as a competitive alternative. And grass-fed is losing share as well.”
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And it’s not cost that is causing the shift. “We partner with Certified Angus Beef for our Prime program. And it’s interesting to me that our Prime sales are up 50%, tonnage is up 46%, and the average retail on the product is $20.50/lb. So price is not a deterrent.”
Given the interconnectedness of the beef industry, challenges in every segment have implications up and down the marketing chain. “Our consumer sees beef as unhealthful and we as an industry, between us, still have to get the word out that beef is healthy.” United does that with a team of four dietitians who produce information on the nutritional attributes of all the products sold in the store, and especially beef.
“Another challenge we face is that most housewives just don’t know how to cook. And really don’t have the time,” Nettles says. “And guys don’t know how to cook, either. That’s why ground beef is such a huge part of our sales.”
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So it’s up to the meat department, working with their dietitians, to develop more value-added items. “To add spices, add seasonings, add traits to the meat so that you can just pop it in the oven. So we still have to do more work on our end to help you guys sell more beef.”
However, the thing that he wakes up every morning worrying about is E. coli. “We do a lot at the store level to educate our team members. Everybody in my department can tell you about cross-contamination, they can tell you cooking temperature for beef, they can tell you the correct way to stack the counter so you don’t cross-contaminate.” And they take extra pains behind to counter to sanitize knives, cutting blocks and rags. “It’s a much different process today because of that one word – E. coli – than it was 20 years ago.”
But perhaps the biggest challenge he faces is the same one ranchers and feeders face as well – cost. “Beef cost to me is up over 10% from last year and we’re up 6% in retail price. So we’re fighting the same battles you guys do. We just do it on a different scale and in a different arena,” Nettles says.