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In 1999, prominent Purdue University agricultural economist, Dr. Michael Boehlje, stated (Boehlje et al., 1999a, b) that the new agriculture of the 21st Century will focus on:

• Global marketing

• Industrialization

• Differentiated, branded production

• Formation of food supply chains

Although the target of his presentation was not just the beef industry, but rather agriculture as a whole, his comments certainly apply to beef production and its evolving role in the food industry.

By 2003, the US beef industry was rapidly growing in its place of prominence in the global market with 9- 10% of all grain-fed beef being exported. Though in a temporary lull because of the BSE incident in December 2003, the US will likely continue to be the number one exporter of high-quality beef.

The evolution of commercial feedlots was the first step toward industrialization within the beef industry. The current formation of structured marketing alliances is continuing to drive this process. An exciting area of progress for beef producers has been the recent evolution of new and branded products.

Although still in its infancy, the future of branded beef products has exciting potential.


Historical perspective

To speculate on the future, it is important to consider changes over the last 50 years to appreciate the progress being made by this tradition-bound industry. Beginning in the 1950s, the evolution of grain-fed beef started making an impact on the taste buds of the consumer.

Before that time, pork was the product of choice. Around that time large cattle feedlots started to develop where over 20,000 animals were concentrated compared with farmer feedlots containing 50-100 head. By the mid- 1970s, great progress in beef consumption had occurred. Beef was ‘king’; and 75% of the cattle graded Choice (modest and higher). Then, in 1976:

• USDA grades were changed, lowering the Choice grade to a small degree of marbling

• Select replaced the Good grade

• The impact of the European breeds were changing the ‘look’ of the cattle industry

• The ‘war on fat’ started with less emphasis being placed on beef quality

• The demand for beef started to decline.

By the late 1990s, demand and per capita consumption of beef had been in a 25-year decline. Improvement was signalled with these key changes:

• The industry identified declining demand as a major threat to the future of the beef industry and established goals to reverse this trend.

• New product research was showing great promise, including the first successful microwaveable products.

• Growth in beef brands was starting to make an impact on consumers.

• Consolidation among feeding companies and retailers was occurring.

Within five years, a more progressive, positive outlook had emerged for the beef industry. There was exellent growth in beef demand in spite of gobal BSE/FMD outbreaks and beef prices never before experienced. New beef cuts and microwaveable products were readily available to consumers; and consumers were shopping for the beef brands of their choice.


Industry structure

To appreciate the impact high-quality branded beef products are achieving, it is important to understand how beef reaches the consumer. Figure 1 illustrates product flow from the producer to the consumer.


Evolution of brands

The development of branded beef items in the protein marketplace has been slow, but progress is steady. By the 1970s, pre-cut branded poultry products were in retail stores and on menus. Pork followed suit in the late 1980s and early 1990s. Yet by 2003, less than 20% of all beef was sold as a national brand. The following chronology outlines some, but not all, of the historical perspective of beef brands.


1978 Certified Angus Beef launched as first USDA certified program

1979 Coleman’s Natural Beef launched as first ‘natural’ program 1985 Laura’s Lean, Harris Ranch, and Maverick Ranch brands appear

1986 Oregon Country Beef started

mid-1990s Packer brands like Angus Pride and Farmland Black Angus appeared

1995 Certified Hereford Beef started


To appreciate why certain beef brands have succeeded while others failed, it is important to ask, ‘What is a brand?’ To be successful, brands usually meet one or more of the following criteria:


• It is a Promise

- Tastes better, runs faster, fee


• It is an Image

- A brand creates a level of anticipation when eaten or used


• It is part of a Lifestyle

- Successful brands are part of a lifestyle, with clothes or riding a Harley being examples


• It has an expectation of Consistency


• It implies Valuels good, looks better





Figure 1. Beef product flow from the cow-calf producer to consumer.



Those beef brands that have created consistency and a point of differentiation from other beef products have clearly had the greatest success. Simply branding commodity products without specification is asking for failure.

How much specific progress has been made with beef brands today? To understand that, appreciate that most beef brands are linked to USDA quality grades and part of the USDA certified program beef schedule. Ten years ago, less than 5% of beef was part of the USDA certified programs, however by 2003 that grew to 17.4% (Figure 2).

To further understand brands, Table 1 illustrates the percentage of the US beef population by USDA grade, the percent branded, and the current growth trend. The percentage of the highest quality grade, Prime, is also rapidly moving towards branding as evidenced by the growth of the Certified Angus Beef® (CAB®) Prime brand (Figure 3).

Besides the growth in national beef brands, the other growth trend is the development of private labels or store brands for beef products. Years ago, store brands often denoted lower quality products, which were cheap alternatives to national brands like Kellogg’s corn flakes, Quaker oatmeal, or Heinz ketchup.

Times have changed as retailers realize developing quality store brands can lead customers to the store seeking the store branded beef as a destination product.

For some retailers, development of store brand specifications has resulted in a more uniform, higher quality beef product. For many retailers, blending the store brand, which represented their lower priced Choice/Select product, with a national premium brand creates the ideal mix for the broad mix of shoppers they serve.





Figure 2. The percentage of total beef represented by USDA certified programs.



Table 1. Beef brands associated with USDA quality grades.








Figure 3. Growth of the Certified Angus Beef ® Prime brand from 1999 to 2003.



Brands and consumer satisfaction

The continued growth of beef brands reflects their success in meeting the taste preferences of the beef consumer. Dr. Gary Smith (Smith, 2005), in a recent presentation at the National Cattlemen’s Beef Association (NCBA), stated that “the end product that you sell is not meat… it is taste.”

He further stated that “always remember the strength of beef with the consumer is its unique and desirable flavor”. The flavor and aroma of cooked beef come from specific carbonyl compounds located in the intramuscular fat (marbling) of beef. Thus, as marbling increases in beef cuts, so does the flavor profile.

Do the USDA grades profile beef flavor? They actually do, as quality grades are predominately determined by marbling. Thus, it is not surprising that quality grades are used by consumers to create a predictable eating experience (Table 2).


Table 2. USDA quality grade and consumer experience.





Economic impact of branded beef

Three distinct economic trends have emerged in the beef industry in recent years:

• Unprecedented beef price ($84.50/cwt average fed cattle price in 2004)

• Unprecedented weekly price fluctuation in cattle prices

• Great differentiation in beef prices depending on USDA quality grade

Linked to growth in beef brands is the differentiated pricing schedule now occurring in the purchase of fed cattle, which is illustrated in Table 3. The magnitude of price variability by quality is the $352 difference in a Prime vs. Select carcass of comparable weight.


Table 3. Differentiation in beef pricing based on USDA quality grade.


*Assumes 1,280 lb. steer and $16 Choice/Select spread. Summary



Summary

Branding has changed the beef industry; rekindling consumer confidence by offering a more predictable dining experience.


References

Boehlje, M.D., S.L. Hufing and R.C. Schroeder. 1999a. Financing and Supplying Inputs to the 21st Century Producer. Univ. of Purdue staff research paper 99.11.

Boehlje, M.D., S.L. Hufing and R.C. Schroeder. 1999b. Farming in the 21st Century. Univ. of Purdue staff research paper 99.9.

Smith, G.C. 2005. Why people eat beef. 2005 NCBA Cattlemen’s College proceedings.

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