What will consumers have to do with the outlook of the beef industry's value chain?
That's a question Western Kentucky University Animal Scientist Nevil Speer tackles in a new white paper, "Consumers, Business and Breeding Systems: Charting the Beef Industry's Path." He suggests the answer is, "everything."
"All business decisions on the ranch, as everywhere along the beef supply chain, should be made with an eye on consumer demand for beef," he says. Part of that means shedding a price-taker mentality and shifting to understanding consumer trends that support beef prices, not just what the markets have to say.
Speer suggests being a "price taker" risks being left behind, and if producers can adapt a new mindset of delivering consistency and efficiency, more specialized production – like a focus on specially branded products – can be successful.
For example, grocers stock shelves and meat cases only with what's selling. Many years ago the industry took note, and the Certified Angus Beef brand saw an opportunity to be a USDA-certified specially branded product in 1978. About 20 years after, 10 more programs came along, and in the 13 years since then, 129 new programs have been introduced.
"This points to ever-growing market differentiation," Speer says.
USDA quality grades are associated with higher levels of marbling, which generally leads to an increased likelihood of a favorable eating experience. In particular, higher degrees of marbling are positively tied to USDA "A-stamp" percentages, with those cattle showing a higher probability of grading Choice or better.
"The effect of establishing positive demand spells prosperity: more consumers buying more beef at higher prices," Speer notes in the research paper.
Growth in that market speaks for itself: the value of weekly combined sales for USDA Prime and branded products (a function of both volume and price) has increased nearly 400% since 2003 and now represents nearly $4 billion per year.
"Given the outlook for ever-tightening supply, this emphasis and its influence upon the supply chain will likely be amplified," Speer says. "Whatever the targets that evolve over time, there will be growing pressure to maintain genetics and breeding systems capable of delivering high-quality beef products coupled with synchronized supply chains that facilitate those attributes, including 'product story.'"
With research and market data proving that consumers identify with brands when shopping for beef, he says, those are the programs best poised to take advantage of integrated supply chains that can sway the industry away from that "price taker" mentality.
The virtuous loop is a kind of self-fulfilling prophesy, he says: "The production of higher quality, more desirable products establishes better consumer demand, and in turn, better consumer demand creates the need for even more high-quality beef."
For more on Speer's research paper, click here.
Source: Certified Angus Beef