Food Service Companies Share
Ideas On New Beef Products

By Colleen Schreiber

DENVER — Participants in the live cattle marketing council and feeder council joint session at the National Cattlemen’s Beef Association summer meeting here recently heard from two leading food service companies about new products and innovations as well as challenges facing the beef industry.

HEB, a South Texas based-company with sales reaching $6.5 billion, has been experiencing double digit sales growth in their red meat department for the last four years. They currently market just over a billion pounds of meat a year, 300 million of which is beef.

Steve Harper, vice president for meat and seafood marketing and procurement, gave the audience a glimpse of the retail world through a retailer’s eyes. His talk focused primarily on food safety, new products, and nutrition.

"We firmly believe that there are a lot of good things about the beef industry," Harper told listeners, "and we’re not willing to accept stabilizing beef demand and we’re certainly not willing to accept declining beef demand. We think there are a lot of things that we can do to make a difference."

He touched first on the importance of getting a handle on the food safety issue.

Food safety, Harper told listeners, is not a marketing tool. "We’ve been deluged lately with food safety stories and exposés. Dateline also recently had a story on the adulteration of ground beef with pork. All these stories have had a large impact on our market.

"E. coli has had a tremendous impact on the value of ground beef. I believe the price of ground beef would be 20 to 30 cents a pound more if we didn’t have the E. coli issue to contend with.

"Our customers are concerned," he continued. "I’m concerned. Food safety is something that once it hits you it has the ability to destroy a company. We have to find a way to solve the problems of food safety together. It really is a requirement to continue to be in business for each segment," he stressed.

Harper said he doesn’t believe testing at the retail level is the answer for handling the E. coli problem.

"I think HACCP is going to be part of the answer. Vaccines may not be the answer, but there are some who believe that probiotic cultures may be," he remarked. "If that can be proven, I would be one of the retailers saying that in the last two to three weeks of feeding, I want my cattle to be fed whatever probiotic that is, because I want to know that when they’re slaughtered, the chances of E. coli showing up have been eliminated."

HEB has about 160 market managers. Because food safety is so important, HEB has a program called Awards and Consequences. This program calls for monitoring and inspection of the various food markets. If the market does well, the department head gets an increase in partner share, or "bonus money" for that particular quarter and the partners working in that market get an increase in one-time money, he explained.

"They get recognition and rewards from within our company for doing a good job."

There’s also an "acceptable" level, a level at which the partner share is reduced, and then a level where partners are put on notice that their performance is not acceptable. If they receive two notices at this performance level, they may be terminated.

"We do this because we can not afford not to deliver safe food to our customers," Harper explained.

New products, he told listeners, are the lifeblood of the industry. Unfortunately, "it’s something we haven’t done a very good job at. Our customers have changed, but we haven’t changed the products to adapt to the customers. We’re slowly starting to make some headway."

He said all entities within the beef industry must know their product and how and why their customers use their product. They must know how they can improve or change their product so the consumer will utilize more of it.

"We must understand that we don’t sell beef," Harper remarked. "We sell a great eating experience."

A retailer’s customers, he explained, first buy their meat products with their pocketbook and with their eyes. Visual appearance of the product in the meat case, Harper said, is one thing a retailer deals with on a daily basis. HEB believes in the use of Vitamin E to give stability to the color of the beef product, which, he said, should help increase its value.

After price and appearance, consumers buy the beef product with their mouth. HEB is working to do its part to improve the consumer’s experience with the taste of beef, Harper said. They are urging packers to make a concerted effort to remove bone skin and connective tissue from the product before it goes into the meat case.

He talked about declining demand and in turn the decline in price for end cuts, primarily the round and the chuck.

"That doesn’t have to be," he insisted. "It is only that way if we continue to do what we’ve always done."

In terms of new products, HEB is refabricating the beef chuck into several new products, which Harper says are selling well. They introduced a fully cooked beef brisket at Easter.

"Our goal was to have about $1.5 million in sales the first year. We’re now at $4.5 million and climbing," Harper told the group.

"A regular brisket sells for 69 to 89 cents a pound. The cooked brisket sells at $2.99, and it was all we could do to keep up with production. We were afraid that if we promoted cooked brisket that consumers would quit buying raw. That didn’t happen. For that promotion the raw briskets grew by 13 percent while the cooked briskets were 36 percent of the total sales growth," he says. "That says that you can add value."

Their seasoned beef for fajitas, a fairly new product, cooks quickly, is guaranteed tender, and "it will forgive you if you overcook it," Harper told listeners. "Sales on this product took off like a rocket and it hasn’t stopped yet."

HEB’s most recent contribution to the improvement of the beef industry came when they introduced their new four-color meat label with cooking instructions right on the label for that particular product. The time it takes to prepare that particular cut is also noted on the label.

HEB meat cutters, Harper said, had to be retrained to cut specific thicknesses for individual products so the cooking instructions would be accurate for that thickness of cut.

Harper also stressed the importance of knowing the nutritional aspects of beef.
"We all should know that beef is nutrient-dense, and we should know what it means to be nutrient-dense," he said.

Finally, Harper said, "There’s no silver bullet. We can’t do just one thing and expect to make a difference. As much as I’m proud of what we’re doing, I often say that we’re the best of the worst. We’re 10 to 20 percent of what we could be if we were all aligned in selling our product.

"We must align the industry segments," he stressed. "We cannot be successful without being aligned. As an industry, we have to start sharing information with each other."

SYSCO is the largest food service distributor in the world, with approximately 61 individual operating companies in the U.S. and Canada. As such, they’re a huge user of beef. Last year, on average, SYSCO consumed 29,682 steers a week.

Bob Lorino, a SYSCO representative, gave listeners an overview of what his company is doing in terms of moving the beef industry into the 21st century.

Contrary to popular belief, he said, wholesalers and retailers alike are not making tremendous amounts of money at producers’ and feeders’ expense.

"A retailer who nets one half of one percent to one percent is having a great year," he insisted. "As good as SYSCO is, as steady as we are, we barely net two percent."

The enemy, Lorino said, "is not in this room.

"The enemy is on the plate. It’s chicken, pork and anything else that the consumer wants. It’s also in the way we present our products to the consumer. It’s what the customer wants that we’re all about."

The inside round, he said, is the number one selling item behind ground beef, but it’s one product that has been and continues to lose market share.

"It’s unbelievable what market share has done the last four or five years on inside round," Lorino told listeners. Since 1994 the price for inside round has gone from $1.48 a pound to $1.25.

"Over four years the price has dropped by 22 cents and today we’re regularly buying loads of inside rounds for $1.18." he said.

Lorino attributed the drop in price most recently to excessive weight.

"The typical inside round is 23 pounds and up. Today the average size of an inside round is 28 to 30 pounds," he said. "It’s too big for our consumers.

"We’ve been dealing with heavyweight cattle for almost a year now," he continued. "That’s where these 30-pound inside rounds are coming from. Not only that, we haven’t been able to buy a 12-pound and down lip-on ribeye now for the last eight months. That’s what we make prime rib and ribeyes out of. If a consumer can’t get what he wants, he’s going to eat something different," Lorino insisted.

Like HEB, SYSCO is concentrating on product development in the lower selling end cuts. More specifically, they’re concentrating on refabricating some of the larger muscles. They recently released three new products that utilize the inside round. These products, he said, average 3.5 pounds in size.

SYSCO has also developed a plate that goes on the head of a grinder. This invention, Lorino said, has allowed them to introduce a whole new line of products. One from which he expects great success is a breaded beef strip.

"When was the last time you went through a fast food chain and ordered beef strips?" he asked. "SYSCO has tried to find a beef strip that will compete in eating experience and price with a chicken strip.

In the past, lorino explained, beef strips were made from a solid piece of beef, which always had gristle in it. "I don’t care what cut you take it out of, the breading starts to fall off and you can’t bite it off. Kids especially can’t eat beef strips, but with the use of this new machine we’re going to have a whole line of breaded products that eat just like a solid muscle but they’re going to be able to bite it off and chew it, and they’re going to like it.

"The price point," Lorino told listeners, "is right there with chicken strips, and we’re using chucks and rounds to do it."

Instead of forcing the meat through cylindrical holes, the new head has vertical slots. This allows the ground meat to be bound back together so that it eats like a solid muscle meat.

Lorino briefly discussed SYSCO’S line of branded beef programs, which he says are doing well. They include Supreme Angus, which is identical in terms of specifications to Certified Angus beef; Imperial Angus, which is all Choice; and a SYSCO brand that is strictly fed Holsteins.

SYSCO’S branded beef products, Lorino said, consistently sell at a higher price and are growing faster in popularity than the generic beef sold by the packers.

Like Harper, Lorino noted the dramatic impact that health concerns, particularly the concern over E. coli, has had on the beef industry.

"If we don’t get a vaccine to keep this out of the system before we harvest these animals, we’re not going to be here much longer," he told listeners. "I don’t think you can see what this is doing to our consumption. We’re selling less hamburger, both retail and food service, compared to a year ago because people are genuinely worried."

The other problem, he noted, is the message given to consumers "that they better cook their hamburgers ‘til they’re dead. Everywhere I go they’re overcooking hamburgers. They are overreacting to a problem that we as an industry allowed to happen. I don’t get very many burgers today that I can say I truly like."
The beef industry, he added, has finally found a way to add a little moisture and a little seasoning to burgers.

"You can cook it to 160 degrees and still get a juicy, good tasty burger. This is one of the things we’ve done to counteract what we should have already taken care of, and that is not to have E. coli in the first place," Lorino said.