Retailers Demanding Tighter
Beef Product Specifications

By Colleen Schreiber

SAN SABA — Some say change is inevitable and progress is optional. The inevitability of change was about all that Texas A&M University beef cattle researcher Dr. Bill Mies was willing to guarantee while speaking at a recent stocker cattle conference here. That and the fact that more and more retailers are beginning to enforce stricter product specification guidelines.

"You don’t talk about what’s coming along in the next 10 years and write it down so that someone can hold it against you," Mies told producers. "One of the ways the cattle business will change is that it's going to be a lot less fun and a lot less exciting."

The researcher, who has been involved in many different facets of the cattle business, talked about where the industry has been and then drew some broad conclusions on where it is headed, based on recent changes.

"The cattle business has always drawn people to it because it was a place where one could exercise his individuality; you could produce a product that was unique, that might be different from any of your neighbors — that walked different, bellered different, was colored different or did something different. That was part of one's freedom of being in the cattle business. That explains having 97 different breeds in the U.S."

For good or bad, Mies said, that freedom, that individuality may be reined in somewhat in the future.

"Specification production is what everyone is talking about today. That means producing a product with a very narrow range of acceptability that hits a rather narrow target."

Today, he said, the "targets" are so wide they're laughable. In carcass weight, for example, the "target weight" is actually a range 400 pounds wide. Producers aren't penalized as long as their carcasses weigh in the range of 550 to 950 pounds.

"You might say that’s good, but how does HEB make a 5.1-pound brisket every day out of carcasses that have a 400 pound weight range in them? It can’t be done. How does Safeway make a specified product with carcasses that have a tenth to an inch and a half of fat on them? It can’t be done."

Producers, the researcher said, must understand why these changes are coming about and what they mean to each individual in terms of production.

"These changes will be driven by dollars, by economics, i.e. the consumer's pocketbook," Mies said. "We'll either respond to the consumer's needs or the competing meats will run over us. We can chose not to go along with the changes and that’s fine, but we may not like the result."

He described the changes that have already occurred in the meat case and how those changes have ultimately impacted today's consumer and the beef industry in general.

"We don’t sell product like we used to. We used to be able to walk the meat counter and the cuts from the chuck, the round, rib, loin, etc. were right there in sequence. That's the way packers sold the product to the retailer. Carcasses were broken up and sold in seven different boxes.

"Today we sell beef by the cut," he continued. "Retail gets certain cuts and food service gets other cuts."

There has been a tremendous boom in the growth of middle meats, while the end cuts like the chuck and the round, sold primarily at retail, suffered. Growth in steak houses, and "away from home" eating, he noted, is what has taken the middle meats upward over the last five years.

"High-priced cuts are being moved away from home; the lower priced cuts are the ones being moved at retail, so retailers have a double challenge — it’s not just that the price of chucks and round is going down; it's also what they have the most to sell, and they're the least convenient, the least consumer friendly and the least standardized of any product."

Retail stores, Mies said, build customer loyalty at the produce counter and in the meat case.

"If that produce counter doesn’t look good and smell good and handle good; if it's not nice and icy and fresh, you lose your consumers to that store."

Today's meat case, Mies pointed out — at least the pork and poultry sections — consists of fewer fresh cuts and more in a bag, preseasoned, premarinated, precooked and much more convenient than five years ago.

"So the black hole is in the beef case. That’s where a store will generate consumer loyalty. It will either get reputation for having good beef or it won’t."

He cited a regularly used statistic today among beef educators, that 70 percent of evening meals are decided on after 4 p.m.

"Thus the retailer is trying to develop cuts and packages that are precooked and convenient so a consumer would rather stop at the store, grab something and go to the house to eat rather than eat out," Mies explained.

He recognized the work being done by HEB in this arena.

"What HEB is doing is not lost. We'll see repeats and competition among other retailers," he assured listeners.

For that to happen, however, retailers must have a product they can manufacture time and time again. That means product specification, Mies reiterated.

"HEB brisket, for example, comes from Select quality grade, YG 1 and 2 carcasses within a 200 pound weight range. They really need a 150 pound weight range, but that’s what they’re forced to work with to get enough product for what their demand is at the moment.

"That’s the size of cattle that has the cut that fits the bag that they can sell that will go through the manufacturing process that will weigh five pounds coming out the other end," he explained.

Mies addressed a recent report in Cattle Buyers Weekly that said Future Beef Management has reportedly contracted with Safeway, the fourth largest grocery chain, to provide them with a guaranteed supply of beef meeting certain standards and consistency. Such a report, the researcher said, is another example where product specification comes into play. Safeway, for example, has always been interested in high cutability, and YG 1 cattle fit the bill. On the other hand, the researcher reminded listeners that for the most part, no two alliances want the same specifications.

"We need to realize that we can’t design cattle for a single operation," Mies remarked. "If we made all YG 1 cattle, the percentage of Standard cattle would increase dramatically and there would be customers who received some tough product. It may be lean, but it will be tough. There’s some tradeoffs to be made with a specification like that. In a lot of cases a YG 1 calf is a freak. It’s either an extremely heavy muscled calf or he’s one really underfinished."

As HEB's business grows and other retailers begin to follow suit, Mies said, retailers will begin to pressure packers to send them cattle with certain specifications, and that pressure will be passed down the chain from the packer to the feeder, stocker operator, cow-calf man and so forth.

Recent numbers indicate that in the last year the number of cattle moving through targeted alliance specification programs in the U.S. has doubled from three percent to six percent, according to Cattle Fax.

"I think we will continue to see it jump eight to nine percent in the next year and a half," Mies said, "but I don't think we'll ever get more than 50 percent of the cattle going through such programs. I think there are too many small producers in the Southeast who will continue to manufacture what they’ve always produced."

The production sector, he feels, will first be pressured to tighten up their weight ranges. One way to do that will be through special sales where cattle are put together not just in load lots but in sorted load lots. Closer to home it might mean fewer days in the calving season, or in some parts of Texas it might mean taking the bulls out to have a calving season, Mies said. It involves sorting off the bigger cows and the smaller ones to even up the overall frame size of a herd to produce more uniform offspring.

He encouraged producers to learn what targets are out there, which ones have been identified for specific programs, and then discover ways to hit those targets.

"What do we do today? We raise calves that make us feel good, that suit us, that fit our operation, and then we look for a home for them. I’m telling you that if your calves don’t fit the specs in the future, the homes for them are going to be very, very minimal.

"There will always be speculators and there will always be cattle that don’t fit, and people willing to take on that risk, but you're not going to like the price. It isn’t going to be anywhere near your cost of production," he insisted.

Mies told producers that he expects more risk management to be used in the cattle business in coming years.

"The more uniform your cattle are, the better your opportunity to utilize the tools that are available in risk management," he noted. "Risk management takes the mystery out of the business and in some cases, the fun out of it, certainly the surprise. It makes it kind of a dull business if we do it right, because we know what we’re going to make. That may not have near as much appeal, but it’s got profit, and that appeals to me. It appeals to me because it means we get to keep our businesses."

Mies fielded some general questions from the audience regarding the short-term outlook. He said he expects heavy feeder cattle to take a beating in the short term, primarily because of cheap corn prices.

"They haven’t turned a wheel yet in the Midwest and the elevators are full from the wheat harvest. The elevators know they’re going to have to dump this corn crop on the ground, which will make really cheap corn this fall," Mies remarked. "Because of the cheap corn, people will want light cattle so they can put as much corn into them and keep them on feed as long as possible," he explained.

When asked the standard question about which breed was best, Mies reminded participants that none of the alliances want the same thing, which means there's a place for most all kinds of cattle.

"The targets are dispersed enough that we’ve got to have different kinds of genetics. To raise cattle in Montana versus Florida requires different genetics. We’ve got to be creative to market those genetics and understand how to raise them and put them into a certain specification group," he reiterated.

Mies did recommend keeping Brahman influence in check.

"I think a quarterblood to three-eighths is all the Brahman we need or that is acceptable," he told listeners. "That means a halfblood cow will work and I think we will keep using them. But, fat cattle that are three-quarter blood or higher are going to have a hard time finding a home."

Mies concluded by reminding producers that the consumer is the key to the success of the beef industry.

"Consumers are always going to buy beef. The question is how much and what will they pay for it. How many of us will they keep in business if we don’t serve them?" he asked.

"If we lose our customers, we lose our markets and they won’t need us."

Planned profit through product specification and risk management, the researcher reiterated, is how beef producers will meet consumers' needs in the coming millenium.

"Profit, routine profit, not a surprise profit. That's what I hope for over the next 20 years."