Building a moat

When they tell these real-life tales, things like “customer loyalty” and “beef insurance” often come up.

Yes, we talk about the price-value relationship so much that you might wonder if we invented the phrase because it fits in nicely with Certified Angus Beef ® and all we stand for, so when we hear those outside our circle talking the same talk, we notice.

When they use data to prove the phenomenon, even better.

On April 6, Nevil Speer wrote a very insightful ‘Industry at a Glance’ column for BEEF Magazine, exploring boxed beef sales by quality category.

He points out that earlier in the year, the eight-week average for total boxed beef sales of USDA Prime and Branded product surpassed sales of Select graded product for the first time ever. What an incredible comment on the quality-mindset shift that has occurred in the beef industry.

Digging in a little further, in 2005, USDA Select accounted for 24.3% of boxed beef loads and 23.8% of boxed beef dollars. (Keep in mind, roughly 40% of boxed beef sales would be grinds, trimmings, and ungraded beef.) Also in 2005, USDA Prime accounted for 0.6% of the loads and 0.7% of the dollars. Branded beef, which in the “USDA Comprehensive Cutout” combines upper 2/3 and lower 1/3 Choice programs, accounted for just over 7% of both load counts and dollars. Branded Select product gets counted only as Select.

Fast forward to 2014 and we see Prime doubling to 1.4% of total boxed beef sales and Branded jumping to 14.5%.

As Speer points out, consumers are clearly paying a premium for higher quality beef and the cattle business is generating a less significant portion of its revenue from low quality product (Select) that more directly competes with pork and chicken.

We celebrate this as a huge success for the beef industry and an indicator of things to come.

As Nevil and I were chatting about this, he said, “We are truly witnessing an incredible separation of the beef industry from the other proteins in the marketplace.”

And then he offered an analogy: that quality is helping to build a moat around the beef demand fortress.

“That doesn’t mean it can’t be compromised, the competitors are always lurking,” he says. “However, it’s pretty amazing – all happening during the span of our careers.  And there’s lots of opportunity remaining to make the moat even bigger!”

That’s what we like to hear.

–Mark

PS–For more details on this and similar market news every two weeks, subscribe to the CAB Insider by sending a request to cattleinfo@certfiedangusbeef.com.

Mark McCully is our vice president of production. Working from Wooster, Ohio, he enjoys analyzing data and consuming ribeyes.

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