March 26, 2009

The US beef industry is trying to fight recession-related woes by promoting new, cheaper cuts from less popular parts of the steer and pushing beef harder overseas.

 

The industry's moves mirror those of restaurants, supermarkets and packaged-food companies seeking ways to entice budget-conscious consumers who are dining out less and looking for ways to economize at home.

 

Making the situation even tougher, a new study this week by the National Cancer Institute concluded that eating too much red meat can shorten life spans.

 

So far, though, beef sales in the US are suffering largely because consumers aren't eating as much at restaurants. Beef sales to food-service establishments were down nearly 5 percent last year, according to figures from food-consulting firm Technomic Inc. Sales to supermarkets and other retail outlets rose 2 percent as consumers started cooking more at home.

 

"You've got enormous competition in the meat case," says Gregg Doud, chief economist at the National Cattlemen's Beef Association. "We're making sure we get to [consumers] before they" choose chicken or pork, which are typically priced lower than beef.

 

Historically, half of all meat sales in the US go to the food-service industry, Doud says. But dining at casual chains is down, in part because of the recession, according to Knapp-Track, which follows sales at about 10,000 dining outlets. Generally, sales at fast-food chains such as McDonald's Corp. haven't suffered as much.

 

At beef and poultry giant Tyson Foods Inc., Springdale, Ark., beef sales dropped about 7 percent in the fiscal first quarter ended Dec. 27. Tyson's stock price has dropped nearly 50 percent since its 52-week high last April.

 

Shrinking demand is having ripple effects on the farm, too, where ranchers are confronting lower cattle prices. Feedlot operators have lost US$4 billion since January 2008, mostly because of feed prices, which soared last year amid burgeoning global demand for grain, says Doud.

 

Brady Rinehart, a cattle rancher in Highmore, S.D., says he's losing money on each calf he raises. "It's really tough," he says. "I hope more people eat more beef."

 

For years, beef consumption fell as chicken's popularity grew, but beef surged early in this decade as low-carbohydrate diets swept the country. Today, production of all three of the main sources of meat protein -- beef, pork and chicken -- is down.

 

The National Cattlemen's Beef Association and its Beef Promotion and Research Board have ramped up efforts at grocery stores to lure consumers who have become less inclined to visit restaurants. For example, the industry this year will hand out 60 million coupons valued at US$1 or more for beef purchases, up from 10 million coupons last year.

 

The industry also recently introduced an online education program designed to teach consumers how to be their own butchers at home so they can harvest cheaper cuts. For example, they'll learn how to cut steaks from a tender roast or cut beef kebobs from a sirloin steak.

 

Similarly, a "Bargain Beef Bundles" program is designed for shoppers who want to buy beef by the side or the quarter to store in their home freezers.

 

It isn't clear yet how consumers will take to these initiatives, but they're clearly a break from the convenience-meat packages the industry has focused on in recent years.

 

In recent months, Cargill Inc., which owns one of the nation's biggest meatpacking companies, has begun trying to make some low-value beef cuts sound more appetizing. Thus, a piece that butchers have long called "flap meat" is being recast as "Cordelico Sirloin," while "ball tip" has been rechristened "Cabrosa Steak."

 

Beef-industry representatives are also working with retailers to provide them with marketing alternatives designed to move meat out of coolers more quickly -- such as packaging four smaller steaks together instead of two larger ones.

 

They're also encouraging supermarkets to put beef on sale. In January the average price of a boneless sirloin steak was about US$4.64 a pound, down nearly 11 percent from the same month last year, according to data from FreshLook Marketing LLC of Hoffman Estates, Ill.

 

The industry is also redoubling its efforts to sell more cuts of meat from a wider variety of the steer's muscles. Traditionally, consumers have favoured the so-called middle meats -- premium cuts from the rib and the loin like rib-eye and T-bone steaks. Middle meats also tend to be more profitable for beef processors.

 

But now as consumers scour delis and supermarkets for deals, the industry is trying to spotlight cheaper muscle cuts like round and chuck that have tended to be less tender and contain more muscle fibre. The industry says new cutting techniques have made the cuts more palatable.

 

The new Denver Cut, a steak from the "chuck roll," near the cow's ribs, is currently being tested in restaurants. Another cut, Boneless Country-Style Beef Chuck Ribs, is being tested in some grocery stores.

 

By harvesting more steaks from the cow, the industry gives consumers more options spanning a wider price spectrum, Doud says. In addition, beef processors can derive more value per animal.

 

"The more steak we can make and the less hamburger, the better," Doud says.

 

On the international front, the US Meat Export Federation is increasing its efforts to woo foreign meat eaters to US beef.

 

While beef exports have generally held up since last year, some analysts expect them to decline as foreign consumers cut back. Already beef exports to Russia have plummeted since the summer as that country's economy has suffered amid lower oil prices and global economic turmoil.

 

"We're trying to move more value cuts," says Philip Seng, president and chief executive of the US Meat Export Federation.

 

In Japan, a key beef-export market, the federation is targeting convenience stores, where sales have picked up in recent months. It's also promoting US beef as an ingredient for so-called bento boxes that have surged in popularity at Japanese convenience stores.

 

In Mexico, the federation is deploying teams of meat experts called "Don Pepes" to grocery stores and other retail outlets to inform consumers about how to cook US cuts of beef.