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Increasing the demand for beef. Outside of the weather, perhaps no other topic captures cattlemen's conversations like this one. And, barring a major weather catastrophe in 1999, a betting man might be hard pressed on which of those two to lay his odds on. To cattlemen, it might seem that one is as impossible to influence as the other. However, halting and then turning around beef's 20-year slide in market share is doable, if cattlemen have the resolve to focus their efforts, energies and expenses around the rallying cry of helping consumers increase their beef demand, according to a report from the Texas Cattle Feeders Association. To understand what demand is, it's important to first understand what demand isn't, according to Dr. Wayne Purcell, a professor at Virginia Tech and director of the Research Institute on Livestock Pricing. Purcell says that often, per-capita consumption is equated with demand. "Nothing could be further from the truth," he says. Per capita consumption is calculated by USDA using an accounting approach to measure beginning beef stocks, production and ending stocks. A ''disappearance'' measure is then generated and converted to a per-capita basis. "If per-capita consumption measures anything directly, it measures per-capita supply. It certainly does not measure demand," Purcell says. That's because consumption and demand are not the same thing. While the old adage that everything that is produced is consumed is certainly true, the swing factor in the equation is price. Which leads Purcell to relate his definition of demand, which is a schedule of the quantities of any product or service that consumers will take at various prices. "Think about the last time you went shopping for a pair of shoes," he says. "You intend to buy one pair, but when you walk into the store, they have a big 50% price reduction sale going on. Do you ever walk out with two pairs when you intended to buy one pair? If you do, you buy two pairs for one simple reason-the price is lower." But when you buy two pairs of shoes at the same price you intended to pay for one, hasn't your demand for shoes increased? No, according to Purcell. "Your demand for shoes did not change when you bought two pairs. You took (you "consumed") a bigger quantity because the price was low." Quantity consumed was different at the lower price. "Your attitude toward those shoes and the amount of money in your pocket-the things that determine your willingness to pay and to consume-did not change." The parallel in beef is obvious. When market channels are full, the marketplace will only absorb the increased quantity at some price. And that price will always be lower if demand hasn't increased. And since consumers have been willing to consume larger quantities of beef only at lower prices, beef demand hasn't kept pace with consumption. But the beef industry is finally righting its course and getting the oversupply situation under control. Shouldn't that mean prices will get better? To some extent, yes. Cattle and the beef they produce are still a commodity and still susceptible to cyclic forces. However, it's important for cattlemen to remember that every penny that flows through market channels in the beef business originates from a consumer's pocket. If the beef industry intends to increase demand for its product, as measured by consumers' willingness to pay more for it, this must always be kept in mind. According to Purcell, there are three primary demand shifters-change in consumer income, change in price of substitute products and change in taste and preference. "If your preference for a product is increasing, you will buy more of it if your income allows and if good substitutes are not being priced lower. This is a long-term demand shifter and it appears to have been the dominant one acting on beef since about 1980," he says. In short, consumers have been voting with their food dollars and have been telling cattlemen that they don't like what's being offered. Don't misunderstand--it's not that they don't like the taste. "Concerns about cholesterol and fat, inconsistent quality and lack of convenience in preparation have turned consumers' preference away from beef," Purcell says. Enter the beef checkoff and the beef industry's recent push to promote the new heat-and-serve beef products just out on the market. From a marketing perspective, these heat-and-serve products represent a shift in direction for the beef industry--a shift that will bring it more in line with the essential need to move the demand curve back in favor of beef. "Beef is one of our country's national treasures," says NCBA President George Swan. "And our industry knows that in order to safeguard that treasure in a changing world, we've got to evolve. We've got to behave less like a commodity and more like a branded product that brings value and the promise of convenience and consistent quality." Swan says that can be done by replacing cattlemen's question of "what can we produce?" with "what do our customers need?" According to Scott Gates, beef department manager for SYSCO, the nation's largest foodservice distributor, that's exactly what the new beef products accomplish. "Americans love beef, plain and simple," he says. "But the challenge for all of us--the beef industry, the distributor and the foodservice operator (and grocery store)--is to deliver a product that lives up to consumers' expectations every time at a price they're willing to pay." Gates says SYSCO is enthusiastic about the new beef products available and is investing significant resources into developing additional products. "Here's the deal--beef is an industry; it's a product; it's a commodity. But in the end, it's food. It winds up in the mouths of real people. Our job is to create products that deliver a consistently satisfying beef eating experience--flavorful, juicy, tender and safe. That's the new reality. The demand is there. The technology is there. And every day, the product mix is growing." That's good news for cattlemen. And that's why the beef industry has invested significant checkoff dollars in encouraging this trend. But it will take time-stopping a 20-year slide in demand won't happen overnight. But it must happen. And with checkoff funds and cattlemen's resolute desire to stay the course, it will. |
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