Feed Lot Magazine Online, Industry Changes Are Key to Survival

Changing as consumers change is key to survival for the beef industry. That was at the heart of the message delivered to attendees of the Cattlemen's College during the Cattle Industry 2000 Summer Conference in Denver. Cattlemen's College is sponsored by Cattle producers through their $1-per-head beef checkoff and by Pfizer Animal Health.

In a presentation by Mark Thomas, vice president of consumer marketing for NCBA and Randy Blach, chief operating officer of Cattle-Fax, members of the audience were reminded that it's the consumer that makes the ultimate decisions that determine the fate of the industry. "Consumers vote for our product every day, and they vote with their dollars," said Thomas.

Consumers value convenience and nutrition, Thomas said. In order to keep them buying beef, the product must not only be easy to use; it must be easy to choose. Although beef in the past has been losing that battle at the meat case, it is beginning to gain ground.

There's still much room for improvement in consumer perceptions of beef's nutrition, Thomas noted. In a recent consumer survey 40 percent said carrots had more zinc than beef, 60 percent thought spinach had more iron, 70 percent believed broccoli had more B-vitamins and 40 percent thought kidney beans had more protein. Beef is higher than these foods in each of these categories.

The industry is now starting to make headway in these and other areas, Thomas said. Beef demand saw its first increase in 20 years last year, and it continues to improve. And Blach pointed out that consumers are not only choosing beef more often, they're paying more for it. Consumer expenditures on beef are expected to grow by more than $2.6 billion in 2000 to a record $52 billion. Cattle-Fax analysts estimate that rising consumer demand for beef was responsible for an increase of $4/cwt. in the value of fed cattle in 1999, and another $4/cwt. so far this year.

Panels Look to Future

Participants in Cattlemen's College panels looked into the future to suggest where the cattle industry should put its efforts to maximize profitability. John Butler of Rancher's Renaissance said getting the same quality time-after-time is a key priority for the industry. "We think one of the big problems is producing a consistent product," Butler says.

The goal of Rancher's Renaissance is to produce a consistent product through a vertically coordinated chain, Butler said. To date, Rancher's Renaissance has pulled together every segment of the beef industry, with the exception of retail. The group includes seedstock producers, commercial cow/calf operators, stockers and feedyards.

According to Steve Hunt of U.S. Premium Beef, economics must be the driver if grids and alliances in the beef and cattle industry are to be successful. He said U.S. Premium Beef members have proven the value of this strategy, with the top 25 percent of its members achieving a 118 percent return on their investment.

Panel member Charlie Mostek of IBP said his company is changing, too, offering a new Thomas E. Wilson line of branded products. The product is "the most profound part of our existence. From the beginning we have focused on the consumer." IBP has also introduced the Thomas E. Wilson brand in a case-ready product, as well.

According to Joe Swedberg of Hormel, taste is the most important element in consumer marketing. Swedberg said Hormel's Always Tender beef products are now in 50 percent of the U.S. market. The company's goal is to reach 75 to 80 percent of the market by October.

Producers Agree on Importance of Change

Producers in a following panel agreed the industry must be prepared for tremendous change in the future. "In the words of Charles Darwin: It's not always the smartest or the strongest that survive, but those that can adapt to change," said Gene Wiese, a farmer and seedstock operator from Manning, Iowa.

Optimization is important for the future success of the seedstock business, Wiese said. Successful seedstock producers are now breeding to maximize their herd's performance, based on factors like genetics, the environment, low maintenance, superior health, feed consumption and beef quality.

Auction markets are also part of the changing environment. "We are providing solutions to improve the value of our product and bring profit opportunities to producers by meeting industry and consumer needs," said Ken Jordan of Jordan Cattle Auction, San Saba, Tex. For example, Jordan said his operation utilizes a computerized ID system that allows them to give buyer verification of what's been done to the cattle, such as weaning dates and vaccinations, thus alleviating much of the risk for the buyer.

For feeders, consistency is also an issue. Paul Engler of Texas-based Cactus Feeders said subjectivity in the current grading system prevents consistency in determining quality and acceptability. In addition, the structure of the beef industry is segmented, and products may change hands eight or nine times. Furthermore, the marketing system provides "middle-man transactions" and trans- portation that adds costs without adding efficiency.

Engler pointed to instrument grading, alliances and innovative marketing strategies as possible solutions to these challenges.