Consumers Eat Up Meat Marketers' Gourmet Branding

They May Not Know What Angus Is, Exactly, but Diners and Shoppers Shell Out for Higher Quality

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CHICAGO ( -- Quick: what's Angus -- a cut of beef or a bovine breed?

When Hardee's asked the question four years ago, many respondents didn't know. "They weren't really sure, but they did know it was better quality," said Brad Haley exec VP-marketing for parent CKE Restaurants.
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Made in Japan: Burger Bar in Las Vegas charges $16 for a gourmet Kobe-beef patty.

Companion Pieces:

What's Your Beef?
Picking the Right Meat
What's in Store
Squeezing Out Your Neighborhood Butcher

And that's the point. Consumers might be confused by the nuances that separate Angus, Kobe and other high grades of meat, but they are still willing to pay more for primo proteins -- good news for a $100 billion wholesale-meat industry with notoriously slim margins and growth that limps along at the same rate as the population. (Angus is a breed, by the way.)

Redefining beef category
"What the restaurant and retail grocers are counting on is that the consumer can make broad distinctions about quality," said Jay Grob, partner at Bain & Co. He likens it to coffee, where Starbucks redefined the category around premium blends, allowing more marketers to play in premium and make comfortable profits.

Morgan Paisley, livestock analyst for Alaron, a Chicago futures- and options-trading firm, said meatpackers are pushing premium meats to keep sales healthy now that the protein-heavy Atkins-diet trend has faded.

It's working: Consumers worldwide bought more than 544 million pounds of Certified Angus Beef in 2006, generating $2.3 billion in retail sales. Among the 6,100 restaurants and 4,500 grocery outlets selling beef under the brand are Cheesecake Factory and Meijer. There's even a Black Angus Steakhouse chain with 84 units in 10 Western states that boasts it sells nothing but 100% natural, corn-fed Black Angus.

Paying more for premium fast food
Bank of America analyst Andy Barish estimated premium meats have raised same-store sales about 2% to 3% for publicly held chain restaurants, compared with a 1% gain a few years ago. They've also boosted average customer checks past the $5 mark for fast-feeders. The range is between $5.25 and $5.75, compared with a dollar lower five years ago.

Grocers and sandwich shops are also upgrading cold cuts.

Tropical Smoothie Café, a 240-unit smoothie and gourmet-sandwich chain, touts its Boar's Head meats and OvenGold turkey. That was "definitely a conscious decision on the brand side," said Barbara Valentino, director-marketing and communications. Focus-group research showed higher-quality meat would help establish the chain as a fast-food alternative. Sales were $80 million in 2006, up 56% from 2005.
McD's Mushroom Swiss burger
McD's Mushroom Swiss burger

No. 2 sandwich chain Quiznos beefed up its quality attack on Subway Restaurants with a TV spot accusing rivals of using bricks of sliced cold cuts known as "shingle packs" instead of slicing fresh meat on-site.

"We were trying to more clearly communicate the basic advantage of the brand," said Steve Provost, exec VP-chief marketing officer for Quiznos, noting that an earlier prime-rib promotion quickly rung up 10% of the chain's total sales. "People are getting more sophisticated in their taste and more discerning in everyday purchases." Subway representatives declined to comment.

Squeezing middle marketers
All this trading up for affordable indulgences has squeezed middle marketers into irrelevance. Darren Tristano, managing director at Technomic, said independent, high-end steakhouses and small chains such as Gibson's are growing faster than full-service chains such as Outback Steakhouse because their customers are less affected by factors such as rising gas prices. He added: "The casual-dining customer who has more options and less disposable income and may be trading down more."

That's the bet the burger barons made when they jumped into gourmet meat. Hardee's replaced its regular burgers with Angus beef Thickburgers to jump-start its anemic lunch menu. Two years later, Burger King jumped in with Angus, and now McDonald's is testing the burgers.

So far, the new burgers haven't cut into the chains' sales. "In the long run, this will be a new platform in the industry," said Mr. Haley, noting the next step may be to upgrade the quality of the ingredients that dress the sandwiches. Hardee's, he said, "won't be doing Kobe beef anytime soon."

Boutique burgers
Gourmet burger joints have cropped up all over. French chef Hubert Keller of Fleur de Lys fame has a Burger Bar in Las Vegas that serves a $16 Kobe-style patty. Sales at super-trendy The Counter, a two-unit northern-Los Angeles chain, shot up after Oprah called it the "best burger in America." Already contracted for 100 franchised units, the chain will affect the burger market if it takes off, Technomic's Mr. Tristano said.
The Sweet Burger, offered at the Burger Bar in Las Vegas
The Sweet Burger, offered at the Burger Bar in Las Vegas

Other marketers have raised quality by removing hormones and antibiotics used in managing the stock. Niman Ranch has become a leading purveyor of "all-natural" meats with humane animal and environmental-stewardship standards. They're sold at scores of independent restaurants and chains such as Chipotle and Big Bowl. Natural and organic meats make up roughly 1% of volume and 2% of beef revenue, but sales are growing in the double digits, said a spokesman for the National Cattlemen's Beef Association.

Aside from the do-gooder image associated with its "Food With Integrity" campaign, Chipotle saw Niman Ranch as offering superior taste, said Jim Adams, executive director-marketing. "For us it started with the idea that meat raised this way tastes better," he said. "Better animal husbandry equals better taste."

What's Your Beef?

Picking the right meat is such a challenge it's become a comedy bit for CBS's "Late Show with David Letterman." In his weekly current-events quiz, "Know Your Cuts of Meat" is a category where audience members try to identify cuts of meat from product shots for a prize of frozen meat. Here's a cheat sheet.
Arguably is the best-known branded meat, named for the dark hide of its cattle breed. Its quality can be graded choice or prime. Just 8% of beef meets the standards; only 2% is graded prime quality.
For beef alone, there are eight grades, from "prime," found mostly in hotels and restaurants, to "canner," which rarely, if ever, is sold at retail. Only 2% of beef is graded USDA Prime quality, according to Jay Grob, partner at Bain & Co. Another 20% to 40% is Choice, and another 30% to 40% is Select.
True Kobe beef comes only from the region in Japan. Black-haired Wagyu cattle are fed beer-and-sake mash to stimulate appetite in the summer months, massaged to release stress and stiffness, and brushed with sake to soften their coats and therefore the meat. Cattle ranchers raising Wagyu in Washington state do not go to those lengths, which has raised debate among foodies over quality.

What's in Store

Upscale-meat sales are soaring, but butchers are losing out, according to a survey for the American Meat and the Food Marketing institutes. Just 6% of shoppers buy most of their meat from a butcher, and nearly six in 10 never set foot in butcher shops except for special occasions or specialty cuts. Michael Sansolo, senior VP-research for FMI, said poultry, not red meat, dominates meat cases as consumers look for cheaper, more-healthful, options. Price is important: 38% ranked it first, and 71% said in-store sales promotions had an effect. For all the hype, just 35% of consumers said brand or organic claims influenced their purchases -- but more than 60% said they'd partake if prices were lower.
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