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BEEF PRICES HURT DEMAND: Wal-Mart meats manager
by John Halbert, Miles City Star Staff Writer
People in the beef industry would do well not to become complacent about what seems to be strong consumer demand, said the manager of the nation's second-largest beef retail operation. Current high prices are adready reducing sales.
It is not strong demand that is keeping cattle and beef prices high, but rather limited suppply, said Ken Stettmeier. Wal-Mart fresh meats merchandise manager. He spoke March 10 at a Bozman teleconference that allowed questions and participation from about a dozen Mt. communities.
Several factors are conspiring to reduce beef's market share, Stettmeier said. They are related both to hard economic facts and to customer psycology.
Contrary to several economic analyses, the Dec. 2003 discovery of a BSE-infected cow in the US did cause a drop in sales. Stettmeier said Wal-Mart saw a 250-basis point drop in beef demand after the discovery was announced.
Ironically, demand for whole-muscle beef cuts fell, while demand for ground beef went up. Of the two, ground beef that includes trimmings that may come from close to the spinal cord carries a greater risk of contamination by the prion proteins that mark BSE or mad cow disease.
Another factor, which Stettmeier noted in response to a question from broadcaster Taylor Brown in Billings, is energy prices.
"Energy prices started it," Stettmeier said. "Our customers have to be very careful with their dollar." He also noted that high energy prices drive up Wal-Mart's costs for processing and transportation.
"Don't misinterpret supply with demand," Stettmeir told Brown after Brown questioned his assertion that demand is declining. "Supply is down, demand is not up. We're down 1.7 million pounds in 2004 from 2003."
He said Wal-Mart has 1,835 Superstores that sell beef across the country to 100 million customers.
"Our beef sales are not what they used to be, due to higher prices," Stettmeier said. "We have 16 feet of meat case space for beef. We're doing everything we can to push beef, but price is having an impact on our customers."
"Our tonnage is down. Yeah, we've increased from 1998, but in 2004, we've seen demand wane."
They are turning to alternatives, he added. "Chicken had a fantastic year last year. Beef fell, due to price."
Rudy Stoltz of Winifred, Mt. commented, "If supply in the US is so low, what would the price be if Japan (closed to US beef since the BSE discovery) opened up? We better be looking down the road four or five years when the supply meets demand."
Stettmeier was asked if there was a possiblity that the corporation might turn to more expensive brand-name niche products. He replied that low price is and will always be Wal-Mart's marketing strategy. "If we're not the low-price leader, what are we shopping at Wal-Mart for?"
Wal-Mart's focus on price led to some discussion of Country-Of-Origin Labeling, which was strongly supported in some quarters. Stettmeier stressed that Wal-Mart intends to obey the law, but called it onerous and expensive and said Wal-Mart's position is that COOL should be voluntary.
He said the estimated cost for Wal-Mart to comply with the existing COOL law is $16.4 million, with a total of $9 billion estimated for the industry as a whole and $1.3 billion of that estimated as the cow-calf sector's share.
"If you think putting 'USA' on the package will sell more beef, I say our customers will buy the lower price," Stettmeier said. "All I'm saying is, be careful what you ask for."
He used the example of ground beef that had been irradiated to kill bacteria, a product that offered the consumer a higher level of safety. It wa offered side by side with regular ground beef, at a 30-cent spread to cover the cost of the irradiation process.
"The consumer bought the cheaper beef," he said, adding that he has worked at Costco and Sam's Club as well as Wal-Mart. Those stores had offered lamb from New Zealand and Australia, all openly labeled with the country of origin.
"Ninety-five percent or higher will pick up that product that's a lesser retail price without a doubt," Stettmeier said. "If the customer gets it home and it meets expectations and they're satisfied with it, they're going to go back and buy more."
by John Halbert, Miles City Star Staff Writer
People in the beef industry would do well not to become complacent about what seems to be strong consumer demand, said the manager of the nation's second-largest beef retail operation. Current high prices are adready reducing sales.
It is not strong demand that is keeping cattle and beef prices high, but rather limited suppply, said Ken Stettmeier. Wal-Mart fresh meats merchandise manager. He spoke March 10 at a Bozman teleconference that allowed questions and participation from about a dozen Mt. communities.
Several factors are conspiring to reduce beef's market share, Stettmeier said. They are related both to hard economic facts and to customer psycology.
Contrary to several economic analyses, the Dec. 2003 discovery of a BSE-infected cow in the US did cause a drop in sales. Stettmeier said Wal-Mart saw a 250-basis point drop in beef demand after the discovery was announced.
Ironically, demand for whole-muscle beef cuts fell, while demand for ground beef went up. Of the two, ground beef that includes trimmings that may come from close to the spinal cord carries a greater risk of contamination by the prion proteins that mark BSE or mad cow disease.
Another factor, which Stettmeier noted in response to a question from broadcaster Taylor Brown in Billings, is energy prices.
"Energy prices started it," Stettmeier said. "Our customers have to be very careful with their dollar." He also noted that high energy prices drive up Wal-Mart's costs for processing and transportation.
"Don't misinterpret supply with demand," Stettmeir told Brown after Brown questioned his assertion that demand is declining. "Supply is down, demand is not up. We're down 1.7 million pounds in 2004 from 2003."
He said Wal-Mart has 1,835 Superstores that sell beef across the country to 100 million customers.
"Our beef sales are not what they used to be, due to higher prices," Stettmeier said. "We have 16 feet of meat case space for beef. We're doing everything we can to push beef, but price is having an impact on our customers."
"Our tonnage is down. Yeah, we've increased from 1998, but in 2004, we've seen demand wane."
They are turning to alternatives, he added. "Chicken had a fantastic year last year. Beef fell, due to price."
Rudy Stoltz of Winifred, Mt. commented, "If supply in the US is so low, what would the price be if Japan (closed to US beef since the BSE discovery) opened up? We better be looking down the road four or five years when the supply meets demand."
Stettmeier was asked if there was a possiblity that the corporation might turn to more expensive brand-name niche products. He replied that low price is and will always be Wal-Mart's marketing strategy. "If we're not the low-price leader, what are we shopping at Wal-Mart for?"
Wal-Mart's focus on price led to some discussion of Country-Of-Origin Labeling, which was strongly supported in some quarters. Stettmeier stressed that Wal-Mart intends to obey the law, but called it onerous and expensive and said Wal-Mart's position is that COOL should be voluntary.
He said the estimated cost for Wal-Mart to comply with the existing COOL law is $16.4 million, with a total of $9 billion estimated for the industry as a whole and $1.3 billion of that estimated as the cow-calf sector's share.
"If you think putting 'USA' on the package will sell more beef, I say our customers will buy the lower price," Stettmeier said. "All I'm saying is, be careful what you ask for."
He used the example of ground beef that had been irradiated to kill bacteria, a product that offered the consumer a higher level of safety. It wa offered side by side with regular ground beef, at a 30-cent spread to cover the cost of the irradiation process.
"The consumer bought the cheaper beef," he said, adding that he has worked at Costco and Sam's Club as well as Wal-Mart. Those stores had offered lamb from New Zealand and Australia, all openly labeled with the country of origin.
"Ninety-five percent or higher will pick up that product that's a lesser retail price without a doubt," Stettmeier said. "If the customer gets it home and it meets expectations and they're satisfied with it, they're going to go back and buy more."
Folks the wreck has started!! Have a good one!