CAB Brand Looks to Producers as Demand Outpaces Supply

CAB Brand Looks to Producers as Demand Outpaces Supply
December 28, 2005

Supply is the only obstacle to more growth for the Certified Angus Beef ® (CAB®) brand, says Jim Riemann, president of Certified Angus Beef LLC. “We just don’t see enough of the right kind of cattle being managed to hit our target,” he says.

The incentive is there, in the form of packer premiums of more than $40 per head, and the American Angus Association has the most accurate genetic selection tools in the world, Riemann says.

That’s good news for producers with cattle that can meet the brand’s eight carcass specifications (see Table 1). CAB product sales increased by about 6% to 533 million pounds (lb.) in fiscal year (FY) 2005, and demand grew in both domestic and reopened international markets, such as Mexico.

However, the modest growth was only made possible by an increase in overall supplies of Angus-type cattle, which reached a record high 12.8 million head last year. Consistent with last year’s numbers, a near-record low 15.6% of those cattle were accepted for the brand, due in part to market pressures that encouraged overfeeding, Riemann reports.

Within the network of 13,000 CAB licensees worldwide, leadership and staff training helped the brand advance in the consumer market, he says, adding, “Our licensees succeeded by going against trends toward lower-value price competition that robbed consumers of the right to choose quality.”

Hot demand comes from the ground beef category, up nearly 16% in sales for each of the last two years. Foodservice is the fastest growing customer for CAB brand grinds, but retail holds the key to capturing more of this huge market. Meanwhile, the international division sales of CAB products to Canada led with 12.3 million lb., and sales to Mexico reached a record 11 million lb.

“As we keep opening more markets, attention must focus on the supply of cattle that meet brand requirements,” he says. “When we saw this developing in 2004, we set out to study the influence of each CAB carcass specification in limiting acceptance. After checking 26,707 carcasses at 12 plants owned by our top four licensed packers in four states, we found that 85% of the cattle lacked adequate marbling, and 15% had been fed too long.

“Ironically, almost half of those overfed cattle had the required marbling, but by overfeeding, their managers set them up for big discounts instead of the CAB premium,” Riemann notes. Producers have a unique opportunity to use genetic selection and management to hit this long-established target and reap economic rewards.

CAB marketing efforts last year reached out to help more producers do just that, Riemann says. Leadership and proactive communication helped all customers, from bull buyers to consumers, understand “there is a difference between price and value,” he concludes.

Other highlights for the year:

• The 2005 National Angus Carcass Challenge (NACC) grew by 30% to exceed 8,000 head. Producers aimed to beat last year’s mark, when 40 heifers from Fansher Angus Ranch achieved 93% CAB brand and Prime grade. Six sponsors put up $28,000 for awards, but publicity and education were the top prizes.

• The CAB Feedlot Licensing Program (FLP) enrolled a record 246,000 cattle, exceeding 1.15 million head during the six-year span of the program. CAB explains data by customer, performance and carcass quality, showing the dollar impact of hitting the brand’s target.

• Consumer marketing strategies focused on the target markets of Pittsburgh, Pa., and Detroit, Mich., and began taking shape in Albany, N.Y. Chef Dianna Stoffer and Home Economist Sarah Donohoe worked through television, radio, and cooking classes at home and garden shows to reach millions of consumers.

• Seasonal recipes and cooking tips on radio and food pages with up to full-page “meal solutions” led consumers to local CAB stores and restaurants to buy the brand.

• Educational programs helped everyone from beef producers to exporters, chefs and even consumers. The annual Roundup seminar for distributors and retailers attracted the largest number of international partners ever. It helped rejuvenate the brand’s presence in opening international markets.

• A 30-second television commercial portraying a beef producer as an expert consumer completed the package of marketing resources available to licensed retailers. A video library began providing all licensees with product images to include in their commercials.

Table 1: CAB Brand Carcass Specifications	Fig. 1: CAB 2005 Sales by Division
"A" maturity (9-30 months) Modest or higher degree of marbling Yield Grade 3.9 or leaner At least moderately thick muscling Medium or better marbling texture No neck hump over 2 inches No internal capillary ruptures No dark cutters

Certified Angus Beef is the world’s leading brand of fresh beef. Since 1995, packers have paid producers $200 million in value-based grid premiums for cattle accepted into the brand. For more information on CAB products and programs, visit www.cabpartners.com.

— Release provided by CAB.