branded beef – who wins and why?

Prime Future 252: the newsletter for innovators in livestock, meat, and dairy

When I think about my steak experiences YTD, I can think of 3 beef brands I’ve knowingly ordered off a menu: 44 Farms, Snake River Farms, and, obviously, Certified Angus Beef.

I’m out here skewing the numbers on per capita beef consumption, and yet, I can only recall three beef brands so far this year? Womp, womp. Maybe there were others on a menu here or there, but none of them were memorable enough to stick.

And yet, there’s a 100% chance that across restaurants and the retail space, you and I have interacted with multiple brands that remain behind the scenes – the bevy of B2B brands that lurk, unbeknownst to the end consumer who sees not a brand name but a commodity identifier: beef.

Even with all of the robustness across the broader beef marketplace, it’s easy to look at the seeming lack of branding and turn to the packers with a proverbial, “I’m not mad, I’m just disappointed.”

But to throw the lack of branding blame on the packers is not at all fair — here’s why:

1. The packers’ #1 job is to disassemble carcasses while maximizing efficiency in the plant — throughput, yield, and utilization. The natural force for a commodity-driven business is towards greater scale to lower per-unit costs. The result of that greater scale is a larger mountain of meat to be moved. High-volume, low-margin.

2. Because of this, the #1 thing (and #2 through #222) that matters most is operational efficiency. Donnie King, CEO of Tyson Foods, recently opened his remarks in the company’s Q2 earnings call, saying, “Operational excellence never gets old or goes out of style.” (I honestly assume most packers have some version of that in tattoo form.)

The core capabilities that make a company excel at operating a plant efficiently are very, very different from the core capabilities that make a company excel at building an enduring brand. You might even say that efficiency capabilities and brand-building capabilities are competing priorities, antithetical even — and you’d largely be right.

With that in mind, here’s my working hypothesis:

The future of branded beef belongs to brands owned by non-packers.

Let me first say, I’m specifically talking about brands that sell into retail and foodservice — not D2C. Which means, brands that have some degree of scale, not small local brands reliant on custom processors. No disrespect to those businesses, but my interest is in the brands that at least have the potential to become CAB-level successful. Or, if that’s too tall an order, maybe CAB-light levels of success.

In order to scale, a beef brand needs the right business model wrapped around:

1. A steady supply of cattle

2. Access to sufficient processing capacity / willing and able to sort, cut, pack, etc.

3. High-quality customer relationships

While techhhhnically, packers have all 3 ingredients, they largely do not have 1) the agility to respond to changing customer needs, or 2) sufficient incentive to build & prioritize brands in the first place. The mountain of meat must move.

My hypothesis is driven by the assumption that the brands that can assemble 1, 2, and 3 above, AND maintain the flexibility and agility to be both brand-first and customer-first (rather than being constrained by an efficiency-first mandate), will win.

Not to mention, it's at points like we’re in today in the cattle cycle, where packers are the most margin stressed, where brand focus becomes the first thing to go right out the window...and rightfully so.

Admittedly, my hypothesis is not actually a spicy take.

The packers are not where the fastest growing, thriving beef brands will sit in the future….because the packers are not where the fastest growing, thriving brands sit today.

Just look at the most successful beef brand on the entire planet, whether measured by brand recognition or sales: Certified Angus Beef (CAB). CAB is not owned by a packer. It’s actually owned by the least likely consumer-facing brand builder of all — a bovine breed association. Mercy!

Similar to the packers’ core capabilities being antithetical to building consumer-facing brands, the same could be said of a breed association — that their core capability suggests they should absolutely not be able to build the largest beef brand on the planet.

And yet, build it they did.

It turns out, there are way more questions about making beef brands successful than there are answers, such as…

First and foremost, why has CAB been so successful? What were the strategic decisions or tactical ideas that were implemented early on, which created inflection points?

Second, where is the traction in beef brands today — is it in retail or in foodservice? It feels like it’s in foodservice, but 1) does data actually back that up, and 2) if so, what conditions cause that to be true?

Third, do private label “non-brand brands” put a ceiling on the potential for actual brand success in retail? Aside from grab-and-go grinds and such, middle meats are largely sold under the brand of the retailer.

For example, everybody loves Costco beef, but the average Costco shopper Joe has no way of knowing who supplies that beef — they trust the Costco brand itself.

The same is even true at Whole Foods, among the bougie, brand-iest of retailers:

The signals are cut, price, level of animal welfare certification, but no brand in sight beyond <gestures around> Whole Foods.

So, is the core capability for a meat brand really about building a relationship with the customer (the retailer, the distributor, the foodservice company) rather than a relationship with the end consumer? If so, that’s the opposite of brands in almost every other category of products on the planet…feature, or bug? What got us here, will it get us there? Is the future of beef brands B2B, or B2C…or B2B and B2C?

And how important is the story of meat anyway? It seems like the answer to that is, VERY. Whether it’s McLaren Farms in the Walmart meat case instead of an anonymous black tray with a USDA logo slapped on it, or the Country Natural Beef pack at Whole Foods instead of the 365 pack, there’s an authenticity that’s expected for a premium protein brand that both private-label brands AND packer-owned brands arguably struggle to pull off. But in a world of reality where taste, price, and nutrition drive most food purchasing decisions, how much does ‘authenticity of the brand’ matter…more to the point, how much will it matter in the future?

Additionally, I’ve been picking on the US pork industry a bit recently (ok, a lot: here, here, and here) for its lack of a quality grading system, and the resulting bleh-ness of fresh pork (😘). But what if the USDA beef quality grading system, and its corresponding grid marketing, which has enabled the massive growth in the percentage of cattle that grade Choice and Prime, actually creates a ceiling on further premiumization?

Meaning, what if the fact that the majority of beef is actually really high quality makes it harder to carve out even higher tiers through differentiated brands for additional premiums?

Related, in countries that do not have a quality grading system, do premium brands play a larger role than commodity beef or private label brands?

My impression of the UK has always been that private label brands ARE the brands, but in a much more real brand kind of way than they tend to be in the US. When Tesco, Sainsbury’s, or Marks & Spencer want to build a brand around specific production attributes, the industry rotates towards making that happen in a way that higher-volume US beef plants cannot, because of the fragmented supply chain before cattle arrive at the plant. My impression of Australia is similar, except retailers have even more influence on supply chains by actually owning the supply chain.

And finally, I haven’t confirmed the accuracy of this number, but Perplexity says 18% of US boxed-beef sales are branded. Only 18%?! This number seems absurdly low when headlines like these are popping up all over the place:

In a world that has 1) premiumized every product category known to man¹, and 2) an all-out protein obsession, if ever there was a moment for beef brands to have their day, this should be it.

So why aren’t they?

Chris Donati, founder of SunFed Ranch, a grass-fed beef brand, summarized the bull case for brands: “Beef as a category is woefully underdeveloped versus other ag commodities like wine or cheese. Done correctly, brands can be high margin, if they deliver a compelling value proposition. As societal demographics shift, consumers will flock to brands they trust and provide value above incremental cost.”

Why is this branded beef nut SO difficult to crack?

That’s the big question I want to explore, together.

I learned in the early days of this newsletter that the only way I could hit send every week was if I remove the expectation for every edition to be a magnum opus, and instead treat each newsletter as just another part of an ongoing conversation that you and I are having — which is all the more true for a topic like this one that has way more questions than answers.

Those of you in the arena: what’s working, what’s not working, and what are the real dynamics you’re up against? Hit reply or 👇

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