Selling grass-fed meat in tough economic times

Tom Wrchota, Omro, Wisconsin — The increase in unemployed, underemployed, and fearful Americans has certainly affected overall spending on food. Here at Cattleana Ranch, meat sales are off slightly from our all-time record high of 2008. A decline in the dollar volume of our chicken and meat CSA sales offset slight increases in our beef, pork and lamb business. Overall, we feel like we’ve held our own through this economic storm.

The challenge these days for all grass-fed marketers is to hold on to the current customer base, keeping revenues at least even without diminishing profit margins. A direct marketer’s developed customer base is the stored “gold” of the business, and the customer’s continued loyalty during rough economic times is essential for success. It is critical to understand why these customers purchase from you, and how the economy is potentially changing their buying habits.

The eating experience continues to drive our beef marketing. Research presented at the 2009 annual meeting of the Agricultural and Applied Economics Association noted that for grass-fed beef, “sensory characteristics play a central role in determining consumers’ preferences and willingness to pay.” Also, “… actual eating satisfaction plays a more important role in consumers’ purchasing choice.”

We agree that maintaining meat quality is a critical element for repeat customer business. Cutting corners by changing your feeding program and butchering at lower weights, along with a myriad of other cost-cutting choices, can affect flavor and other meat quality factors. Some of those short-term production and marketing strategies can cause a loss of your cherished “gold” assets. So cut costs with care.

Customers are changing their buying habits. On the positive side, we are seeing a trend of eating at home rather than at restaurants. We have been direct-marketing beef since 1994, and this past year was the first time we noticed a marked increase in customers purchasing steaks for special occasions rather than “going out.”

However, our high-end steak sales have slowed somewhat. We’ve seen increased sales in lower-end beef cuts such as hamburger (our inventories are always low these days), chuck roasts and stew meat, but steak inventories have increased slightly. With money tighter, our customers are buying smaller amounts more frequently, and saving the high-end cuts for special occasions.

We have adjusted by slightly reducing our high-end prices, while increasing low-end prices just a little to maintain overall profit margins. We have also installed a small discount for customers purchasing larger quantities of steaks, which has helped to quickly increase sales.

Sales through our meat CSA have dropped the most, with many customers making smaller orders. We have figured out why: Many people simply cannot come up with that much money at once, and some can’t do it even with our option of two payments over a seven-month period. We’ve had a number of payment requests lately, including one loyal customer who asked if we would accept food stamps. That one really brought home the economic pain faced by many people in our area. So we now offer a three-payment option for the full CSA share.

Marketing flexibility is important in maintaining business during tough times. In addition to not having the money to spend on large quantities of meat, the majority of our customers do not have large freezers. It is here that our on-farm, walk-in freezer is a real asset. With our customers buying smaller volumes more often, along with their increased desire for variety, we have increased our selection of cuts and provided smaller packages. The freezer allows us to easily keep track of sales and inventory.

Sometimes a meat selection will be a hot seller for a couple of months, but then cool quickly while another selection rises to the top. To maintain maximum flexibility, we have some primal and trim boxes stored at the butcher shop. When a hot-selling selection is becoming scarce in the farm freezer, we call the butcher and have him prepare the meat.

One way to make smaller sales more frequently is to sell through grocery stores. However, in large supermarkets all producers are viewed the same, and all are expected to discount to get their product on the shelves. As small producers, we don’t have the quantities and cost structure that allow us to discount our meats. Also, the selection of meat cuts is very limited in these bigger outlets due to corporate strategies on selection, quantity, packaging and pricing. The local store managers often do not have such decision-making power. As a small producer, what do you do with everything else — grind it up into lower-margin hamburger? You will not be in business long.

To address our customers’ needs for convenience, Cattleana Ranch instead works primarily with small, local, owner-operated food stores. Although their customer bases are smaller, these outlets are more willing to vary the cuts by season and take special orders. We can send our customers to these stores for quick, spur-of-the-moment purchases.

In addition to working with these stores, we maintain a city presence throughout the winter at the farmers market. Our once-a-month trip allows customers to order meat for the month and pick it up at a convenient location. In 2009 we sold 45% of our meat at farmers markets, up from 29% in 2005. This is due to our increased presence at both the winter markets and the smaller grocery stores.

We’re also working smarter at maintaining communications with our customers. In the past, we were haphazard in obtaining e-mail addresses. Now Sue is more systematic in getting them and using them. These communications allow us to change offerings to meet demand, and make sales that may have otherwise gone to the local supermarket

New customers are always essential in keeping our business growing. More people are becoming aware of the differences between grass-fed and conventional meats. Books such as The Omnivore’s Dilemma and movies such as Food, Inc. have increased our customer list.

Although they may contact us because of a movie or a book, they come back because they like the flavor and the value. We rarely try to convince anyone to buy our beef anymore. We have enough of a following to continually add to our “beef sampler” prospect group. We do not provide free samples: new customers have to purchase like everyone else.

Value is an area often overlooked when selling grass-fed beef. Although a pound of our hamburger is more expensive than what’s sold in the supermarket, our clients often look at the fat difference. Conventional beef has excessive fat in the opinion of our clients, and is commonly viewed as waste.

One of our accounts is a Natural/Organic Food Day Care. When the government inspector came in to review the food recipes to ensure nutrient requirements were being met, she commented that the day care would need to increase the amount of hamburger used to meet protein requirements. The owner showed her the hamburger. After one look at its leanness, the inspector reportedly said: “No need to increase the beef content of those recipes.”

Sue and I are very fortunate that we have continually sought new clients, remained flexible in our meat offerings, and not compromised our sustainable, grass-fed production practices. Yes, this does take more time and costs more money. But as a result, our clients have been more than willing to stay with us through good times and bad.

Tom Wrchota and his wife, Susan, graze beef cattle and direct market a wide variety of farm products from their farm near Omro, Wisconsin.