Riding out the storm

Beef has been in for a tough time of late, garnering negative press from the anti-salt, anti-meat lobby and subject to tightening global supply and rising prices.

The gloomy weather hasnt helped, suppressing the traditional summer barbecue boom. However, as John Mettrick of J W Mettrick & Son in Derbyshire points out: Theres lots of scaremongering out there.
The fresh beef industry is currently worth 1.78bn and, despite the sluggish economic climate, sales have performed well over the last year. Research from Kantar Worldpanel show that sales increased by 1.5% or 23m in the 52 weeks ending 10 July 2011, with spend and volume of fresh beef increasing by 5% in the 12 weeks to 10 July compared to the same period last year. Penetration during that time was also up by 1.3%.

Beef cuts proved more expensive in July than in the previous month. The greatest increase was in rump steaks, up 2%, while the majority of recorded cuts also rose, by up to 2%. Mince, sirloin steaks and diced stewing steaks, however, bucked the trend, falling by 1%, which may explain why these have been the main drivers of recent sales.

Rising prices

However, wholesale and farm gate prices have also gone ever upwards and are not expected to slacken over the coming months. The overall prime cattle average price increased to 312.4p/kg in the week to 12 August (according to Eblexs market intelligence), with supplies of cattle in the domestic market remaining tight. With a 3% fall in Irish beef production, down to 266,000 tonnes (t), there is less potential around for topping up supply with imported meat.

Steve Turton, of catering butcher Turtons of Devon, thinks the current prices are here to stay. Beef prices are not going to be dropping back anytime soon, he says. I dont think well be getting the drop-off we normally see in September because of the strong export market, and imports just arent there. Were not getting the Irish beef in, so thats not going to help stabilise the price in this country.

As Steve puts it bluntly: Beef prices have crucified margins. It has made it a very difficult trading time. Obviously you can pass some of it on, but at the moment were looking at beef prices over the last 12-month period going up from around 2.84/kg to as much as 3.18/kg thats a big funding gap.
Butchers agree that they need to start passing on costs to customers, but with pricing a difficult area, they have hesitated until now. Yet as John points out, although beef sales are holding their own at present, butchers cannot afford to take the cost on the chin for much longer.

Paul Kendall, of Kendall Farm Butchery in Pateley Bridge, worries that the price of beef may start to adversely affect sales. Demand hasnt changed on beef yet, he says, because prices havent been put up, but I think it may do. It has definitely changed for lamb, and I think it will change for the beef when the prices get reflected.

Maximising profit

So how can butchers work around this problem to boost their margins and play to their strengths against the major retailers? As William Dye, of Scotts of Carshalton, points out: The thing that is still in our favour is that people associate good steak with independent butchers.

Sourcing high quality and local products are areas where butchers are really able to stand out against the major retailers. Turtons has used this unique selling point to springboard into a new market, launching a premium beef product earlier this summer. Rather than going with the general trend, which is looking at buying a cheaper products and OTM (over-30-month beef), weve gone the other way, making sure we stock a product that adds a point of difference, says Steve.

The launch of our Black Label Beef has been very successful, even though it is actually going against the grain a little bit, because of the price premium. But it is paying dividends although our margins have been squeezed, sales are up 45%.

Paul agrees that it is a mistake to compromise on quality, as cheaper alternative can provide less consistent eating quality: Its a slippery slope if youre cutting quality, he warns. If you dont maintain it, then your loyal customer base will also go.

However, most agree, saying that butchers need to be looking at their costs to see where improvements and efficiencies can be made.

Changing demand

William feels that there has been a discernible shift in customer demand. Were selling lots and lots of steaks, he says, so much so that we buy in roastings as well as hind-quarters now, as that is what has been going the best.

However, I have seen that, in particular, roasts are in decline, he adds. Although weve been selling roasts in the catering and the deli side, on the fresh meat side it has been a bit of a slow sale for us.
Although its understandable, as people do go off roasts in the summer, they have gone off them big time this year.

Paul see pies as a big growth area, as they offer customers convenient meal solutions and help quality meat go further. We do a lot of big pies, such as steak and kidney, steak and ale and steak and potato, he says. The pies, sausages and ready meals your cooked prepared meat is often where your profit is.

Mike Whittemore of Eblex, suggests that butchers also look to promotions and meal deals to increase sales. Offering a selection of fixed weight packs for 5 or 10 is a good idea, he says, or think about whether you can offer a meal deal with sauces, pasta or rice, all of which can be sourced from a grocery wholesaler or purchased from a local cash and carry outlet. The evening meal is the core occasion for all beef cuts, so this is an opportunity for the taking.

John agrees: Its about giving customers confidence and making the price more palatable, such as pricing up the joints so there arent any shocks, or cutting smaller cuts. Our Sunday opening has also worked very well. And weve also been doing lots of school and private barbecues, which not only provide catering, but also helps to generate sales.

Different avenues

Butchers are also increasingly willing to pursue different avenues and different ways of selling their wares than they have ever been, utilising the lesser-known cuts and using different techniques. Eblex retail project manager Mike Whittemore has conducted extensive research into five beef primals the thick flank, topside, rump, feather and chuck roll to see the value to be gained from alternative methods of preparation. The results showed enhanced gross profit margins in all cases for the new seam butchery, from 4% for the chuck roll to 8% for the rump and thick flank.

Although seam butchery methods do involve slightly more preparation time, Whittemore feels that there are significant margin improvements to be gained, with businesses standing to benefit commercially. We estimate that by replacing some of the traditional roasting and braising cuts with those suitable for frying and grilling, the industry could stand to gain up to 16m every year, he says.

Every year that weve done it, we see an increase in the number of butchers taking it up. Weve now got about a 40% penetration in the retailers. The Denver is a really good one, as its off the forequarter block, so it is utilising the lesser-known muscle blocks, and turning them into a more premium line that is, from a braising steak into a frying steak.

Paul has found the new cuts a hit with customers. Im promoting it from my side, but customers do want new products, he says. Were doing something called a rib fillet roast which is a boneless rib of beef with a pork tenderloin. You use the flank from the top of the rib of beef, so youre getting good money back for it and people really like it.

With butchers able to diversify their products and offer practical solutions for cost-conscious customers, Steve Turton remains positive on the outlook. It has been a pretty volatile marketplace, but that can be good, as there are always opportunities, he says. I think people have to try to remain positive as at the end of the day, as the more we talk ourselves down, the worse it gets.

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