Is Walmart’s move to Choice beef contradictory to its goals?

 Resize text         Printer-friendly version of this article Printer-friendly version of this article

Walmart’s decision to add Choice beef to the meat cases in all 3,800 of its U.S. stores is big news for American cattlemen, and it’s likely to make many other retail grocers nervous.

Walmart has traditionally sold only Select grade beef, which fits with the giant retailer’s low-price mantra. But Walmart has been buying Choice beef for the past three months, and that strategic shift has created an impact on the wholesale beef market.

Walmart’s revelation about its buying habits in recent weeks also provides insight into the historically wide Choice-Select spread, which closed Friday at $17.38. In short, Choice beef is more expensive relative to Select beef.

The decision to add Choice beef at its stores was a response to customer demands for a broader selection of cuts, Walmart says. The company stressed that it is still offering Select beef for value-conscious customers.

Market analysts believe the addition of Choice beef is one of several new initiatives the company is taking in an effort to rebound from a dramatic U.S. sales slump – nine consecutive quarters of sales declines at stores open at least a year. Attempts to lure new customers who are not focused solely on price included an organic food initiative, and removing clutter from stores and offering more upscale merchandise. Those strategies apparently alienated some of Walmart’s traditional customers.

New efforts to win back those traditional customers include more low-priced merchandise, and a renewed emphasis on sales of guns and fishing tackle. Last month Walmart executives said the company would end its long losing streak on Nov.15 when it reports three straight months on positive same-store sales.

Walmart’s new initiative with Choice beef, however, may create a major impact on the U.S. beef market. Already the largest U.S. grocery merchant, more than half of Walmart’s $260 billion in U.S. sales last year came from groceries.

On the production side, approximately 50 to 55 percent of carcasses graded Choice until about three years ago when the number of Choice carcasses began to increase. Early this year Choice carcasses represented about 67 percent of the total, a number that has slipped to about 63 percent in recent weeks. About 29 percent of carcasses are graded Select.

When the world’s largest retailer, and the largest U.S. retail grocer starts buying Choice beef, the price of that product will increase. At the same time, producers should expect the price of Select to decline. In fact, over recent weeks the widening of the Choice-Select spread has been due more to the decline in Select prices than any increases in Choice prices.

In theory, Walmart’s decision to offer Choice beef should be good for the industry. More product of higher quality offered to more people should mean increased sales and better profits. Yet, Walmart scares more than just their competitors – there are many Walmart suppliers that worry about their future should the Bentonville, Ark., giant suddenly switch directions.

For beef producers, Walmart’s flirtations with the organic and sustainable food movement should be reason for concern. For instance, Walmart recently announced plans to purchase and sell $1 billion of food grown by one million small and medium sized farmers around the world. The company also says it plans to double its sale of locally-purchased produce in the U.S. by the end of 2015.

One might argue that Walmart’s move in to the Choice beef market is contradictory to its goal of supporting so-called sustainable foods. But the company says it plans to “produce more food with fewer resources” as part of its commitment to global sustainable agriculture.

American beef producers just hope Walmart stays committed to Choice beef.


Prev 1 2 Next All



Comments (17) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left

Sally Buxkemper    
Ballinger, TX  |  November, 10, 2011 at 09:31 AM

I was really disturbed a few years ago when Walmart started selling water added select beef. I noticed lately that they had discontinued that. Adding choice should be good for the industry.

Jay O'Brien    
Amarillo, TX  |  November, 10, 2011 at 10:07 AM

I don't understand how you can say, "American beef producers just hope Walmart stays committed to Choice beef." That is not true. As a beef producer, I hope that Walmart knows their customer and provides them with the quality they want and sends me the signal of what to produce. Drovers acts like there is a virtue to choice beef. Meeting the consumer's desires is where value is given to the producer. For many, Select provides just what is desired and American beef producers should be happy that is true. The market should determine what retailers try to sell, not some preconceived notion of Drovers.

Ray Rodriguez    
Az-Us  |  November, 10, 2011 at 10:08 AM

The breeding programs in the US today are geared towards more marbling in the beef with resulting higher percentage Choice and higher carcasses in the market. The dominance of the Angus breed in todays breeding programs easily predicts more Choice and higher beef suplies. Most of the commodity beef producers still go for a more leaner, lower yield grade product that is really cheaper to produce. Supply and demand will dictate prices, and I think Walmart sees this phenomena coming and its capitalizing on it. Niche markets (Hispanic etc) and the economy of production of the leaner product might level the pricing field to where Choice-Select spread might become minimal at best.

Chuck    
Texas  |  November, 10, 2011 at 11:45 AM

Now we know where the "people of Walmart" pictures come from, they were "alienated" by Walmarts decision to sell Choice beef and more upscale merchandise. I always wondered about that one person at the checkout counter with green hair and a purple tail coming out from under his or her bathrobe. Was that person really interested in "organic" food or Choice meats?

Tex Hall    
Marlow, OK  |  November, 10, 2011 at 12:01 PM

I got turned off by WalMarts decision in the past to oppose COOL. I want consumers to know where their beef is raised. That's important to the consumer and our industry. While they have grown tremendously in the international markets, their real goals should be in line with keeping American beef sustainable. Other governments take care of their farmers and ranchers through more socialized subsidies. Our principles say that the free market contributes most effectively in our country. Go back to the old Wal Mart "Proud to be Made in the USA" when it comes to food for American people. That is the best Choice.

Marion    
iowa  |  November, 10, 2011 at 07:20 PM

i work hard to produce a choice beef product that is well mabled and cooks up tender and moist. Even if the cook doesn't get it just right. That doesn't happen with select. No wonder Walmart shoppers switch to fish. Hard to make it tough

Sam Johnson    
Summitcrest  |  November, 11, 2011 at 05:15 AM

Greg, Really? "One might argue that Walmart’s move in to the Choice beef market is contradictory to its goal of supporting so-called sustainable foods" to make such a stupid statement requires the belief that choice beef production is somehow less sustainable than producing choice and higher grades. The facts are exactly the opposite. In our feedlot the select carcasses are from the poor less efficient cattle and we produce them at a loss. Hopefully we produce enough prime, Certified Angus Beef, and low choice to offset the losses from select production. As a producer I can tell you definitively that prime, CAB, and choice is a lot more "Sustainable" than producing select and standard

Brian Denman    
Richland Center, Wi  |  November, 11, 2011 at 01:25 PM

Producing better grades of beef is probably more sustainable for the individual beef producer. However the large feedlots that tend to produce the higher quality grades are being portrayed as less sustainable than grass/forage finishing "programs" which are going to produce the lower quality grades of "finished" animals.

Maxine Jones    
Midland, SD  |  November, 11, 2011 at 02:48 PM

The comments show yet again that there is little agreement among cattle producers and others in the industry of what constitutes 'the right product'. Now, I as a producer am more confused about what is expected of us! I hope that less Standard beef is produced in feedlots and that most of it comes from cows. I hope that the "beef with water in it" claimed sold at Walmrt was MARINATED or TENDERIZED cow beef. I've tasted some of that at conventions demonstrating the procedure and found it very palatable, certainly not top of the line steak, but very good FOR THE PRICE level. I HOPE that we will continue to be paid for improving the value of our cattle.

Noah Sweat    
lawrenceville, GA  |  November, 13, 2011 at 11:21 AM

Walmart is in the process of putting up small stores that sell only grocery and drugs items meant to compete with the neighborhood grocer types such as Whole Foods and Trader Joe's. They have already started one such store at Snellville, GA. They will carry upscale items such as organics and grass-fed beef, free range chicken, ETC. Whole Foods meats, poultry, seafood are not fed GMO diets and I believe that is what they will be shooting for if they want to compete in that market. The stores will be located in the more expensive zip codes and won't sell retail items. I would say they are catering to those in the Ivory Towers and Gold Domes or somewhere in between.

Betty    
Salem. Virginia  |  November, 14, 2011 at 03:59 PM

I tried Walmart's meat about 4 times. It was so tough we could not chew it. If a product is no good you don't save any money. I will try it again. But if it isn't good I won't buy it again.

Venarae Lennox    
Cape Vincent, NY  |  May, 18, 2012 at 12:44 PM

Thank you Wal Mart!!! Growing up in Kansas, beef was the best! The last 20 yrs I have not had a good steak until the last choice sirloin steaks I bought at Wal Mart. When in the Army steaks I had purchased at commissary smelled like fish when frying. Could not even eat it. Years later we discovered much beef was sold in Europe that had been fed fish based feed. The beef I have purchased in NY, even the highly touted Angus beef just lacked flavor. I was thinking I did not even like beef anymore, until my last purchase. Please continue w/choice beef, nothing compares to a really flavorful great tasting steak!!!!!

Thomas Porter    
Atlanta, GA  |  May, 29, 2012 at 08:04 PM

WOW - I guess I'm an older semi-urban guy who likes to cook, and, who likes beef, but, this dialogue has been eye-opening to me as a person far removed from the production. Not the guy who believes beef comes from cellophane packets, but not the guy who heard this chatter before. Thanks.

Frank    
Birmingham  |  August, 02, 2012 at 10:13 AM

I was in the meat business all my life. What Walmart is doing, they have a small display space featuring USDA choice and the rest of the beef is Select though they do not place Select labels on the pkgs which is against the law.They make it appear that they sell nothing but USDA Choice. IF THE PACKAGE DOES NOT HAVE USDA CHOICE STICKER ON IT, IT IS SELEC!!!!

(anonymous)    
August, 22, 2012 at 11:16 AM

Lets hope Wall-mart stops selling Choice graded product. I am positive restaurant owners would be pretty upset if they are forced to purchase middle-meats from wall-mart because all of the local purveyors are out of business. Wall-Mart is bad for business and moves markets because of their buying power.

Joan    
Put-in-Bay, Ohio  |  December, 18, 2012 at 11:41 PM

thank goodness, I have tried the angus, it is the most unflavored and tough and dried out meat there is and I like choice. it is tender and has flavor.

Jimbo    
Irmo  |  August, 24, 2013 at 01:12 PM

What, you eat Walmart meat?? Nevermind "Choice" or "Select" or "Scrap"! Walmart meat is "Enhanced" (according to the labels), meaning they put some chemical concoction on it or in it to make it taste differently. Why on Earth would anyone want that?? I want my meat to taste *exactly* like it does in real life, as taken from the animal!!! If I want it to taste differently, I can manage that all by myself thankyouverymuch, without any strangers "Enhancing" it! This works perfectly: Go out and find a butcher near you and buy all your meat from them. Let Wally enjoy their role as the end-user distribution center for mindless mass-produced disposable consumer goods. Leave the fresh meat and vegetables to the experts you can meet, get to know and trust. If you don't believe that works, *watch me*!! (PS: Even if Wally STOPS "Enhancing" their meat, remember that the kind of mind that will make the decision to "Enhance" the meat CANNOT BE TRUSTED with any food item.)


HPX 4x4 Diesel

Not only is the Gator HPX 4x4 the fastest choice in the John Deere Work Utility Vehicle line-up (with a top ... Read More

View all Products in this segment

View All Buyers Guides

Feedback Form
Leads to Insight