Jolley: Five minutes with John Stika and the CAB brand

Q. Let’s do a case study in the creation, development and defense of a brand. First, let’s define Certified Angus Beef. Give me some history and what the brand means.

A. One of the most important points I can make in defining the Certified Angus Beef ® (CAB®) brand is that it really is a brand. It is not just some program through which USDA certifies that this or that is “Angus” beef. As for history, keep in mind our 1970s roots when Angus cattle were losing market share to Continental cattle. The USDA quality grades had just been sort of devalued to allow more of those cattle formerly in the “Good” grade into the new bottom-third of the widened Choice grade.

With that backdrop, and Angus producers consoled only by their breed’s longstanding reputation for high-quality beef, the roots of our brand go back to Ohio Angus breeder Harold Etling having a bad steak at a restaurant that advertised “Angus” beef on its menu. He talked to others in Ohio, like American Angus Association Board member Fred Johnson, about how to add value to Angus cattle with a specification-based, high-quality branded beef program.

The Association set up a committee – and its regional manager Mick Colvin began to sit in on those meetings, foreshadowing his eventual 21 years of leadership. Those explorations led to consulting with the Ohio State University meat scientist Bobby VanStavern, who laid out the basic carcass specifications. We set it up with USDA that if cattle looked like Angus by virtue of predominant black hide, AND met all the carcass specifications, then they would qualify for the new Certified Angus Beef brand. In 1978 when we officially started in business, this was new territory for USDA and for cattlemen. All other beef at that time was commodity, but a lot has changed since.

Q. The brand has expanded over the years. How was that managed and has it widened in scope or altered the original intent?

A. The mission always implied growing the brand because that’s the only way to add more value to registered Angus cattle across the U.S. CAB grew slowly at first. It took almost two years to sell the first million pounds. Now it takes two or three hours. But it certainly didn’t just happen on its own. We grew by selling more and more partners on the idea of this win-win-win concept, and the growing buy-in built demand so that we could talk to another packer.

By 1995, CAB accessed 80% of the U.S. packing base, and in 2000 the first licensed Canadian packers began producing. Reaching a practical saturation in packing, we renewed our focus on “supply development” in the late 1990s, working to help producers make more money by hitting the CAB target.

You might say CAB widened in scope in that we adjusted specifications to look at each component of Yield Grade rather than simply a Yield Grade number, and that we introduced the CAB brand Natural and CAB brand Prime extensions, but those must first meet all of our other specifications, so the extensions complement our mission. As the beef industry changes, we adjust, but we never alter the original intent as expressed in our mission statement.

Q. A point of confusion for many is the expanded use of the word “Angus.” We’ve seen it used by major quick service chains to describe their upscale attempts, clearly borrowing on the image CAB has established over the years. What’s the reaction in Wooster and why aren’t those chains working with you?

A. We recognize that other programs have helped build the Angus category, to the extent that they remain true to the high-quality specifications. Others probably do nothing to build on the quality image of Angus, but rather ride on the coattails of that reputation. In some respects they provide useful points of comparison. Our licensed partners can differentiate their businesses by promoting that their menus and meat cases feature the one and only original, premium Angus brand owned by the 30,000 producer members of the American Angus Association, where every pound of product is tracked from packer to consumer purchase.

Some of the quick-service giants demand more product than could possibly be supplied by the Certified Angus Beef brand at this time, but neither do their business models allow for the price point of buying a premium quality product. Most of them want a slice of the premium image without paying much if any more; and although they have a perfectly legitimate business model, it is vastly different than those of our licensees. Still, our doors are always open to any organization that wants to discuss offering its customers a premium option.

Q. The brand is occasionally ‘pirated’ so the perception is that it has some tangible value. What’s the real value at each level of the distribution chain – farm to fork?  Would you talk real, bottom-line dollars?

A. Yes, we do have to remain vigilant to protect the brand from imitations and confusing claims. Nobody can say exactly what impact the CAB brand has for any one farm, ranch or feedlot, but CattleFax completed an economic model study about 10 years ago. It concluded that every million pounds of CAB brand product sold at that time added about a dollar to the value of a registered Angus bull.

On other fronts, we have conducted research that shows that $500 to $750 premium for a bull shows up in the added value of Angus calves at auction. The premium for Angus over non-Angus in our “Here’s the Premium” study moved up from $15 per head in the late 1990s to more than $30/head today. Our biannual packer survey shows that packers have paid the last owner of qualifying Angus-type cattle more than $300 million in grid premiums since 1998.

Using round figures, we could say that consumers spend approximately $3 billion a year, worldwide, to purchase CAB brand products from our 14,000 licensed partners. Every one of them keeps this thing growing because it is in our mutual self interest. The seedstock Angus breeder networks with his commercial bull buyers, and they partner with feedlots that sell on quality grids to licensed packers, who pay our program about 2 cents a pound for the right to put our brand in their boxes and sell that brand, mostly to our licensed distributors and retailers. Only the packer pays into the program, but that reflects the consumer demand that more than repays both the fee to CAB and the premium to producers.

Q. Those people and businesses who borrow the logo without permission or do a little creative redesigning of the image – would you do a little show and tell here and walk me through some of the more creative attempts?

A. The misappropriation (pirating, if you prefer) of our registered trademarks was a problem in the U.S. after the brand started to be recognized, but those have diminished or at least evolved over time. We had a “Trademark Compliance Division” sometimes called the Beef Cops, and our staff dealt with hundreds of mostly petty issues.

Consulting with our attorneys, there were cease-and-desist letters for those who were breaking the law. There have even been lawsuits, but we prevailed and in most cases have gone on to develop mutually favorable relationships with those companies. In the early days, we had unlicensed distributors take us to task on the issue of CAB as a brand vs. just a term used in the meat trade. Of course that was a basic victory for our brand. Over the years, we have had companies try things like using the logo with the steer facing the other way or inserting another word into our registered trademark three-word phrase.

The more creative or discouraging cases these days are in places remote to us in other countries – and at least as likely to crop up in places where we have little or no market presence such as the European Union. Confusingly similar terms may not look as obvious to us in foreign languages, but a current example in Germany involves a combination of our trademark and one from the Australian Angus beef program.

Q. To retain the brand, you have to defend it, of course. How to you find the transgressors and how do you handle the legal issues?

A. Our program is based on a huge database and reporting system. We mean it when we say we track every pound of product, all 777 million pounds last year, for example. That makes it routine to catch errors, and the vast majority of those are innocent mistakes such as a transposed number in a product code. Our partners thank us for correcting them.

As for non-licensed abuse, remember that we add a lot of value to our partners’ businesses, so they willingly report problems in their areas. We have also had Angus associations in other countries report issues that they have helped us resolve, including some in the EU. When we signed onto the Madrid Protocol with trademark protection in more than 60 countries about 10 years ago, we gained legal rights, even in emerging markets such as China, Russia and the Middle East.

But we still have to be vigilant; our legal rights don’t stop disreputable firms from trying various forms of brand piracy from time to time. If we don’t act against the German group, for example, it is not likely that any other authority will do so.

Another area of defending the brand that is more difficult to accomplish is right here at home in the mainstream media and the wide-open world of the Web. We take the same open approach, but there are always some writers or editors who believe all “Angus” beef is a category and anything we might say to the contrary is some kind of puffery or other attempt at financial gain. Sometimes it helps to point out that we are a not-for-profit company, and the only Angus brand owned by the American Angus Association members.

As we make progress fighting Angus confusion in the U.S., the challenge shifts. We deal with a network of licensed distributors that cover the continent, coast to coast. But we certainly do not license all distributors. In fact, our partners have distinct trade areas that we respect and take into account when competing businesses seek a license. As more consumers realize there is a big difference and increasingly demand our brand, non-licensed firms come under increasing pressure to get creative in satisfying their clients. That can lead to trademark violations that we must fight.

We have become more proactive, changing the division name to Brand Assurance a few years ago, and adding a Customer Service Department that has really curtailed issues from within our own licensees. Today, many of our violation tips come from a voluntary corps of staff and licensed partners who function like a global neighborhood watch program. As CAB S.W.A.T. team members, their efforts bring in more than 4,500 menus each year, and we target which ones we need to take a look at based on tips or firsthand experience of our expanding network. I would tell you more, but it’s classified.

Q. Thousands of people read Drovers/Cattlenetwork.com. What would you like to say to them?

A. Cowherds are constantly changing with genetics and management. We have provided many examples over the last decade or more that point out the financial rewards available to those who aim high, but we especially want to thank you for working to please consumers, to improve beef quality and build a brighter future for all of us. We’re proud to continue working to add value to your cattle.

Chuck Jolley is a free lance writer, based in Kansas City, who covers a wide range of ag industry topics for Vance Publishing.