When times are lean, sales of luxury items are typically the first to fall off. However, when it comes to beef, it appears that consumer demand for the higher-quality and pricier Certified Angus Beef brand held up better than that for USDA Choice or lower-grade beef.

What has been called an “economic collapse,” in Fall 2008, led many observers to speculate that the demand for premium brands would give way to lower-quality alternatives. With colleague Daniel Bluntzer, Frontier Risk Management, we set out to explore short- and long-term value and demand dynamics of the CAB brand versus Choice beef, to quantify the branding value of CAB, and recently completed our study titled “Certified Angus Beef Brand Wholesale Demand Analysis.”

To gather information, we looked at pricing and volume data based on sales of the 15 highest-volume CAB cuts, not including ground chuck and round, but accounting for nearly 75 percent of total brand sales. The USDA National Weekly Boxed Beef Report provided data on Choice, while CAB pricing came from the Urner-Barry Yellow Sheet and volume from brand records.

Results were strongly supportive of premium-brand value in this case. Overall, they showed that in four years (2005 to 2008), demand for the CAB brand brought in $367 million more at the wholesale level than it would have if sold as Choice product.

Expressed as a percentage, the combination of CAB price and volume showed a 26.9 percent advantage over Choice-grade beef in those four years. Conventional wisdom would suggest that could not hold up after the economic recession hit, but that would be wrong.

In fact, the CAB advantage over Choice more than doubled, to 56.1 percent when the sales and pricing data include the first half of 2009 vs. 2005, on a 22.4 percent increase in volume.

The findings clearly show that CAB pricing, volume and revenues have held up far better during tough economic times in comparison to USDA Choice. Granted, CAB pricing declined 10.3 percent for the first half of 2009 versus a year earlier, but Choice pricing fell harder, by 12.3 percent. Moreover, CAB sales volume rose 4.6 percent in that time period, on top of a 4.5 percent increase the previous year.

Even with lower prices, the market placed an extra $56.7 million value on these 15 representative CAB products, compared to their value if sold as generic Choice, a 21.1 percent increase from the same period a year earlier. With overall revenues falling in the beef industry, this is precisely what we would hope to see in an established premium brand.

While many ob-servers from academics to producers tend to worry about a narrower Choice/Select spread, that misses the point by not including volume. During a time of sluggish beef demand, total revenues for Choice beef still managed to increase 5.6 percent from 2005 to 2009 — but CAB licensees have been able to garner 8.9 percent more by selling the product as a premium brand.

It is fair to say that the consumer continued to support the CAB brand during the recession, paying more for it perhaps as a reward for a special meal at home. 

When times are lean, sales of luxury items are typically the first to fall off. However, when it comes to beef, it appears that consumer demand for the higher-quality and pricier Certified Angus Beef brand held up better than that for USDA Choice or lower-grade beef.

What has been called an “economic collapse,” in Fall 2008, led many observers to speculate that the demand for premium brands would give way to lower-quality alternatives. With colleague Daniel Bluntzer, Frontier Risk Management, we set out to explore short- and long-term value and demand dynamics of the CAB brand versus Choice beef, to quantify the branding value of CAB, and recently completed our study titled “Certified Angus Beef Brand Wholesale Demand Analysis.”

To gather information, we looked at pricing and volume data based on sales of the 15 highest-volume CAB cuts, not including ground chuck and round, but accounting for nearly 75 percent of total brand sales. The USDA National Weekly Boxed Beef Report provided data on Choice, while CAB pricing came from the Urner-Barry Yellow Sheet and volume from brand records.

Results were strongly supportive of premium-brand value in this case. Overall, they showed that in four years (2005 to 2008), demand for the CAB brand brought in $367 million more at the wholesale level than it would have if sold as Choice product.

Expressed as a percentage, the combination of CAB price and volume showed a 26.9 percent advantage over Choice-grade beef in those four years. Conventional wisdom would suggest that could not hold up after the economic recession hit, but that would be wrong.

In fact, the CAB advantage over Choice more than doubled, to 56.1 percent when the sales and pricing data include the first half of 2009 vs. 2005, on a 22.4 percent increase in volume.

The findings clearly show that CAB pricing, volume and revenues have held up far better during tough economic times in comparison to USDA Choice. Granted, CAB pricing declined 10.3 percent for the first half of 2009 versus a year earlier, but Choice pricing fell harder, by 12.3 percent. Moreover, CAB sales volume rose 4.6 percent in that time period, on top of a 4.5 percent increase the previous year.

Even with lower prices, the market placed an extra $56.7 million value on these 15 representative CAB products, compared to their value if sold as generic Choice, a 21.1 percent increase from the same period a year earlier. With overall revenues falling in the beef industry, this is precisely what we would hope to see in an established premium brand.

While many ob-servers from academics to producers tend to worry about a narrower Choice/Select spread, that misses the point by not including volume. During a time of sluggish beef demand, total revenues for Choice beef still managed to increase 5.6 percent from 2005 to 2009 — but CAB licensees have been able to garner 8.9 percent more by selling the product as a premium brand.

It is fair to say that the consumer continued to support the CAB brand during the recession, paying more for it perhaps as a reward for a special meal at home.