By definition, niche products target groups of consumers who want some-thing different and are willing to pay for it.
Angus beef used to be a niche — an alternative for consumers willing to pay more for more assurance of marbling and eating quality. Today, the word “Angus” is so prevalent in beef brands and promotions it hardly can be considered a niche market.
Most of the niches emerging in today’s beef market involve consumer perceptions of how producers raise their cattle, says Colorado State University economist Wendy Umberger. Attributes in demand include natural, organic and grass-finished, along with assurances of animal welfare and environmental protection. Source and process verification provide the documentation to go with the claims.
None of these attributes is worth much if the eating experience is unfavorable. Consumers who insist on natural beef, for example, typically shop in high-end stores and expect top quality. “Never underestimate consumer desires, or under-price your product,” Allen Williams says. “Remember the examples of bagged lettuce and Starbucks coffee.”
Demand creates opportunities
Allen Williams is an animal scientist and consultant with The Jacob Alliance and Livestock Management Consultants. The consulting group’s main focus is on building and facilitating supplies of cattle into branded-beef programs, which involves working with all participants of the beef value chain.
Retailers, he says, increasingly say they do not just want a product, they want a story to go with it. “Chefs say the same thing. They want to be able to tell their customers where the beef came from and how it was produced. They are looking for ways to differentiate themselves and the products they carry.” Natural beef has been the fastest-growing niche in the industry, but Dr. Williams says grass-finished beef could be the next big growth area as retailers seek further differentiation.
Several recent studies indicate consumer interest in grass-finished beef over grain-finished. In taste-panel tests conducted at Colorado State University, 16 to 22 percent preferred the taste of grass-fed beef. Tests at Auburn University found that 25 to 33 percent preferred the taste of grass-fed beef. Grass-finished beef probably never will claim a majority of market share, but clearly there is untapped demand.
Specialty markets require specialized production
Some earlier studies and experiences with grass-finished beef, Dr. Williams says, failed to focus on genetics and management practices intended to optimize productivity and beef quality in a grass-finished system. This requires high-quality forage from weaning through harvest. “To achieve the nutritional requirements, we transport cattle from one region to another,” he says, “much like producers in other parts of the country ship cattle to the Midwest for grain finishing.” This also allows small producers to participate. They can ship their calves to a custom-grazing operation that eventually assembles load lots for shipment to the processor.
Todd Churchill, owner of Thousand Hills Cattle Co. in Minnesota, puts that concept to work in supplying grass-finished beef to 15 retail stores in the Twin Cities area. The key to success in marketing grass-finished beef, he says, is to simultaneously meet consumer expectations for a healthy product, environmental stewardship and animal welfare, while supplying high-quality beef that assures a positive eating experience.
Toward those goals, Mr. Churchill has worked with Dr. Williams and others to develop extensive protocols covering genetics, forage production, grazing and other management practices for profitable production of high-quality grass-finished beef. The first step, he says, is genetic selection for low-maintenance, easy-fleshing cattle. “It takes a different animal to finish on grass, compared with what works in grain-finishing programs.”
Mr. Churchill sources calves with the preferred genetics from ranchers in Nebraska, South Dakota and Wyoming — areas he says are great for cow-calf production but are less suited to grass finishing due to climate and forage resources. In southeastern Minnesota, he and cooperating growers finish cattle on highly fertile land that otherwise would produce corn and soybeans. He acts as a cattle buyer for several custom growers in his local area who supply cattle to the Thousand Hills beef program. At the time of purchase, he enters a contract to buy the cattle back at slaughter. In some cases, cow-calf producers retain owner-ship on calves they send for custom grass finishing.
With the right genetics, high-quality forage and careful management, these programs “routinely produce better than 60 percent Choice, which is better than the national average for grain-finished cattle,” Dr. Williams says.
Interestingly, specialty products such as natural or grass-finished can attract business from customers who might otherwise not purchase beef at all. In one Jacob Alliance survey, Dr. Williams says, 86 percent of shoppers who identified themselves as vegetarians said they would eat all-natural, grass-finished beef at least once a month if it were available.
Dr. Williams cites a number of natural-beef or grass-finished programs, such as B3R Meats, Western Grasslands Beef, U.S. Wellness Meats, New England Livestock Alliance and others that regularly pay producers premiums of $1.50 to $1.75 per pound on a carcass-weight basis.
Understand the challenges and risks
Participation in niche marketing can mean joining one of a number of existing programs or building a new brand, either alone or in cooperation with other like-minded producers.
Either approach requires planning and research, Dr. Umberger says. Branded-beef retailers, and in turn processors, have strict standards and protocols for production practices and increasingly require complete source and process verification on every animal.
In general, joining a large alliance entails less risk than going it alone or trying to address a “micro niche.” But even in the largest, most-established programs, participants face risk if they are unable to meet product conformation and supply specifications.
The first and most difficult step for participants, Mr. Churchill says, is to change their mindset from that of isolated commodity producers. “You have to decide that you want feedback from customers, and want to know what kind of beef you are producing.” You need to be committed to using that feedback to make whatever changes are necessary to produce top-quality beef, he adds.
Participants in branded supply chains of all sizes regularly cite inventory management as one of their greatest challenges. Retail and foodservice customers need the assurance of reliable supplies of product, and their periods of peak demand do not necessarily match up with production schedules. Missed sales opportunities cost money. So does cold storage for excess inventory.
Successful brands have spent a great deal of time analyzing how many cattle they need and when. They have developed systems such as slot premiums or contract specifications for delivery of cattle during specific time periods.
Another major challenge is that of finding a market, and a reasonable return, for the entire animal.
Branded programs often find that premiums are easy to come by for high-value end meats. “I used to say it just took a trained monkey to market middle meats,” Dr. Williams says. “Now I just say it takes a monkey.” He stresses that niche marketers must account for, and find a market for, less-valuable cuts and ground beef.
Mr. Churchill agrees, saying he would never have started marketing beef to retailers without first solving the issue. He has found markets for every cut, so inventory of end meats never accumulates in cold storage.
Plan early, plan often
Dr. Umberger says producers should follow a deliberate decision-making process in considering niche marketing. First, identify a specific niche market. Next, consider the resources you will need to participate, including land, labor, capital, knowledge, skills and cattle. Conduct a feasibility analyses, analyze your market, identify your target customer, define your product, and evaluate the competition. Finally, develop a business plan including specific goals along with financial, production and marketing strategies.
“Talk with others who have done it,” she says. Learn what has helped some programs succeed and others fail. In the end, she adds, success in these markets depends on human relationships as much as product attributes. Producers who have succeeded have built strong relationships with processors, retailers and consumers.
Agricultural economists at Colorado State University have developed a four-part step-by-step guide on how to write a successful business plan. To access the guide online, go to http://dare.agsci.colostate.edu/csuagecon/ex tension/pubstools.htm.
To learn more about Thousand Hills Cattle Co. and protocols for finishing cattle on grass, go to www.thousandhillscattleco.com.