We Are A Ground Beef Nation

By Doug Rich

The United States is a ground beef nation. The move to upscale hamburger chains is one of the trends in the beef Paul Heinrich highlighted during his presentation at the 2016 Cattlemen’s Day in Manhattan, Kansas, March 4. Heinrich is chief executive officer at Encore Food Solutions, LLC. He has 20 years of experience in domestic and international meat sales and procurement.

“Ground beef is big because that is what people can afford,” Heinrich said.

In the old days 20 percent of the carcass went to ground beef. Today nearly 50 percent of every beef carcass is ground up. Heinrich said almost all of the chuck roasts are ground up for hamburgers and they are starting to grind parts of the sirloin for ground beef. The top three restaurant beef dishes are cheeseburger, hamburger and specialty burger.

Specialty burger restaurants are driving the beef business. Many of these are regional with only 25 to 50 outlets.

One of the things that impacts trends in the beef industry is the gap between the producer and the end user. The production cycle for chickens is about 12 weeks from egg to plate. It is 24 weeks for turkeys and less than a year for pigs. But for beef it is nearly three years. That is how long it would take for producers to make changes that consumers want.

“I realize that we as an industry have challenges when it comes to making changes that the consumer wants yesterday,” Heinrich said.

The growing income disparity and a shift in the consumer base also impact trends in the beef industry. There are two income groups that are growing as the middle class is shrinking. Heinrich said one group is budget conscious and the other he calls spenders. Sixty percent of population is in the budget conscious group but they only account for 25 percent of the purchasing power. Forty percent of the population is in the spender category and they control 75 percent of the purchasing power.

“There is a high demand now for prime beef but I caution us that not everyone can afford that product,” Heinrich said. “There are consumers out there that are living from paycheck to paycheck.

“The last thing I want is for beef to become a luxury item and therefore people will consume it less frequently,” he said. “We don’t want to become like the veal industry.”

Heinrich broke down consumers further into three groups: millennials, males and multicultural. Nearly 86 million people fall into the millennial group, and Heinrich expects many of the people in this group will eventually shift into the spender category. Forty-three percent of the male population does the primary grocery shopping for their households and 54 percent of the U.S. population will fall into the multicultural segment by the year 2043.

“We need to provide products for all three segments,” Heinrich said. “But millennials are the key to long-term growth.”

Looking specifically at the multicultural segment Heinrich noted that 30 percent of the population is Hispanic, 11 percent is African and 8 percent is Asian. Each of the cultural groups likes a different flavor profile that needs to be considered when developing new products. A one-size-fits-all approach will not work.