Wal-Mart on COOL

[Cattle Rack Rancher]

BEEF PRICES HURT DEMAND: Wal-Mart meats manager

by John Halbert, Miles City Star Staff Writer

People in the beef industry would do well not to become complacent about what seems to be strong consumer demand, said the manager of the nation's second-largest beef retail operation. Current high prices are adready reducing sales.
It is not strong demand that is keeping cattle and beef prices high, but rather limited suppply, said Ken Stettmeier. Wal-Mart fresh meats merchandise manager. He spoke March 10 at a Bozman teleconference that allowed questions and participation from about a dozen Mt. communities.
Several factors are conspiring to reduce beef's market share, Stettmeier said. They are related both to hard economic facts and to customer psycology.
Contrary to several economic analyses, the Dec. 2003 discovery of a BSE-infected cow in the US did cause a drop in sales. Stettmeier said Wal-Mart saw a 250-basis point drop in beef demand after the discovery was announced.
Ironically, demand for whole-muscle beef cuts fell, while demand for ground beef went up. Of the two, ground beef that includes trimmings that may come from close to the spinal cord carries a greater risk of contamination by the prion proteins that mark BSE or mad cow disease.
Another factor, which Stettmeier noted in response to a question from broadcaster Taylor Brown in Billings, is energy prices.
"Energy prices started it," Stettmeier said. "Our customers have to be very careful with their dollar." He also noted that high energy prices drive up Wal-Mart's costs for processing and transportation.
"Don't misinterpret supply with demand," Stettmeir told Brown after Brown questioned his assertion that demand is declining. "Supply is down, demand is not up. We're down 1.7 million pounds in 2004 from 2003."
He said Wal-Mart has 1,835 Superstores that sell beef across the country to 100 million customers.
"Our beef sales are not what they used to be, due to higher prices," Stettmeier said. "We have 16 feet of meat case space for beef. We're doing everything we can to push beef, but price is having an impact on our customers."
"Our tonnage is down. Yeah, we've increased from 1998, but in 2004, we've seen demand wane."
They are turning to alternatives, he added. "Chicken had a fantastic year last year. Beef fell, due to price."
Rudy Stoltz of Winifred, Mt. commented, "If supply in the US is so low, what would the price be if Japan (closed to US beef since the BSE discovery) opened up? We better be looking down the road four or five years when the supply meets demand."
Stettmeier was asked if there was a possiblity that the corporation might turn to more expensive brand-name niche products. He replied that low price is and will always be Wal-Mart's marketing strategy. "If we're not the low-price leader, what are we shopping at Wal-Mart for?"
Wal-Mart's focus on price led to some discussion of Country-Of-Origin Labeling, which was strongly supported in some quarters. Stettmeier stressed that Wal-Mart intends to obey the law, but called it onerous and expensive and said Wal-Mart's position is that COOL should be voluntary.
He said the estimated cost for Wal-Mart to comply with the existing COOL law is $16.4 million, with a total of $9 billion estimated for the industry as a whole and $1.3 billion of that estimated as the cow-calf sector's share.
"If you think putting 'USA' on the package will sell more beef, I say our customers will buy the lower price," Stettmeier said. "All I'm saying is, be careful what you ask for."
He used the example of ground beef that had been irradiated to kill bacteria, a product that offered the consumer a higher level of safety. It wa offered side by side with regular ground beef, at a 30-cent spread to cover the cost of the irradiation process.
"The consumer bought the cheaper beef," he said, adding that he has worked at Costco and Sam's Club as well as Wal-Mart. Those stores had offered lamb from New Zealand and Australia, all openly labeled with the country of origin.
"Ninety-five percent or higher will pick up that product that's a lesser retail price without a doubt," Stettmeier said. "If the customer gets it home and it meets expectations and they're satisfied with it, they're going to go back and buy more."

 

[dun]

Glad to see someone higher up in the food chain has finally stated the obvious. Price sells

dun

 

[texhallMT]

Price sells to a point and in certain markets. Remember Wal-Mart's (and Sam's and COSTCO...they are all the same HUGE corporation) positions: they want to be the leader in low-cost -- of course they'll slant data to say price sells (2) They USED to be proud of selling as much "Made in USA" stuff as possible, now they want lots of cheap stuff regardless of origin.
Most market research indicates Brand consciousness of a majority of consumers; Pepsi drinkers don't switch to Coke instantly just because it goes on sale.
'Value sells' more than price does. Otherwise, we'd be overrun with Yugos, Hudsons, (the low price folks) etc. and Craftsman tools, Cadilacs, and Ford trucks would be out of business (NO, I'm a Chevy man personally).
Of course Wally world is against COOL. It's another opportunity for them to lose market share when things are more clearly labled and their consumers want to know what they are getting. Personally I'm for a voluntary label -- if you put out a quality product then you're generally willing to brand it so that folks know it's yours. But I imagine that will get ironed out and legislated to us too soon. And COOL might not be so great for USA products in some foreign markets...need LOTS of market research on that one.
Yup, if there's a major price difference and little quality difference, then folks will go with price. But if the price difference is minimal for a significantly better product then quality sells. The Wal Mart rep is comparing apples and oranges when he compares beef to chicken/pork. Yes the other meats had a near record year in 2004, but his data is incomplete at this point until we see the summer BBQ season data when he starts talking how many feet of display case he has this year. 2004 did see a drop, but one data point doesn't make the industry down. BSE did have an impact, but so did the decline in the latest fad diet (we need to have another of those eat beef diet things again :lol: ... get those involuntary check-off dollars working again).
Folks pay what they need to for the things that they want up to a point -- will gas ever stop going up?. The decline in beef sales in one market -- actually one niche of a market to be precise -- is only an indicator, not a weather vane of the entire industry. To objectively sum up Stettmeier's points: In the LOW-PRICE beef sector of the larger beef industry, consumers who are used to cheaper beef are indicating a decresed demand for beef when other meats are available.
But look at chicken prices over the past few years. There aren't many $0.29 or $0.39 per pound chicken parts anymore. And there are less whole chickens on the shelves (traditionally much less expensive) because folks are willing to pay significantly more for packaged legs, thighs or breasts...price didn't sell in that market, the convenience sold. Just my two cents worth.

 

[Corey]

It might be that the "Poor Quality" of walmarts beef is why their sales are down. I know that since they went to that prepackaged stuff I and very few people I know have bought any beef from them. Until we started growing our own we went to the local meat market and actully paid less for a better product. Also walmart is losing its grip on the customer wants and only stocking what is most profitable to them.
This is only my opinion and what I see in my little circle of this world

 

[Arnold Ziffle]

That prepackaged beef at Walmart is a real turn off to me as well Corey, although I can't quite put my finger on all the reasons I feel that way. In fact, I haven't bought a package of Walmart beef since they made the change. I much prefer the "old fashioned" way of my favorite Kroger and HEB stores. I do buy a fair amount of beef at Sam's Club, but of course its not prepackaged and its USDA Choice.

 

[la4angus]

I have to agree with AZ on purchasing beef from WalMart. Since they have gone to prepackaged beef, we have not bought any beef at all from their meat counters. I resent it when WalMart tries to tell me what I want to buy. In the past I could go in their stores and ask for a certain cut of beef and tell them how thick I wanted it cut, and what I wanted for quality. The butchers or butchrer helpers would go in back and bring out what they thought I wanted and if it was up to my standards of quqlity, they would cut it to the thickness that I wanted. Now what is already cut and packaged in the meat case is what they expect the public to buy. The quality of the beef that WalMart sells since they started having it pre-packaged has really gone down.
No, I don't plan to buy anymore beef from Wal Mart in the future
I have about as much use for WalMart as I have for McDonalds.

 

[J Baxter]

I have no use for the Walmarts of the world either. I may frequent one twice a year to pickup something that I can get nowhere else.

Price does sell when it comes to peoples basic protein requirements, but Walmart is not the low price leader in hardly any category (at least around here) anymore. They move into an area with cheap prices and then after they cut the throats of all the competition they tend to mark their items up.

JB