Are we on the cusp of a paradigm shift in beef production/marketing? Sustainable Beef LLC (SB) held a ground-breaking ceremony last Oct. 4 for its new rancher-driven, state-of-the-art $325 million, 500,000-square-foot cattle/beef processing facility in North Platte, Neb., slated to open in 2024. In a previous blog, when SB first announced their intention to build the facility, I opined that what the industry did not need was more cattle processing availability since it was operating at about 85% capacity industry wide.

I further said that those who will suffer the most are the cattle ranchers who will have put up a sizable portion of their hard-earned income to help fund the new plant’s cost, only to see that investment disappear. The big beef behemoths, AKA the beef industry’s big four who already control nearly 80% of the cattle/beef processing and marketing in the US, coupled with their plant efficiencies, will present the new SB facility and their investors with insurmountable competition that will force SB into a death spiral debacle fait accompli.

Further to this cattle-beef scenario is the lack of consumer branded fresh beef products, with one major exception. The beef industry should thank Mick Colvin every day for his tenacity over many years to establish and make successful the Certified Angus Beef (CAB) brand that has added many dollars to the pockets of the beef complex participants who embraced CAB. Other beef marketers have, for the most part, steadfastly refused to brand fresh beef, as we still find a sea of identical white foam trays sans any brand identification in the retail beef counter.

However, the ground rules may have changed when Walmart announced last August its minority investment in SB’s North Platte plant. And, just recently, Walmart announced that it will spend $257 million to open a beef processing plant in Olathe, Kan. This facility will package and distribute cuts of the higher grade Angus beef from SB’s North Platte plant. And that SB-Walmart “partnership” is the paradigm shift to which I am alluding.

Is such a cattle producer/processor-retailer partnership a precursor to a new beef future?

In the past, cattle/beef industry members and retailers have been loath to integrate, unlike the chicken industry. Consequently, I have taken to task the stubborn independence of the cattle/beef industry for abdicating their predominant role in protein production and consumer takeaway. By nearly any measure, be it per capita consumption or protein demand, chicken consumption with its integration and branding easily surpassed beef’s.

If the beef industry simply refuses to integrate to reduce the “silo” mentality and separate profit center structure, retailers like Walmart will do so by integrating forward of the rancher/backgrounder/feedlot operators to manage their supply. Who do you think will control this battle? Well, if the ranchers et al do not want to integrate and brand, Walmart and other retailers surely will.

History, however, provides us with a disclaimer to these “new” partnerships. Over 20 years ago, Future Beef Operations (FBO) contracted with Safeway to take a substantial portion of its new state-of-the-art Arkansas City, Kan., plant’s beef production. However, it all cratered when Safeway pulled out of the deal in part forcing FBO into bankruptcy. Will this SB-Walmart partnership or similar future industry partnerships be any different? Time and success will tell.

Will more major retailers follow Walmart, Kroger and Costco’s lead by forming partnerships with beef production sources rather than bid on various suppliers’ beef products in the “open” market? These new and more expansive production-marketer “partnerships” seem to indicate so.

The beef industry learned long ago, probably when the first animal was slaughtered, that to make money, more cattle must be slaughtered, not necessarily more beef sold. In fact, the industry coined a new word for beef sales— disappearance. The beef disappeared somewhere, somehow and the money was made not when more beef disappeared but when more cattle were killed.

But, finally, that may be changing with the “disappearance” companies like Walmart, Costco, Kroger or other retailers joining forces with cattle producer-processors. And, such partnerships will bring a whole new dynamic to the industry and maybe, just maybe a whole new surge in beef demand. We can only hope.

A shift for beef's future?

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