I have been more than a little puzzled by the kerfuffle between the beef industry and Chipotle - for multiple reasons. But it's evident - although virtually predictable - my opinion doesn't line up with the majority of farmers and ranchers. This became obvious when we talked about it on Agritalk Friday.
Chipotle has turned to Australia to source grass-fed beef. Considering the price of beef, especially the lean beef they need to cut our higher fat fed beef down to burrito level, this is hardly a surprise. But the beef industry took offense at their CEO comments.
In 2013, our company purchased about 45 million pounds of domestic Responsibly Raised beef; but the U.S. supply isn't growing quickly enough to match our demand. Even though our loyalty to American ranchers is strong, rather than meet the shortfall with conventionally raised beef from cattle treated with growth hormones and antibiotics, we decided to take this opportunity to start sourcing more truly grass-fed steak. So in addition to expanding our supply of beef raised without growth hormones or antibiotics, we are particularly excited to be able to serve more beef that comes from cattle raised entirely on grass. [More]
Of all the possible reasons, I think this quote hints at the most important one: the supply/price crisis in the US. Cull cows are setting records for both price and small numbers. So getting to 80/20 for ground beef is really tough with our beef output. Sure we have grass-fed beef but I can't even get any good numbers on the size of our grass-fed herd, let alone the percentage that are non-hormone and antibiotic free.
Nobody collects information on exactly how much of the grass-fed beef that Americans eat comes from abroad. Theo Weening, the global meat coordinator for Whole Foods, says his company buys very little. "We probably import maybe 3 percent. The rest is regional, local; that's what we really push for," he says.But you'll see plenty of Australian-origin beef in other supermarkets. Organic Valley, meanwhile, gets all of its grass-fed beef from Australia. There's also a lot of grass-fed beef coming in from Uruguay and Brazil.So why does the U.S., the world's biggest beef producer, have to go abroad to find enough of the grass-fed variety?Curt Lacy, an agricultural economist at the University of Georgia, says some of the reasons are pretty simple. Weather, for instance. In most of the U.S., it freezes. In Australia, it doesn't. So in Australia, as long as there's water, there's grass year-round.And then there's the issue of land. "If you're going to finish animals on grass, it takes more land," Lacy says. Grassland in Australia is relatively cheap and plentiful, and there's not much else you can do with a lot of it, apart from grazing animals.As a result, Australian grass-fed cattle operations are really big. In fact, they're the mainstream. Seventy percent of Australia's beef production comes from cattle that spent their lives grazing. And when beef operations are large-scale, everything becomes cheaper, from slaughtering to shipping.On Monday, the U.S. company Cargill announced a new deal with Australia's second-biggest beef producer — a company called Tey's. Cargill will now sell more Australian beef in the U.S., both grass-fed and grain-fed. [More]
I think Chipotle knows exactly what they are doing. And for the most part, the beef industry isn't thinking this through. Chipotle is arguably the brightest star in the food service galaxy right now, and seems to be handing both fast and casual dining competitors their heads, by inventing - along with Panera, etc. - a new category: fast casual.
There are now over 1,400 Chipotle locations in 43 states, and the chain reportedly made a 25% profit margin on $2 billion in sales in 2011.Chipotle began a trend in restaurants that the industry has dubbed “fast casual,” which offers a more upscale dining environment and food quality, along with higher prices, but in the familiar, convenient limited service format of fast food. “When I started Chipotle, I didn’t know the fast-food rules,” Ells explained years later. “People told us the food was too expensive and the menu was too limited. Neither turned out to be true.”By either ignoring or directly challenging all the dominant trends in its industry, Chipotle quickly became a great brand. Now Chipotle has become the trend-setter in the category, and trade publications feature headlines such as, “Who Will Be the Chipotle of Pizza?” Wendy’s and Taco Bell are just two of the most prominent fast food players investing in new store designs that look shockingly similar to that of Chipotle. The Wall Street Journal dubbed Ells the “Fast Food Revolutionary,” and Esquirecrowned him America’s most admired CEO....McDonald's sold its stake in Chipotle in 2006, and since then, Chipotle has moved farther and farther away from the typical fast food way of doing business. Ells’s latest obsession is the issue of sustainability. Chipotle is now the largest buyer of higher-priced pork, beef, and chicken from animals that have been naturally fed and humanely raised outside of the factory-farming system, which provides inexpensive commodity meats to the rest of the food industry. Produce served at Chipotle is also locally raised if possible (lettuce served in January on the East Coast still comes from California). What Chipotle has learned is that customers notice the difference in flavor from natural meats and fresh vegetables grown “with integrity,” as the chain’s tagline states--and they’re willing to pay extra for it. [More]
Chipotle is adding 200 restaurants a year to boot. Even the NCBA rep on the show with me pointed out the lines out the door at the stores in the DC area. Oddly, he couldn't connect that with the dots that suggest Chipotle knows what they are doing.
Mostly Big Beef hasn't gotten over their big beef (I've been saving that line for, like, ever) with the slick Chipotle videos, notably the latest - "Farmed and Dangerous". Partly this is due to the clearly top-notch production values, and mostly I think it's simply a lack of any effective response.
The beef industry has decided, for reasons I cannot fathom, to go with "you hurt my feelings".
Some U.S. producers say they were not given adequate opportunity to fulfill the company’s rising orders. While U.S. beef supplies are very tight, they aren't tight to the point where there's not enough supply. The company's decision to source some of its beef from Australia likely has more to due with price. Plus, the firm continues to strive for use of beef raised with no antibiotics or hormones, which it calls, "responsibly raised."Chipotle has the right to source its beef (and other meat) needs from wherever it chooses. But to say there isn't enough "responsibly raised" beef in the U.S. is a slap in the face of cattlemen here in the States. Cattlemen (and the entire farm community) should choose to "eat responsibly" and opt to dine at restaurants other than Chipotle. [More, but gated from Profarmer]
Brian Grete (above) reports this pretty accurately. I've heard and seen the "slap" reference repeatedly. It strikes me (heh) as one of the worst metaphors cattle producers could use. First, imagine somebody slapping the quintessential 'Merican cowboy (Marlboro Man, or Clint Eastwood from Rawhide). These are the rough-tough personas invoked often by our cow-calf people, so talking about a face-slap is an inexplicable transition from grizzled survivor to playground victim. Maybe the victimhood thing has worked so well for my sector (the weather/Chinese/Big Oil/etc.!), they have decided to join the whine cellar crowd.
But unlike corn farmers who are whining to government for hidden subsidies, cattle producers are aiming, I guess, for the public. This could be a big mistake. Jane Q Consumer is already aware of painful beef prices. And she is responding just like economists predicted, for once. Beef consumption continues to drop. While there is substitution going on, total meat consumption is a tide that carries all proteins along.
[Source] [Note: I couldn't find any charts beyond 2012, but trend has not changed]
I see no evidence that pity-based marketing has been working or will work for the beef industry - unless they are shifting to subsidy-based ag, which could be, given the new livestock support in the recently passed Eventual Farm Bill ™. (This is my designation, which I thought up all on my own because the timeline for the current farm bill seems to be stretching to infinity and beyond)
Complicating this response is when you are "slapped in the face", simply griping about it seems a little...umm, limp, to put it mildly.
It could also be our grass-fed producers were simply out-hustled by the Aussies. [I would include an excerpt, but they lock down their content] At any rate, without oodles of corn, we should hardly be surprised Australia would be very, very good at growing and marketing grass-fed beef. And just as we laud our export efforts in Asia, etc. when US beef takes market share from domestic suppliers, why are are miffed when the free markets works freely (both ways)?
But the bigger picture may be what is troubling most US cattle people (if only subconsciously). What if Chipotle's upfront promotion of "responsibly raised" beef works? What if competitors are forced to match their move? [See also: gestation crates] What if slick videos posed next to feedlot pictures sway consumers to eat less conventional beef?
Right now the answer seems to be, "We'll just export our product." This is a legitimate countermove. The US could become the high-value dominant supplier and simply leave the ground beef sector to others. While it seems to be working, there are things to watch as well.
Increasing dependence on exports means greater volatility, IMHO. From currency fluctuations to competition to foreign policy entanglements to outright conflicts, lots can go wrong with exports. Secondly, growing income inequality here at home means the growth in the domestic market will be in exactly the sector dominated by the "Chipotles" of the industry. The domestic/export trend could intensify rapidly.
To sum up, beef producers at ticked at Chipotle for saying things they don't like, but can't answer effectively. They are also miffed at losing a grass-fed customer. But if it hasn't dawned on them there is not much they can do about it, they risk looking like ineffectual complainers.
The American and perhaps global consumer is getting used to vendors catering to even illogical preferences. Amazon has taught them they can really have it their way. Tomorrow. All of agriculture needs to realize this will ripple through our value chain and arrive our our farm gate, whether we like it or not. Meanwhile, our government is busying eating its own and can't be bothered with a tiny, never-satisfied slice of constituents. We can wrap US beef in the flag all we want, but that got tiresome back when Japanese cars kicked our automotive butts into the 20th Century. Patriotic shopping happens when consumers prefer US products.
I don't think Chipotle "slapped any cowperson's face". I think they said, "No thank you, I like Brand X". It's not about us, it's about our products. And if we weren't plowing rangeland to grow insured-for-nearly-free crops, maybe we could play in the Big Grass-fed Leagues.
For the time being I think I'd take a pass on tattling that "Chipotle slapped me!"