A New Way to Buy Beef

W A S H I N G T O N, Feb. 26, 2001 -- The corner butcher shop is gone. The supermarket meat cutter may not be far behind.

In a bid to boost profits and cut labor costs, giants of themeatpacking and grocery industries are trying to change the wayconsumers buy beef.

It would no longer be cut and wrapped at theback of the store, instead arriving at supermarkets prepackaged andcarrying brand names that packers hope will one day be as familiaras Kellogg's and Campbell's.

Packers can make an extra 60 percent profit on prepackaged,name-brand beef, said Christine McCracken, an analyst for MidwestResearch. Beef that's sold in bulk to supermarkets for $1 per poundwould go for $1.60 if it's sold with the brand.

Stores make up the difference in costs by eliminating the needfor meat cutters, who are among the highest-paid employees.

New Development in Food Industry

For consumers, the prepackaged beef will be handled less,reducing the risk of bacterial contamination, and it will be easierfor stores and health officials to trace when there is a problem,say industry officials.

Special leak-proof, oxygen-rich plastic packages — a newdevelopment in the food industry — ensure that the meat has thebright red color of meat that's cut inside the store. Without thatpackaging, the beef would turn brown, a sure turnoff to shoppers.

"We really believe it's the way the industry is going to go,"said Gene Leman, chief executive of fresh meats for beef industryleader IBP Inc., which introduced its Thomas E. Wilson line of beeflast year.

Wal-Mart is switching all its beef sales nationwide to Thomas E.Wilson.

Consumers want "a name in the fresh meat case that they cantrust time and time again," Leman said.

‘A Win-Win for Everybody’

Poultry giant Tyson Foods Inc. is betting IBP is right. Tyson,whose brand name now dominates U.S. chicken sales, wants to do thesame in beef and pork and recently won a bidding war with rivalSmithfield Foods to buy IBP for $3.2 billion.

The deal will give Tyson "an unparalleled ability to developinnovative, branded food products and market them successfully,"says Tyson chairman John Tyson.

Nearly 39 percent of all meat sold at retail last year wasprepackaged, or "case-ready," compared with 23 percent in 1997,according to the Food Marketing Institute, the supermarketindustry's trade association.

"The consumer pays about the same price and he gets a betterproduct. It's a win-win for everybody," said McCracken.

Not everybody feels that way.

The United Food and Commercial Workers union, which representssupermarket butchers, predicts many consumers will reject theprepackaged meat in favor of beef that's cut in-store becausethey'll see it as fresher. Wal-Mart's real aim, according to unionofficials, is to prevent meat cutters from unionizing.

Many People Want Special Cuts

Packers are trying to "force-feed" consumers, said GaryO'Brien, a meat cutter at an upscale Dorothy Lane Market inCincinnati that has no plans to stop cutting its own meat.

"There are so many people who want special cuts. They want aporterhouse that's cut and an inch and a half thick," he said."They're going to have to come to these smaller shops. It's likethe old gas stations that work on cars. They are fewer and fewerbut you still need them."

Cattle ranchers started pushing for brand-name beef in the 1990sin hope of reversing a slump in consumption. They think processorswill do a better job of marketing beef and be more conscious of itssafety and quality if they've got their name on the label.

Packers currently do little advertising for beef. The adcampaign — "Beef. It's what's for dinner" — is paid for byproducers.

‘Not a Messy Product Anymore’

Wal-Mart's shoppers like the prepackaged meat because of thewatertight package it comes in, said Wal-Mart spokeswoman JessicaMouser.

"They like to be able to pick up a nice, clean package. It'snot a messy product anymore," she said.

Wal-Mart is selling Thomas E. Wilson beef in about half of its868 supercenter stores nationwide and plans to phase it into therest as IBP increases production

IBP retrofitted a plant in Council Bluffs, Iowa, to cut andpackage the beef, and has a larger facility under construction inNashville, Tenn. So far, IBP is selling about 5 million pounds ofThomas E. Wilson products a week, out of its total weekly sales of210 million pounds.

"It's hard to say that we've reached a point to say that thisis the only way we're going to buy beef," said University ofMissouri economist Gary Brown. "It's safe to say we're definitelytrending in that direction and it will continue to be more and morea dominant part of what happens."

The Tyson-IBP merger has cleared the Justice Department'santitrust review. Tyson has delayed closing the deal, pending IBP'sresolution of accounting issues raised by securities regulators.IBP slaughters 35,000 cattle a day, well ahead of No. 2 ConAgra, at24,800, and reported sales last year of $14 billion.