CAB at 25

Document Sample
CAB at 25 Powered By Docstoc
					                                                                                                              conferred with Fred Johnson of nearby
                                                                                                              Summitville, who was on the American
                                                                                                              Angus Association Board of Directors with
                                                                                                              Robert Giess, Arnold, Kan. They brought
                                                                                                              Etling’s ideas to the Board in October 1975.
                                                                                                                  If the Association could license retailers
                                                                                                              and restaurants to market top-quality Angus
              Silver for the beef industry’s gold standard.                                                   beef, Etling suggested, demand for Angus
                                                                                                              cattle would rebound. Nobody knew
                                            by Steve Suther                                                   enough about the product side to say how or
                                                                                                              if that would work, but the Board appointed
                                                                                                              a committee to look into it.

C     ertified Angus Beef LLC (CAB)
       celebrated its silver anniversary in
October, recalling the moment in Renzetti’s
                                                      however. Anyone who was producing Angus
                                                      cattle 25 years ago knows the frustration of
                                                      selling at a discount. If you believed in Angus
                                                                                                                  Greensburg, Ind., producer Gilman
                                                                                                              Stewart was chairman. Etling, Johnson, Giess,
                                                                                                              and Ed Elliott of Mount Victory, Ohio,
IGA, Columbus, Ohio, when the first pound             cattle, you believed you were selling the best          joined staff coordinator Keith Evans and,
of Certified Angus Beef ® (CAB®)                            for less. Consumers, if they knew                 later, Chicago, Ill., banker Elliot Frank. After
product sold.                                                anything about a good steak, guessed it          two meetings, including one with Marriott
   This year, 11,500 licensees                                    should be grain-fed Angus.                  Inc., Stewart told the Board in July 1976 that
worldwide sold 585 million                                              They were usually right, but          the concept would require more staff but
pounds (lb.) of CAB products                                           there was no system to                 would not pay for itself, at least initially.
at $2.3 billion, garnering                                              identify and deliver these                Angus registrations had been in an eight-
premiums for Angus producers                                           products, or to provide                year decline and money was tight in Saint
via pull-through demand.                                             feedback to the producer. A              Joseph, Mo. The branded beef idea was
   “The good times are here,” says                              restaurant might call itself the Angus        tabled, and the committee was encouraged
Brent Eichar, CAB senior vice president. After        something-or-other, or make claims on the               to keep “working with packers and retailers
17 years of accounting, analyzing and                 menu. But managers, chefs, waitresses and               to see if there was a way to get the two
managing the brand, Eichar knows the                  customers experienced disappointment too                together,” Evans reported in his 2001 book, A
numbers.                                              often.                                                  Historic Angus Journey.
   “Some weeks the major packers paid as                 Angus producers grew discouraged by a                    The Ohio producers were convinced it
much as $80 per head just for the CAB                 U.S. beef industry that had embraced larger             would work, given the chance, and they were
component on their grids. That fluctuates,            and leaner Continental cattle. When that                near enough neighbors to meet often. In late
but it is regularly $30 to $40 — a clear              industry persuaded the U.S. Department of               1976, Association regional manager Mick
incentive to produce,” Eichar says.“We see            Agriculture (USDA) to widen its Choice and              Colvin of West Salem, Ohio, stopped by and
no slowing in demand from existing                    Prime grades to fit the lower quality,                  asked questions that cut to the heart of the
markets, nor from those areas where we                producers decided to act.                               issue.
don’t yet have enough licensees. CAB is truly                                                                                              CONTINUED ON PAGE 100

limited only by supply. When just 18% of              Branded ideas
Angus-type cattle qualify for the brand,               A bad steak inspired Harold Etling,
there is tremendous upside potential.”                Marshallville, Ohio. He
   Things didn’t always look so bright,
                                                                                                                       Phase II supply development
                                                                                                                       concept approved by Board

                                                              USDA grants ap-                                          First fabricator of CAB product:
                                                              proval of G1 for first                                   Beef Specialists of Iowa
                                                              certified brand
                                                                                                                       First foodservice distributor:
                                                                                                                       DeBragga & Spitler, New York, N.Y.

                                                                                                                       First international retailer:
                                                              First retail distributor: Oxford Trading Co.,            Pueblo Int’l, San Juan, Puerto Rico
             First packer: Val Decker Packing Co.,            Boston, Mass.
             Piqua, Ohio

                                                              First restaurant:
                                                              Maple Root Inn,
                                                              Coventry, R.I.

                                                                                                                       First international restaurant:
             First sale: Renzetti’s IGA, Columbus, Ohio       First million pounds sold to date                        Shangri-La, Singapore

98   ■   ANGUSJournal   ■   November 2003
   “I had no interest in the meats end,”                                                                       altered. The standards have been copied, in
Colvin recalls,“but I asked,‘Can you identify               Table 1: Specifications to qualify                 part, by other brands throughout the years,
Angus cattle in a high-speed packing plant                  for the CAB brand                                  but none have duplicated the complete CAB
and maintain identity to the consumer? Will                 @ 51% black hide;                                  formula that includes Association ownership
the consumer pay more for the product?’                                                                        and a brand assurance division to monitor
The committee asked me to find the                          @ neck hump of less than 2 inches;                 compliance.
answers.”                                                   @ “A” maturity (9-30 months);                          Differentiation became the key.“We knew
   Colvin replaced Evans as staff coordinator               @ modest or higher degree of marbling;             we wanted to add value by sorting out those
in a reorganized Ohio-centric committee                                                                        that would qualify,”VanStavern says.“What
that included Charles Cannon, Flemingsburg,
                                                            @ medium or better marbling texture;               we didn’t know was how many cattle would
Ky. Frank attended as often as possible.                    @ USDA Yield Grade (YG) 3.9 or leaner;             be identified or would qualify for the brand.”
Excitement grew as Ohio State University                    @ moderately thick or thicker muscling;                Before anyone knew those numbers,
(OSU) meats professor Bobby “Dr. Bob”                       @ no internal hemorrhages; and                     Colvin and company had to put a program
VanStavern helped them find answers (see                                                                       in place. First came months of detailed work
“Scientist Behind The Sizzle,” page 109).
                                                            @ no dark-cutting characteristics.                 with lawyers, the USDA and VanStavern to
                                                                                                               translate specifications into operational
Given the chance                                       just saying a product was ‘Angus.’ Studies              procedures. Finally, 25 years ago, Val Decker
    In 1977 the Association Board voted to             said we needed marbling, and we knew                    Packing Co., Piqua, Ohio, became CAB-
fund a $50,000 pilot program, despite                  Angus genetics could provide that type of               licensed and sold orders to Renzetti’s three-
income projections of only $6,000. The sole            beef, with some selection and management                store chain. With then Ohio Gov. James
source of income would be fees of 1¢ to 7¢             effort.                                                 Rhodes in the promotional photo, the sale
per pound of CAB product, paid by licensed                “We simply set the minimum standards                 was widely noted.
packers. However, there were no licensed               to give a high degree of assurance of an                    The news came to Carol Tucker Foreman,
packers at the time.                                   enjoyable eating experience,” he says (see              USDA undersecretary for food and
    The CAB Program debuted in 1978, with              Table 1).                                               consumer services, who tried to shut the
Colvin as executive director (see “Certified              The live specifications were designed to             brand down, alleging a consumer “rip-off.”
Visionary,” Angus Journal, September 1999).            increase the likelihood of Angus influence.             Confiscating the USDA carcass roll didn’t
He sought legal advice about visual type and           The USDA agreed that only predominantly                 quite kill the program since it was operating
licensing, as well as science-based brand              Angus cattle could meet both the live and               at such low volume. Qualifying cattle were
specifications that would stand the test of            carcass specifications. All standards must be           still being identified at Decker while Colvin,
time.                                                  met to earn the CAB brand — a                           Johnson and new Association Executive
    “We knew we had to add value,”                     determination made by the USDA, not plant               Secretary C.K. Allen wrote, called and
VanStavern recalls.“Consumers were buying              or brand employees.                                     traveled to Washington, D.C.
other things, and beef is better than that. But           Although specification-based beef                        In retrospect, Colvin says it was the best
we knew there was no long-term future in               production on a large scale was unheard of              thing that could have happened, because the
                                                       prior to the CAB standards, VanStavern’s
                                                       contribution to the industry has never been

             First national conference, Saint Joseph, Mo.                                                                Retail sales exceed foodservice sales
                                                                First processor: David Berg & Co., Chicago, Ill.

                                                                                                                         Supply Development Division and
                                                                Identified 1 million Angus-type cattle per year          Carcass Data Collection Service begin

                                                                First packer incentives given for qualifying cattle:     First “Big Three” packer licensed:
                                                                Litvak Meat Co., Denver, Colo.                           Excel Corp., Schuyler, Neb., plant

                                                                                                                         One-millionth carcass certified

                                                                Certified Angus Feeder Program identifies high-
                                                                quality Angus cattle for sale

100   ■   ANGUSJournal   ■   November 2003
CAB science-based specs became USDA             leads, Colvin snagged a big one while            were many hopeful signs, such as licensing
sanctioned and ready for wider use. On          scanning the notes from a 1976 meeting           Beef Specialists of Iowa (BSI), the first
April 2, 1979, USDA approved all procedures     with Marriott in Chicago, Ill. Leonard           fabricator to maintain an inventory of CAB
and returned the carcass roll. The news was     Berkowitz, a Florida professor of “hospitality   product. Colvin knew about a lot of pending
again noted in the trade, and this time with    management,” had been there as a                 deals, like the Bruss plan to license a
more positive effects. Diggs Packing Co.,       consultant. He invited Colvin to Miami, Fla.,    Shangri-La hotel in Singapore that would
Columbia, Mo., became licensed and sold to      liked what he heard, made calls to contacts      take the brand international.
12 area grocers during the next year.           on the spot and joined the brand as a               After a passionate appeal by Colvin, the
                                                consultant.                                      Board agreed to continue the brand. Six
Hope and pressure                                   Colvin and Berkowitz figured if they         months later CAB recorded its first
    Oxford Trading Co. President Charlie        could get four key foodservice distributors      profitable month, with sales of more than 1
Robinson, Boston, Mass., read the news in       licensed, they could make a profit. They         million lb. of product.
The National Provisioner. He recalls,“I was     went on the road the next spring, calling on
selling Holstein [beef] then, but if any        targets in New York, N.Y.; Omaha, Neb.;          Supply quandary
consumer has heard of any beef, I thought, it   Miami; and Chicago, where Ellard “Butch”             Restaurants were licensing at such a pace
was Angus.”                                     Pfaelzer Jr. was at the helm of The Bruss Co.    that supply became a worry. Fortunately,
    The article “changed the focus of Oxford        Now retired and consulting in the            Berkowitz had contacts at National Beef
Trading and my life forever,” Robinson says.    Chicago area, Pfaelzer admits he didn’t see      Packing Co., which operated one of the
Although licensed as a retail distributor in    then the impact their visit would have on his    industry’s largest plants at Liberal, Kan. Its
June 1979, Oxford helped license the first      company or the industry. But he quickly saw      license was approved in 1983, and National
CAB restaurant, Maple Root Inn, Coventry,       CAB was just what Bruss was looking for.         produced 3 million lb. of the 8.3 million lb.
R.I., the next year. Momentum was building,     “When they showed us everything about the        of CAB product sold in 1984, the first full
but not fast enough. The Association was        brand’s image, the controls and USDA             year of profit.
still chipping in $50,000 each year, and some   certification, we realized it was years ahead        Had CAB bitten off too much? Would
Board members harbored strong doubts.           of anyone else and would position our            supply flood the market and destroy
Registrations were still lagging, and the       company ahead of our competitors,” he says.      profitability of the program?
overall farm economy looked shaky. In 1981          As the Association’s deadline neared,            “The first five years were a toss-up as for
the Board served notice, voting to cancel the   Colvin knew CAB had come far, but not            what was going to happen to the brand,” says
brand experiment unless it could show a         quite far enough to show a profit. There                                       CONTINUED ON PAGE 102
profit by the following September.
    Desperately casting about for

                                                                                                  First seedstock, commercial producer and
                                                30% of fed-packer base processing CAB product     feedlot awards presented

                                                                                                  Expanded focus on
                                                                                                  export balances
                                                Feedlot Gain and                                  carcass utilization
                                                Carcass Contest
                                                began seven-year
                                                run at Decatur
                                                County Feed Yard,
                                                Oberlin, Kan.

                                                                                                  Nation’s largest packer, IBP (now Tyson),

                                                                                                  First packer grinds sold by IBP

  “The Art of Cooking with Certified Angus
  Beef” cookbook leads chefs to the brand

  First Roundup (boot camp) training for
  sales reps, Amarillo, Texas                   10 million Angus-type cattle identified

                                                                                                         November 2003    ■   ANGUSJournal    ■   101
Bob Hillier, Stillwater, Okla., who replaced       January 2003). John Stowell, from Bennett,       Tyson) and double supply again, you’re really
Johnson on the Board in 1987 and served as         Colo., and then Larry Dorsey, Gallatin           going to become a commodity product.”
chairman from 1992 to 1995.“Our problem            Gateway, Mont., headed the supply                    Skeptics saw CAB as a niche product with
was developing markets then, not supply.           development effort, which focused on             limited demand. After ConAgra Beef Co.
Before BSI and National, we would go               genetic improvement. They worked in              (now Swift & Co.) was licensed in 1995, the
harvest 100 head and then run out and sell         concert with the Association to increase         brand enjoyed the mainstream status of
it.” Once National demonstrated the CAB            participation in evaluating sires for end        working with more than 80% of the packing
Program would work in a big, high-speed            product merit.                                   industry. In recent years, licensing three
plant, the future looked brighter and supply          It would take many more years to build        plants in Canada has brought CAB to a
appeared to be even less of a problem.             ownership among Angus producers, so that         similar position north of the border.
    But supply problems were brewing under         they could explain the market-driven                 Board members say it took a long time to
the surface, Hillier knew.“You got some flak       program to their customers. Predominant          fill the broad pipeline.“When you could get
within the industry itself,” he recalls.           black hide was only the first door to the        the specs out of the commodity supply, we
    From retail meat managers to restaurant        brand; focused Angus genetics were required      weren’t seeing the premium,” says Bill Davis,
waitstaff, foodservice salesmen to packers,        to achieve significant CAB acceptance. Few       Sidney, Mont., whose father, Dale, was on
brand-directed training had become a               producers would care until premiums were         the Board during CAB’s formative years.
successful hallmark of the CAB Program.            widely available.                                “But as demand increased and finally
But Hillier noticed a rift between the                                                              exceeded supply, it was a huge milestone. It
growing acceptance at the trade level and          Building the base                                showed in the premiums we started to get.”
producers who felt left out.                           With producers engaged, Hillier and              Association Executive Vice President John
    “Brent [Eichar] had come right out of          Colvin focused on licensing one of the “Big      Crouch says CAB’s first impact on seedstock
Ohio State, and he was ingenious with those        Three” packers. Their inquiry was well-          sales came in 1988, shortly after the first
computer and tracking programs,” Hillier           received at Excel Corp., which was licensed      CAB premiums were reported. With the new
says.“But we needed one-to-one producer            three days after a visit in late 1988, Hillier   focus on high-quality beef,“we saw a
contact in the field.” It was time for Phase II.   says.                                            tremendous resurgence of interest in
That’s the name the Board used in                      “It nearly doubled our supply,” Eichar       evaluating seedstock for carcass traits,” he
approving the concept of CAB supply                says.“The increase was much bigger than          says.“Breeders who had never sold any cattle
development in 1981, figuring it would             when National came on, but we had grown          on carcass merit all of a sudden were being
follow from Phase I, brand development.            so that the percentage growth wasn’t as          asked for information.”
    The Association had been building closer       sharp.” Again, synchronized growth in sales,         Steve Brooks, Association president,
ties to the commercial industry, and when          made possible by the assurance of product        Bowman, N.D., noticed the requests for data
the CAB Program added a Supply                     availability, absorbed the supply over time.     his family had been collecting since 1980.“It
Development Division in 1988, areas of             In 1990 CAB had licensed 30% of the              really hit home in 1995 because it was the
cooperation appeared (see “The Road                nation’s fed cattle processing.                  first time we had the opportunity to lease
Ahead, the Road Behind,” Angus Journal,                When the nation’s largest packer was         bulls to the major AI (artificial insemination)
                                                   licensed in 1992, Eichar heard the familiar      studs based on their carcass merit.”
                                                   warnings.“Gosh, if you license IBP (now

            Cattle-Fax identifies that CAB brand
                                                                                                      First value-based grids identify packer premiums
            contributes $354 to the price of an
            Angus bull                                    More than 1 billion lb. sold to date
                                                                                                      First heat-and-serve entrées: RMH Foods Inc.,
                                                          Monfort (Swift & Co.) licensing brings      Morton, Ill.
                                                          potential to 70% of fed-cattle base

            Value-added Products Division formed          First licensed burger chain: Blake’s
                                                          Lotaburger, Albuquerque, N.M.

                                                                                                      Marketed 1 million lb. per working day

                                                                                                      First restaurant chain licensed for deli:
                                                                                                      Mr. Subb, Cohoes, N.Y.

                                                                                             Web site introduced
102   ■   ANGUSJournal   ■   November 2003
   Mark Gardiner, Ashland, Kan., had also                                                            interests. Producers, packers, distributors,
focused on carcass merit for years. A                                                                retailers and restaurants are concerned with
founding member of U.S. Premium Beef                                                                 their own reputations, brands and bottom
(USPB) in 1996, he says the cooperative                                                              lines. But they continue to cooperate on the
made a big difference in the market and in                                                           CAB team because it makes them money.
attitudes.“Before, our customers felt they                                                               Excel Corp. President Bill Buckner wrote
were not being paid directly for marketing                                                           in a congratulatory letter this summer that
CAB-type cattle,” he notes. USPB’s industry-                                                         CAB has “set the standard of what a brand
leading CAB premiums pressured all packers                                                           should be. At Excel and Cargill Meat
to ante up so that customers would have                                                              Solutions, a brand is delivering on a
market opportunities, he says.                                                                       promise, and [CAB’s] exacting specifications
   “Through the evolution of CAB and the                                                             have allowed that brand to consistently
market power it has gained,” Gardiner says,                                                          deliver. The move to branded beef, away
the brand stands alone.“It became what the                                                           from commodity beef, has been a critical
founding fathers envisioned, a standard of                                                           factor in the increase in beef demand.”
excellence that has put millions and millions      with a certain packer, they’re going to be able       Bob Norton, CAB Board chairman, CEO
of dollars into producers’ pockets. USPB           to get that with the CAB line — and not           of BioZyme Inc. and once head of CAB-
alone has paid more than $17 million in            have to change packers. Producing all the         licensed packing company BeefAmerica Inc.,
CAB premiums.”                                     items in all the plants truly gives our brand a   says CAB’s quality-assured product and
                                                   selling advantage.”                               marketing programs turned the tide.“CAB
The multi-packer brand                                Sellers of finished cattle can deal with       has been able to leverage few dollars into
   Collectively, CAB-licensed packers were         several licensed packers paying premiums on       effective marketing that compares with a
paying more than $25 million in annual grid        competing grids.“Over those years of rapid        product rollout at Procter & Gamble, where
premiums for the brand by 2000.                    growth, when we were licensing more               they spend $100 million to introduce a new
   “Each time it took a leap of faith to bring     facilities across the packing segment, we         line of toothpaste.”
the big packers online,” Eichar says.“But          built the base for those premiums,” Eichar            Success will bring more competition, but
today one of the most valuable things we           says.“It’s the competition on a grand scale       “there is no single processor on the planet
bring to a retail or foodservice licensee is the   that Mick [Colvin] envisioned.”                   with the marketing effort CAB devotes to
opportunity to seek product from multiple             Each segment looks after its own               being the Angus category leader,” Norton
suppliers to fill an ad or menu. If they have a                                                                                   CONTINUED ON PAGE 104

specific trim or other feature they
have worked out
                                                                  First licensed feedlot:            First packer licensed in Canada:
                                                                  Triangle H Grain & Cattle Co.,     IBP-Lakeside, Brooks, Alta.
                                                                  Garden City, Kan.

First consumer ad campaign, Life Can’t Have Too Much Flavor,
debuts in Houston, Texas, and Jacksonville, Fla.

First menu designed: Charlie’s Chop House,
Southgate, Mich.

                                                                  Line-item licensing gives
                                                                  restaurants more flexibility
                                                                  in CAB offerings

                                                                                                     10 million Angus-type cattle identified per year

                                                                                                             November 2003   ■   ANGUSJournal   ■   103
says.“All have sales efforts in retail,                 rewarded are the ones after bulls with             marketing because of uncertain supply, he
foodservice and international, but none go              carcass merit.”                                    says. “I think 50% acceptance is attainable,
far beyond that, like we do with public                    The cattle industry is always changing,         and it’s important for us to have the
relations, graphic design and attention from            but trends don’t develop overnight, Crouch         products to compete with other markets
staff to the customers’ business.”                      says.“We are fortunate to be associated with       and proteins. We know what the consumer
   Working with dozens of packers and                   a breed that excels in reproduction, early         target is. Now we have the information and
fabricators, CAB became a leader in adding              growth, maternal ability and end product           tools to create those cattle.”
value to each animal, Brooks says.“The                  quality. We are four times larger than our            Seedstock producers must show
value-added products started using more of              nearest breed competitor because we have           leadership in advising bull customers, many
the chuck, which resulted in a higher                   been successful in creating a market for our       of whom are part-timers, Norton says.“We
percentage of the carcass being marketed as             end product.”                                      need to be more involved in their future, and
CAB. With a variety of CAB products out                    Since those inquiries 15 years ago, the         help them understand the importance of
there, people discovered there was a                    trend has accelerated with access to               aiming for the CAB standards.”
difference in quality. Just because it was              ultrasonography.“Genetic values for                   Because of the brand’s efforts, VanStavern
convenient did not mean that it had to be               composition are no longer a nicety, they are       says,“Angus cattle are better because they are
poor flavor or bad quality.”                            a necessity,” Crouch says.“Commercial              produced with the consumer in mind.
   CAB president Jim Riemann explains,                  producers are participating in programs to         Producers have realized that they are in the
“Sales of value-added products and ground               track cattle and to get that carcass               beef business rather than the cattle business.
beef help make our brand more profitable                information back. They know they can get           And packers have come to realize they can
for packers. As we make it possible to sell             paid for the genetic goodness that these           separate product into specific levels for
more of the carcass as Certified Angus Beef, it         cattle carry.”                                     specific markets, right on through the chain
makes it possible for them to pass more                    The CAB Feedlot-Licensing Program               to the retailer and foodservice.”
premiums back to producers.”                            (FLP) was set up in 1999 to help oversee              Hillier says CAB led producers to focus
                                                        production on representative groups of             on the upper end of the market, which led to
The legacy                                              Angus-type cattle, says John Stika, supply         value-based price discovery and a recovery
   Roy Wallace, vice president of beef                  development director.“We can’t own cattle,         in consumer demand.“The whole industry
programs for Select Sires Inc., began buying            and our licensed feedlots can’t feed them all.     owes a debt of thanks to CAB for pulling a
bulls 36 years ago. “When CAB started                   But by working with Angus producers and            thorn out of its paw.”
there were very few people who even                     this network of feedlots, we can gather
looked at carcass information,” he says.                information that will influence 100% of the
“Starting about 10 years ago, there’s been              cattle.”                                           Author’s Note: Margaret Cook, Crystal Meier,
                                                                                                           Deanna Scrimger, Eileen Keller, and the CAB
increased interest in marbling and                         Premiums provide the incentive for
                                                                                                           Marketing-Communications Division contributed
cutability, but only by producers who own               producers of Angus-type cattle to move             interviews and research for this article.
their cattle all the way through to slaughter.          from the average of 17% CAB acceptance
Grid premiums were put in place to reward               to 50%, Gardiner says. CAB has been
producers for raising cattle to fit into                constrained in
specialty programs. Those who want to be

                                                                                                                  Prime deli meats introduced:
                                                                                                                  Levonian Bros., Troy, N.Y.

             First major packer offers CAB Prime:                  Suppliership at 2002 Olympic Winter
             National Beef Packing Co.                             Games in Salt Lake City, Utah, leads
                                                                   the brand to a world stage

                                                                   “Mouthwatering” ad campaign and
                                                                   Angus beef at its best™ tagline debut

             Urner Barry Publications Inc. publishes
             its first CAB Market Report in its daily
             insider’s newspaper, Yellow Sheet

                                                                   Waldorf-Astoria, New York, N.Y.,               Swift & Co. establishes premium grid
                                                                   licenses for CAB Prime                         specifically for CAB

104   ■   ANGUSJournal   ■   November 2003

Shared By: