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Americans seem to be a bit more at home on the range these days, judging by the spike in natural and organic meat sales. And while the segment remains a niche market, it's become decidedly more noticeable recently following a steady stream of exposure in some of the nation's most popular consumer publications, like Time, Newsweek, and USA Today.
Though no one is predicting the products will take over the meat case, many retailers and industry experts agree that greater demand for natural and organic meats and poultry will have important implications for the retail meat department over the next decade.
Noting that natural and organic sales are less than one percent of the business for the average supermarket's meat department, Mark Boyer, a partner with PMG LLC, a perishables data and category management consultancy based in Lindale, Texas, says the trends for the category are positive. "This is currently a pretty small bandwagon, but nevertheless an important segment for the retailer who wants to convey breadth of assortment and appeal to a specific demographic," Boyer says.
Alan Warren, director of meat and seafood for Richmond, Va.-based Ukrop's Super Markets, Inc., is also a believer in the all-natural meat movement. "I see it as an extremely promising growth category. It's small yet, no question, but it's definitely growing," he says.
Ukrop's has offered a source-verified beef program for the past several years in conjunction with its partnership with PM Beef Group of Kansas City, Mo. (see sidebar). Warren says the program "has been a very good thing, not only from a food safety standpoint, but also from a health standpoint as well." The process-verified beef program is a highly visible part of the chain's quality message in its meat departments, Warren notes, which also include a large line of all-natural chickens.
Pointing to the proliferation of chains specializing in natural foods, Warren says the addition of a natural and organic meat category is among the prime considerations for operators seeking to succesfully combat those formats. "If we can keep them from entering this marketplace by proactively positioning ourselves with products that appeal to more nutritionally and quality-conscious consumers, we see it as a good strategy."
Likening the growing demand for natural and organic meats to the gradual phase-in of irradiated ground beef, Warren says, "As this thing heats up, we will soon be seeing many more players—both retailers and suppliers alike—jumping on the bandwagon."
Growing consumer awareness of food safety issues and the use of antibiotics and growth hormones in meat and poultry, coupled with grocers' collective need to create points of differentiation, boost same-store sales, and raise the average ring per customer, are giving several small and mid-size companies a boost for their all-natural product lines.
"Over the last several years, more and more people have been seeking a 'safe haven' with respect to their beef products, and as more people research the issue, they have found that companies like ours can, in effect, provide an affidavit audit trail that makes them feel comfortable that the risks are mitigated," says Pete Pappas, president and c.e.o. of Coleman Natural Products.
The USDA allows the "all-natural" label to be put on meat and poultry products that are minimally processed and contain no artificial ingredients, coloring, or chemicals. Organic meat and poultry are produced without pesticides, irradiation, or genetic engineering and are grown within a sustainable eco-friendly agriculture system.
More beef and pork
While a good selection of natural and organic poultry products is already available to supermarkets, the selection of beef and pork items is expected to explode in the wake of the implementation of USDA's national organic standards last month.
"Today's consumers are increasingly aware of the types of foods they eat and serve their families," says Barbara Haumann of the Greenfield, Mass.-based Organic Trade Association, who adds that nutrition facts such as fat content are not the only concern weighing on their minds.
"They are also concerned about cuts of meat from animals routinely fed a diet of antibiotics and animal byproducts," says Haumann. "Organic meat producers have a message, and the organic industry wants it to get out to consumers to explain why they should consider buying organic meat. And consumers are showing they are receptive."
A component of that heightened reception, she adds, "has been availability, or lack thereof, of products. But with the new labeling that went into effect Oct. 21, we anticipate that more products will be available from our meat supplier members."
Data from OTA's most recent market study finds 151-percent growth from 1999 to 2000 for organic meat and poultry products, a figure Haumann calls "totally impressive." Within the next five years, she adds, the industry is projecting 175-percent annual average growth for those items.
In spite of the strong potential of natural and organic meats, the category carries added costs for both consumers and producers, which translates to prices that are roughly 20 to 40 percent higher than those for conventional products.
Determining the best selection and gauging which products generate optimum repeat sales are among the biggest challenges for retailers seeking to enhance their natural and organic meat medley or to add one to their department. Retailers also face the question of whether to feature the products in the full-service case, the self-service case, or both.
They may also need to be prepared to address consumers' perceptions that natural and organic meats and poultry are safer and more healthful than traditional cuts, which isn't necessarily true. "It's not just about natural and organic products being safer or better, it's about giving consumers choice," says Josee Daoust, manager of public affairs for the Washington, D.C.-based American Meat Institute.
And when it comes to helping consumers make educated choices at the meat case, the majority of the industry's natural and organic suppliers do a commendable job of providing retailers with a variety of merchandising support materials that explain the production process and give other relevant information about their products.
One such company is Lexington, Ky.-based Laura's Lean Beef, which ranks among the nation's most successful branded all-natural lean beef companies. Started in 1985 by president and c.e.o. Laura Freeman, Laura's Lean Beef, whose retail sales are expected to top $55 million this year, is now found in over 3,800 stores in 34 states.
Karen Blakeman, senior marketing director, says after years of raising cattle without antibiotics or growth hormones, "it's exciting to see these issues getting so much more exposure in the media and in the marketplace. Clearly, consumers are increasingly aware of how beef is produced, and there is growing demand for beef that has been raised without antibiotics and growth hormones."
Pete Pappas of Coleman Natural echoes Blakeman's view. "One thing that surprised me when I joined the company 14 months ago is the growth rate of natural food products, including meats, which has grown approximately 20 percent on an annualized basis," he says.
Coleman bills itself as the first company to receive the USDA's certified "natural" label for beef. The Denver-based natural beef pioneer, which has been selling steak, hamburger, roasts, and tenderloins since 1979, achieved a 17-percent sales increase during the first half of 2002 from the year-earlier period, according to Pappas, "mainly through new store distribution and strong same-store growth, not with pricing."
Pappas says Coleman is committed to helping its largest target partners—conventional and natural grocery stores—grow the category by employing merchandising support teams in major markets to help at store level, because that's where the customers need it most.
"Mel [Coleman] Jr. has picked up the ball on that front, because we really think it's important and is money spent that is not passed on to consumers," says Pappas. Educating customers about such issues as humane husbandry practices and food safety remains at the forefront of the company's outreach efforts, he adds.
"But for retailers, there's another set of issues going on," he says. "There are noticeable differences between the stores which are doing a really successful job of selling both conventional and natural proteins, and those which do not."
The successful ones, says Pappas, "have a clear message when you look at their cases, while those who are struggling have an inconsistent case with a mishmash of products ranging from totally unbranded conventional products, to conventional products with the store's name on it, to branded natural products, to co-branded natural products featuring both the supplier's and store's name on the package. And from a consumer standpoint, it's very confusing."
Pappas tips his hat to the poultry industry, which he says has done an exceptional job of "making the purchase decision process easier for consumers. It's something we can learn from going forward." He adds that the company will soon introduce natural pork and natural lamb products under the Coleman label.
Lamb imports up
The all-natural meat movement dovetails especially well with the energized marketing efforts of the Fresh Australian Premium Lamb program, says Washington, D.C.-based Stephen Pocock, lamb program manager for Meat and Livestock Australia, Ltd.
While lamb in general represents roughly two percent of the total pie, imports of Australian lamb in the U.S. have grown by 30 percent, or 37,000 tons per year. "If it keeps growing at this pace," says Pocock, "we expect to see significant gains in the next few years."
Much of the growth of Australian lamb has been fueled by warehouse club juggernaut Costco, which is the commodity board's largest U.S. retail account and stocks no other lamb products, and Wegmans, which carries Australian lamb exclusively for its private label line.
"The natural advantages of fresh Australian premium lamb provide a healthy eating experience for the modern-day consumer," says Pocock, "since many of its retail cuts are value-added, have little or no bone, and are well trimmed of fat and waste prior to export. These cuts require minimal handling and no further trimming, which gives maximum yield and significant savings in labor costs at store level. Most of our 15 different value-added cuts can be supplied case-ready to meet retailer needs. Retailers have the option of ordering only the cuts they want in the volumes they require, rather than having to order a full range of carcass cuts."
All product arrives in the U.S. chilled and vacuum-packed, which allows an account like Costco to either display items—such as primals with legs, racks, and shanks—case-ready or custom cut chops and loins at store level, Pocock explains.
"Wegmans' range of product is fantastic," he adds. "They've literally got a cut that fits every cooking method." That pleases Pocock greatly in view of his organization's desire to get more consumers thinking about lamb for non-holiday meals. To help retailers and consumers follow that message, the Fresh Australian Premium Lamb program launched a new advertising campaign this month backed by 16 full-page ads across five consumer publications that will run for six months.
"The natural meat category has huge potential," Pocock says, "and Australian lamb naturally fits into it, so it's all about being able to capitalize on what we've already had. We haven't changed anything to move into it."