Purebred Cattle Header
 

Alliances

Brand Identity in the Beef Industry

      In today’s competitive beef market, where marketing can mean the difference between a successful operation and a just-break-even ranch, many beef producers have turned to beef alliances to get a leg up on the competition.

     There are various types of alliances in the beef industry, but all have the common goal of creating a brand for participating beef producers and ensuring the quality of that brand. With established quality, the participating producers can then use the brand to market their beef.

       Traditionally, “brand” and “branding” in the cattle industry has conjured up an entirely different image, one of hot pokers and searing hides, but in today’s business world, the brand we are referring to is a mixture of attributes, tangible and intangible, symbolized in a trademark, which, if managed properly, creates value and influences consumer buying habits.

     In a way, it is not unlike the literal definition of branding that cattlemen and women have long associated with; however, apart from indicating ownership, this form of branding imparts a semblance of quality, familiarity and trust within a consumer. Ideally, consumers faced with a long line of similar and seemingly indistinguishable beef products, will make their final selection based on “brand familiarity.”

     For beef producers, each alliance type has pros and cons, and it is important to understand the differences before deciding whether to jump on a brand wagon. In general, all alliances attempt to capture and create additional value and higher returns for participating producers.

Alliance Pricing Grids

     Despite variations in product, almost all beef alliances use pricing grids, which are designed to provide incentives for producers to produce animals that yield desired carcass traits, generally based on quality grades or yield grades. These grids define the premiums paid for desired grades.

     In the beef industry, pricing grids are still based on the market price for the particular animal as if it had been sold on the open market. So by nature, these grids still maintain the variability of the open market.

     Additionally, they add variability through the premiums and discounts rewarded on a herd as animals will grade differently; each group of calves will likely not perform identically. It is important for producers to examine the grids to determine which grid will help them receive the maximum benefit from the marketing arrangement.

     Cooperatives are producer-owned entities (e.g., US Premium Beef). Generally, they have shown to give the highest returns, but these returns do come at a price. In a closed cooperative, producers must either buy stock shares or lease shares from other producers. Once you own the stock and in a effort to regulate the amount of cattle in the program, most require you market one head of cattle for each share you own. These programs pay dividends on the stock you own, provide discounts, incentives and bonuses, when appropriate, and, perhaps most importantly, give your products the brand familiarity that is important to consumers.

     Brand licensing organization programs are generally based on breed. Certified Angus Beef, Certified Hereford Beef, are two examples, and it’s safe to assume every major, marketable breed has an alliance in one form or another. These programs rest their success almost entirely on brand awareness, and require participants to ensure their products retain the standards set by the alliance. The alliance then markets the certified products. There is little contractual obligation, and you are not required to have all your cattle meet their brand requirements.

     Specialty product marketer programs are similar in concept to the brand licensing programs but do have some difference. Specialty product programs attempt to appeal to niche marketing to grab today’s consumer. Their products must meet certain standards. For example, some require that the cattle not contain any supplements or be strictly grass fed. In today’s world, these niche markets have become increasingly more popular.

     Before joining any alliance it is important to understand the pros and cons of each. Make sure you study the restrictions and costs of participation. Also, make sure to fully understand their pricing grids and other monetary structures. Producers expect high return, but also remember you are at the mercy of perhaps hundreds, if not thousands, of other producers, who you are trusting to maintain the same standards. Alliance participation can reap huge rewards, but only after careful consideration of your particular needs and herd. 

Beef Cattle Chain

 

 Red Beef Cattle Barn