Changing beef purchasing patterns

[SJUfeller]

An interesting thing has happened with in the last 4-5 months that I'd like to bounce off folks here . . . and I appreciate any input. Here is the situation:

For the first 2.5 years of our business, we had to periodically "short" customer orders of top cuts -- ribeye, filet, and strips. Items that we had to work more to move were the "other" cuts and trimmings -- rounds, ground beef (chubs), hamburger patties, jerky, etc.

That is not unusual in the Wagyu world, especially for producers (like us) that have the majority of their revenue come from restaurant sales (or to distributors that service nice restaurants). We are subject to the "ups and downs" in the restaurant industry.

High quality Wagyu producers usually have minimal trouble selling the top cuts, but they also must sell other portions of their livestock. About 50% of the meat goes toward ground beef and trimmings. The last 2.5 years, we had more challenges finding buyers for these items than the well known, top cuts of steak.

In the last 4-5 months, things have flipped. We are now shorting customers on ground beef & patties, but we've run specials on ribeyes, filets, and strips, in order to avoid building too large of an inventory of frozen product.

We have not lost any of our good fine-dining restaurants, but their orders have decreased in volume and some are focusing on mid-level cuts.

Here is our theory: Sales to nice restaurants were inflated after covid -- people were thrilled to be able to go out again, and they were happy to be served an $80 - $150 steak. They justified spending more at restaurants because there was a time where they did not (or could not) spend anything at restaurants. Now, we are far enough removed from covid lockdowns that the public's comfort in spending money on extra nice steaks has decreased.

On top of that, we feel that many people struggling financially -- or even if they aren't personally struggling -- they've slowed spending given all the talk of economic challenges.

Orders of burgers and "middle steaks" (such as Denvers, sirloins, and Flat Irons) are going better than ever, while we need to get creative to sell what we previously were shorting customers on.

Also, although restaurants are still the largest segment (dollar-wise) of our gross revenue, we've seen that percentage come down on line and retail sales have increased. This seems to support the "Post-Covid Bubble" is over + economy challenges theory.

Is our theory on the cause correct?

Have people here changed their dinning and beef consuming habits over the last year? If so, why?

Thanks!

Don

[J-Melt]

In my household that would make sense, but I’ve also switched careers from coffee shop management to a church ministry and part time coffee shop supervisor position, plus we went from renting to owning our home. We have had to cut out our eating out to practically nothing: $50/ month for a 4 person family.

[jfmorris]

SJUfeller Don, I feel your theory is somewhat sound, but based on MY experience, its less to do with COVID lockdowns, as they were not huge here in Alabama, but inflation, which started ramping up in 2021, and really cranked up in 2022 and 2023.

I've tracked prices on some perishable items I buy (brewer's yeast), and the inflation of those items started slow in early 2021, accelerated in 2022, and by the end of 2023, prices for almost all manufacturers of brewing yeast was double where it was in early 2021. The 10 years before that had seen nominal price increases. While this is an extreme example, and not all items I buy such as meat are doubled in price, they are certainly very inflated since the end of 2020.

My business and income have been affected as well, starting in mid 2021, due to supply chain shortages that delayed production and product rollouts, impacted customer orders, and in general sucked. We are just now recovering, and all owners in our business are still on a reduced income, since mid 2021, in order to be able to avoid laying off non-owner employees, and pay for production. I am just now feeling that the end of that may be in sight, but things could get worse tomorrow. You never know...

Anyway, I am buying less beef either out OR for home, and only buying sale items when I do, just because it's gotten too expensive. A lot more chicken and pork, less steak or brisket or beef ribs. But its due to inflation - not to a change due to lockdowns being lifted.

[Davek8282]

I think it has a lot to do with Amazing Ribs. When dining out I quite often will have a burger but almost never a steak of any sort as I usually end up thinking mine is better. Seriously though I don't remember the last time I went to a "high" end restaurant, just not where I want to spend my money when eating out. I am more in favour of smaller "mom and pop" type restaurants and find I am often pleasantly surprised.

[Uncle Bob]

I'm with Jim, you're somewhat on the right track, but inflation is the number one driver of conservative spending that impacts how the upper middle class is reining in some of their more, let's call it "luxury", spending. While the month to month inflation numbers reported by various sources may appear to be reducing some, the big numbers of a year to three ago are still baked in the cake, so to speak.

You're not alone as a supplier to restaurants. I had the chance to go to a promo party put on by the folks at 44 Farms. They too present themselves as premium meat purveyors, though not Wagyu specifically. It was a very informative day, especially when we got to the more informal stand around part of it after their programmed presentation. They have seen their restaurant sales decrease around 30 some percent, while their "retail" sales to individuals are up 40ish percent year over year. Their suspicion is that the folks who still seek quality meats have chosen to go to restaurants less and prepare their own more in exchange. They may be correct, or at least here in Texas.

We could dig deeper, but to do so risks getting into what some whiner would claim is political. Consumers don't just vote in politics, they also vote with their wallets. If they perceive a vendor is "getting greedy" they'll change their buying habits. In reality there isn't as much greed as charlatans will wail, it's most often a reaction to the actual drivers of inflation. Nuff said...............

[Purc]

+1 on not eating steak out at a restaurant. I do eat steak/beef 3 to 5 times per month at home. When eating out, I try to have something that I cannot make at home myself -Thai, Chinese, Sushi, pizza, fish etc. and meals that are hard to make for only one person. So far this month I have done a normal ribeye steak, a large cowboy ribeye and that was good for 2 meals for me as well as a 2 bone standing rib roast-several meals, and then a skirt steak made into sliders for several meals and it's only the 20th of the month. I eat a lot of beef, just at home. That said
for only me, it easier to have a burger out than to buy all the stuff needed for a proper burger and cook just one for a meal.

[Oak Smoke]

It’s a tough business. You are dependent on a demographic with considerable disposable income. That group is for the time being growing smaller and more conservative in their spending. This is rural Texas, cattle prices are discussed every day here. My daughter is a large food animal veterinarian . She is telling me the market for AI to wagyu bulls is all but gone. Several producers have been unable to sell their calves for anything other than just market price. In other words there are some nice steers going through the sale barn bringing the same price as an angus steer. We’ve been very blessed and even I can’t rationalize a reason to spent more than is needed to get a nice prime or very high choice steak to grill at home. In our rural area a very expensive ribeye is $55.00 at the nicest place around. That’s nothing like you need to see them bringing. I guess this is all to say that in your shoes I’d prepare to weather a downturn until economic trends put more money in the pockets of those you serve. They are far from broke but I see them being careful with what they have. Good luck.

[yakima]

From a production perspective, beef prices have declined recently from highs a month or so ago. But still good.
From a consumer perspective, I rarely cook expensive meat. The challenge of turning a lower quality cut into great food is part of the appeal, to me, of grilling. Brisket, pork belly, etc.

We don't go out much to eat, except for lunch once a week at a local bar with great food.
However, 4 of us recently went to a very nice local restaurant. Family style, so shared several dishes. Including an 18 oz bone-in ribeye. Piedmontese, a breed new to me. Outstanding. We all ate it and had a bit left over. $56 for the steak. The owner gets it out of South Dakota.

Given recent threads here, I am trying to learn more about hanger, flap, bavette, and skirt. At my instigation our friends above ordered a 50 lb case of outside skirt; I will take 10 lbs and play with it. Not sure price; under $10 wholesale. They will use the rest at their on base restaurant.

In conclusion, no obvious conclusions here. Just ruminations.

[Uncle Bob]

Ruminations............a fine word.........

[yakima]

Uncle Bob. Especially when considering ruminants.

[Donw]

We are in a seemingly endless cycle of elections. Almost every political ad on television is blaming the other for high inflation. Newspapers are continually featuring article about interest rates and low home sales. No wonder people are watching and examining every food purchase whether justified or not. It is the perception regular people have that everything is too high.

Here you cannot purchase large pieces of beef like rounds as it all have been cut down and prepackaged into smaller sizes to give the perception of being reasonable or a bargain. Walmart and a few other chains’ employees explained to me that this is their orders from headquarters.

[Murdy]

Interesting. I was looking for a chuck roast the other day, and the largest one in the case was 2-1/2 pounds. Now I know why.

[realdocBBQ]

I agree with some of the above - I think inflation and costs of necessities like food, gasoline, utilities and FREAKING INSURANCE COSTS have gotten a lot of people down and the seemingly excessive spending of 2021 or so is curbing back, from my thought.

I was flabbergasted at the money people seemed to be spending a couple of years ago - buying homes and paying above asking values, well over loan values, same thing with automobiles. Seemed like a lot of people were just jumping in with both feet because they could get the loans for these things. Of course, wages seem to have gone up quite a bit, so people can make some of those payments, though my understanding is auto defaults are getting pretty high. As an employer, I see the increase in costs of utilities, INSURANCE (again) and wages have practically killed us - to the point I no longer get a salary from my business at all. Or bonuses. I basically work for free and am just 'volunteering' for the foreseeable future.

Inflation is catching up with us, the national debt has people worried and the uncertainty with upcoming economic possibilities (political stuff again) I think has folks dialing back.

I know we don't eat out nearly as much as we used to, and like above, I NEVER order a steak out at a restaurant anymore. I think I got one when we went out in December with the kids, we had a $100 gift certificate to a local place we needed to use or lose. I can't remember the last time I bought a steak outside of that, at a restaurant. As for eating steak at home, I am sure in the last 2-3 years I have only bought tri tip, skirt or flank. Zero ribeye, T-bone, NY strip or anything else used to love to cook. I did get a couple of prime rib pieces at Aldi around Christmas time, if that counts? I dunno. Only because it was like $5.99/lb, I think. Did one of those at Christmas, and one in May for my niece's birthday, so, 6 months apart. All other times it was tri tip and skirt, and I even feel guilty buying those. The Wife looks at me funny. <sigh>

Basically, I just can't afford it anymore.

[jfmorris]

Sad to hear you are in this position in the medical field. I'm in it after agreeing to be part owner in a business 7 years ago, and getting behind rather than ahead. The increased insurance costs, the medical bills that have hammered me over the past 4-5 years, right on the tail of paying for 3 weddings in 18 months, all conspired to wipe me out. It's led to some interesting conversations with the wife for sure...

Praying for a turnaround for us both!

[Hulagn1971]

Auto defaults have increased for sure. I really blame the banks on this one (I'm in auto lending myself). They were chasing competition during covid lending money like it was free and making loans at sky high LTV ratios. Customers who bought their cars during that era paid what the market was bringing which was sky high. If they try to trade they are $10-$25k upside down and see no end in sight so just dump them.

[TripleB]

Have people here changed their dinning and beef consuming habits over the last year? Yes, probably my dining habits have increased over the last couple of years. Beef consuming habits have stayed about the same.

I was tethered by my finances when I was younger and raising a family. My kids are grown and out of the house, I've saved my pennies and now when I go to an upscale restaurant, we're going to get whatever we want. The funny thing is, we rarely ever order beef. Seafood is what we generally order.

[acorgihouse]

I have no doubt I do not fit the demographic you target, but I'll answer anyway. I can only address my personal experience, and those I know well enough to know their habits and preferences. At least here, there was a lot of change with Covid. Lot of closings, restaurants, various services, I lost my lawn guy, my housecleaning people, my massage person, my hair cutter. Many small restaurants around here disappeared. Many of my neighbors took to working from home, and home schooling kids. A lot of them just never stopped, they still do all that. There was also a run of people, at least that I know, who got way more into cooking at home. By late spring/early summer 2020, my neighborhood smelled spectacular every afternoon. Instead of the odor of bbq on weekends, it was every day. I have always done my basic shopping at Costco, and I suddenly found that the steaks and "fancier" cuts were copious, and the briskets and pork shoulders were selling out. It has changed a bit, but not gone back completely, and I just wonder if people realized how much better it can be to do yourself at home. I have known the same circle of people for years, but they no longer talk about the restaurants they want to try, or went to last weekend, but more about the whatever they cooked at home. I also have stopped working every dang day, so although I have always really cooked myself at home, mostly, I find I'm not cooking so much. Not cooking ahead for work lunches, not taking stuff into work, I'm throwing things together when I'm hungry. It seems I just don't want as much as I used to.

[58limited]

There are many factors involved but I think, and based on conversations with several friends locally, COVID caused a lot of change: people cooking at home figured out that they can made world class cuisine for pennies on the dollar. The inflation of the past few years has also contributed. YouTube/ the internet is also a factor by introducing people to "butcher's cuts" which are usually cheaper but full of flavor. I tend to gravitate towards these cuts myself.

For me personally, I have trended away from restaurants for the past 10-12 years as my cooking has improved. Plus, I have vintage commercial processing equipment and I have several friends who hunt every year and are on game management leases: the state comes in and says that the land owner needs to lower the deer population so the land owner is given extra tags with a mission of harvesting, say, 50 deer. My friends bring me a deer or two or three every season so I have freezers packed with red meat. I no longer buy ground meat at all and at this point I only buy prime or wagyu beef, heirloom pork, and sometimes free range chicken (although I still buy chicken at the grocery store a lot); I buy mostly online and on sale. I also have a college buddy with a grass fed beef operation that I buy from.

[texastweeter]

I can say auto sales slow down (especially higher end models) the closer you get to an election. It doesn't seem to phase entry level vehicles as much.

[Jerod Broussard]

Mosca A guy on the Tube was explaining the upkeep cost of those things. Absolutely insane. Not surprised by the total. Can't imagine the insurance cost.

[HawkerXP]

I've got a team McLaren cap.

[Hulagn1971]

Auto sales do slow down the closer the election gets. I am a non-prime auto lender and different economic cycles don't effect our business much on the front end (applications and loan volume) but they surely hurt our margins over the last couple of years. Our profit margin has shrank at least 50% due to the rate increases. We used to borrow at a little over 3% now we pay close to 9% for our money.

[Clark]

My wife and I are on a different tack than most folks. We are age 83 & 69, no kids/grandkids, no debt, no worries other than health and politics. We like nice things, including good quality food. We eat lunch out about every other day, either with neighbors or by ourselves and we go to nice places. Evenings I cook outside about every other night and she cooks inside the other nights.

Our big freezer is full of prime steaks and other beef cuts from Nolan Ryan's Goodstock, 44 Farms, and a local ranch. We have lots of pork, also. Chicken, not so much. By keeping it full, I hedge against inflation for the next 6 months or so.

We travel a lot and take one/two cruises each year because we enjoy them. The cruise ship lines that we favor have very good food, and not having to cook or clean up after for a week or two is a treat.

We can't take it with us, so why not enjoy the things we like? The facts of life are different with every family.

P.S. We do NOT drink the ridiculously overpriced $8-$10-$12 coffee or booze. I laugh when I see wine by the glass at a higher price than I used to pay for a bottle.