Alberta Beef Magazine - BeefNews.com

Prairie Heritage Beef has "branded beef" battle scars by Bonnie Warnyca
January, 2010

While the bulk of producers nationwide continue to muse about whether or not increasing our domestic slaughter capacity and/or joining a value chain offers the promise of financial stability to the beef sector, there are a few that are wading in those muddy waters.

After visiting Canadian Premium Meats, the meat processing plant at Lacombe in November, and then meeting with one of their custom customers, Prairie Heritage Beef (PHB) a small band of about twenty-five Alberta/Saskatchewan cattle producers, the road to developing a brand is "filled with potholes" according to Dr. Christoph Weder, one of the founding members of PHB.

Selling the story
For Christoph and Erika Weder, who raise 400 red and Black Angus cows in the Peace Country, the idea of a branded program had a lot more romance six years ago when they founded PHB than it does today. Like many others who have entered into this arena, they just didn't know what they didn't know (a phrase often used by Ken Piller, founder of the now defunct Natural Valley Farms at Wolseley, Saskatchewan). But, if there were ever more passionate marketers for the beef cattle industry, I have yet to meet them.

"Six years ago, the only thing that we knew was that we couldn't afford to stay in the commodity beef market," says Weder. "And even though I'm a Livestock Agrologist, I couldn't find someone that could answer all the questions about developing a brand. It's been a frustrating, challenging and rewarding journey. We realized early on that we had to develop, package and then tell our story to the customer. Many people in this industry suggest that as an industry we don't promote ourselves very well and we have identified that as key to successful branding."

Prairie Heritage Angus is the name of that brand and the customer list is growing, albeit not as quickly as they hoped, but then that is also part of the story involved with developing a brand.

"We don't just sell antibiotic free and hormone free beef," says Weder with his voice rising. "Anybody can duplicate that part of the story. We are selling our Canadian image of crisp mountain air and clean cool waters. We are selling grass and cattle that are raised in an environmentally friendly manner. We are selling the story about our producers that are all audited and certified under the Verified Beef Production Program and how they care for their cattle and their land. We are selling consistency. When you feed with antibiotics, you change the ruminant metabolism which changes volatile fatty acids which change how your meat tastes. We are selling, tenderness and flavor."

If you've ever heard Weder speak either in person or on the phone, you would know that his conviction is inspiring. This group has packaged their story and done it well. They have invested the time to develop a set of protocols that go far beyond just removing the antibiotics and implants. They have included all the bells and whistles that the more "health conscious" consumer is asking for. And, they have a product that is now traveling to some of the finer restaurants in Weder's native Switzerland.

"Our first customer was Thrifty's on Vancouver Island," reflects Weder. "They are still one of our best. We picked up Quality Foods a couple of years ago on the Island and lower mainland, Canadian Mountain Holidays (a high end food service account), Sobey's in Quebec and we will sell a half a million pounds of burgers into the Hero Burger Program in Ontario this year. Sales do not happen overnight. Customers need to know that we will be here for the long term. There have been others before us that have not survived and now many customers are gun shy."

Hurry up and wait
With many producers on the brink, the wait for profitability can be agonizing. Randy and Sheena Keep are the third generation to operate Keepville Ranch at Punichy, Saskatchewan. They run 300 Angus cows and have always backgrounded their calves to 800 weights. Four years ago they decided to move their calving dates and grass the cattle longer to try to gain some profitability.

Randy says, "We moved our calving dates from February/March to May/June. With just Sheena and I left at home, we needed to reduce the labour involved and try to reduce our feed costs. We also made the decision to finish our own cattle in a small on farm feedlot. We figured that by eliminating two middle men, we could actually get paid a wage for our efforts."

Even though Keep admits that PHB isn't the cash cow he had hoped for, he's not willing to throw in the towel. "The commodity market is simply a price taker and I'm going to hang in here for the long haul," he says. "The growing pains are painful, but we entered into this fairy tale world and we still believe it will all pay off."

Jerry and Sharon Holtman belong to PHB. Their ranch is located along the north bank of the Oldman River near Taber. The Holtmans have raised cattle in the short grass country for more than three generations. Jerry has been an advocate of Record of Performance testing of his bulls for 32 years and has recently added DNA gene testing to help to take more of the guesswork out of his matings.

"When I heard about the move afoot to create a value chain based on a natural beef model I knew our cattle fit right in," says Jerry Holtman. "After BSE, the packers literally stole our meat and we let them. It brought home the fact that if I was to make a profit on my animals, I would have to take responsibility for my own marketing."

The Holtmans have always used various feeding strategies to try to extract the best long dollar from their 400 head Angus herd. They've wintered the calves and run them back on grass and sometimes sold them as long yearlings. Or, if the market looked right, they forward contracted them and finished them in the family feedlot. But even though they are now members of the PHB program, only about one quarter of their animals are committed to the program.

"We've made inroads with our hormone free, antibiotic free meat," says Holtman thoughtfully. "But there are a lot of factors to be considered before you can say a niche marketing approach is profitable. It costs me roughly 18 percent more to finish my animals than it does for animals that are implanted or given ionophores etc. to aid in digestion and raise the rate of gain which can add up to $75 a head. Add to that, lower yields since my cattle are grassed longer. On top of that 18 percent higher production cost, then our animals must be processed in a smaller packing plant unequipped with economies of scale and processing fees add up to at least $150 higher than "big" packer costs. The smaller plant cannot recoup the same income from offal and hides as their larger counterparts."

With the high Canadian dollar, COOL, and the reduction of the national herd numbers, it doesn't seem to be the right atmosphere to ask the market for more money for the cow/calf producer. Yet, even with those many market challenges, Holtman, still believes he will see the day when all of his cattle will be sold through PHB for a profit.

Challenges abound
In a recent speech titled "The Romance & the Reality of Branded Beef", Weder outlined the difficulties in selling the "whole carcass". "It's the 80:20 rule" says Weder, "80% of the value comes from less than 20% of the carcass but you must sell the rest of the carcass to make it all work. In UTM cattle typically a full third of the carcass of the carcass is trim and of this one third will probably be 85's (lean ground beef) while two-thirds will be 50's (half fat and half trim) which must be blended with leans elsewhere. Trim has a relatively short shelf life. The market for 85's is typically fresh and so it must be sold daily."

"The reality is, there is still the marketing/sales costs to factor into the cost of doing "natural beef" business and that's about $50/head minimum. So add it all up and selling roughly 4,8 00 head per year with total higher costs of about $275/head just to get the same level of pricing as commodity and you must have substantial returns you need another $150 to make some long term margin for your ranching operation."

Production and sales must be parallel to equal a promise of profitability. "Our group sits down in the spring and the fall to try to match our supply to our sales," continues Keep. "Most of our beef is going to the west coast on the Island and we're now supplying 24 Hero Burger stores in Ontario with all their hamburger patties. We also have some new customers in the EU."

An early Christmas present
Weder returned from a marketing mission to Switzerland in early December with roughly twelve new accounts. With the addition of the Swiss owned Lacombe packing plant, Weder has cultivated even more value to add to his Canadian Angus beef program. "We are now the largest European supplier of natural beef," he boasts. "We're also ramping up our program here in Canada. Beginning January 1st we will be in Costco Foods with our Canadian Heritage Angus deli meats. I'm told that Tim Hortons was a 40-year overnight success story. We plan to beat that by a long shot," he chuckles.

All PHB cattle are fed at the Hagel family feedlot near Linden. Each producer has his own assigned pen and all his animals are fed together. When it comes to shipping the fats, the finished cattle are sourced from several different pens to make up a more consistent load. "We sort for consistency rather than feed for consistency," says Jason Hagel. "We feed a ration of 78-79% barley, 3.5% supplement and the rest silage. We go by dry matter conversion and we're around 10-12%. Because these cattle aren't fed Rumensen or implants, they finish lighter or at around 1250 lbs. as opposed to 1400 lbs. We're trying to get that poundage up."

There are pros and cons feeding value chain cattle. "Dealing with more producers and also the paperwork involved with shipping cattle to the European market is extensive. But dealing with the same producers for a number of years, I know the cattle and I know that some take longer and some take less time to get to market. We have a steady flow of PHB cattle all year round and they make up about one third of our 4800 head capacity."

Industry Question

Are you optimistic about the outlook for our cattle industry in the coming year?