Many of today's most innovative cattle producers are actively looking for ways to build consumer-direct niche markets for beef. But, what happens when a major retailer decides to build its own beef supply chain? A new project should provide some answers.
Walmart, the nation's largest grocer, has entered the beef industry in a big way. The giant retailer is developing its own Black Angus supply chain, enlisting Texas rancher Bob McClaren's Prime Pursuits as a "best-in-class company" to work with on the project.
The McClaren name is a familiar one in cattle circles, where 44 Farms genetics are considered to be some of the best in the Black Angus breed. The seedstock operation, which dates back to 1909, is based in Cameron, Texas.
In addition to selling seedstock, 44 Farms includes two feeder-calf programs: the NeverEver3 (NE3) feeder calf program and the new Prime Pursuits feeder-calf program for Walmart. With the Walmart program, beef produced will come from cattle that meet these criteria: no hormones added, predominantly "Angus Strong" genetics, able to meet USDA's definition of Angus, weaned for a minimum of 45 days, have no more than 90 days between the youngest to oldest in a group, and subject to minimal sort by a 44 Farms representative to ensure uniformity. McClaren calls the Walmart program a paradigm change for the beef industry.
LOADING THE PENS
The nuts and bolts of how this massive new enterprise is going to come together fall to a large degree under Warren White, general manager of Mc6 Cattle Feeders Inc., based at Hereford, Texas. This is where some of the calves for the program will be fed out. White says they will have traceability back to the farm of birth or to Prime Pursuits using electronic identification methods on all cattle in the program. Tracking will continue through the packing house.
"We will source the calves and decide whether they are going to the feedyard, a backgrounder, grass or wheat," White says. "This is a 44 Farms project because Walmart wants those genetics. Right now, the size of it is larger than 44 Farms, so we will be buying calves for the program outside of that initially."
He says for 2019, Walmart needs more than 100,000 head for its program. Mc6 will feed about half of them; the rest will be in a feedyard in Nebraska. Walmart's program is specific to Black Angus, but White thinks this is going to eventually create opportunities for the beef industry as a whole.
"We have a major retailer willing to commit to a specialty program that has traceability," he says. "With them involved, over time it raises the bar for all producers who may be willing to do something like this."
Asked about the focus on one breed for the program, White says the retailer specifically went to one of the largest Black Angus seedstock producers in the country because that was what they wanted.
"We all know Angus generally grade better," he says. "While all breeds have cattle that grade high, it was important to Walmart that, for this program, it be Black Angus. They feel their consumers can relate to that, which is why they distinguished it in this way and why they wanted those 44 Farms genetics."
OPPORTUNITIES SPREAD WIDE
Given the size of the venture, White says initially a smaller percentage of beef in the program will be 44 Farms genetics. But, he expects that will change as more people buy 44 Farms bulls or semen to have the genetics that will allow them to take part in the program.
Initially, the Prime Pursuits program will be a selection of Black Angus cuts marketed in 500 Walmart stores across the Southeast, including Alabama, Florida and Georgia.
After feeding in Texas or Nebraska, the cattle will be slaughtered at Creekstone Farms' processing, in Kansas, and packaged at FPL Food, in Georgia. Walmart reports this will add 250 jobs at Creekstone Farms and another 200 jobs at FPL Food.
Derrell Peel, Oklahoma State University beef economist, says this move by Walmart to build its own supply chain is indicative of a fundamental change in the beef industry.
"We are seeing a continued shift from beef being a commodity to its emergence in terms of product orientation," he says. "Branded marketing can be done in different ways, but as a whole, it enhances the value of beef to the whole industry. Walmart's program is one way but not the only way."
Peel says while Walmart stands alone in its behemoth presence in the marketplace, it is possible through partnerships and alliances to create smaller, unique value chains that maximize the value of producers' product in the marketplace.
"It's complex, and it's not something an individual can easily do. But, this process of branding a product can work in a lot of different ways. This is one model. And, it's very unique in that it's a retailer reaching back to create their own value chain within the beef industry. We will have to wait and see how it works, but overall, it's a move in the right direction for the beef industry."
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