BEST OF THE BEEF

Now that eating beef is chic again, a growing number of supermarket meat departments are rolling out premium products to reach consumers willing to pay more for better quality.Hard-to-find prime, dry aged, natural and even exotic Kobe beef have an enthusiastic following in certain well-to-do markets. Retailers who have introduced the premium products told SN they've had no trouble moving the expensive

Now that eating beef is chic again, a growing number of supermarket meat departments are rolling out premium products to reach consumers willing to pay more for better quality.

Hard-to-find prime, dry aged, natural and even exotic Kobe beef have an enthusiastic following in certain well-to-do markets. Retailers who have introduced the premium products told SN they've had no trouble moving the expensive meats.

"Fifty percent of our beef sales come from dry aged prime," said Larry Long, director of meat and seafood for Edina, Minn.-based Lund Food Holdings, which operates 20 stores.

In some cases the key to a successful launch is having a limited product assortment offered only at stores in select markets. But anyway you slice it, statistics show people are eating more beef. For the first time since 1979, beef expenditures went up, accounting for 45% of all meat spending in 2001, compared to 44% the previous year, according to the U.S. Department of Agriculture. Among beef eaters, there are consumers who will pay a premium for top quality, and they're feeding the demand for high-end beef.

"I believe there's a large segment of consumers who are now more quality- and value-conscious than price-conscious," said John Nalivka, president and owner of Sterling Marketing, Vale, Ore. "If they get all the attributes they're looking for, the quality and convenience and value, they're willing to pay for it, as opposed to just price shopping."

There's another growing segment of health-conscious consumers who want grass-fed beef produced without growth hormones, and they don't mind spending more for it. Natural beef costs 20% to 50% more than conventional product.

In the last year, Syracuse, N.Y.-based Penn Traffic introduced a handful of all-natural products under the Laura's Lean label at 25 stores in the chain. Based on the results, officials plan to extend the line to more stores, though they plan to study the demographics of market areas before adding the items to the case. The retailer learned a lesson after it pulled the label from stores where it experienced low demand, the official said.

Penn Traffic operates 215 stores in diverse urban and rural markets, and officials have found the greatest demand for natural beef in urban markets where incomes are higher than in smaller areas.

"We handle just the highest-turn items in Laura's," said Steve Erdley, vice president of meat, deli and seafood for Penn Traffic. "We don't have the complete variety. We're comfortable with what we have at the moment, but there will be more stores taking Laura's in the near future."

Nearly all stores in the chain carry a large selection of Armor Black Angus beef products, a line with broader appeal than the natural-beef program, Erdley said. Angus products, considered by many to be a cut above commodity beef, have been available at the stores for many years. Sales of Angus and Laura's Lean make up 15% of total beef sales. "We've had modest growth on the high-end beef side," Erdley said.

In the affluent Silicon Valley, officials at Albany, Calif.-based Andronico's Markets introduced American Kobe beef at the stores seven months ago in less-than-robust economic times. An official in the meat and seafood department said he's noticed consumers keeping an eye on their spending, and while stores haven't seen a decline in meat sales, growth has slowed a bit. For that reason, he said he was concerned about bringing Kobe into the meat departments.

"The cost on Kobe isn't cheap," said Marc Kane, vice president of meat and seafood for the family-owned chain. "It can hit you in your pocketbook quick."

He was sold on the product after sampling a paper-thin steak he prepared himself. At the stores, the response has been similar. Sales of Kobe beef, sold in nine of the 10 stores in the chain, make up roughly 4.5% of total beef sales -- higher even than U.S.D.A prime, considered the gold standard of the beef category and a well-established product for Andronico's.

While it is exotic in most quarters, Kobe beef was not unknown to the well-traveled Andronico's consumers, who were familiar with the Kobe name and were -- and continue to be -- eager to buy it, Kane said. Kobe is the region of Japan where the legendary Wagyu breed of cattle, renowned for producing highly marbled and flavorful beef, are raised. Andronico's gets American Kobe products from Snake River Farms, which claims to be the largest producer of American-raised Kobe beef. On its Web site, the Boise, Idaho, company says it was instrumental in bringing the Wagyu breed and its unique Japanese feeding program to the United States.

As a rule, Kobe products are sold out of the service meat cases, though for the Christmas and New Year's holidays, the stores planned to carry standing rib roasts out of self-serve cases. Up until the holidays, the chain did not do any discounting, and in fact, it did very little to promote Kobe, Kane said.

Andronico's has always been committed to carrying a premium beef product. Many years ago, the chain became one of only a handful to carry prime beef. Sales of prime have fluctuated, but in the last half dozen years, sales have been steady and growing somewhat, particularly in certain stores on the south end of the Bay area, Kane said. The growth is interesting since the price difference between prime and Certified Angus Beef is considerable -- consumers pay $5 per pound more for prime New York strips, filets and T-bones.

Distinguished by extensive marbling and rich flavor, prime represents just 2% of all beef produced in this country. Most of it is sold to restaurants. Only a handful of supermarkets -- and then only those with full-service meat counters -- carry prime, and not always on a consistent basis. The Market Place in Chicago, some Ralph's stores near San Diego, Food Emporium in the New York City area, Whole Foods in the Washington area, and Lunds and Byerly's stores in the Twin Cities region carry the product, according to officials with the National Cattlemen's Beef Association.

A dozen years ago, Lunds and Byerly's rolled out prime, and it became a signature item at the service counters. Last summer, the retailer became the first in the Twin Cities to introduce dry aged prime. During the dry aging process, beef hangs in a cool room for two to four weeks. Afficionados of dry aged beef believe the process, which breaks down tissue within the meat, produces steaks that are more tender and flavorful.

The stores carry 11 retail cuts, all loins and ribs that sell for about $2 more per pound than the "wet" prime. The company's distributor built a 5,000-square-foot, state-of-the-art dry aging facility, equipped with floor-to-ceiling racks for primal cuts, for Lunds and Byerly's exclusively.

Since the rollout, officials have seen a 4% increase in sales of dry aged prime, said Long.

"Older people have shown an interest in it. They say it tastes the way beef used to taste," Long told SN.

Restaurants often are credited with starting trends that ultimately find their way into supermarkets. In this case, however, the supermarkets are starting the trend. No restaurants in the Twin Cities carry certified dry aged prime, Long said. "We've had a lot of really good response from chefs in the community," he said.

The retailer educated consumers with large, prominent signs featuring beautiful photos of dry aged steaks. At the meat counters, signs featuring a logo greet customers. Inserts with recipes and information on the history of dry aging beef are included in all wrapped packages of the product. The retailer also paid for print advertising, and it brought in a number of chefs to prepare the beef for demonstrations.

Encouraged by the strong response, Long wants to expand the line. His goal this year is to offer new cuts from the round. "That would give us another seven varieties," he said. "If I have my way, it'll be next fall when the cooler weather hits."

Premium beef products are not for everyone. They're not an option for most large retailers with self-service meat departments and consumers with limited budgets. Yet these products can help smaller retailers with service counters and well-heeled customers, one industry observer pointed out.

"The challenge for all retailers is: How do I offer customers something they can't get at Wal-Mart?" said Sam Rovit, a director at Bain & Co., a global business consulting firm with headquarters in Boston. "This requires relationships with some suppliers that don't exist with the big chains. Supermarkets [that] are looking to differentiate themselves from Wal-Mart should consider it."