Please imagine a cow in a pasture. Days spent along a hillside nibbling some grass sound rather appealing. Especially when the alternative is grain in a muddy feedlot. Yes?
Not if you are a cow.
Animal welfare expert Temple Grandin tells us that “grain is like cake and ice cream to cows…” In a well-managed feedlot that is properly drained, a cow can be pretty content.
Then why do more ranchers and consumers like grass-fed beef?
Grass-Fed Beef Sales
A good starting point is defining grass-fed beef.
We can’t.
The grass-fed beef label is so inexact that the USDA just said it would no longer provide a definition. You could say your cow was grass-fed if she roamed the pasture for one month or 36. Also, the label need not indicate whether the diet was organic or antibiotic-free.
I was surprised that beef from grass-fed cows do not necessarily taste good. Explained by a top NYC chef, his grass-fed cows need a “grain-finished” diet (I’m not sure for how long) before they are slaughtered to have tasty fat. Others complain that the steaks are chewy.
Still though, the grass-fed image is sufficiently compelling to have boosted sales by close to 30% each year from 2005 through 2015. Attracted by its healthy reputation, consumers have been happy to spend 30% to 80% more per pound of grass-fed beef. And there is lots of room to grow since we are just talking about a 1.4% slice of an $18 billion beef market.
Our Bottom Line: Product Differentiation
Most beef markets resemble perfect competition. Located at the end of a market structure continuum, a perfectly competitive firm cannot distinguish its goods from everyone else’s. As a result, the market–not the producer nor the consumer–controls supply and demand.
Grass feeding was one way that ranchers could create an identity. I read one story of a group of small ranchers that operated the Tallgrass Prairie Producers Co-op from 1995 to 2000. Saying their meat was exclusively grass-fed and antibiotic free, they charged more. Meanwhile, on the demand side, they could target the customer that sought a healthier product. In a similar way, the generic grass-fed label provides some differentiation within a massive market for beef.
So, as we saw with Driscoll strawberries, an identity can empower you. By differentiating your product, you can move to the right along the competitive market continuum into monopolistic competition. The result? More price control and (with grass-fed beef) more demand.
My sources and more: While I started with yesterday’s WSJ article on grass-fed cows, it became the beginning of a fast and fascinating read on raising cattle. My first stop was this tale about a 2010 rancher coop, then the Washington Post Wonkblog for the Temple Grandin quote, also also grazeonline and foodbusinessnews.
