Internet Beef Is Taking Advantage of Not-So-Hot Supermarket Meat
Plant-based cuisine was one of the biggest food trends of 2018. At the same time, beef sales were massive. Nielsen has reported that beef saw the biggest change in U.S. sales in the past few years, with almost 11 percent more pounds sold in 2018 than in 2015. Beef consumption is expected to continue to rise, to 58.8 pounds per person in 2019, 2.8 percent higher than last year, according to forecasts from the Cattle Site.
While 55 percent of Americans still buy their meat at full-service markets, a growing segment is shifting to the internet to find more specialized products. Online meat purchases have jumped from 4 percent in 2015 to 19 percent in 2018. There are three main reasons: Customers are looking for a product that’s higher-quality, sustainable, and traceable.
So while traditional retailers such as Kroger, Albertsons, and even Whole Foods have done little to innovate—course-correcting a brick-and-mortar chain is slow business—consumers are now a click away from the finest-grade beef and the most esoteric cuts, with that pinnacle of fat-marbled decadence, wagyu, leading the charge. Google searches for “wagyu beef” have more than tripled in the past four years.
“It was just a couple years ago that we would constantly get the ‘What is wagyu?’ question from consumers and cattlemen. Those days seem to be behind us,” says George Owen, executive director of the American Wagyu Association.
A quick wagyu primer: Although many people think it’s a Japanese export, American wagyu dates back to the 1970s, when animals brought over from Japan were crossed with domestic breeds such as Angus and Holstein. Today’s American wagyu is predominantly crossbred with some, but not many, full-blood wagyu. Many believe that full-blood, Japanese-heritage wagyu has higher marbling and a richer flavor than its American counterpart. (Kobe beef is also from wagyu cattle but can only come from specific breeds from Japan’s Hyogo prefecture. Beware the words “Kobe-style.”)
The arbiter of our country’s meat quality has long been the U.S. Department of Agriculture. The government agency’s top rating is USDA prime, which comes from young beef cattle (traditionally grain-fed) with abundant marbling. But you won’t find much at your local supermarket. Instead, most markets offer a meat counter stocked with basics (with occasional nods to organic, grass-fed, or antibiotic-free) and a freezer stocked with commodity cuts such as ground beef and rump roast.
“Stores have a hard time modifying presentations for each category of shopper and instead stick to the one-size-fits-all option. More importantly, there’s no longer one meat consumer,” says food-retailing expert Anne-Marie Roerink, of 210 Analytics. Price dictates in-store meat purchases 33 percent of the time; appearance comes in at 26 percent.
“In the end it’s about limiting shrink, which is the percentage of items that go unsold, while maximizing sales,” she says. Shrink is a problem online can ignore, since products are shipped frozen.
In her 2018 Power of Meat survey, Roerink reported that 53 percent of shoppers buy meat at the supermarket for the speed and convenience it provides. When we shop online, we can spend hours learning the minutiae of animal husbandry, flavor profiles, and cooking methods.
Carrying niche products such as wagyu is a difficult stance for markets to take, says Darren Seifer, executive director at market researcher NPD Group. “Space is limited, and everything needs to fly off the shelves,” he says. “Online is more about what your distribution can handle.”
Online meat sales aren’t new. Omaha Steaks has been selling direct for a hundred years, but experts describe their main products as more commodity than craft. Now, the fifth generation butchers are attempting to get with the program. In late 2018, they added four wagyu cuts, including a burger, ribeye, New York strip and filet mignon, and so far “sales are exceeding expectations,” said Todd Simon, senior vice president and fifth-generation owner of Omaha Steaks.
Other sites have more fully embraced wagyu. “That [top-end] category formerly occupied by prime is now wagyu,” says Kurt Dammeier, chief executive officer of Seattle-based Mishima Reserve (as well as Beecher’s Handmade Cheese). He sells wagyu online from Japanese-heritage, full-blood Kuroge Washu bulls crossed with Angus cows from the western U.S. Costco, the rare exception among mass retailers, sells a 12-pound Japanese-imported wagyu for $1,280 online.
Another standout in direct-to-consumer is Crowd Cow, which started in 2015 and has already grown to annual sales well north of $10 million. Today, it has over 100 farms; steak arrive with the farmer’s name attached. Online you can learn how the animal was cared for and fed. At the apex of its assortment is “Olive Wagyu,” which comes from a ranch in Japan where the animals—only 2,200—are fed a special diet of Inawara rice straw, Italian ryegrass, and toasted and sweetened local olive pulp. The A5 olive wagyu tenderloin sells for about $400 per lb. The first time Crowd Cow listed it on its website, it sold out in 22 minutes. It’s one of the reasons Crowd Cow’s wagyu sales have grown fivefold this year alone.
“I think Crowd Cow is very clever,” said Andrew Gunther, executive director of A Greener World, a non-profit focused on bringing greater transparency to meat production. “If you’re selling on the internet, it’s about branding and marketing to your demographic. They’ve done all the homework for the millennial.”
Another new entrant is KC Cattle Company, located outside of Kansas City. Founded in late 2016 by Patrick Montgomery, the ranch raises a Holstein-wagyu mix, which has comparable marbling potential to Japanese wagyu and a taste that isn’t quite as overpowering. A former Army Ranger, Montgomery donates 10 percent of his sales to Warhorses for Veterans, a non-profit equine program for people with service-related injuries.
While the internet is a boon for testing out new meat products, it’s expensive to build and maintain websites and market them to internet shoppers. While sales are great for Lone Mountain Wagyu, a family-owned business based in New Mexico that’s reporting annual growth in the 20-25 percent range, Griff Foxley, the COO, has concerns: “Eight years ago there wasn’t anyone selling wagyu. Today, there are a lot of competitors and running an online business is very hard. You can’t just build a site. It’s not the ‘Field of Dreams’ thing.”
With dozens of websites flaunting wagyu, Flannery Beef—a Bay Area purveyor that sells online and to chefs like Joshua Skenes of Saison, Kim Alter of Nightbird, and David Kinch of Manresa—sees the trend differently. While the Angus-wagyu hybrid is what most American ranchers use, it’s not Katie Flannery’s favorite.
“It’s not that they’re better quality, it’s that they’re the fastest to mature. You’re going to turn your inventory faster,” said the third generation Bay Area butcher. From 2014 to 2016, they saw 100 percent annual growth rates. As 2018 wrapped, they were at a 50-65 percent growth rate on annual sales of roughly $5.5 million.
Flannery’s beef of choice is the Holstein: “Dad is convinced that in 5-10 years the Holstein will be talked about in the same way as wagyu,” she says.