The direct-to-consumer beef market: Is it for you?

Published on Fri, 09/24/2021 - 11:52am

The direct-to-consumer Beef Market: Is it for you?

 By Jaclyn Krymowski.

 A globally connected world means that more people are now keenly interested in the story of where their hard-earned dollar goes – right down to the origins of their day-to-day purchases. COVID multiplied this exponentially regarding foods when supply chains were interrupted.

Getting to “know your farmer” is now more popular than ever – and that means there’s a huge opportunity for financial growth. Cattle producers are business owners as much as they are stockmen. When diverse situations present themselves, it can be progressive to consider ways to shift strategies. In today’s world, for some that might mean making the transition to direct sales and marketing.

This shift may not be for all operations, but it could be a very positive adjustment depending on your target consumer, size of the operation, resources and geographic location. There is plenty of potential and lots to consider when exploring avenues for direct-to-consumer practices and that starts before the active process of transitioning.

The bang behind the buck
The allure of direct marketing and sales – be it in the beef world or otherwise – is largely to it putting more independence in the hands of the original producer or supplier. “Cutting out the middleman” is the empowering phrase used to summarize this.

In theory, this should work. But if you lack an understanding of your target customer base and the means to reach it, this won’t do you any good and is almost guaranteed to flop.

But done correctly, this mode of marketing can seamlessly add value. Keep in mind that a lot of folks are willing to spend more on companies they trust, or in this case the farmer. In fact, a 2020 Farm Bureau report found that nearly 90% of U.S. adults find farmers to be trustworthy. Simply being open and sharing your farm’s or ranch’s story is a way to instantly add monetary value.

The considerations
According to Nathan Briggs, a Penn State Extension Livestock Educator, in a spring 2021 article for Lancaster Farming, the key indicators beef producers need to monitor before pursuing direct sales are expenses, cattle growth rates, and individual market, or what consumers are specifically looking for in your product.

An online tool he recommends to calculate the monetary aspects is the Cornell Meat Price & Yield Calculator. The more information and data you can provide, the more detailed of a picture you have regarding the profit or loss potential of a direct-to-market enterprise.

Briggs notes that the longer an animal is in your care, the more investments are put into the animal creating a more significant risk. Minimizing time on feed – such as by purchasing weaned calves or processing a bit sooner – should be options considered.

Don’t forget to also look at the big picture of all other expenses involved in the operation such as taxes, mortgages, insurances, and etc. Are all parts of the operation efficient? For instance, if you currently have a feedlot operation separate from the cow/ calf operation, is it going to be efficient to transport back and forth or will there need to be adjustments made?

When it might not work
Bear in mind that direct to consumer might not be practical or even attainable in many situations. A factor heavily determining this is resources. One of the most significant is access to a reliable local packer. In his article, Briggs highlights the importance of establishing a good relationship with the packer as consistently sending cattle can potentially be a strain on their business – especially today as many are still overburdened due to the pandemic.

Over fat cattle or cattle that are too big can likewise limit access to packers due to added labor and equipment limitations. Feed efficiency and advanced scheduling are key to maintaining this balance that will keep both producer and packer happy.

Overhead costs are the notorious monster of any new enterprise.  During the first year or first couple years, these costs will be the highest, especially when establishing new resources, transportation, facilities and miscellaneous expenses. How high these costs are can really make or break the transition, especially where loans are involved. Additional labor can also be a factor in this. Depending on the scale and intricacy of the business model, it may be helpful to seek financial counsel with someone who has experience in agribusiness accounting.

How to go Direct to Consumer
One of the first steps for a farm discerning the direct to consumer road is research. This is where you will find where your greatest potential lies in regards to marketing and wooing customers towards your business.

“Communicating with potential customers is key, but also with the processor,” said agricultural economist Dustin Pendell in an article for Kansas State Extension.

Again, this is due to COVID, but similar stories can happen in a variety of circumstances. At this stage, you will also want to consult with your processor and ensure the two of you are following all government regulations.

On the consumer side, Briggs says, “Tell your story and explain your passion and knowledge for raising beef cattle. Every beef operation is different, so spend the extra time to keep consumers coming back!”

Switching your operation mindset to direct to consumer should start with all the considerations and looking for signs that might indicate that it’s not the change for you, but knowing how to transition could be a resource in the future.

Perhaps one of the best ways to navigating the whole process is to follow in the footsteps that other direct-to-consumer producers have gone through in your region. Change is never comfortable, but many have found success in finding their own customers and sworn to never look back.