Walmart invests in cattle company as buyers prefer premium meat

The assortment in Walmart’s beef department has reflected changing consumer preferences, as more of them opt for higher-quality cuts of meat.

Melissa Repko | CNBC

As more grocery shoppers turn to higher-quality meats, Walmart said Wednesday it is investing in a company run by ranchers and meat producers to increase its offerings.

The retailer is acquiring a minority stake in Sustainable Beef, which plans to open a processing plant in North Platte, a small town in west-central Nebraska that is home to the former ranch of famed western showman Buffalo Bill Cody. It hopes to start construction next month and create 800 jobs.

Walmart declined to disclose the specific amount of its investment. However, as part of the deal, the retailer will get most of the beef produced at the facility, which is expected to open in late 2024, said Tyler Lehr, senior vice president of marketing for deli services, meat and seafood. from Walmart US. he will also have representation on the company’s board.

For the retailer, the deal means a larger and more consistent supply of beef, including better cuts. For shoppers, it will appear in the form of ground beef and steaks, including ribeye, sirloin and New York strips, in their meat department. Walmart will source the company’s Angus, a type of beef that comes from a breed of cattle often associated with more flavor due to its marbling.

The meat will hit store shelves in the central part of the country starting in late 2024, Lehr said.

A strengthened supermarket strategy

Walmart, the nation’s largest grocery store by revenue, is investing in agriculture and food production as consumers eat differently and crave more information about the items they toss into their shopping carts. The company invested earlier this year in Plenty, a California-based startup that grows leafy greens indoors and closer to urban centers. The vertical farming method of farming uses less water, eliminates the need for pesticides, and requires less transportation to get to the store shelf.

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Two years ago, Walmart opened an Angus beef processing plant in Thomasville, Georgia, and in 2018 it opened a high-tech dairy plant in Fort Wayne, Indiana.

The investment in Sustainable Meat also feeds Walmart’s environmental and social commitments. By 2030, the retailer, along with the company’s foundation, committed to protecting, restoring, or more sustainably managing at least 50 million acres of land and 1 million square miles of ocean by 2030. And two years ago, He said he would work toward more sustainable fresh beef by working with ranchers on grazing management, grain sourcing and more.

Groceries account for nearly 60% of Walmart’s US sales, according to its most recent annual report. Fresh foods like fruits, vegetables and meats are especially a driver of growth and influence where people choose to shop, Lehr said.

“Customers continue to tell us that one of the biggest points of differentiation is that they want to know where it comes from,” Lehr said. “They like to know and learn a little more about it instead of just seeing it at the meat counter. There’s a greater drive and desire to know what the backstory is on the products they’re buying at the store.”

sizzle and steak

During the past few months of rising inflation, Walmart’s reputation for low prices has attracted middle- and upper-income shoppers looking to save on groceries and essentials, including some who may seek premium cuts of meat. In the most recent quarter ending July 31, Walmart said About three-quarters of the company’s market share gains in food came from customers with annual household incomes of $100,000 or more.

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The discounter cut its full-year profit guidance last month but raised its sales growth projections, citing gains in its grocery category.

Grocery shoppers, especially younger generations, expect more from their food, even when watching their budget, said Rob Dongoski, food and agribusiness leader at consultancy EY. In addition to looking for tasty and affordable items, they consider other attributes, such as whether an animal was treated humanely or whether the produce was grown in a more sustainable way. They may also look for labels associated with health or wellness, such as “organic,” “grass-fed,” or “antibiotic-free.”

If you look at Gen Zers and millennials, cars and houses are more need-based and food is more important.

Rob Dongoski

food and agribusiness leader, EY

And, Dongoski said, some of those consumers are willing to pay more for them.

“There is a renewed interest in food,” he said. “Boomers and Gen Xers’ affiliation status with their car, house and food was a need and need-based purchase. If you look at Gen Z and millennials, cars and houses are more based on on needs and food is more of a status. We’ve seen a real difference in that attitude.”

Those changing preferences have also changed the look of Walmart’s meat department. On a store tour earlier this summer with Walmart chief marketing officer Charles Redfield near the big retailer’s Arkansas headquarters, he pointed out coolers full of beef.

Inside the refrigerated area, there are now more steaks on black trays than on white trays. The black trays are for select beef, a higher quality cut that is juicier and more flavorful, and the white trays are for select beef, a lower standard of meat that is less marbled and tender.

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Three or four years ago, about 70% of the steaks in stores were on the white trays, he said; now, the mix has been reversed.