010245 Consumer Beef Purchases May Change

Washington - The corner butcher shop is gone. The supermarket meat cutter may not be far behind.

In a bid to boost profits and cut labor costs, giants of the meatpacking and grocery industries are trying to change the way consumers buy beef. It would no longer be cut and wrapped at the back of the store, instead arriving at supermarkets prepackaged and carrying brand names that packers hope will one day be as familiar as Kellogg's and Campbell's.

Packers can charge an extra 60% on prepackaged, name-brand beef, said Christine McCracken, an analyst for Midwest Research. Beef that's sold in bulk to supermarkets for $1 per pound would go for $1.60 if it's sold with the brand.

Stores make up the difference in costs by eliminating the need for meat cutters, who are among the highest-paid employees.

For consumers, the prepackaged beef will be handled less, reducing the risk of bacterial contamination, and it will be easier for stores and health officials to trace when there is a problem, say industry officials.

Special leak-proof, oxygen-rich plastic packages - a new development in the food industry - ensure that the meat has the bright red color of meat that's cut inside the store. Without that packaging, the beef would turn brown, a sure turnoff to shoppers.

“We really believe it's the way the industry is going to go,” said Gene Leman, chief executive of fresh meats for beef industry leader IBP Inc., which introduced its Thomas E. Wilson line of beef last year.

Wal-Mart is switching all its beef sales nationwide to Thomas E. Wilson.

Consumers want “a name in the fresh meat case that they can trust time and time again,” Leman said.

Poultry giant Tyson Foods Inc. is betting IBP is right. Tyson, whose brand name now dominates U.S. chicken sales, wants to do the same in beef and pork and recently won a bidding war with rival Smithfield Foods to buy IBP for $3.2 billion.

The deal will give Tyson “an unparalleled ability to develop innovative, branded food products and market them successfully,” says Tyson chairman John Tyson.

Nearly 39% of all meat sold at retail last year was prepackaged, or “case-ready,” compared with 23% in 1997, according to the Food Marketing Institute, the supermarket industry's trade association.

“The consumer pays about the same price and he gets a better product. It's a win-win for everybody,” said McCracken.

Not everybody feels that way.

The United Food and Commercial Workers union, which represents supermarket butchers, predicts many consumers will reject the prepackaged meat in favor of beef that's cut in-store because they'll see it as fresher. Wal-Mart's real aim, according to union officials, is to prevent meat cutters from unionizing.

Packers are trying to “force-feed” consumers, said Gary O'Brien, a meat cutter at an upscale Dorothy Lane Market in Cincinnati that has no plans to stop cutting its own meat.

“There are so many people who want special cuts. They want a porterhouse that's cut and an inch and a half thick,” he said. “They're going to have to come to these smaller shops. It's like the old gas stations that work on cars. They are fewer and fewer but you still need them.”

Cattle ranchers started pushing for brand-name beef in the 1990s in hope of reversing a slump in consumption. They think processors will do a better job of marketing beef and be more conscious of its safety and quality if they've got their name on the label.

Packers currently do little advertising for beef. The ad campaign - “Beef. It's what's for dinner” - is paid for by producers.

Wal-Mart's shoppers like the prepackaged meat because of the watertight package it comes in, said Wal-Mart spokeswoman Jessica Mouser.

“They like to be able to pick up a nice, clean package. It's not a messy product anymore,” she said.

Wal-Mart is selling Thomas E. Wilson beef in about half of its 868 supercenter stores nationwide and plans to phase it into the rest as IBP increases production

IBP retrofitted a plant in Council Bluffs, Iowa, to cut and package the beef, and has a larger facility under construction in Nashville, Tenn. So far, IBP is selling about 5 million pounds of Thomas E. Wilson products a week, out of its total weekly sales of 210 million pounds.

“It's hard to say that we've reached a point to say that this is the only way we're going to buy beef,” said University of Missouri economist Gary Brown. “It's safe to say we're definitely trending in that direction and it will continue to be more and more a dominant part of what happens.”

The Tyson-IBP merger has cleared the Justice Department's antitrust review. Tyson has delayed closing the deal, pending IBP's resolution of accounting issues raised by securities regulators. IBP slaughters 35,000 cattle a day, well ahead of No. 2 ConAgra, at 24,800, and reported sales last year of $14 billion.

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