Supermarket margins

EvanFahy

Lady Haywire wrote: »

Yes, but what was the intention of your post.

somebody on this thread wanted a breakdown of what you could expect from a carcass/animal

paddysdream

EvanFahy wrote: »

somebody on this thread wanted a breakdown of what you could expect from a carcass/animal

Below is copy and paste but its from 2019 and Irish;

3 DECEMBER 2019

ICSA beef chairman Edmund Graham has suggested that following an ICSA trial, the association believes that processors and retailers are making substantial mark-ups on heifers destined for the supermarket shelf.

In some cases however, aggressive discounting by big retailers is used as a means of getting consumers in to buy other products. When this happens, the farmer is essentially subsidising other over-priced goods in the supermarket.

The second key finding is that higher grade suckler type animals are yielding a lot of added value through higher meat yield which is not reflected in the beef grid payment system.

The ICSA trial showed that an O= animal (dairy cross) under 30 months was priced at €1,043 (VAT exclusive) and its meat could fetch €2,217 in the supermarket, a mark-up before costs of €1,174.

The R+ grade suckler animal, under 30 months, was priced at €1,228 (VAT exclusive) and its meat was priced at €2,741, a mark-up before costs of €1,512.

The trial was conducted taking two heifers from the farm of Mr Dan Lynam in Westmeath who were weighed live, slaughtered and hung for 28 days. The meat from both was then carefully weighed, category by category, and then priced according to a range of prices available in the main retail outlets.

While the trial has the obvious limitation of being based on just two animals, the outcomes point the way for further research and investigation. Edmond Graham says that this information will inform the ICSA approach at the Beef Markets Taskforce, particularly in relation to the Teagasc review of the grid and the independent study into price composition.

One heifer was a Limousin suckler type heifer which was assessed as R+ and the second heifer was an Angus dairy cross heifer assessed as O=. The method was to weigh every cut and price it in all the main supermarkets. There is a lot of variation in pricing not only between supermarket chains but within supermarkets. However, this points to the need for a debate about the sustainability of pricing policy.

“We have tried to exclude very high prices which are not reflective. For example, we have taken a price of €28.73 for fillet steak even though we have seen it priced at €37.50. But on the other hand, some supermarkets are selling beef under special offers without any regard for the fact that you cannot feed two animals for the price of one or decide that this month I am going to cut my heifers’ feed by 33%.”

“A farmer might get €1,100 for an animal that has taken over three years to bring from breeding to slaughter whereas processors and retailers expect to make more than that for processing the animal and putting it on shelf, a process which takes three weeks.”

“In addition, meat processors make significant earnings from the fifth quarter which the farmer doesn’t get paid for. In 2018, beef offal was worth €385 million which works out at just over €200/ animal.”

The story gets worse when you consider that this animal will have cost €1300 to bring to slaughter and the farmer will be expected to have levels of traceability seen nowhere else in the world, be quality assured and be actively investing in saving the planet at the same time.

“The real insight here is that there is a lot of extra value in the suckler animal that current beef grid price does not reward. From a starting point of two heifers of almost identical liveweights (590kg v 600kg) the suckler animal outperforms all along the food chain to yield €523 more value in retail sales. Allowing for her higher kill out and better grade, the farmer makes €184 (VAT excl) more on the suckler animal. But is this enough of a fair reflection?”

“It is true that the suckler animal takes up more shelf space and has more distribution and retailing costs simply down to more packets of meat to sell. But with the massive efficiencies and economies of scale both in processing and retailing, it seems incomprehensible that a lot more of this extra €523 cannot be returned for the suckler type animal.”

“It is also important to note that there is a lot of value added without any major addition of cost other than processing to the O grade animal.”

However, there is another twist to the story which is the cheap food strategy which is destroying value for everyone. While the prices quoted here reflect prices charged in a supermarket in the past week, there are plenty of examples of similar meat cuts being flogged off cheaply.

“Supermarkets are notorious for using primary agricultural produce as a kind of “loss leader” to attract in the customers. They then sell the meat or vegetables for unsustainably low prices from the perspective of the primary producer but it doesn’t matter if other products are being sold to consumers at inflated prices. For example, one supermarket was selling 400g of minced meat for €2 and a few aisles down was charging €32 for 8 replacement shaving blades!”

“When you look at how much meat can be got from a suckler type heifer, it beggars belief that the suckler farming sector is on its knees. It is clear that further subsidies for sucklers are a waste of time if we do not effectively address the massive profiteering on these animals in particular. The carcass weight of this animal was absolutely spot-on when it comes to in-spec demands and therefore ideally suited to all retail markets. Yet the price of €1228 is an absolute scandal when you consider the time, effort and cost of producing her in a world where there are more and more demands on farmers.”

The ICSA beef chairman acknowledged that this trial has its limitations and that ICSA would be demanding that similar exercises were done on a wider basis both domestically and internationally as part of the Beef Markets Taskforce work programme.

EvanFahy

Thanks so much, very interesting read.

Shelflife

Its a good read but its a very simplistic view to take, I realise that they are trying to make a point and I do sympathise with the farmer but they are just using figures to try and garner sympathy from the public.

Saying that a shop buys the animal for €1228 and that its sold for €2741 giving a profit of €1512 is very disingenuous.

They do mention costs but dont even attempt to put a figure on that.

The animal has to be killed and then boned, both of those are skilled jobs that dont come cheap and both have to be carried out in highly regulated and expensive to run locations.

The carcass is aged for 28 days, that means that the carcass is literally hanging in a fridge for that length of time so that needs to be costed as well, both the refrigeration costs and the finance costs.

Its then boned and packed and delivered to the shop where there is no guarantee that the whole carcass will sell, in theory a shop could buy a whole carcass and sell none of it and lose the whole €1228 that they paid for it.

The shop itself has to have refrigerated display units and of course has its own staff costs and running costs.

Overall its a poor puff piece that only wants to get its point across instead of putting a decent article together.

wrangler

Shelflife wrote: »

Its a good read but its a very simplistic view to take, I realise that they are trying to make a point and I do sympathise with the farmer but they are just using figures to try and garner sympathy from the public.

Saying that a shop buys the animal for €1228 and that its sold for €2741 giving a profit of €1512 is very disingenuous.

They do mention costs but dont even attempt to put a figure on that.

The animal has to be killed and then boned, both of those are skilled jobs that dont come cheap and both have to be carried out in highly regulated and expensive to run locations.

The carcass is aged for 28 days, that means that the carcass is literally hanging in a fridge for that length of time so that needs to be costed as well, both the refrigeration costs and the finance costs.

Its then boned and packed and delivered to the shop where there is no guarantee that the whole carcass will sell, in theory a shop could buy a whole carcass and sell none of it and lose the whole €1228 that they paid for it.

The shop itself has to have refrigerated display units and of course has its own staff costs and running costs.

Overall its a poor puff piece that only wants to get its point across instead of putting a decent article together.

The fact that there's very few customers for factories when they come for sale reinforces your points too, if it was as good that post claims everyone would want a piece of it.

kk.man

paddysdream wrote: »

Below is copy and paste but its from 2019 and Irish;

3 DECEMBER 2019

ICSA beef chairman Edmund Graham has suggested that following an ICSA trial, the association believes that processors and retailers are making substantial mark-ups on heifers destined for the supermarket shelf.

In some cases however, aggressive discounting by big retailers is used as a means of getting consumers in to buy other products. When this happens, the farmer is essentially subsidising other over-priced goods in the supermarket.

The second key finding is that higher grade suckler type animals are yielding a lot of added value through higher meat yield which is not reflected in the beef grid payment system.

The ICSA trial showed that an O= animal (dairy cross) under 30 months was priced at €1,043 (VAT exclusive) and its meat could fetch €2,217 in the supermarket, a mark-up before costs of €1,174.

The R+ grade suckler animal, under 30 months, was priced at €1,228 (VAT exclusive) and its meat was priced at €2,741, a mark-up before costs of €1,512.

The trial was conducted taking two heifers from the farm of Mr Dan Lynam in Westmeath who were weighed live, slaughtered and hung for 28 days. The meat from both was then carefully weighed, category by category, and then priced according to a range of prices available in the main retail outlets.

While the trial has the obvious limitation of being based on just two animals, the outcomes point the way for further research and investigation. Edmond Graham says that this information will inform the ICSA approach at the Beef Markets Taskforce, particularly in relation to the Teagasc review of the grid and the independent study into price composition.

One heifer was a Limousin suckler type heifer which was assessed as R+ and the second heifer was an Angus dairy cross heifer assessed as O=. The method was to weigh every cut and price it in all the main supermarkets. There is a lot of variation in pricing not only between supermarket chains but within supermarkets. However, this points to the need for a debate about the sustainability of pricing policy.

“We have tried to exclude very high prices which are not reflective. For example, we have taken a price of €28.73 for fillet steak even though we have seen it priced at €37.50. But on the other hand, some supermarkets are selling beef under special offers without any regard for the fact that you cannot feed two animals for the price of one or decide that this month I am going to cut my heifers’ feed by 33%.”

“A farmer might get €1,100 for an animal that has taken over three years to bring from breeding to slaughter whereas processors and retailers expect to make more than that for processing the animal and putting it on shelf, a process which takes three weeks.”

“In addition, meat processors make significant earnings from the fifth quarter which the farmer doesn’t get paid for. In 2018, beef offal was worth €385 million which works out at just over €200/ animal.”

The story gets worse when you consider that this animal will have cost €1300 to bring to slaughter and the farmer will be expected to have levels of traceability seen nowhere else in the world, be quality assured and be actively investing in saving the planet at the same time.

“The real insight here is that there is a lot of extra value in the suckler animal that current beef grid price does not reward. From a starting point of two heifers of almost identical liveweights (590kg v 600kg) the suckler animal outperforms all along the food chain to yield €523 more value in retail sales. Allowing for her higher kill out and better grade, the farmer makes €184 (VAT excl) more on the suckler animal. But is this enough of a fair reflection?”

“It is true that the suckler animal takes up more shelf space and has more distribution and retailing costs simply down to more packets of meat to sell. But with the massive efficiencies and economies of scale both in processing and retailing, it seems incomprehensible that a lot more of this extra €523 cannot be returned for the suckler type animal.”

“It is also important to note that there is a lot of value added without any major addition of cost other than processing to the O grade animal.”

However, there is another twist to the story which is the cheap food strategy which is destroying value for everyone. While the prices quoted here reflect prices charged in a supermarket in the past week, there are plenty of examples of similar meat cuts being flogged off cheaply.

“Supermarkets are notorious for using primary agricultural produce as a kind of “loss leader” to attract in the customers. They then sell the meat or vegetables for unsustainably low prices from the perspective of the primary producer but it doesn’t matter if other products are being sold to consumers at inflated prices. For example, one supermarket was selling 400g of minced meat for €2 and a few aisles down was charging €32 for 8 replacement shaving blades!”

“When you look at how much meat can be got from a suckler type heifer, it beggars belief that the suckler farming sector is on its knees. It is clear that further subsidies for sucklers are a waste of time if we do not effectively address the massive profiteering on these animals in particular. The carcass weight of this animal was absolutely spot-on when it comes to in-spec demands and therefore ideally suited to all retail markets. Yet the price of €1228 is an absolute scandal when you consider the time, effort and cost of producing her in a world where there are more and more demands on farmers.”

The ICSA beef chairman acknowledged that this trial has its limitations and that ICSA would be demanding that similar exercises were done on a wider basis both domestically and internationally as part of the Beef Markets Taskforce work programme.

Excellent article. However not many know that after 28 days hanging the carcuss loses a substantial amount of weight that's its fresh weight. It drains water up to I stand corrected 20%. You could take 100e to slaughter it and another 100e to bone it. The factory paid for it on the day and it's moved on after 28 days or whatever is agreed. They are 3 to 6 months credit terms between factory and supermarket to be factored in. The 5th quarter is not as valuable as it was since this piece was published.

So it's not all profit but beef barons are not billionaires from someth that fell off the trees. However mass production helps in times of tight margins.

wonski

Rookie question - are you guys referring to the 28 days hanging carcasses as to the ageing process?

Most regular supermarket meat would be wet aged in vacuum bags so I think it is hanging as long as it has to to lower the temperature of the carcass, no?

After that cut and pack and let it sit in the chiller for 21-28 days and cut into steaks or whatever?

Or am I misunderstanding something?

The cost of dry ageing is substantial (time and space) , so is the loss of weight in the process.

Of course I agree that simplistic view of price odlf the animal versus rrp of product on the shelf is completely wrong. Labour, transport, storage, advertising etc adds a lot, but as other mentioned the bigger the scale the more likely low margin still guarantees profits.

EvanFahy

https://www.bordbia.ie/farmers-growers/prices-markets/cattle-trade-prices/beef-market-tracking/