The gourmet burger business is helping support wholesale ground beef prices at a time when retail sales are weak.


Gourmet burgers driving demand

Sliders, those increasingly popular mini-burgers, are helping halt the swoon in the ground beef complex. Although beef sliders date back nearly 100 years, they have become one of the hottest items in the hamburger business both in the U.S. and globally. The gourmet burger business meanwhile continues to thrive in the U.S. Both categories are helping support wholesale ground beef prices at a time when retail sales continue to be weak.

Americans still eat billions of burgers each year, well in excess of 11 billion, in fact. Eight out of 10 food service establishments serve hamburgers, and ground beef accounts for 63% of all beef sales in the sector and 37% of the beef revenue. The big names, from McDonald’s to Jack in the Box, still dominate the hamburger business. But sales weren’t exactly stellar in the past year, as other chains continued to take away market share. McDonald’s on March 1 said it was going back to basics with a focus on its burgers and improving their quality.

Names that are likely well-known to burger aficionados and are quickly garnering iconic status include: Cook Out, 211 locations, all in the Southeast; Habit Burger, 160-plus locations in 10 states; BurgerFi, 83 locations in 23 states; Burger Lounge, 24 locations in California and Nevada; Umami Burger, 24 locations in California, Illinois, Nevada and New York; Bobby’s Burger Place, 17 locations in 10 eastern states; Hopdoddy Burger Bar, 17 stores in Arizona, California, Colorado and Texas; Larkburger, 13 locations in Colorado and Kansas; and Halo Burger, 10 locations in Michigan.

Click here for a slideshow of burger trends emerging in food service.

Most appear to be adding locations through franchising, and all seek to differentiate themselves as much as possible from the giants. Cook Out, based in Greensboro, N.C., said it uses fresh never frozen hamburger patties, and Delray Beach, Fla.-based BurgerFi has focused on traditional fare in a roadhouse setting.

These chains and others have increased the demand for ground beef, especially that made from more than just beef trimmings. They are asking for patties made from muscle meat (chucks, rounds and sirloins) and everything from Angus to Wagyu beef. This means specialty beef producers can get a premium for parts of a carcass that will go through a grinder.

Beef sliders meanwhile are helping boost ground beef consumption in their own unique way. Sliders date back to 1921, when White Castle introduced them as its signature item. A tiny patty with just a bun, onion and a pickle sold initially for 5c each. White Castle even trademarked the spelling variant “slyder” and used the name between 1983 and 2009.

Slider purists for years have claimed a true slider should contain only those four ingredients. They would be mortified at what Israeli-based chain Burgerim offers. Its 2.8-oz mini-patties include regular beef, aged beef, Wagyu beef, lamb, salmon, turkey and spicy Moroccan meat. It even offers a veggie burger. Burgerim encourages its customers to order several sliders at a time, and its motto is “Always more than one.” It also emphasizes how customers can mix flavors in one sitting. Founded in 2005, Burgerim began franchising internationally in 2011 and in 2015 expanded to the U.S., the U.K., Spain, Romania and Russia. It has three locations in California and one each in Texas and Tennessee but has dozens more planned.

The growing popularity of sliders and other gourmet burgers come at a time when ground beef’s tepid performance at retail continues to alarm the U.S. beef industry. Sales of the industry’s most ubiquitous product have now been weak for 36 months. Part of the swoon is because of ground beef’s price versus the price of competing meats. Part is due to consumers’ rediscovery of their love for a good steak.

Ground beef accounts for 63% of all beef sales in the food service sector and 37% of the beef revenune.


Suffering sales

Retail ground beef sales, which account for nearly half of all ground beef sales by volume and 39% by revenue, began to run into trouble in August 2014. That’s when the average monthly price of all ground beef, as reported by U.S. Department of Agriculture, exceeded $4 per lb for the first time ever. The average price only fell below that in January last year. It ended the year with a monthly low of $3.60 per lb last December. But this was still extremely high compared to historical lows of less than $2 per lb.

More importantly, ground beef retail prices were high compared to pork and chicken items, which retailers routinely featured at prices well below ground beef. For example, the average retail price of bone-in chicken legs last December was $1.51 per lb. Even boneless, skinless chicken breasts sold then at an average $3.26 per lb. All pork chops meanwhile sold at an average $3.51 per lb, 9c below ground beef.

U.S.D.A. in its retail price series also reports monthly ground chuck and lean/extra lean ground beef prices. Ground chuck’s average price last December was $3.70 per lb, while the lean/extra lean ground beef price was $5.67 per lb. Consumers in the grocery store appear prepared to pay a hefty premium for the three leanest categories of ground beef. But they account for less than one-third of all retail ground beef sales.

A key trend last year at retail was that the price of steak items declined enough to allow Americans to grill a lot more steaks. Taking a U.S.D.A. Choice round steak as an example, its price fell below $6 per lb for the first time in some years in January 2016. There were only five months last year when the price exceeded $6, and the December price was $5.76 per lb.

These price trends have continued to show up so far in 2017. Ground beef’s average price in January was $3.56 per lb, down only 4c from December. Ground chuck’s average price was $3.62 per lb, down 8c, and lean/extra lean ground beef’s average price was $5.54 per lb, down 13c. In contrast, U.S.D.A. Choice round steaks averaged $5.56 per lb, down 10c from December.

Even more telling is how chicken and pork items have become even more competitive to ground beef in grocery stores so far this year. The average retail prices of bone-in chicken legs in January was $1.43 per lb, down 8c from December. Boneless, skinless chicken breasts sold at an average $3.20 per lb, down 6c. All pork chops meanwhile sold at an average $3.46 per lb, down 5c.

An examination of retail feature prices reveals the intensity of the competition facing ground beef. The average feature price in January for 70% to 79% lean ground beef was $2.15 per lb. The average retail feature price for a boneless pork loin in January was $2.08 per lb. Consumers were thus faced with buying featured regular ground beef at about the same price as a boneless pork loin and leaner ground beef at far higher prices than boneless, skinless chicken breasts. Retailers so far this year have featured New York strips and T-bone steaks heavily, in part at the expense of ground beef. Feature prices for both cuts continued to decline from late last year and more stores featured them.

Beef production in 2017 is expected to increase 3.2% on 2016’s total so ground beef and other beef prices will moderate further. But this is likely to mean even more retail steak featuring. In addition, broiler production is expected to increase 2.1% and pork production 3.5%. The bottom line is: ground beef sales at retail will continue to struggle this year against competing meats and increased steak sales. Sliders will become an even more important part of ground beef’s future.