How long have we been talking about a looming recession at this point? eight months? year? I was definitely starting to prepare for one of these when banks started failing in March, but the economy actually seems to be doing well.
It doesn’t work great, mind you. As the second quarter earnings season begins, it’s clear that April and June were mixed months. Traffic is declining at many restaurants as consumers seem tired of high menu prices. But many economists seem to think we won’t slide into a recession in 2023. Maybe next year, but who knows?
However, diners, especially those with lower incomes, behave somewhat slackly, meaning they respond more to “value pricing,” but less intuitively also meaning they are interested in beef.
You see, in times of economic or political uncertainty (and apparently during escalating natural disasters and increased awareness of climate change, as we’re seeing now), consumers engage in emotional self-care. They may have to delay buying that new car or cut back on vacation plans, but they can (and do) splurge on a nice meal, and that often means beef.
I’ve already reported an increase in interest in wagyuthe Japanese beef breed is highly regarded for its high level of marbling and pleasant taste, but interest in beef in general is high.
A friend of mine who works in consumer journalism, and whose job is, among other things, to generate clickbait, says that anything that mentions beef casual dining specialists, like Texas Roadhouse or Outback Steakhouse, guarantees traffic to his websites .
Restaurants have taken notice, too. In discussing BJ’s Restaurants’ earnings for the quarter, CEO Greg Levin said ribeye steaks are now one of the chain’s best-selling items.
Beef does not need to sell at a higher price to signify luxury. Applebee’s promoted a steak on its “2 for $25” value platform in June, Dine Brands CEO Tony Moralejo noted on that company’s earnings call.
“It’s compelling and provides the value guests are looking for in this environment,” Moralejo, who is president of the company’s casual dining division, said during Dine Brands’ quarterly earnings call.
But if a cut of beef is somewhat fancy, customers tend to gravitate toward it more. An example is the Shake Shack White Truffle Burger — topped with fontina cheese, white truffle sauce made with Regalis truffle oil, and fried sweet onions, starting at $8.99 — which CEO Randy Garutti credited with increasing sales at the store. chain when the burger was available from February through April.
Although many restaurant customers balk at higher prices, they may just have to make do with those prices when it comes to beef, the cost of which continues to rise as a result of the effects of drought in southwestern cattle country: Drought tends to push ranchers to Slaughtering early to save on feeding and watering costs, temporarily lowering prices as beef floods the market, followed by a beef shortage as herds rebuild. This is where we are now.
It takes about three years from insemination to slaughter of cows, so rebuilding those herds takes time.
However, in the past, during periods of high beef costs, consumers would go ahead and pay for it anyway, especially when it came to steaks. I still remember about 20 years ago when my managing editor asked me to write a story about how customers were switching from steak to other entrees, due to the high prices of beef at the time. So I called a bunch of chefs and asked them what was going on, and they said that when their customers wanted steak, there was no suitable substitute. They paid extra and got their steak, and that’s the story I wrote.
Would the modern consumer, who is often more environmentally conscious, respond in the same way? Time will tell.
Climate change is a factor when it comes to beef. Cattle, as part of their natural grass digestion process, excrete a lot of methane, a potent greenhouse gas, and it is widely accepted that our widespread consumption of beef is an important contributing factor to global warming.
But some livestock producers mitigate this through “intensive grazing,” a process of rotating cattle across different pastures that keeps the grass strong: When cattle eat grass, they stimulate the growth of that grass, and it doesn’t just grow upward; It strengthens its roots, which dig deeper into the ground, sequestering more carbon. Some proponents of intensive grazing say that livestock farming, if done right, could be carbon neutral, allowing us to use otherwise unsuitable land to grow fruit, vegetables or grains.
It’s something to keep in mind as you have conversations with your beef suppliers.
Contact Brett Thorne at (email protected)