Atlantic tender beef: Canadian beef producer & consumer co-ops expanding market for home-grown meats

Beef producers in the Atlantic Canada region--comprised of Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador--have long struggled to overcome the perception that their product was inferior to beef from western Canada and other regions. But this picture is being turned around through a comprehensive production and branding program.

This effort includes the opening of a co-op beef-processing plant in Prince Edward Island, the establishment of strict beef-production quality and safety standards, and the launching of the well-received Atlantic Tender Beef brand. The branded beef program is a joint effort of the Atlantic Beef Producers Cooperative, headquartered in Borden, Price Edward Island, with the consumer co-ops that share membership under the umbrella of Co-op Atlantic, a federated co-op headquartered in Moncton, New Brunswick.

The beef farmers' new-found marketing clout has helped to somewhat soften the severe blow the Canadian beef industry, absorbed when the U.S.-Canadian border was closed to cattle exports following the discovery of a case of BSE that originated in western Canada.

Family farms in the region remain under enormous pressure and face an uncertain future due to various challenges, but their new marketing strategy has given them a better chance to withstand negative forces. The co-op's effort is benefiting not just producers, but all of the region's nearly 2.5 million people by helping to strengthen the economy of Atlantic Canada.

Reinvigorating dormant industry

For at least 25 years, Atlantic Canada's beef was poorly marketed and the region's cattle industry was generally underdeveloped. Stores in the region--even cooperative retail outlets--mostly carried western beef, which had a reputation for high quality, while the region's own beef was considered "unreliable."

Consumer demand forced retail grocery co-ops and other food retailers to buy the majority of their beef products from western Canada or abroad because they lacked local suppliers who could offer a consistent supply of top-quality beef products.

While farming, forestry and fishing historically have been dominant industries in this region and remain key industries, their share of the regional economy has declined during the past 25 years. Still, the beef industry alone in Atlantic Canada generates $100 million in annual farmgate receipts, so its well-being is very important to the region's economy.

Beef producers saw an opportunity to improve their market position through their membership in Co-op Atlantic, a regional cooperative wholesaler. Co-op Atlantic actually began life in 1927 as the Maritime Livestock Board, which evolved over time into a multi-faceted, federated co-op. It serves not only farmer cooperatives, but also retail consumer co-ops, housing co-ops and a variety of other smaller co-op sectors.

Co-op Atlantic is today an integrated, agri-food business serving 135 member co-ops throughout Atlantic Canada. It had 2003 sales of more than $508 million (Canadian). Retail sales of its member co-ops are close to $1 billion.

The cooperative is a significant player in consumer products, agriculture and petroleum products, as well as real estate and housing development. Collectively, Co-op Atlantic and its member co-ops employ more than 5,000 people and serve more than 226,000 member-families.

Agri-foods strategy

There has long been tension within Co-op Atlantic resulting from the dominance of the retail co-ops, which for many years have been more prosperous than farmer co-ops. The farmer co-ops sometimes feared that they were the "tail being wagged by the consumer dog."

At the same time, there has also been a deep well of good will among the co-op sectors, creating opportunity for innovative thinking about farmer/ consumer cooperation and mutual self-help.

With both farm and retail cooperative members, Co-op Atlantic was in a strong position to respond to the growing crisis facing beef and other farmers. Indeed, many of the keys to creating a solution to the beef farmers' problems were already in place.

Co-op Atlantic provides farm supplies for both grain and beef farmers and operates several feed mills across the region. It also acts as a meat wholesaler to the last significant regionally owned retail supermarket chain. So it made sense for farmers to team with Co-op Atlantic to create a comprehensive beef production and branding program.

The Atlantic Tender Beef (ATB) branding program sets the following guidelines to ensure highest quality meats:

* All cattle are fed a high-grain diet with feeds produced by Co-op Atlantic;

* Beef must grade AA or AAA;

* Feed is hormone- and antibiotic-free and contains no animal byproducts or renderings;

* Cattle are dressed at smaller carcass weights, subject to a minimum aging period and handled following strict safety guidelines of HACCP (Hazard Analysis Critical Control Point);

* Beef is traceable.

All cattle in the program are raised on the scenic rolling hills and the fresh air of Atlantic Canada. Consumer co-ops in the program guarantee to buy all the beef that is produced, and the brand has benefited from strong promotional efforts that helped it gain rapid market acceptance.

To make all this happen required the creation of complex partnerships involving: marketing boards, government agricultural agencies in four provinces, the retail and ag cooperatives that comprise Co-op Atlantic, the newly formed beef cooperative created in 2002, secondary processors which manufacture "Market Town" and private label products, plus independent farmers and their associations.

Pulling all the pieces together was a challenge, but Atlantic Tender Beef was launched in 1998. In 2002, after only a few years on the market, Co-op Atlantic's then-CEO Eric Claus said "Although we consider it our brand, we are expecting more and more Atlantic Canadians will continue to make it their brand. The numbers tell the story ... the tonnage in beef sold in stores has risen nearly 19 percent since ATB was introduced in our member co-ops. We expect that trend to continue because we've worked very hard to ensure that the quality of the beef is consistent from week to week."

Co-op Atlantic purchases more than $15 million worth of beef annually under the program, and the trend is upward.

In 2002, Atlantic Tender Beef grilling steak won a Canadian Grand Prix Award, presented by the Canadian Council of Grocery Distributors. The competition evaluates product innovation, packaging design, labeling, pricing, taste, nutrition, value, quality and overall benefits to the consumer.

While some people feared that supporting local producers might mean that they would have to sacrifice quality or price, Co-op Atlantic and the beef producers deliver goods that meet the standards of national and international competitors--and often exceed them.

Packer closing, BSE pose major challenges

Atlantic Tender Beef was still in its infancy when Hub Meat Packers--the only major packer in the region--was bought by the giant Maple Leaf Foods in February 2000. A press release said: "Hub Meat Packers currently has annual sales of approximately $270 million. No changes are currently planned for the businesses or their operations."

Some hailed the move as promising stability for the beef industry through integration with a national meat company. Others feared that the plant was purchased to achieve market control and would be closed. After a brief life under the new owners, the plant was shut down.

The implications for Atlantic Tender Beef were disastrous. Beef producers in the region were left with the prospect of shipping cattle to Ontario for slaughter and then shipping the meat back--over 750 miles each way.

Lightning struck twice when the U.S. border was closed to Canadian beef due to a case of BSE, creating a "perfect storm" of hardship for farmers.

The response of the cooperatives was quick and decisive. Co-op Atlantic--together with its co-op partners--subsidized the shipping of beef to and from Ontario and began planning for a regional, cooperatively owned beef processing plant.

An integral part of the plan was the creation of the new Atlantic Beef Producers Cooperative. The co-op came into being in November 2002. By April 2003, it had 160 members and by early 2005 membership stood at 200.

Co-op packing plant overcomes challenges

Moving from plan to reality was, of course, not without challenges. Stiff competition from multi-national retailers have made it difficult for Co-op Atlantic to invest its planned 50 percent share to make the beef-processing plant a reality. Aggressive price competition between the major competitors drove down retail markets and margins, forcing retail co-ops to focus diminished profits on defensive retail strategies. Its planned $1.5 million investment had to be reduced to $500,000. Finding money became a problem and progress faltered.

The Prince Edward Island (P.E.I.) government stepped in to provide support that put the project back on the road. P.E.I. offered the co-op a piece of land in a "food park" at a favorable price and also helped finance a waste-treatment plant.

The beef farmers, in spite of the battering their industry has taken over the past two years, did not falter in raising their share of the investment. To raise their $1.56 million share, Atlantic Beef Producers Cooperative sold shares, often referred to as 'hooks,' that carried the right and the responsibility to deliver cattle to the new plant.

Every producer share cost $60. With planned processing of 500 cattle a week, there were 26,000 shares available. Farmers investing in those hooks raised the $1.56 million needed to make the plant a reality.

The cooperative is in the process of increasing its ownership of the plant from 50 to 80 percent. Co-op Atlantic will hold the remaining 20 percent.

Stock sale exceeds expectations

The co-op initially expected a minimum sale of 18,000 shares. That number was seen as a measure that there was enough interest in the industry to move forward. That figure was easily surpassed.

In testimony before a Canadian Senate Committee in April 2004, Atlantic Beef Producers Cooperative President Dean Baglole said, "We suspended sales after the initial run to give us an opportunity to sit back and see exactly how many cattle we could put through. With Co-op Atlantic as our prime customer, certainly in the early going we did not want to have more cattle coming into the plant than we could sell. We want to be very careful and businesslike."

A waiting list was established for would-be share buyers. The $60 share price is a one-time investment by producers.

"For someone who has 100 cattle, [the cost] is $6,000 and they are in for life, which is very appealing," Baglole said.

"Right now, we pay in excess of $80 an animal to have them shipped to Ontario; so, to pay $60 to actually own part of a plant was a no-brainer for many producers. They felt it was the right thing to do."

One of the strengths of the new plant is that it operates on the basis of real commitments from farmers to deliver cattle, ensuring a steady supply to the plant. Because it buys only from members, it is able to schedule deliveries more accurately than can a processor buying cattle on the open market. Still, farmers who have spent their lives thinking of the processing plant "as the enemy" have had some difficulty thinking of the plant they own as "us."

The co-op hopes its strategy, of transparency in its dealings with members and not "painting rosier pictures than reality" will pay off with members. Honesty and openness are, after all, a basic foundation of the cooperative movement.

The new plant has a supply agreement with Co-op Atlantic, which makes the Atlantic Tender Beef brand exclusive to co-op stores. That will not prevent it, however, from providing other house brands to other retailers, selling to the food service industry or seeking specialty or niche markets.

Expanding beef traceability

There are other challenges and opportunities facing the industry. While ATB is traceable to its point of origin, traceability ends when it arrives at the plant door. Baglole says the co-op is in negotiation with the Canadian federal government to find funds to add traceability technology to the plant, which would be a big advantage in promoting their products.

"It's not just food safety that this would help," Baglole says. "We would be able to look at which type of animal sells better, which cuts sell faster and share the information back with the producer. It would make us more responsive to what the consumer wants."

This initiative will not solve all the problems facing beef farmers. BSE and other problems could continue to create havoc for the foreseeable future. But it does point to a long-term way out.

This marketing effort is not limited to beef. The co-op also markets Atlantic Tender Pork and Chicken. There is a range of Market Town house label products that are locally sourced. These products are all part of the co-op's agri-food strategy that supports Co-op Atlantic's goals of: integrating agriculture production into its retail merchandising strategies; generating and retaining wealth in the communities of Atlantic Canada; differentiating the co-op from the competition.

The programs are variously described as "farm-to-fork," "gate-to-plate," "stable-to-table" or "from the farm family to your family." The programs are intended to offer both farmers and consumers--everyone in Atlantic Canada--a local alternative for goods and services needed if they are to live in viable, healthy--communities. The aim is to seek win-win solutions to challenges, such as Atlantic Tender Beef, where both consumers and farmers support each other.

Given the push towards market globalization, some assume that it is inevitable that huge multinational corporations will control every facet of the economy. But when there is a commitment to find innovative methods for solving the challenges faced by locally owned enterprises, everyone benefits: local producers, consumers, communities and the entire co-op system.

Editor's note: Webb is a former advisor to Canadian Prime Minister P. E. Trudeau. lie is a cooperative business consultant and program manager of the International Minster of Management--Cooperatives and Credit Unions Program, delivered by distance education from Saint Mary's University in Halifax, Nova Scotia. More information about the program may be found at: www.smu.ca/mmccu and about Webb at www.global-co-operation.com.

RELATED ARTICLE: Consumers prefer locally produced foods.

Canadian beef farmers have a history of using cooperative solutions to overcome challenges. Since the early 20th century, farmers have been instrumental in the development of producer and consumer cooperatives, including credit unions, that evolved, thrived and grew few all across the Atlantic region.

As elsewhere, local cooperative development was followed by the creation of second-tier "cooperative centrals," like Co-op Atlantic, which were created and owned by local co-ops to meet shared needs.

But even this strong co-op tradition has not stemmed the out-flow of businesses during the past century from Atlantic Canada to the powerful economic centers of Central Canada and the United States. Often, these businesses take the provinces' best jobs and educated young people with them.

Most of the region's people, even those living in urban communities, have strong ties to rural communities and the values they represent. This has led to strong support for the economic base of rural communities. Surveys show that Atlantic Canadians want to support their farmers.

About 96 percent of Atlantic Canadians would prefer to buy and support a local product, while 95 percent prefer local products if the price and quality are equal. Some 92 percent want to know where and how their food is produced and 80 percent say knowing this kind of information influences purchases.

Another 81 percent trust locally produced food more than imported food. A solid 85 percent support the Co-op Atlantic Agri-Food Strategy. Food safety and ethical production have become real issues with consumers.

Among the issues of growing interest to consumers are animal treatment, additives, pesticides, fertilizers, GMOs (genetically modified organisms), e-coli and labor practices. The recent move by the U.S. government to pass an anti-bioterrorism act to protect food from chemical and biological tampering has heightened awareness among North American consumers of a wide range of food issues.

Consumers increasingly want to know, for both primary and secondary products, who grows their food, what happens to it chemically and mechanically, and where it comes from. They want to know what an animal was fed and its health record. Increasingly, consumers want "traceability."

--By Tom Webb

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