Restaurant woes bad for beef business

Tight economic circumstances for many American families is giving the restaurant industry fits. Particularly hard hit are the middle market chains like Village Inn (in bankruptcy), Appleby's, Bennigan's (corporate locations shut down), Steak n' Ale (many locations shut down), etc. Raising more capital for expansion or at least remodeling, is crimped by the lack of bank liquidity and the U.S. economic crisis.

This is bad news for the beef industry, where well over 50% of the beef sold is through restaurants. Families are cooking more at home, and more downscale at that. That means more vegetarian meals, less expensive chicken and turkey, and more hamburger than steaks and roasts.

This is not altogether bad for the beef business though. Convenience still figures prominently into home cooking, as most wives work outside the home, and are too tired and time-pressed to cook elaborate meals when they get home. Ground beef is at the bottom of a lot of quick, easy, popular meals, be it hamburgers, Mexican food, Italian dishes, etc. Beef like pot roast also lends itself well to all-day cooking crock pot meals.

The well-conceived, famous study by food consultant Faith Popcorn identified consumer Chicken Fatigue, which shows that people grow tired of bland white meat, and eventually crave the texture and stronger flavor of red meat.

Thus far, consumer demand for beef, while showing signs of slowing, remains strong. Exports have continued to grow, taking up a lot of the slack in the domestic market. Exports, too, have slowed as the U.S. dollar strengthens against foreign currencies.

But cattle numbers are well under control, and cowherd expansion has stopped, according to the most recent statistics. This alone will keep cattle prices from falling completely out of bed.

The first two days of the post-election stock market has dropped nearly 1,000 points. Thus far the economy is not buying into the Obama phenomenon. But the beef industry, at least, seems to be well positioned to weather whatever economic storm the U.S. will continue to face.