I had written the first draft of this blog in December 2012, long before the horsemeat in the burger scandal broke, but had to park it up because of the busy Christmas period. I thought it was time to finish it now, given the recent news items about cheaper quality products going into burgers.
The Low Cost Alternative
How many people remember the Lada cars? These were cars imported from Russia, based on the old Fiat 124/128 body type. They looked good but people who bought them soon discovered they were not up to the standard of cars made in Japan, Germany, France or the UK. The reason many people bought them is because they were cheap and affordable for many people. There was even a line of jokes about Lada cars, such as “why do Lada cars have heated rear windows? To keep your hands warm when you are pushing them”. The lesson people learned from this experience is the low cost does not always equate to good value.
People often remark to me about the quality of the meat in my butchers shop compared to the supermarket meat. For example, they often compare the quality of the mince with the mince in the supermarkets. I sell very lean mince, typically less than 5% fat content. This is very attractive to the shoppers who are trying to reduce their fat intake as part of a weight reduction programme. This type of mince is available in many places, even the supermarkets, but customers have commented that the mince in the butcher shop is far better than that available in the supermarkets. These comments would also be said about other cuts of meat.
There can be many reasons for the better quality meat in the butchers shop compared to the supermarkets. Traditional Butchers shops will use Prime Heifer Meat, these is young female cattle, typically about 24 months old. Most Butchers prefer prime heifer for their shops. So what happens to the young male cattle? Steers or bullocks as they are known are sent to the meat factories to be broken into primal cuts and then sold as boxed cuts such as Striploin or fillets. The majority of supermarkets are supplied by these factories, which use steer beef for their cuts.
The Aging Process
Hanging beef is an important part of the aging process. I buy in my beef on the bone each week. Many butchers’ shops buy their meat this way, but no all butchers shops buy their beef on the bone. My beef hangs for between 14 and 21 days, with my sirloins & ribs hanging for up to 28 days. These are used for T-Bone Steaks, Striploin Steaks, Fillet Steaks, Rib Eye Steaks and Rib Roast. When the beef is hanging it dries out naturally. As the beef dehydrates the flavour intensifies, this is known as dry aging. Meat supplied from Factories is stored in vacuum packed bags. This keeps all the liquid in the bag and the beef does not age as good as beef that is hanging. All butchers will tell you that beef hung for a period is better than beef supplied in vacuum packed bags.
Loss Leader Products
Supermarkets often use meat as a loss leader to attract people into their shops. The supermarkets will put some meat specials on and these will appear to be good value, and they may be good value if you only buy these items alone. When you are doing your weekly grocery shopping, you are not just buying the things on offer. You are buying fruit, vegetables, tinned goods and sometimes baby food and nappies. The supermarkets will get their money back on the other items that you buy.
Cheaper Input Costs
Now this brings me back to the matter of the Lada cars. Not every low cost bargain is good value. If a person buys a low cost alternative of anything, the chances are, it is going to be of lesser quality than the more expensive item. This will apply to cars, electrical goods, clothes and many others items.
This has proven to be the case in with the burgers being processed for the supermarkets. The pressure by the multiples to drive prices down on products has put suppliers under pressure to reduce costs, particularly the input costs of raw materials. We have learned recently about the ingredients that go into the cheaper burgers that are being supplied to supermarkets, ingredients apart from the meat. The meat content of the cheap Tesco burgers was listed on the pack as only 63%. This means that there are 37% of other ingredients in the burgers, 10% was listed as onions. We have been informed about fillers that are put in to bulk up the burger and reduce the cost price.
The point of this blog is to emphasise the point that cheap is not always good. Businesses that are constantly driving prices down so far that they are below the cost price of the main input ingredients are treading a fine line with their products. Suppliers may substitute the better quality ingredients with cheaper ingredients, therefore cheating the end user of the products. The top management of the multiples are unlikely to be purchasing the cheapest products on sale in their shops; after all they would not be seen driving a Lada car.
Quality does not have to cost the earth either. There can be good quality found at a reasonable price in many shops. Every business must make profits; some make more profits than others. It is easy to compare one butcher shop against the other, as the cost of the raw material does not vary by that much. If one shop is charging 15% more for a product than another shop, they are making a greater gross profit, however their overheads may vary.
The issue with the multiples is that they are seeking to sell items at the lowest cost possible and still retain the same level of profits from these products. In this case, something has to give, and most of the time it is the quality of the raw ingredients that will be compromised. In cases like this cheap is not good. I would always stick to the old mantra; if it looks too good to be true then it is too good to be true. If you don’t believe me ask any Lada car owner, if you can find anyone who will admit to owning one of them.