Omaha Steaks CEO: Building Domestic Herd Key for Demand

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00:00Talk us through what you're seeing in your seat when it comes to the cost of your stakes.

00:05Yeah, I mean, the demand is really high and the supply is low. So my business focuses a lot on

00:12the power that we built over 100 years to leverage flash freezing, where we can buy

00:18in the commodities market when we see little breaks in the market, build that inventory,

00:22and then leverage some of our supply chain, leverage our processes and automations to hold

00:28our prices pretty static. In fact, America is going to be, I think, pleasantly surprised when

00:34they come to OmahaSteaks.com. They're going to find that our premier gift package, that perfect gift,

00:40is going to be $89.99 again this year. And I told my teams internally, this is one of the great

00:48moments for Omaha Steaks to really step forward and shine and leverage and flex our muscle that is

00:54that vertical integration and that ability to play that commodities market. But watching the beef

00:59market now has been just fascinating for my seat, seeing what it's doing, particularly in grocery

01:05stores across the country. Well, talking about the beef market more broadly, outside of just your

01:10business, I mean, when it comes to matching supply and demand, how does the U.S. necessarily boost supply?

01:17Or is it just inevitable that you're going to have to try to source beef from overseas?

01:21Yeah, I think there's a lot to be learned about the supply chain of beef in America. Only about 13 to 14%

01:30of the total beef consumed in America is imported. And of that percentage, about 80% is lean trim that

01:38goes into ground beef. So in particular, you know, portions, steaks and roasts and that largely come from

01:44the domestic supply. And, you know, those percentages really give you a sense for how important

01:49building the domestic herd is to meeting the demand of America's desire for red meat. And so,

01:57you know, imports are an important part of the overall picture, but it's not the solve. It's not

02:04the silver bullet to addressing the cost of beef in America. Rebuilding that herd is the inevitable

02:12requirement for bringing supply up. And that is not a fast process, Katie. That's, you know, that's a

02:19six to eight year process to kind of get back to what would be considered a surplus in the size of

02:26the herd. I am curious, though, Nate, how we do that. And by how, I mean, is there a real push to do

02:32that beyond just yourself, meaning a more coordinated push? Yeah, it's a decision that ranchers and feedlot

02:39owners make. It's called heifer retention. It's an industry term that describes a holding back the female

02:45animal to build the herd as opposed to sending it to market. Now, as you might imagine, when demand is

02:51high, there's a lot of motivation for ranchers and feedlot operators to send those female animals to

02:57market and take advantage of the optimal live price. But that comes at a cost. And over the last

03:05number of years, because of the demand for beef, those female animals have gone to market and have

03:10not calved. And the end result is the lowest herd size in 70 years. And so to change that is to make

03:18that decision to hold that animal back to build the herd. And we're seeing, you know, early signs of

03:23that. But what's super interesting, guys, is that when you make that heifer retention decision,

03:29it actually further exacerbates the size of the herd because fewer animals are going to market. So

03:36to say it's going to get worse before it gets better. Yeah. Just real quickly, Nate, we only

03:42have about 30 seconds here, but I am curious just about long term trends, you know, sort of looking

03:47really further out and consumption trends and consumption patterns. And I know we've seen

03:51oscillations where, you know, we all favor chicken for a while, then it's beef, then it's pork back and

03:56forth. How do you sort of manage those swings? Yeah, I mean, you know, America trades down

04:01really in any product set. And as it relates to beef and chicken, you know, we're seeing some

04:07consumers opt for chicken, but it's just not as satiable as a protein. It really just doesn't

04:13deliver like beef does. And so we are seeing some trade down kind of inside the product set of beef.

04:19You know, those consumers that may have opted for the filet mignon are now exploring how amazing the

04:24top sirloin is. Yeah. Or, you know, a strip or a ribeye and exploring, you know, up and down the

04:30category there and really pushing themselves to educate on where else they can get their beef.

04:36All right, Nate, got to leave it. Mike Oma Steaks.

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