Agribusiness Review - Vol. 7 - 1999

Paper 4
ISSN 1442-6951

Attitudes of Independent Rural Meat Retailers to a National Beef Quality Assurance Program

R.A. Idstein and G.R. Griffith*

*Former undergraduate student, University of New England; and Principal Research Scientist, 
NSW Agriculture Beef Industry Centre, Armidale.

• 1. Introduction
• 1.1 Background
• 1.2 Objectives of the Study
• 2. The Benefits of Quality Assurance in the Australian Meat Industry
• 3. Research Method and Data Collection
• 3.1 The Proposed Quality Assurance Program
• 3.2 Questionnaire Design
• 3.3 Data Collection
• 4. Results and Interpretation
• 4.1 Results of the Survey
• 4.2 Meat Retailer Comments From Personal Interviews
• 4.3 Why Independent Meat Retailers May Oppose an Official Quality Assurance Scheme
• 5. Conclusion
• 5.1 Summary of Results
• 5.2 Limitations and Possible Responses
• 6. References

1. Introduction

1.1 Background

In the last two decades there has been a substantial reduction in the domestic consumption of beef and veal ( Australian Bureau of Agricultural and Resource Economics 1997, Table 142). While most of this decline can be attributed to a change in relative retail prices ( Cameron 1995; Piggott , Chalfant, Alston and Griffith 1995), some can also be attributed to changes in consumer preferences. Market research has clearly shown that consumers are increasing their demand for quality characteristics such as tenderness, flavour and leanness. Yet the industry is still marketing an inconsistent product to consumers who are demanding consistency ( Cameron 1995).

This general problem of quality inconsistency has been recognised by industry and has been included in the Meat Industry Strategic Plan ( Meat Research Corporation 1996b). One of the key goals was to describe palatability accurately and guarantee food safety. The meat industry hopes to succeed with this by the year 2001, through the development and implementation of value-based marketing systems that would lead to a 50 per cent reduction in the variability of quality and volume, and would to some degree ensure security of supply ( Meat Research Corporation 1996b). National quality assurance procedures would have to be a necessary component of any such marketing systems. This has led to the development and trialing of Meat Standards Australia, a meat grading system based on eating quality which involves accredited pathways to achieve certain grades.

National quality assurance procedures would provide the Australian beef industry with the opportunity to serve its customers more efficiently through increased market information. However, previous attempts at the implementation of quality assurance have not succeeded. A major concern has been that of who will pay. Because quality assurance will mean increased costs for both the producer and the processor, they need to be assured that they will be appropriately rewarded for their extra efforts. Given that consumers have indicated that they would pay more for beef more closely meeting their requirements, the establishment of a premium payment scheme at the retailer level would seem like a simple solution. But will meat retailers be able to secure premiums from all their customers, and will they be prepared to pass any premium onto processors and producers?

1.2 Objectives of the Study

Wilson and Wissemann (1981) surveyed 90 meat retailers about their attitudes towards beef carcase classification. The study revealed that while the majority of retailers were in favour of classification, there were mixed feelings about who would gain and lose from such a system. It was also established that those retailers who believed there were disadvantages associated with beef carcase classification, were mostly concerned with the additional costs they would incur ( Wilson and Wissemann 1981, p. 51).

In an attempt to re-evaluate the conclusions of Wilson and Wissemann, a survey of New England meat retailers was conducted in mid 1996. The primary research question addressed in this study was ‘will the meat retailer be prepared to pay a premium for beef that is quality assured by both the producer and the processor?'. In addition the study aimed to investigate the attitudes toward a quality assurance scheme if it were to be formally implemented.

2. The Benefits of Quality Assurance in the Australian Meat Industry

Quality assurance will help in reassuring customers that Australian beef is clean, wholesome and reliable. It is vitally important that the industry offers a consistent and quality-guaranteed product that will continually satisfy the needs and expectations of the consumer. Thus, the ability to buy meat according to simple, recognisable descriptions that meet the needs of retailers is seen as crucial for the continuing success of the industry. Buying by description highlights a need for meat retailers to develop close partnerships with their suppliers, and likewise processors with producers. Accredited processors should seek out accredited producers in order to create a real marketing tool between producers, processors and the end user ( Palmer 1995, p.10).

The benefits of quality assurance are distributed throughout the marketing chain, from the producer through to the consumer. Producers who adopt the quality assurance code of practice will decrease the risk of having unwanted residue found in their beef, and will improve the professionalism and efficiency of their operation through better record keeping, staff training and awareness of product quality. Finally they will enjoy the benefits of preferred supplier status, and as more and more abattoirs adopt quality assurance procedures, the demand for producers operating under similar standards will increase.

A large proportion of the benefits associated with a quality management system are related to the subsequent adoption of a classification or grading scheme. The Australian literature on the economics of classification and/or grading has had a long history (examples include Freebairn 1967, 1973; Bureau of Agricultural Economics 1976; Griffith 1978; and Mullen 1982). These studies indicate that the costs incurred in adoption and use are able to be measured with a reasonable degree of accuracy, and without great difficulty, but the measurement of many of the benefits is very difficult. In particular it becomes obvious on examination of the range of cost data that quality assurance will not be successful in reducing expenses with respect to inspection, as it was originally designed to, but will instead have the opposite effect of increasing costs, particularly in the area of labour. While it is generally argued that the benefits stemming from such a program will more than cover these additional costs, examining the role of retailers and their attitude towards implementing quality assurance is of particular importance as they are the connecting link in the marketing chain between the production side of the industry and the consumer. If the beef retailer is not prepared to adopt the idea of an official quality assurance program the system will not be successful.

3. Research Method and Data Collection

A survey of meat retailers in the New England region of northern NSW was conducted to address the question ‘will the meat retailer be prepared to pay a premium for beef that is quality assured by both the producer and the processor?'. Three steps were required.

3.1 The Proposed Quality Assurance Program

In order to answer the research question, it was necessary to develop a quality assurance program that would satisfy the requirements of the meat retailer (recall that this study was undertaken prior to the development of Meat Standards Australia). It was considered that the best results would be achieved from a quality assurance program that incorporated components from both farm-based and abattoir-based programs. Since there were no combined programs such as this already in operation in 1996, the development of a hypothetical Beef Quality Assurance Program was essential for the research.

Farm-based and abattoir-based programs such as Cattlecare ( Meat Research Corporation 1996b) and AUS-MEAT descriptions (Aus-Meat 1995) were examined, the research literature was surveyed (eg Wythes and Ramsay 1989) and meat research and marketing experts were consulted. After food safety, most consumers are primarily concerned with the tenderness of beef. Thus, it was essential to include those factors in the Quality Assurance Program that contributed to the overall tenderness of beef, as it would be reasonable to assume that meat retailers would be aiming to supply their clientele with the tenderest product possible. However only those carcase measurements considered to be of the greatest importance, and most readily required by meat retailers, were included as the measurement of each component is costly, and valuable resources cannot afford to be wasted.

The fine detail of the proposed Quality Assurance Program was provided to the retailers surveyed, but it is not necessary to report those details here. In brief, the proposal was that the producer provides information for each animal on such factors as source property, age, breed, sex, type of feed (grass fed, supplements or grainfed), frame score, herd health status, vaccination status, and the presence or absence of chemical residues and growth promotants. Each beast delivered to an abattoir should come with a certificate of Quality Assurance provided by the producer. The second requirement of the Program is fulfilled by the wholesaler or processor who purchases the animal. The processor provides the relevant carcase details once the animal has been slaughtered. These measurements are taken by accredited individuals at various points along the processing chain and include carcase weight, eye muscle area, meat colour, meat texture, fat cover, fat colour, marbling score and muscle pH.

With this type of information available to market participants, beef should be able to be sold according to description, reducing the risk of misallocation of resources. However, the process of gaining this information has been costly. While this cost must be recovered explicitly at some particular point along the marketing chain, all participants in the marketing chain will eventually share the burden, as the market adjusts to the new cost imposition, according to the degree of price responsiveness they face. In economic terms, the incidence of the cost depends on the relative elasticities of demand and supply at the different market levels.

3.2 Questionnaire Design

The questionnaire was designed to be brief and straightforward so as not to discourage retailers from responding. It consisted of only 14 questions with the majority asking for simple yes or no answers. First, the respondents' ages were established, to determine if a relationship existed between attitude towards quality assurance, and age. Previous experience with, and current knowledge about, quality assurance was established along with the respondents' general attitudes towards the subject. Finally the survey asked if the retailer would be willing to pay a fee of up to $2.85 per carcase, or a premium of between six and ten cents per kg. This fee of $2.85 was estimated to be the commercial cost of the collection, analysis and release of carcase data that would be necessary to ensure buyers had sufficient knowledge to make judgements about quality assurance (National Carcase Data Service 1995). All but the first question are included in Table 1.

The questionnaire was designed to be brief and straightforward so as not to discourage retailers from responding. It consisted of only 14 questions with the majority asking for simple yes or no answers. First, the respondents' ages were established, to determine if a relationship existed between attitude towards quality assurance, and age. Previous experience with, and current knowledge about, quality assurance was established along with the respondents' general attitudes towards the subject. Finally the survey asked if the retailer would be willing to pay a fee of up to $2.85 per carcase, or a premium of between six and ten cents per kg. This fee of $2.85 was estimated to be the commercial cost of the collection, analysis and release of carcase data that would be necessary to ensure buyers had sufficient knowledge to make judgements about quality assurance (National Carcase Data Service 1995). All but the first question are included in Table 1.

3.3 Data Collection

Independent meat retailers in Australia are responsible for selling almost two thirds of meat to the domestic market ( Australian Meat and Livestock Corporation   1996, p. 19). Given this information it was decided to focus the research on butchers rather than the more versatile supermarket. Also it was considered that it would be of more use to study individual butchers as they are yet to officially incorporate quality assurance into their marketing mix, unlike many of the major chain stores such as Coles and Woolworths who are already undertaking such practices.

The questionnaire was pilot tested on two butchers in the local area before the remainder were distributed. This was to ensure that the questions were easily able to be understood and answered. A total of 47 surveys were mailed out to independent meat retailers throughout the New England area of northern NSW. A copy of the proposed Quality Assurance Program, for reference, along with a covering letter explaining the nature of the research, was attached. In the hope of increasing the response rate it was decided to personally collect each questionnaire rather than rely on them being mailed back. This also provided an opportunity to speak to the butchers on a one-to-one basis to obtain feedback that would otherwise be unavailable.

4. Results and Interpretation

4.1 Results of the Survey

Of the 47 questionnaires distributed, 30 completed copies were received, giving a response rate of 64 per cent. The survey revealed that the majority of the respondents were 40 years of age or more, with almost one quarter of respondents being older than 55. Only one respondent was less than 25. The responses to all other questions are presented in Table 1. Most respondents had had no previous experience with quality assurance, either in the beef industry or elsewhere. Of the seven that had, most stated their experience had been with the meat industry in either abattoirs or with exporting companies. All but one retailer felt that they were confident in selecting a carcase through visual appraisal only, that would meet the needs of their customers every time. That is, they did not feel it was necessary for any official carcase measurements to be taken to be able to effectively select a carcase that would satisfy the demands of their clientele.

Table 1 : Survey Questions and Responses a

a Question 1 on age omitted because of a different format. b Percentages of all answers to that question. c Percentages have been rounded to the nearest whole number.

Half the respondents declared that they were certain their supplier would meet the requirements they specified in a carcase each time, while only 17 per cent of the retailers surveyed admitted that they found a noticeable difference in the quality of meat they offered for sale each week. The remaining 83 per cent said that the meat they offered for sale remained consistent from week to week.

When questioned about their attitude towards quality assurance, all agreed that food safety was an important issue; 90 per cent felt a Quality Assurance Program would benefit the beef industry as a whole; but only 73 per cent thought it would benefit them as an individual. Some 70 per cent of respondents expressed an interest in looking at the benefits that quality assurance could provide for their industry and individual organisations, while 30 per cent were either not interested or unsure.

About one quarter of the meat retailers surveyed saw the new technology, Real Time Ultrasound equipment and Video Image Analysis, incorporated in the program as being a potential problem with the system. About 13 per cent felt it would not cause any difficulties and the remaining two thirds said they did not know.

When asked whether they would be prepared to pay a premium for quality assured beef, 57 per cent said they definitely would pay a premium, 20 per cent said they would not and 23 per cent admitted to being unsure. In response to Question 12, about the willingness to pay a fee of up to $2.85 per carcase for the collection, assessment and release of carcase data, only 37 per cent of respondents answered that they would be prepared to pay this fee. Almost two thirds of respondents answered no, or do not know to this question. A similar response was obtained when butchers were asked whether they would pay a premium of between six and ten cents per kg for quality assured beef. Almost 40 per cent said they would, 50 per cent said they would not, and 13 per cent said they were not sure. So eight of the retailers who said that they would pay an unspecified premium, changed their mind when a specific premium or fee was mentioned.

The majority of retailers surveyed did not specify anything else that they would like to see included in the proposed Quality Assurance Program. Of the few retailers that did comment in this section, several were concerned about the issue of who would pay for the program and suggested that a government subsidy should be provided, or that wholesalers should bear the associated costs.

4.2 Meat Retailer Comments from Personal Interviews

The grading of meat also featured regularly in comments made by retailers, both on paper and in person. A number of butchers were concerned that meat was being advertised, under false pretences, as ‘Quality' beef. They were of the opinion that many of the larger food chains were advertising meat of poorer quality, such as cow meat, as being of the same standard as yearling meat, consequently "taking the quality out of beef sold in Australia." One respondent expressed the need for a colour coded grading system to be established in conjunction with the Quality Assurance Program.

4.3 Why Independent Meat Retailers May Oppose an Official Quality Assurance Scheme

Assuming that a grading or classification scheme would be a natural extension from the implementation of an official Quality Assurance Program, market information would be improved and beef retailers would be forced to face increased competition. Consumers would be able to compare prices of meat between butchers, based on comparable standards of quality. The implication of this for retailers would be that they would have to set prices at a competitive level or else risk losing a proportion of their clientele to other outlets ( Griffith 1974, p.235).

Despite the fact that there is no official carcase classification scheme in the Australian domestic beef market, grading, in a sense, is still practised on the basis of the exchange of informal information between the retailer and the consumer. Retail butchers regularly interpret price information for their customers, and attempt to provide advice on meat quality. "Butchers could be expected, therefore, to oppose official grading since their incomes presumably include at present, a quasi-rent deriving from their skill in selecting meat of the preferred quality by their customers" ( Watson and Parish 1982, p. 340).

If the market for beef was perfectly competitive, it would be reasonable to assume that a grading system would not be necessary as all market participants would have equal access to market information and cuts of beef would be priced accordingly ( Tomek and Robinson 1990, p.129). However, it has been revealed in previous research ( Griffith 1974; Griffith , Green and Duff 1991) that the practices of price levelling and price averaging have occurred in the retail meat trade throughout Australia, confirming the fact that the market for beef is not perfectly competitive, at least in the short run. Price levelling is defined by Watson and Parish (1982) as being the practice whereby retailers vary margins to smooth retail prices over time in the face of fluctuating saleyard and wholesale prices, while price averaging is the practice of averaging margins through spreading costs across all classes of meat in order to minimise the extent of an individual price change.

There are a number of reasons as to why beef retailers practice price averaging and price levelling. Firstly, frequent changes in the prices of beef and the quantity sold each week may have the effect of increasing the sellers costs. Price levelling and averaging help to stabilise the volume sold and prices at the retail level, consequently stabilising retailer's income. Secondly, because price differences in cuts of beef between outlets can be seen as an indication of varying quality, in the absence of an accredited grading system, retailers will be reluctant to vary prices ( Watson and Parish 1982, p.339).

If an adequate grading system at the retail level was able to be established in the Australian domestic meat market, the extent to which price levelling and price averaging is practiced would be significantly reduced through increasing market information and decreasing consumer uncertainty ( Watson and Parish 1982, p. 340). Assuming that a percentage of the meat retailers surveyed for the research do practice price levelling and/or price averaging, it would be reasonable to assume that this could be a explanation for their resistance towards the introduction of an official Quality Assurance Program.

The issue of benefits and costs has also arisen from the survey results, as while the majority of respondents felt that they would receive benefits from the program they did not feel that they should have to pay for them. A proportion of retailers were also under the impression that the industry as a whole would benefit while they as individuals would not. The adoption of such classification programs is dependent upon who will want to pay, and adopt the system if the added cost is counteracted by an added benefit ( Tomek and Robinson 1990, p.130). The beef retailer could be opposed to paying a premium because they are unaware or unsure of the benefits that they will receive from a Quality Assurance Program. The possibility of being able to pass on any premium to consumers, who have indicated that they would be prepared to pay for more certain quality meat, was not mentioned by any of the respondents.

An alternative reason for the respondents showing an unwillingness to pay a premium for quality assurance could be due to a simple lack of knowledge, or an unwillingness to express an opinion on the subject. The respondents ability to assess the usefulness of such a program to them, is somewhat dependent on his/her knowledge and skills in the specific area ( Wilson and Wissemann 1981, p.57). Responses to several of the survey questions imply that this could have been the case. The responses to Question two indicate that a large majority of the retailers surveyed have had no previous experience with quality assurance and would therefore have limited knowledge on the subject. The responses to question ten confirm this opinion, with over 60 per cent of respondents unsure of whether the new technology required for the program to operate would be a problem.

5. Conclusion

5.1 Summary of Results

The results of the study provide an insight into the response the Australian beef industry would face from independent rural meat retailers if it were to introduce a nation-wide, official Quality Assurance Program into the marketing system. In addition the research has attempted to establish the reaction the industry would face from retailers if it were to suggest that butchers cover the associated costs in the form of a premium paid for quality-assured beef.

The research has shown that retailers are expressing an interest in the benefits that quality assurance could provide for them, but they do not hold enough confidence in such a system to show a willingness to pay for it. The survey indicated that a small majority (57 per cent) of respondents would be prepared to pay an unspecified premium for quality-assured beef. However, when the premium was specified to be between six and ten cents per kg, the majority of meat retailers stated that they would not be prepared to pay a premium of this size. Similarly they were not willing to pay a fee of up to $2.85 for the collection, assessment and release of carcase data. Thus any premium that the meat retailer is prepared for quality- assured beef will be lower than six cents per kg or lower than $2.85 per carcase.

A second objective of the study was to determine the ease of adoption that the system would face from independent meat retailers if it were formally implemented. The results in this area appeared to be encouraging as while a large proportion of retailers insisted in the informal interviews that they maintained their own informal Quality Assurance Program, the majority of retailers expressed an interest, in the benefits quality assurance could provide for their business. A similar percentage felt that quality assurance held benefits for both themselves and the industry.

5.2 Limitations and Possible Responses

Independent meat retailers were chosen as the sample for the research as they still sell almost two thirds of beef and veal within Australia. However, by excluding supermarkets from the study, it has meant that the results obtained from the research are slightly biased. This is not seen as being a major problem as supermarkets are already accepting quality assurance as part of their marketing system, while butchers are still in the initial stages of discovering its benefits. Thus education on the subject needs to be targeted at this latter group.

A serious concern with the research is the possibility that the respondents did not read thoroughly enough, to provide an informed opinion, the proposed Quality Assurance Program attached to the survey. Consequently, it could be assumed that their responses were based on information received via the media. While information such as this is important in forming an opinion on the subject it has not been helpful in gaining true and reliable answers about the Quality Assurance Program developed specifically for the study. Increasing the awareness of retailers and other market participants to the benefits of quality assurance could possibly be achieved through a series of workshops such as those held by ‘Cattlecare', the on-farm Quality Assurance Program specifically targeting the beef producer (MRC 1996a).

6. References

Australian Bureau of Agricultural and Resource Economics 1997, Australian Commodity Statistics , AGPS, Canberra (and previous issues).
AUS-MEAT 1995, AUS-MEAT Standard Carcase , AUS-MEAT, Sydney.
Australian Meat and Livestock Corporation 1996, Meat and Livestock Review , AMLC, Sydney, March (and previous issues).
Bureau of Agricultural Economics 1976, Developments in Beef Carcase Classification , Beef Research Report No. 19, BAE, Canberra.
Cameron , D.H. 1995, "Identifying genetic superiority for carcase yield and quality in beef bulls", paper presented to the Droughtmaster Stud Breeders Society, Brisbane, January.
Freebairn , J.W. 1967, "Grading as a market innovation", Review of Marketing and Agricultural Economics 35(3), 147-162.
Freebairn, J.W. 1973, "The value of information provided by a uniform grading system", Australian Journal of Agricultural Economics 17(2), 127-139.
Griffith , G.R. 1974, "Sydney meat marketing margins - an econometric analysis", Review of Marketing and Agricultural Economics 42(4), 223-237.
Griffith, G.R. 1978, "An ex ante evaluation of the National Pig Carcase Measurement and Information Service", Review of Marketing and Agricultural Economics 46(3), 238-257.
Griffith, G.R., Green, W. and G.L. Duff 1991, "Another look at price levelling and price averaging", Review of Marketing and Agricultural Economics 59(2), 97-109.
Meat Research Corporation 1996a , Cattlecare - On Farm Quality Assurance Training Program , MRC, Sydney.
Meat Research Corporation 1996b, Meat Researcher , MRC, Brisbane, July, pp. 13-14.
Mullen , J.D. 1982, "Evaluating a pig carcase classification service using willingness to pay techniques", Review of Marketing and Agricultural Economics 50(2), 181-192.
National Carcase Data Service 1995, Data for Decisions , NCDS, Brisbane.
Palmer , D. 1995, "QA-fact or fiction?", in Cattle Council of Australia Yearbook , Executive Media Pty Ltd, Melbourne, pp. 10-11.
Piggott , N.E., Chalfant, J.A., Alston, J.A. and G.R. Griffith 1995, "Demand response to advertising in the Australian meat industry", American Journal of Agricultural Economics 78(2), 268-279.
Tomek , W.G. and K.L. Robinson 1990, Agricultural Product Prices , Cornell University Press, Ithaca, 3rd Edition.
Watson , A.S. and R.M. Parish 1982, "Marketing agricultural products", in D.B. Williams (Ed), Agriculture in the Australian Economy , Sydney University Press, Sydney, 2nd edition, pp. 326-252.
Wilson , T.D. and A.F. Wisseman 1981, "A note on the attitude of beef retailers to beef carcase classification", Review of Marketing and Agricultural Economics 49(1), 47-59.
Wythes , J.R. and W.R. Ramsay 1989, Beef Carcase Composition and Meat Quality , QDPI, Brisbane.