What was once a gas station staple snack product in the bulk bin has somehow grown into a C-store monster that sits at the top of the “premium snack” category. In the process, beef jerky has alienated a lot of consumers due to its seemingly ever increasing cost… Let’s take a look at “why” beef jerky is so expensive and what Nebraska Star Beef is doing to overcome that challenge of the current jerky market with Lucky® Beef Jerky.
Beef jerky has been a staple food item in man’s diet since time immemorial. Only recently has the process been commercialized and turned into a consumer product that is as much about flavor and style as it is about nutritional value. People used to eat to live…now, many live to eat and in addition to providing necessary nutrition for their flesh-vehicle. Lots of folks want to be entertained in the process of fueling.
But why is it SO EXPENSIVE?? The short answer is that it’s very expensive to support the supply chain that is required to transport and place it in tens of thousands of retail locations. The other reason is the very nature of the product itself. Shrink. Let’s dive a little deeper into both; starting at the top.
Beef Jerky production starts with…Beef. Beef is, and has always been, an expensive protein. Traditional beef jerky typically starts with a cut called “round” and it is typically trimmed to a state described in the beef industry as “denuded”. Denuded rounds typically cost around $5 per pound. Denuded rounds are then sliced into pieces from 1/4” to 3/8” thick and placed in a vacuum tumbler with seasonings and water. This part of the process imparts the flavor, seasoning and process time all of which add additional cost to the beef. Now for the really expensive part – cooking. Cooking cuts in two directions. In the process of cooking the beef, it will lose approximately half of its weight right out the smoke stack. That means that rounds that started as $5.00 are now worth well in excess of $10.00 per pound and we haven’t even talked about packaging or production labor cost. So, on to packaging and labor. A nice ziplock pouch like most jerky is packaged in these days will cost in the neighborhood of $.15/pouch. Labor, from start to finish, is typically $1.50 per 3oz bag. Let’s add that up… 1 pound of finished jerky will turn into 5.3 – 3oz bags. At $10.00/pound, that is $1.89 for 3oz of beef jerky. Now, we add the packaging and labor cost, which total $1.65, to 3oz of jerky and we have a total hard cost of: $3.54 per 3oz bag of jerky sitting on the loading dock at the manufacturer.
Shipping to the distributor will typically add $.10 per bag. The distributor is going to need to make a minimum of 15% for their time, trouble, warehouse, and transportation services. The 3oz bag now costs $4.19.
Next stop is the C-store or other retail outlet. The C-store has the ultimate responsibility for selling the jerky to the retail market, with this responsibility comes risk. That risk is mitigated in two ways. 1st a nasty thing called a “guaranteed sale” which covers faulty product…and more importantly, product that reaches its “code date” without selling. What this boils down to is that if product hits its “code date” or the “best by” date, the manufacturer is required to replace the product with “fresh” product free of charge to the retailer. That can get expensive if product does not sell through quickly. It’s a horrible business practice for small producers like Nebraska Star® Beef… The second way the retailer mitigates their risk is to charge significantly more margin to sell the jerky than the distributor or manufacturer make. Retailers also typically work in “points of margin” as opposed to a “percentage mark up”. What’s the difference, one might ask…well, the difference is that a 50% mark up increases price by half of the item’s cost…(a 50% mark up would raise the price from $4.19 to $6.25). 50 points margin…means the cost of the product is doubled, in other words, a 100% mark up. This is also described as “keystone margin”. Now the 3oz bag of jerky is on the shelf in the store with a price tag of $8.38 cents. Sound familiar??
The deck is not stacked in favor of the manufacturer, especially small manufacturers. Larger, more efficient manufacturers have figured out ways to reduce cost, which also typically reduces quality and nutrition. Things like sugar are added to help stabilize active water and keep the product heavier – as the less weight that goes out the smoke stack…the more jerky goes into bags for sale. These are all nuances that will help over extremely large production batches. It is virtually impossible for small producers to be competitive.
We tried to compete in this market for a number of years. It cost a lot of money and generated very little “real” business. We made the decision to go a different direction last year.
We stopped working with expensive retail partners and moved all of our focus to selling our jerky products to highly valued “business to business” clients as well as on our website and our amazon.com account. It has been a good move. Doing this allowed us to reduce the price on our jerky so that we can offer free shipping and still make enough money to justify maintaining the beef jerky product line.
At www.luckybeefjerky.com you can get a 3oz bag of PREMIUM slab style beef jerky for $5.50 or a 1.5oz bag of the same jerky for $3.50. We can’t compete with the big boys on their home court – the “C-Store” – but we can on the internet.
Whether you’re stocking up on snacks for back to school or just to make sure you’ve always got plenty of healthy, nutritious snacks on hand for a rainy day, www.luckybeefjerky.com is your one stop shop – and we deliver right to your door. That kind of service can’t be found at any “Convenience” Store…