Buying Beef Is a Game Of Monopoly
Lots of Brands but Few Suppliers
Americans have never had this many options in the beef aisle. That’s certainly what the offerings lining supermarket shelves would seem to suggest. And yet, behind the carefully branded facade of new packaged meats is a troubling reality: the illusion of choice.
Americans, as it turns out, have never had so few options in deciding what company makes their meat.
“The U.S. meat industry is more consolidated today than ever before,” said Christopher Leonard, author of The Meat Racket.
Indeed, the top four U.S. beef packers — Tyson Foods, JBS USA, Cargill and National Beef — control almost 80 percent of the U.S. market, Leonard said. Fifty years ago, that number was 25 percent, the Census Bureau said.
A similar shift has played out in other U.S. industries. The soda industry, despite its many branded offerings, is locked up by two companies — Pepsi and Coca Cola, which control 72 percent of the market.
But meat is a different and more dangerous game. Consumers are increasingly concerned with how their meat is produced. That is borne from a demand for more humane practices — the meat industry’s malpractices are well documented — and from a heightened awareness about what people are consuming and the potential for large-scale contamination. Consolidation ultimately leaves shoppers with fewer options for where to buy their meat.
Last week, Tyson Foods won the bidding war with Pilgrim’s Pride in the food fight over Hillshire Brands. Tyson reportedly offered $7.7 billion — about $1 billion over its rival.
So why has the beef industry tended toward near monopolies? Because of a healthy appetite for just the kind of acquisition that Tyson is forging with Hillshire, which makes Jimmy Dean sausages, ballpark hot dogs, deli meats and lots of other popular, branded meat products.
“We want to buy this business for what it can become, not just for what it is now,” Tyson chief executive Donnie Smith told investors in a conference call.
What Hillshire can become is the latest vertical integration by the nation’s largest meat company. Unlike Tyson, which primarily packages the sort of unbranded meats sold in restaurants, cafeterias and supermarkets, Hillshire focuses on the end product — branded, value-added, packaged meats. Think pepperoni, sausage and hot dogs — most of which just happen to be made with Tyson’s, or one of its competitor’s, unbranded offerings.
Tyson has been gobbling up its meat suppliers, buyers and competitors for decades, and, in doing so, forcing other beef behemoths to do the same. Brazil-based meat packer JBS, the second-largest beef seller in the United States, churns out 3.3 million pounds of supermarket-ready meat each day.
“Companies like Tyson are swallowing up all the independent brands,” Leonard said. “It’s not only true of beef, but poultry, too.” Tyson, mind you, was the king of chicken before it moved on to American beef. That appetite began in earnest in the late 1970s, and has largely shaped the American meat landscape. It’s why today, more than ever before, choice in the meat aisle is merely an illusion.