Oct. 23, 2003, 6:47AM
Bullish beefeaters bite into restaurants' profits
By DAI HUYNH, Houston Chronicle
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Ask Houston chefs about beef prices, and eyes roll.
"It's killing us," Sambuca Jazz Cafe chef Carl "C.J." Johnston moans. "It's gotten to where every time we sell beef, we lose money."
While diners are on a beef binge, restaurants are on a beef diet. Rising prices have affected the cost of throwing a steak on the grill, prompting restaurants here and across the country to rethink their menus and even strategically discourage diners from ordering beef.
"When you come to my restaurant, the waiters are going to push the fresh seafood specials," Johnston confesses. "If we sell equal amounts of seafood and equal amounts of beef, we'll be OK. We've got to get creative because it's not economically sound right now to raise prices."
Six months ago, a 10-ounce beef filet cost Johnston $8. Today, he's paying $10.60, and by December, he expects to pay $12 or more for the same cut.
"It's scary," he said. "But can we not serve beef and stay open as a restaurant? I don't think so. In Houston, Texas, you've got to have beef."
Several factors have boosted beef prices.
The United States shut down cattle imports from Canada after a lone cow was diagnosed with mad cow disease in May. According to the National Cattlemen's Beef Association, Canada provided 7 percent of our beef supply prior to the ban. Although the U.S. government has partially lifted the embargo, the amount coming in is shy of earlier levels because live Canadian cattle are still barred.
"But that's just a small part of it," said Rick Hamilton of Chicago-based Allen Bros., which supplies beef to high-end restaurants nationwide. "This has actually been going on for several years. There's been a steady decline of cattle because of drought conditions (in Nebraska and Kansas). The ranchers have nothing to feed them on. The number of cattle on feed has dropped by 8 percent. Right now, they're holding back heifers to build up stock. But it'll take 30 months before we really start to see results."
While cattle production has slackened in the last decade, the demand for beef has increased.
Casual steakhouses saw a 12 percent rise in consumer spending over the past two years. And U.S. demand for beef has increased 10 percent since 1998, Texas Beef Council marketing manager Russell Woodward said.
The reason?
"People are very confident in the safety of beef," Woodward said. "Now they've got permission to consume it."
Blame Dr. Atkins.
"We did a little survey," said Texas Land & Cattle Steak House President David Franklin, "and it indicated that 30-40 percent of our customers are on the (high-protein) Atkins diet."
Beef supplier Hamilton fields phone calls from distressed chefs daily.
"I feel their pain," he said. "Right now, many are taking beef off the menu and replacing it with pork and pasta. Some steakhouses are also entertaining the idea of raising prices."
"Oh God, it's ridiculous," Cafe Annie executive chef Ben Berryhill said. "We're losing money with anything beef on our menu right now. We're against raising prices because people are so conscious about spending right now, so we haven't raised prices. But we're not offering as many beef dishes like we used to. We've cut back to one beef dish a week. We used to offer three at a time."
At Churrascos restaurants, Argentine-style grilled steaks account for half of total sales.
"I'm crying," owner-chef Michael Cordua said. "It's worse than gas prices. We're paying about 25 percent more compared to last year. And the more selective you are in the beef you want, the higher the price of the meat. We're not willing to compromise our quality because our reputation rides on churrasco (the grilling style), so these are not merry times."
While chefs wring their hands over mounting prices, consumers continue to enjoy beef without feeling squeezed, despite a slight increase in retail prices.
According to the latest figures from the U.S. Department of Agriculture, the national average retail price for beef in July was $3.08 per pound, compared with $2.84 last year.
Restaurants and retailers are absorbing most of the costs, Hamilton said. But if beef prices continue to rise, the cost of dining out is likely to follow.
"We're all interested in making a reasonable return. Inevitably, if our margin is compromised, we have to look at our prices," said Rick Weber, vice president of marketing and sales for Morton's steakhouses.
For now, most restaurants are resisting the urge to raise prices and are exploring other options, such as buying beef in bulk.
"Having a very large cooler is extremely nice," Brennan's executive sous chef Chris Shepherd says. "Fortunately we are a large established company and have the capital and storage capacity to buy that way. We started looking in early September, and it's a daily watch on the market. It can be somewhat stressful at times ... because you could be talking about thousands of dollars."
He also may add other red-meat alternatives to his menu, such as buffalo or venison.
At Sambuca, chef Johnston offers a surf-and-turf platter.
"Rather than selling a 12-ounce steak, you're selling a 6-ounce filet with a 6-ounce lobster tail," he says. "It's all about counterbalancing. Want to know something ironic? Lobster tail by the pound is cheaper than (prime) steak right now."
Industry watchers expect beef to soar through the end of this year and into the next.
"Everyone is wondering when it's all going to stop. If I can nail this, I can be on a yacht in the Bahamas," Hamilton says. "I just don't see any light at the end of the tunnel right now."
"Bullish beefeaters bite into restaurants' profits"
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