COOL Is Back- But Will It Sell More Beef?

By Will Verboven Contributing Editor

It’s a topic your humble writer always treats with some trepidation as it concerns something that is the business of the United States, not Canada. It’s also an issue that is decades old and on which I have written columns many years ago. It involves U.S. Country of Origin Labelling (COOL), and it looks like déjà vu all over again. The latest COOL reincarnation is called the American Beef Labeling (ABL) Act and is before Congress with the likelihood that it will pass.

This one is designed to clarify what constitutes “Product of USA” and “Made in USA” and is intended to be voluntary; at least, that’s my understanding. The act also requires the proposed labeling to comply with the World Trade Organization (WTO) decision that struck down the previous COOL legislation. That may tie up implementation for years as the WTO operates at a glacial pace. I believe the United States, Canada and every ot

her country have the right to label products produced in their own countries as they define that production. But as it would be – traditional businesses, like the beef and cattle trade between Canada and the United States, put a unique twist on product labeling.

Veteran readers would understand that trade situation from past discussions this topic has raised. Earlier COOL attempts were struck down by the WTO to reflect that long-standing beef and cattle trade reality. But to no one’s surprise, the beef industry always seems to attract political mischief, which in my view, has little benefit to the fickle consumer or the long-suffering cattle producer.

Proponents of past COOL legislation and the proposed ABL Act cite surveys that American consumers overwhelmingly prefer beef born, grown and processed in the United States. No surprise there; Canadian consumers overwhelmingly prefer Canadian-sourced beef. Does that mean beef from either country is better or worse? Nope, the only difference is patriotism, which is always admirable. Would ABL mean higher cattle prices for U.S. cattle producers? Past studies have shown those hopes to be negligible at best.

Canadian cattle producers, feedlot operators and processors are price takers in the U.S. market. With less than 10 percent of the market, they have very little pricing power. Here’s a developing situation, the Canadian cattle herd is declining and would see more U.S. feeder and slaughter cattle heading north to Canada. That would have a positive impact on U.S. producer prices, but it would not be the result of the ABL Act.

Will there be a Canadian Beef Labelling Act to thwart those U.S. imports? Readers might have noticed that labeling legislation has little impact on prices since they don’t increase beef consumption. Increasing consumption is what the North American cattle industry should strive for.

In one of my previous lives, I was involved in surveys to determine consumer preferences regarding the country of origin of meat cuts. As one might expect, consumers invariably preferred the local product over imported. However, when consumers were presented with a relatively cheaper but similar imported product, most chose the imported one and were prepared to buy more meat.

I know there are merchandising approaches that can change the process, particularly from a retailer’s aspect. For instance, Canada Beef Inc., the merchandising arm of the Canadian cattle industry, works at making the “Canada Beef” label into a high-end, mystic label that gets premium prices over U.S. beef in the American market. The irony is that Canadian beef is essentially identical to U.S. beef – but that’s the fun of brand marketing. Some have asked, why spend millions on U.S. and Canada branded beef, and all the political energy on non-tariff barrier legislation when declining beef consumption is the real issue for the North American beef industry? But alas, I have been beating that drum for over 25 years.

There is every expectation that the U.S. Congress will pass the ABL Act; politicians everywhere always vote for patriotism regardless of any unintended consequences. With the proviso that ABL has to be WTO compatible, that may make it an ultimately futile attempt. But all that will do is instigate another attempt a few years hence.

What might be different today is that the average consumer is much more concerned with the cost of living, which has steadily increased. Much of that concerns supply chain issues, including higher food prices (justified when producers receive them). But higher prices only annoy grumpy consumers, and they have a threshold of price pain for beef. If extra ABL labeling costs partially cause that pain, then the beef industry may be contributing to declining beef consumption. Those same consumers are quite willing to switch from beef to cheaper pork and chicken if the price is right.

Major U.S. producer organizations seem to understand the bigger picture, that being no problem with patriotism, but let’s not shoot ourselves in the foot. Worse yet, do we have to repeat history again for no benefit to the hard-working producer?