Karan Beef is the largest supplier of premier-quality beef in SA. It is the first beef supplier to build a brand around its own product and it is poised to tackle the mighty Australian and Brazilian suppliers in the discerning Middle East market.
The company is armed with recent research from the Medical Research Council which states that SA-bred A-grade beef is considered the healthiest in the world. Unlike most A-grade beef consumed in the US, which has up to 35% fat content, SA's A-grade beef has 13% fat.
Few would have expected this from the small group of drought-stricken beef farmers who in the late 1960s were forced to operate feedlots - penning the animals and feeding them grain.
The story of Karan Beef is one of incremental innovation, driven by an obsession with quality and a vision of where the company and market were going.
Karan's original 100-head facility in Heidelberg, 70 km south of Johannesburg, accommodates 80 000 cattle on any one day, about a quarter of all feedlot cattle in SA.
Though the increase in the size of the herd is phenomenal, peers in the SA Feedlot Association (Safa) say the real Karan accomplishment is the integration. The company has taken beef from the range to the retailer on a perfectly planned and scientifically controlled journey. It is a model incorporating both social and environmental responsibility and puts Karan among the world's best producers.
Many of the integrated feedlots, such as Bullbrand and Sparta, now operate on a model similar to Karan's, if smaller, and also have abattoirs, deboning plants, feedmills, cold houses and distribution centres.
Karan hosts regular fact-finding delegations from the US, Argentina, Australia, the Middle East and most recently China, all eager to know the reasons for the company's success.
Some, like the custom-developed software package that manages the entire operation, are willingly shared. Others, like the scientifically developed formulation of the animals' food and handling techniques designed to keep the cattle calm and relaxed at all times, are trade secrets.
Karan and many other beef producers started getting their act together when Safa was formalised in the early 1970s. Deregulation and the subsequent demise of the meat boards in the late 1990s enabled Safa members to buy abattoirs. This encouraged innovation by giving farmers the first link in the chain that eventually tied in distribution, wholesaling and retailing.
Ivor Karan quickly set himself apart from his competitors with his business approach to farming. His feedmill, for instance, is one of the most modern in the world. The feed system is run on PLC technology (programmable logic controls) and is a completely computerised operation.
As a result, the farm can consistently mix precise formulations of food. It also enables Karan's animal scientists to test and refine the formulation all the time.
Rather than buying calves on auction, as is the norm, Karan employs agents who deal directly with farmers to find the right beef to bring into the Karan system.
The company is scientific about how it receives these new calves. Inoculations, dips and starter packs of nutrients are immediately administered. "Some of these methods have been adopted from other models and perfected by us," says Karan, who is chairman of the company.
A more recent innovation was a decision to transform Karan Beef into a brand, rather than simply selling a high-quality commodity to retailers.
Marketing manager Graham Simonsen says this decision was driven by Ivor Karan's view that the market was changing. "As consumers become more discerning they look for a brand they can trust. There is no strong brand in the fresh meat business."
If someone is looking after the brand, "supermarkets and butcheries are then free to focus on selling and educating consumers". Simonsen believes this is important as younger consumers, in particular, are not well informed about cuts of meat and ways to prepare them.
This approach has been welcomed by some customers, Pick 'n Pay and I&J in particular.
Mandy Murphy, I&J's marketing manager for beef, is a Karan customer. The Karan stamp is prominent on all I&J's added-value beef products. "Karan has every health and hygiene rating necessary, including ISO 9001 and 14001 and HACCP [hazardous analysis and critical control points]," she says. For I&J the Karan stamp on its packaging is an additional seal of approval and makes good marketing sense.
The company's focus on development, says Murphy, is evident in its product offering. Among many other firsts, it has mastered the difficult process of individually wrapping and packaging beef patties.
"From a quality perspective, what is particularly attractive to I&J is that the meat can be traced from farm to fork, and any problem is identified and isolated. It gives us the assurance of consistent supply, which is critical in our business."
Meat processing is the latest step in Karan's value-adding chain. Beef is marinated, pickled, par-cooked or turned into hamburger patties, sausages, biltong, and boerewors.
"Innovation doesn't have to be in the technology or development," says Simonsen. "For example, because our halaal process is strictly monitored and trusted, it prompted us to develop a halaal biltong, and demand is soaring way above our forecasts."
Karan is not too proud to replicate overseas successes that will work in SA. One of these is "tray ready" beef. Each pre-aged cut is packed separately in a plastic tray, put into bulk boxes and delivered, with either the Karan brand or the retailer's own mark.
However, Karan's production successes would be of little value without Safa's recent steps to counter plummeting sales. A 2003 consumer study by ACNielsen revealed a drop in beef consumption, mainly among women and older people, because of the perception that eating beef was not healthy. An R8,5m advertising campaign was commissioned and flighted on SABC 1, with support on other channels, to put beef back on the menu.
Hettie Schonfeldt, an academic nutritionist employed by the Agricultural Research Council, supports the claim that A-grade SA beef has only 13% fat. "SA's lean beef is perfectly acceptable as part of a balanced diet," she says.
Safa executive director David Ford says: "With so much conflicting information out there, it's time to inform consumers of how good SA beef is."
The message worked: 10% of beef consumers (notably, including young females) shifted from medium beef consumption (once a week) to heavy consumption (three times a week).
Ford recently presented the campaign in Ireland to a symposium of other beef-producing countries that are fighting their own battles against waning sales. One of the few exceptions is the US, which has had help from an unlikely source - the high-protein Atkins diet. The American Beef Association attributes much of the 15% growth over the past three years to Atkins.
Over the past five years Karan has focused on carving out its space in the local market. Just 5% of SA beef is exported, mainly to the Indian Ocean islands, the Middle East, Switzerland and other parts of Africa. However, without compromising the local market, Ivor Karan believes the time has come to focus attention on the export market.
The Middle East is the immediate target. "The market is big, it's accessible and our product enjoys a high degree of acceptance there already," says Simonsen. He acknowledges that it is well supported by Australian and Brazilian exporters, which also supply high-quality halaal beef. "Product differentiation and competitive pricing are all we have to go on," he says.
Pricing is a challenge for Karan and other SA beef exporters. "We don't have the high-quality grazing of some of our competitors. We have perfected the feedlot process because we had to - not because we want to. But obviously this adds to our costs," says Simonsen.
"We could have done things cheaper and made more money," he says. "But that is not all this company is about."
Ivor Karan is also keenly aware of social responsibility. There is a modern agricultural village on land adjacent to the feedlot. Each staff member has a home, and land for small-scale crop farming and raising livestock.
Social responsibility extends to the environment. A wetland and wildlife sanctuary borders the farm. It is not all altruistic; the wetland, home to 13 of Africa's 18 indigenous waterfowl species, acts as a natural filtration system, purifying any accidental run-off from the feedlot. Karan adheres to the ISO 14001 standard that governs wetlands; the water it puts back in the river downstream from the feedlot is cleaner than the water it takes out upstream.
