Omaha Steaks: Focus on Fulfillment
On the surface, it’s a typical American success story: an immigrant family fleeing religious persecution arrives in the United States and starts a business; 85 years later it’s not only successful, but still family-owned and operated.
Today Omaha Steaks is a meat dynasty, making the merchandising and fulfillment challenges it faced from the beginning uniquely significant. How it continues to survive those challenges highlights strategies for other catalogers hoping to conquer the perishables market.
Omaha Steaks enjoys the advantage of processing most of its own product offerings. The company sources its—literally—raw material mainly from Midwestern producers, and then ages, trims and packages the beef at its own production plants in Omaha.
This offers two benefits for the cataloger. First, it easily can project orders or change projections based on real-time sales analysis. Todd Simon, senior vice president, estimates that Omaha Steaks turns its inventory eight to 10 times a year. And though the company outlines buying plans a year in advance, thanks to on-site manufacturing it can modify those plans almost daily.
Second, it can offer customers a no-back-order policy that guarantees the items they order will be in stock.
“It’s not like we’re an apparel company that’s ordered a certain amount of T-shirts from Hong Kong, and when the supply runs out we can’t sell them,” Simon says.
In the rare instances when an item isn’t available, he says, the company either manufactures the item or substitutes a better one. The company ensures not only the availability, but also the quality of its meat from when it arrives at the plant until it gets to the customer.
Beyond adhering to the meat industry’s standards for buying beef, Omaha Steaks requires its meats to be inspected upon arrival at the plant and again during processing. For example, each steak cutter is responsible for his or her own quality control, and each is empowered to reject any product not worthy of the Omaha Steaks name.
On the customer end, each package delivery includes a registered number proving its inspection by a staff member. And the company offers a 100-percent satisfaction guarantee. Fortunately, says Simon, the company’s high standards for quality control keep this from adding significant cost. In addition, he continues, the sharp eye on quality control helps boost both customer goodwill and repeat business.
A Cut Above
Since its inception in 1917, Omaha Steaks has aged all of its own beef cuts. While this now serves as a business differentiator, back then it simply was a tradition carried from Latvia by the company’s founders.
According to Simon, the process of aging involves holding meat in a cooler set at precisely 28 degrees for three to four weeks, allowing its natural enzymes to break down the meat’s connective tissue, and giving it a more tender texture and robust flavor. Though aging separates Omaha Steaks’ cuts from those in a grocer’s freezer, it also slows down the production process.
The ability to visually communicate the product’s taste, texture and quality is essential for any food catalog, and at Omaha Steaks that boils down to one thing: photography.
“It’s absolutely critical to our presentation,” Simon says. As a result, photography is allotted a large portion of the company’s budget, as the cataloger mostly outsources to professionals who specialize in food photography.
After a photographer is contracted, the creative team deliberates about whether to shoot a product in its raw or cooked state—a decision ultimately made by a customer’s association with the food itself, as tracked by real-time sales analysis.
The creative team then may choose which accessories to complement the item; for example, a steak may be paired with a potato side dish or seasoning package. But for the most part, says Simon, the catalog displays its offerings by category (steaks, chicken, fish, appetizers, desserts, etc.), much like a restaurant menu. They pay special creative attention to the catalog’s core offerings—among them: filet mignons, New York strips, sirloins and burgers.
However, even the estimated 10 percent to 15 percent new catalog offerings presented each year are subjected to strenuous review. First, managers propose an idea, either original or based on feedback from customers. New ideas then are vetted by a well-trained internal team of taste-testers, and if deemed sufficient, go on to be considered from a production standpoint. This process has yielded the development of sales successes such as bacon-wrapped top sirloins and marinated steaks.
But even after such labored consideration, some items fail, though often for different reasons from products sourced from a dry goods business. “Sometimes a product fails because a supplier goes out of business, or because the market for that item is doing badly that year,” Simon says.
Dry Goods vs. Dry Ice
Shipping steaks also presents several challenges when compared to shipping dry goods. Simon calls the Omaha Steaks distribution system an “overnight success” that’s taken 40 years to perfect.
“Once the product is in the box,” he continues, “it’s pretty much the same as any other operation.”
Getting it in the box is another story. To begin with, the boxes themselves are made of styrofoam, not cardboard, adding significant cost. Next, they’re filled with dry ice to maintain the meat’s temperature. Because of the ice’s hazardous nature, distribution workers must be properly trained so they don’t get injured while handling it. Also, dry ice must be used just in time for packaging, because it will evaporate if left outside for any length of time.
The challenge extends even to facilities. Instead of a large warehouse, Omaha Steaks stores its products in a large freezer, which presents an array of maintenance and temperature considerations.
Fortunately, the company’s ongoing perfection of its distribution center ensures relatively smooth fulfillment during holiday seasons. “From our standpoint, a holiday is just a step up from regular days,” says Simon.
“A step up” may be an understatement. During the Christmas season, Omaha Steaks triples its pick-and-pack lines and operates 24 hours a day, seven days a week.
Looking ahead, Simon notes that Omaha Steaks will continue innovating product around its customers’ needs and wants. “We’re constantly exploring. Right now we’ve got a lot on our plate, no pun intended.”
A Steak in History
Few catalogers can parallel their growth alongside that of a nation’s, but Omaha Steaks is one of them.
The company was founded in 1917 by J.J. Simon and his son, B.A., who, along with J.J.’s wife, fled from Latvia in 1898 to escape religious persecution.
Upon arrival in the United States, the family took a west-bound train and got off in Omaha, NE, because it looked similar to the farm country they had left. They bought a building and began a company with only a cooler and a freezer to its name (Table Supply Meat Co.), which itself was borrowed from the building’s previous owner.
“Certainly in 1917 no one thought we’d be this multimillion-dollar company,” asserts Todd Simon, descendant and company senior vice president. “I think [the owners] just wanted to do their best for themselves and their family.”
Table Supply’s offerings began growing in popularity, and in 1924 the family had to move its business to a larger building. There it began a small cattle-breaking operation, where a small crew divided full cattle carcasses into smaller cuts and sold them to local markets, national grocery chains, hotels, restaurants, and other institutions.
Railroads and Restaurants
B.A.’s son Lester became company president in 1946 and presided over what is arguably the company’s greatest period of expansion. Table Supply’s products found a new audience on the Union Pacific Railroad, where they were served to customers traveling between Omaha, Los Angeles, San Francisco and Seattle.
Restaurants around the country began requesting the meats, and the food service business added sales centers in the burgeoning Southeast, Southwest and Southern Midwest regions of the country.
Rising demand from the general public prompted Lester to establish the company’s first mail-order venture in 1952, shipping product via train and packaged in ice-filled, wax-lined cardboard boxes. The meat cuts themselves were wrapped in white butcher paper.
Three technological advancements made during the 1950s and ‘60s helped Table Supply Meats expand its direct mail operations even further: direct parcel shipping, polystyrene shipping coolers and vacuum packaging. In 1963, company executives sent their first direct mail fliers and catalogs, and a year later added color and more product offerings to the mailings.
The consumer business continued growing, so in 1966 the company bought an even larger plant and headquarters, one with more room for beef breaking (cutting whole carcasses into tenderloins), order processing and freezing. With the new facilities came a new name: Omaha Steaks International. Aptly so, because the company’s efficiency and success had gained global renown. During the 1960s, groups from countries such as Chile and France came to tour the company’s facilities. Omaha Steaks even played host to seven Russian meat-packing experts who toured the operation in 1960, despite the ongoing Cold War.
On the home front, business kept expanding. Spurred by customer demand, Omaha Steaks opened its first retail store in Omaha in 1976, and in 1985, that division took a step out of Nebraska to Houston, TX (there currently are 75 Omaha Steaks retail stores across the United States).
In 1975, the company opened its first inbound call center, and then added an outbound telemarketing department three years later. In 1979, it became one of the first companies in the country to offer a toll-free customer service number.
Omaha Steaks continued its technological pioneering as the country sped into the Information Age. As early as 1990, the company offered customers who were connected to CompuServe the opportunity to order products electronically, and in 1995 it established a Web site. In 1999 it combined its global and technological reach with a Japanese Web site.
Keeping It in the Family
Today, three members of the fourth generation of the Simon family and two of the fifth are involved in the business.
According to Simon, all the members intend to keep the family business traditions alive, and often look to their elders for advice. “They tell us every day: ‘Don’t get complacent. Keep innovating and keep customers happy.’ That’s what we tell everyone here, and it seems to have worked.”
Omaha Steaks at a Glance
Headquarters: Omaha, NE
Primary Products: Aged beef, pork, lamb and veal
Employees: 1,800, with 1,000 more hired during the Christmas season
Annual Company Revenues: $300 million
Sales Generated from Direct Mail: 50 percent of consumer business
Number of Retail Stores: 75
Number of Divisions: Five
Spinoffs: A la Zing, an online prepared-foods retailer
Todd Simon, senior vice president, outlines for other catalogers of perishable products two strategies that have contributed to Omaha Steaks’ success:
- Ensuring both the high quality and availability of your product gains customer trust and boosts repeat business.
- Good quality photography in any catalog is crucial, and even more so for catalogers who sell perishable items. Allot a relatively significant portion of your creative budget to expert photography.
Omaha Steaks Buyers
24-month Buyers: 1,828,262
Median Household Income: $50,000
Age: 55 and older
Gender: about evenly split
Average Order Size: $75
List Manager: Direct Media
Contact: Sheryl Benjamin, (203) 532-2449