Where's The Beef? Tariffs Create Complexity For Protein Providers
It's no secret that tariffs directly affect the price of imported goods, which can lead to higher consumer prices and alter trade dynamics and international relations. What may not be so apparent is how the protein industry would be hit particularly hard by the escalating tariff wars. The dwindling number of cattle – and small farms – in the U.S., as well as the consolidation of the protein production under four major corporations, is forcing smaller protein providers to think outside the box to remain competitive.
Valor Provisions is no stranger to this adversity and is committed to supporting American farmers and ranchers who are dedicated to regenerative and ethical practices, ensuring a resilient food system. Thankfully, founder Patrick Montgomery is also no stranger to adversity and his special operations background has helped him tackle pressing supply chain issues that directly impact his business.
Patrick Montgomery, Founder of Valor Provisions
Valor Provisions
'Being a member of special operations means you must be able to outthink the adversary on the battlefield,' said Montgomery. 'This is the best carry over to business. In a world of common practice over common sense, it leaves room to maneuver against slow moving large corporations.'
The inherent risk and the sobering perspective of special ops is also not lost on Montgomery.
'Those willing to try out and deploy with special operations have come to terms with the fact they might fail and at worst die. They also are taught what a bad day looks like. It's not a bad day of sales. It is a flag draped casket containing one of your brothers. These are great lessons to apply in business. How to take weighed risk without paralysis from analysis. And how to not be overcome by the stress and emotion associated with a start-up.'
Is a trade war the right approach to ensure the U.S. remains competitive on the global stage? Is there a more balanced approach to consider?
Montgomery believes a better place to start would have been with the SEC and FTC sharpening their teeth to break up duopolies and oligopolies in the U.S.
'I can't name a single industry in the United States where more than five businesses don't control 60% of the market share. In my opinion, the food industry is the best example of how a consolidated market can negatively impact the consumer.'
Montgomery believes ironclad legislation needs to be passed barring foreign entities from controlling critical infrastructure through ownership of business in America such as food. As a result, a free market for good ideas to flourish into thriving businesses might be restored.
If passed, tariffs will create short term turmoil for independent protein providers like valor, however, there might be long term benefits if market dynamics play out the right way.
It's important to remember the U.S. has the lowest cattle inventory in the United States since 1951. American ranches exiting the business due to bankruptcy, no replacement for the elderly rancher, drought, natural disasters, or land prices creating a higher ROI than farming or ranching are the main culprits.
'If these tariffs are passed, and now meat companies start looking for domestic cattle inventory, it is going to continue to drive up beef prices to new record highs,' said Montgomery. 'In addition, you are going to see cow/calf producers sell off their herds because of the increased incentive of record high cattle prices, reducing cattle inventory further.'
However, Montgomery believes domestic farmers, ranchers, and investors will get back into cattle as prices reach new record highs and in a few years, inventory of fat cattle increases, driving down the price of beef to a more moderate level.
'I set up Valor Provisions model to thrive in a turbulent protein market,' said Montgomery. 'The goal of the company is constantly reducing the gross margin needed for Valor Provisions by selling protein to pass those savings on to the consumer and the producer.'
One tactic Valor is utilizing to ride out these turbulent times is a 'one-time, lifetime fee' (currently $100) that goes up as demand for Valor Provisions goes up. It's a way for early adapters of Valor Provisions to look back on their purchase of their membership 'as an investment they are proud of,' according to Montgomery. When Valor has influxes in demand and cannot serve the customer adequately, availability is shut down. When the membership returns for purchase, it will be more expensive.
'I set up Valor Provisions model to thrive in a turbulent protein market,' said Montgomery. 'The goal of the company is constantly reducing the gross margin needed for Valor Provisions by selling protein to pass those savings on to the consumer and the producer.'
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