Butchers

Inside a warehouse in the Northern California city of San Rafael, you’ll find a spectacular abundance of bovine flesh. There are giant walk-in freezers full to the brim with rounds, flanks, chucks, and loins, in various states of aging.

In the prep station, workers use vertical band saws to trim hanger steaks and ribeyes.

BRYAN: We’re not, generally speaking, a Tuesday night dinner. We’re an anniversary, a birthday, a holiday, a celebration, when it’s natural to get a big steak.

That’s Bryan Flannery. He and his daughter Katie run Flannery Beef, a butcher shop and meat distributor. They specialize in beef, which they source, cut, and trim for restaurants all over the country. On average, Americans eat around 83 pounds of beef per year, per person.

Before all of that meat gets to their tables, it passes through the hands of a butcher like Bryan, Katie, or one of their 12 employees. And turning a 1,400-pound cow into an edible — and economically viable — product is more challenging than it might appear.

BRYAN: Anybody can pick up a knife, but people that can do it correctly are not easy to find. To cut portions, you’ve got to look at that piece of meat. You’ve got to gauge the size and the shape. They’re thick, they’re thin, they’re round — and each piece is different. It really takes a lot of thinking.

For the Freakonomics Radio Network, this is The Economics of Everyday Things. I’m Zachary Crockett. Today: butchers.

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Many decades ago, before supermarkets became ubiquitous, buying groceries was a very different experience. You’d go to a separate market for each of your needs — a grocer for vegetables, a fishmonger for seafood, and your neighborhood butcher for meat. That’s the environment in which Bryan Flannery’s dad, Bryan Sr., got his start.

BRYAN: He just got out of high school, got a job in a meat market in San Francisco. And over a course of, I guess probably 15 years worked up from sweeping the floors to actually being the general manager. At their peak, they had 80 butchers processing 120 head of cattle a week!

In 1963, Bryan Sr. opened his own butcher shop in San Francisco. They gained a reputation for their beef — and, according to family lore, they even sold steaks to Alfred Hitchcock.

BRYAN: My mother worked there, my sisters worked there, my two brothers worked there. So that’s how I got introduced to it.

When Bryan Jr. inherited the meat shop with his brothers, he broke off and started his own arm of the business — a distribution company called Flannery Beef. And eventually, he talked his daughter Katie into joining, too.

KATIE: I actually got as far away as I could. I decided to go to the East Coast to study art history. But, with family businesses, you’re always part of that orbit.

Today, Katie’s all-in on the business. She even has a piece of beef as the background on her phone. As the company’s co-owner, she’s helped usher Flannery Beef into the age of e-commerce. You can go on their website and order ribeyes, porterhouses, New York strip steaks, and filet mignons for home delivery. But the bulk of the company’s business is selling steaks to more than 400 restaurants around the country.

KATIE: They’re mostly accounts that the industry would call white tablecloth restaurants. So it’s your high-end, steakhouse-style experience. It’s not an Outback Steakhouse or Applebee’s or anything like that.

Flannery Beef sells around 7,500 pounds of meat every week — something like 10,000 12-ounce steaks. And the role they play is very different from that of the neighborhood butcher shop Katie’s grandfather started 60 years ago.

KATIE: In the past, a butcher would be incredibly knowledgeable from slaughter to final product. Nowadays, I think there’s more segmentation between the slaughter side and the butchering side. 

In the old days, butchers would actually go to the slaughterhouses themselves and buy whole cow carcasses. They’d hang them on big hooks and cut them up in the back of their shop. Today, the supply chain of America’s beef is a bit more complicated.

BRYAN: The first step in the cattle industry is what they call a cow-calf operation. And that’s basically a ranch or a farm that does the breeding. And they will keep the cow and the calf together until the calf is mature enough to be able to be weaned off of the cow. That type of operation will put the calf up for sale.

After six to nine months, calves reach a weight of 400 to 600 pounds. Some are killed and processed for veal. Others are sold alive, for around $2 per pound, to an operation called a backgrounder ranch or a stocker.

BRYAN: They will take that same calf and then they will isolate it and feed it a formula and raise it to a much larger animal, probably 800 pounds.

From there, the cow often goes to a specialized feedlot, where it feasts on grains and bulks up to as much as 1,400 pounds. Around a year and half into its life, it’s sold to a slaughterhouse. And this is where things get a little tricky.

KATIE: I think a really good way to look at the beef industry in America is to look at it as an hourglass. You have a lot of people at the top of this hourglass who are raising animals for beef production. And at the bottom of the hourglass you have a lot of people who are consuming beef for dinner. The choke point are the slaughterhouses.

This part of the supply chain is almost entirely controlled by 4 big companies — JBS, Cargill, Tyson, and National Beef. These firms own dozens of regional slaughterhouses, and they have a tight grip on the way that beef is sold in America. Cattle from all over the country are funneled into these slaughterhouses, where huge teams of butchers break them up for distribution.

KATIE: It’s like, it’s like an assembly line, except instead of putting something together you’re taking it apart. They eviscerate, guts out, hide off. Split it down the middle. The carcass will chill, then it’ll go down the production line to be broken down into the smaller primals.

Primals are the first big cuts of meat from the cow during the butchering process, and they follow the natural muscles and seams of the animal. They have names like rib, chuck, round, loin, brisket, short plate, and flank. A slaughterhouse pays for the full weight of a 1,400 pound cow. But at the end of their butchering process, they’re left with much less.

BRYAN: That’ll be around 450 to 500 pounds of salable weight for that entire carcass. And, of that, max is 80 pounds of steak.

As all of this beef makes its way through a slaughterhouse, it’s also inspected by an official from the U.S. Department of Agriculture. As a part of that inspection, the plant has the option of paying for its meat to be graded. If you’ve bought beef at a supermarket, you’ve probably noticed there’s a sticker on there that says “prime,” “choice,” or “select.” These are grades assigned by the USDA, based on the yield (the amount of usable lean meat on the carcass) and also quality — the tenderness, juiciness, and flavor. The latter has a lot to do with the meat’s marbling, or the way that the natural specks of white fat are distributed through the meat.

BRYAN: The way that they grade is they look at the eye of the rib and they determine the quantity of marbling and the positioning of it.

KATIE: That’s where the computers have come into play. They actually take a picture and they’ll analyze and they’ll spit out this percent of fat to this percent of lean to then help you make that decision.

Prime is considered the best grade. It’s only assigned to around 10 percent of all assessed beef. But not all Prime cuts are of the same caliber. There are different subrankings, based on how much yield a buyer can get.

BRIAN: Prime 1 would be the Holy Grail. It’d be beautiful marbling with no excess fat. Prime 3 would be beautiful marbling with a ton of fat, which is a loss from a producers point of view.

Slaughterhouses sell a large portion of this meat to distributors, who, in turn, sell it to grocery stores. Some of it is sold as primals, which are cut up and sold over the counter. But the role of the supermarket butcher has changed significantly in the past few decades. Because much of the meat you buy at the supermarket today isn’t fully butchered onsite. It’s what’s called case ready — it’s cut, trimmed, packaged, and labeled — either at the slaughterhouse, or a third-party processing plant. Then it’s sent to the store ready to sell as-is.

BRYAN: They’re doing a little bit of, of onsite cutting but, very little. It’s a much, much reduced version of the old-fashioned butcher shop.

Many of the steaks sold to supermarket chains are less pricey Select-grade cuts. And instead of paying to get the meat graded, some retailers come up with their own branding. For years, Safeway sold some of its beef under the name Rancher’s Reserve.

BRYAN: A lot of them will come up with unique branded names, because they don’t want to say, “This is USDA select.” 

The pre-packaged steaks at supermarkets also use some tricks to keep meat looking fresh — like pumping packages with carbon monoxide.

KATIE: The color of meat is very dependent on the presence of oxygen. So that’s where this modified air packaging comes into play, because the consumer associates bright red with fresh good meat. And it’s not entirely true. Like, you can have something that’s browned out a little bit and there’s absolutely nothing wrong with the product. 

Of course, not all beef ends up at supermarket chains. Slaughterhouses also sell directly to mid-sized independent butcheries like Flannery Beef. And the meat that goes there experiences a very different journey before it gets to your plate. That’s coming up.

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Every week, Katie and Bryan Flannery fill out a detailed menu of all the beef cuts they want from the slaughterhouse.

KATIE: I can tell my rep at the slaughterhouse I need 50 cases of boneless rib-eyes. I want 100 cases of bone-in ribs. I want 30 cases of briskets, I want them all prime, etc., etc..

BRYAN: We’ll order ribs. We’ll order short loins. We’ll order chucks for our grinding. We’ll order tenderloins, the filet. So you’re buying cases and they’re roughly on average 80 pounds per case.

The USDA posts a weekly report of the going rate for 100 pounds of various primal cuts of beef. But the prices are constantly in flux. And they can be affected by a wide range of factors, like droughts, grain prices, cattle supply, and even the time of year.

KATIE: Fourth quarter of the year is when prime beef goes absolutely through the roof, especially ribs. Everybody is thinking Christmas. Everybody’s thinking rib roast. So your prices will go up, you know, three, four bucks over a month or two.

BRYAN: That’s equivalent to about a 25 to 28 percent rise over what it was last month. I mean, that’s major. 

The competition to score the best cuts has gotten fiercer.

BRYAN: So like, like a Costco as an example, I’m not picking on them, they’ll come in and they’ll order a million units of filet. So boom, it just sucks all the air out of the market. So we have to anticipate not only is the price going to go crazy, but it’s going to be the question of whether you can get the supply at this time of year.

When Bryan and Katie do manage to get the cuts they need, the beef is transported to their warehouse in a giant refrigerated meat truck, unloaded, and put out on racks. Flannery Beef specializes in dry aging — a process where meat is left out in a temperature-controlled room, typically for a period of two weeks to a month. During this process, enzymes in the meat break down, making it flavorful and tender. When we visited the Flannery Beef warehouse in late November, we walked through a freezer with $135,000 worth of beef in it, in various stages of the dry aging cycle.

 KATIE: You’ll see one rack that has that kind of bright cherry red meat on it, and that’s fresh product. So that’s product that has just recently been opened and put onto the rack. 

We also saw something we didn’t expect.

KATIE: You’ll look at a different rack that’s got much darker, moldy meat on it. And the mold is really unique to our process here. Partly our process, partly our location. We really kind of lean into the mold. I think it gives a phenomenal flavor profile to dry aged beef that you’re missing if you don’t have that. It’s like a buttery, nutty kind of warm smell. I know that sounds crazy. 

Once the primals are appropriately aged, they have to be cut down into individual steaks. And a skilled butcher can break down a particular piece of meat in a few different ways. Take, for instance, the short loin — the big piece of beef that comes from the back of a cow.

KATIE: The anatomy of the short loin is that on one end of it, it has the muscle that makes up the New York steak and the muscle that makes up the filet mignon. So, if you cut it and it has both a section of the New York and the filet mignon, that’s considered a porterhouse. The difference between a T-Bone and a porterhouse is the width of the filet. So, from the short loin, you could get a porterhouse, a T-Bone, a bone-in New York. There’s a ton of different ways that you can work that one primal.

A butcher has to know what kind of dollar value they’ll get from each primal cut. Flannery Beef might buy a 20-pound short loin from a slaughterhouse for around $290. If it’s shaped just right, they can get three 32-oz porterhouse steaks and five bone-in New York steaks out of it. Those steaks might add up to around $600 in revenue. Setting prices for those steaks also involves a complicated financial calculation. A 10-ounce filet mignon, for instance, runs around $50 — more than double the price of flat iron steak. That’s partly to do with demand, since it’s prized for its tenderness. But it also has to do with supply.

KATIE: You have two tenderloins per animal. Out of each tenderloin, you’ll get maybe 6 center-cut steaks. So you’ll get 12 filet mignon steaks per animal. That’s it. That’s insane. And think of how many people are out there ordering filets.

When pricing their steaks, Flannery Beef also has to account for product loss throughout the butchering process. During the dry aging stage, a cut of meat loses 10 to 15 percent of its weight. And when that meat is cut up into steaks, anywhere from 20 to 50 percent of the weight is lost from all the tendons and excess fat that gets trimmed off. That 20-pound short loin they paid $290 for might only yield 10 or 11 pounds of meat.

KATIE: I take our sales at the end of every single week — every single SKU that we have, I have like a trim-loss multiplier. So if it’s a portion cut New York, I know that our guys’ trim loss is about 33 percent when they’re cutting New Yorks. 

All the leftover scraps from meat are called bench trim. Flannery Beef used to grind it up and sell it as hamburger meat — but Bryan says that’s no longer financially viable. Trim that’s intended to be resold is subject to additional USDA testing — it requires meat to be traced back to its origin source. And for mid-sized operations like Flannery Beef, the extra manpower and paperwork isn’t worth it.  

BRYAN: It’s taken a big percentage of potential profit off the table because that was a way to recover the cost of some of that trim.

Sometimes, Flannery Beef will pay a tallow company to come collect all of their trim, and it’s used to make soap. But much of the time, it’s just thrown away. Trim is considered an overhead expense in the business. And it’s not the only one. There’s labor, rent, and a $13,000 monthly utility bill for all the freezers. At the end of a typical month, Flannery Beef’s net profit margin works out to around 8 percent. That may sound pretty small for all the work. But when you’re selling 10,000 steaks a week, it’s not a bad living. And, let’s just say, it comes with some pretty juicy perks.

KATIE: Every week there’s something new coming up, you know, it’s a different problem to solve. You get to be creative. You’re constantly thinking, moving forward, adjusting. It’s exciting. It’s definitely not a static job.

CROCKETT: Do you guys eat steaks like seven days a week? 

KATIE: No! Because, it’s like, you don’t want too much of a good thing, you know. A really good steak, I’m happy with like two, three times a month, honestly. That’s it. I don’t want to overdo it.

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For The Economics of Everyday Things, I’m Zachary Crockett. This episode was produced by me and Sarah Lilley, and mixed by Jeremy Johnston. We had help from Daniel Moritz-Rabson and Sam Anderson.

BRYAN: Filets generally have minimal flavor. They’re very, very tender, but they have minimal flavor.

KATIE: They’re also ugly as hell.

BRYAN: One of the worst looking steaks.