Canada burger chain A&W taps demand for hormone-free beef


By Rod Nickel

WINNIPEG, Manitoba, Sept 27 (Reuters) - Privately ownedCanadian hamburger chain A&W will buy only beef from cattleraised without added growth hormones or steroids, a move thatadds costs but taps into growing consumer interest in how foodis prepared.

Vancouver, British Columbia-based A&W Food Services ofCanada, known for its Teen Burger, dancing bear mascot and rootbeer, launched its "Better Beef" promotional campaign this week.

"What we've observed from our customers is there is a lotmore interest in the food they're eating, where it comes from,"A&W chief marketing officer Susan Senecal said in an interviewon Friday.

"We've discovered that things like no hormones, no steroidsare very, very important to our customers, remarkably so."

Privately held A&W, which has annual sales of about C$850million ($825 million), said it is the only national burgerrestaurant in Canada to source only hormone-free beef. Itsburger rivals include McDonalds Corp, Burger KingWorldwide Inc and The Wendy's Co.

A&W calls itself Canada's second biggest burger chain with791 outlets. It is separate from the U.S. restaurants thatoperate under the same name and it licenses the A&W trademarksfrom A&W Revenue Royalties Income Fund.

A&W's campaign comes as the way food is produced becomes anincreasingly prominent issue for restaurants, grocers andconsumers. Denver-based burrito chain Chipotle Mexican Grill Inc is one of the most well-known restaurant companies thatuses organic ingredients and antibiotic-free meat when possible.

"You see more and more companies trying to go that route,"said Steve West, a restaurant industry analyst at ITG, based inSt. Louis. "We've seen hamburger chains in the past likeHardee's and Jack In The Box realizing, 'wecan't compete with McDonald's and Burger King on thislow-quality, cheap food - we've got to take it up a notch.'"

Growth promotants help ranchers and feedlots raise more beefusing less feed.

The company has worked on its plan for 18 months, lining upsuppliers in Canada, the United States and Australia. Senecalsaid A&W's beef costs will climb, but it has no plans to raiseburger prices. "I think we'll get lots more customers and selllots more burgers," she said.

But West said A&W will have to raise prices at some point toreflect its higher costs unless it's willing to absorb a slimmermargin, which is unlikely.

Canada is the world's 11th biggest beef producer, accordingto U.S. Department of Agriculture data.

The Canadian Cattlemen's Association says all Canadian beefis "safe, wholesome and nutritious." In a statement, it saidCanadian ranchers have used growth promotants for more than fourdecades, and the products are approved by the country's healthdepartment.

"Science shows that the amount of hormone in a serving ofmeat from a treated animal is virtually indistinguishable fromthe amount of hormone in an untreated animal," said CCAspokeswoman Gina Teel.

The decision is aimed to satisfy a consumer preference, andA&W makes no claims that beef without added hormones or steroidsis more healthy or nutritious, Senecal said.

Meat processors have also been examining how cattle areraised.

Tyson Foods Inc, the largest U.S. meat processor,and Cargill Inc said in August that they would haltpurchases of cattle fed the growth enhancer Zilmax. Tyson saidit was worried about cases of cattle with difficulty walking.

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