Omaha Steaks aims for meaty holiday sales

Omaha Steaks is hoping this holiday season will cap another year of meaty sales.

The 98-year-old family-owned business that first sent steaks across the country by train has had to contend with online sales overtaking traditional catalogs and a trend toward diets that put meat on the back burner, not to mention the fact that beef in particular has fallen out of style with some eaters, particularly in the U.S.

Yet, Omaha entered this holiday season still at its perch as the industry leader in a still relatively small category and has kept the idea of shipping rib-eye and roasts by mail both novel and desirable. It's done so in part by expanding its product line, opening storefronts and catering to a shift in consumer preferences by offering smaller portion sizes, a line of grass-fed beef and more options that emphasize convenience for time-starved customers.

The holiday season is Omaha's most lucrative time of year. Omaha is a privately held company, and it declined to share many figures related to its growth. But it did say that on peak days in the holiday season, the company ships 10 times the volume of a normal day. And in the entire holiday period, which Omaha defines as October through New Year's Eve, Omaha Steaks generates one-third of its annual sales, which topped $450 million last year. Omaha was the No. 1 food mailer in 2015, and No. 22 among all categories, according to Target Marketing Magazine's annual list of top 50 mailers, which ranks direct mail campaigns by volume. Omaha was the only food company to make the top 50.

Awareness of the brand  "is what really helps them more than anything," says Bob Goldin, vice chairman of food research firm Technomic. "They are the best known and they have a reputation for quality."

The company encountered significant hurdles along the way. Even though it caters to an affluent, meat-loving audience — average order value is around $110 — Omaha has had to combat significant changes in consumer tastes. The biggest potential threat: Americans are eating less beef. Consumption has fallen from 28.1 billion pounds in 2006 to 24.1 billion pounds in 2014, according to the U.S. Department of Agriculture.

To stay ahead of the decline, Omaha has expanded into other proteins, including turkey, chicken and even bison. It also continues to give customers other options besides meat, such as chocolate, wine and fresh vegetables.

A key to Omaha's continued success can be found in the holiday-induced clamor for the ultimate gift that says, "I'm thinking of you." For Omaha's more than 3 million active customers, the answer remains a filet mignon.

"The whole food-gifting boat tide has risen, and we’ve gone with that," says Todd Simon, senior vice president of the company and a fifth-generation family owner along with his cousin Bruce Simon, who is CEO. He adds that the interest in experiential gifts, particularly among Millennials, "bodes well for a product like ours."

Not everyone is always happy when a cooler of meat arrives at their doorstep, though. Dozens of Yelp reviewers harshly call out the company for the quality of its meat, smaller portion sizes and perceived high prices. Several call the meat "tasteless." Omaha sources its beef from around the Midwest — it is primarily grain-fed, although Omaha introduced a grass-fed beef line in November. When asked about the Yelp reviews, the company pointed out its 100% satisfaction guarantee that vows to replace your purchase or refund your money if you're not satisfied.

At a time when many retailers are still struggling to fully grasp, and capitalize on, shoppers' growing preference for transacting online and on mobile, and restaurants and grocery stores are also scrambling to keep up with a litany of start-ups aimed at delivering food straight to your door, Omaha Steaks has deftly made the jump from mail-order catalog company to one that does half its consumer business online.

The shift has relied on a series of strategic business decisions over decades, Simon says. Omaha was notably early to Web sales, allowing customers to place orders online starting in 1990.

"As a direct marketer and direct shipper, the Internet was pretty easy to get our heads around," Simon says, "especially since we already had the back-end fully in place."

Scrapping a business plan to cater to the food service industry over American households also proved crucial. In 1980, 80% of Omaha's business was sales to food service companies. Today, 95% of its business comes from sales to individual consumers.

The decision paved the way for Omaha to stand out among fewer options and allowed it to start making a name for itself in neighborhood shopping centers. Omaha had opened its first store in 1976, but in 1985, it started expanding those stores outside of its hometown of Omaha. Today, it has 72 locations across 27 states.

The fact that people are eating less beef — a trend partly fueled by higher beef prices — in some ways may actually help Omaha Steaks and similar direct-sale steak companies such as The Kansas City Steak Co., and Chicago Steak Co., says Darren Seifer, food and beverage industry analyst at research firm The NPD Group.

"A company like this is able to position themselves as an indulgence," he says. "It’s now kind of a special experience."

It's the same reason steakhouses and premium hamburger sales, "are doing just great," Technomic's Goldin says. "No one objects to getting a nice steak."