Omaha Steaks: Carving Out a 21st Century Sales Model

Particularly in today's health-conscious times, consumers are seeking not only "locally-sourced" products but leaner cuts of beef and other protein-filled alternatives.

The company answers that demand by offering gourmet chicken and pork. Omaha Steaks is also the largest direct-to-consumer seller of seafood, according to Simon. The company recently rebranded the product line to World Port Seafood in order to expand its distribution and appeal to customers who might not know that Omaha Steaks sells seafood.

"We haven't seen sales suffer because we've been able to answer that need," Simon says.

Omaha Steaks even created a line of pet treats, including a pet-safe jerky and a "canine cookie" treat.

"Many people will spend more money on their pets then they will on their children. We felt like we needed a couple of offerings," Simon says. "It's a novelty within our line that helps us address customer need."

What's also appealing about Omaha Steaks products is that consumers can choose their portion sizes.

"In the case of a place like Costco they're typically selling a big bulk package, whereas we can offer a very consistent individually portioned aged steak. Our products require a lot less work on the part of the customer," Simon says.

Right now, though, the company's biggest issue isn't the value of social media, competing against the grocery giants, catering to a more health-conscious society, or whether it should launch a wasabi-seasoned pet-safe jerky (in reality, pet jerky tends to be less seasoned, less salty.) What it can't ignore is increasing commodity prices. The severe summer drought that has caused an unprecedented increase in corn and soy prices means that no matter how good the company is at marketing and planning, the economics of the business are likely to change.

"This drought is creating some issues with supply and demand. In the near term, maybe most of 2012, we will see beef prices moderate a little bit, but as we get into 2013 we will see prices go back up. The growers will have taken a lot of their stock to market. And so supply will get tight," Technomic's Karp says.

Karp's outlook is in line with a recent report from the U.S. Department of Agriculture.

"The drought is really going to hit food prices next year," USDA economist Richard Volpe wrote. "It's already affecting corn and soybean prices, but then it has to work its way all the way through the system into feed prices and then animal prices, then wholesale prices and then finally, retail prices."