September 27, 2013 / 7:51 PM / in 4 years

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

WINNIPEG, Manitoba, Sept 27 (Reuters) - Privately owned Canadian hamburger chain A&W will buy only beef from cattle raised without added growth hormones or steroids, a move that adds costs but taps into growing consumer interest in how food is prepared.

Vancouver, British Columbia-based A&W Food Services of Canada, known for its Teen Burger, dancing bear mascot and root beer, launched its “Better Beef” promotional campaign this week.

“What we’ve observed from our customers is there is a lot more interest in the food they’re eating, where it comes from,” A&W chief marketing officer Susan Senecal said in an interview on Friday.

“We’ve discovered that things like no hormones, no steroids are very, very important to our customers, remarkably so.”

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

A&W calls itself Canada’s second biggest burger chain with 791 outlets. It is separate from the U.S. restaurants that operate under the same name and it licenses the A&W trademarks from A&W Revenue Royalties Income Fund.

A&W’s campaign comes as the way food is produced becomes an increasingly prominent issue for restaurants, grocers and consumers. Denver-based burrito chain Chipotle Mexican Grill Inc is one of the most well-known restaurant companies that uses 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 in St. Louis. “We’ve seen hamburger chains in the past like Hardee’s and Jack In The Box realizing, ‘we can’t compete with McDonald’s and Burger King on this low-quality, cheap food - we’ve got to take it up a notch.'”

Growth promotants help ranchers and feedlots raise more beef using less feed.

The company has worked on its plan for 18 months, lining up suppliers in Canada, the United States and Australia. Senecal said A&W’s beef costs will climb, but it has no plans to raise burger prices. “I think we’ll get lots more customers and sell lots more burgers,” she said.

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

Canada is the world’s 11th biggest beef producer, according to U.S. Department of Agriculture data.

The Canadian Cattlemen’s Association says all Canadian beef is “safe, wholesome and nutritious.” In a statement, it said Canadian ranchers have used growth promotants for more than four decades, and the products are approved by the country’s health department.

“Science shows that the amount of hormone in a serving of meat from a treated animal is virtually indistinguishable from the amount of hormone in an untreated animal,” said CCA spokeswoman Gina Teel.

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

Meat processors have also been examining how cattle are raised.

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

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