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BAB427 / MAY 2018

Analytics for Sustainable Products:

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The Case of Sustainable Beef
Background: Enterprise Sustainability
Normally, one associates the word “sustainability” with the environment in terms of the
importance of promoting a green and healthy planet. We consume products to keep us

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alive and to better the quality of our lives. However, to do so, we must balance our desire
for these products against the potential danger for future generations and the planet. The
same is true for any enterprise. Enterprise sustainability is the study of how a business can
endure while balancing profitability, growth, and its impact on the planet. For example, a
business requires resources to produce its products and to survive competition, but at
what cost to the planet and our long-run sustainability? Are there alternative resources
that have less of an impact, but will allow the enterprise to thrive? Sustainability and
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sustainable development are now very popular goals. Individuals and businesses are
becoming more aware of these goals and more accepting of the competitive risks
associated with not accomplishing these goals. One just needs to consider the focus on
“Natural” and “Organic” to realize sustainability goals.1 Do terms like “Natural” and
“Organic” imply “Sustainable”? “Natural” and “Organic” certainly imply “Sustainable,” but
are they really sustainable? “Organic” is USDA-regulated. “Natural” is not.
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To be a sustainable enterprise, the entity must possess five abilities: availability,

dependability, capability, affordability, and marketability.2 This case focuses on three of
these abilities.3 First is capability, which is about performance metrics, performance
measures, and performance management. Second, a quantitative analysis of decision
making using decision trees will be employed to assess the affordability of the costs of the
product, sustainable beef, as it goes through its life cycle. Third, marketability needs to be
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1 Julie Creswell, “Is It ‘Natural’? Consumers, and Lawyers, Want to Know,” The New York Times, February
16, 2018, https://www.nytimes.com/2018/02/16/business/natural-food-products.html, accessed February
2018.
2 Elizabeth Driscoll, Clare L. Comm, and Dennis F.X. Mathaisel, “A Lesson Plan for Sustainability in Higher

Education,” American Journal of Business Education, vol. 6, no. 2 (March/April 2013): 1-22.
3 Background information on the five abilities can be found in Dennis Mathaisel, Joel Manary, and Clare

Comm, Enterprise Sustainability: Enhancing the Military’s Ability to Perform Its Mission (Boca Raton, FL:
CRC Press, Taylor and Francis Group, 2009).
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This case was prepared by Dennis F.X. Mathaisel, Professor of Management Science at Babson College. It
was developed as a basis for class discussion rather than to illustrate either effective or ineffective handling
of an administrative situation. The funding for this case was provided by the Teaching Innovation Fund. It is
not intended to serve as an endorsement, a source of primary data, or an illustration of effective or
ineffective management.
Copyright © 2018 Babson College and licensed for publication to Harvard Business Publishing. All rights
reserved. No part of this publication may be reproduced, stored, or transmitted in any form or by any means
without prior written permission of Babson College.

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 Analytics for Sustainable Products: The Case of Sustainable Beef
BAB427 / MAY 2018

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considered, since public acceptance of sustainable products must be considered before a

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company decides to develop and promote sustainable products.

Background: Sustainable Beef

In the last decade, U.S. consumption of beef declined about 15 percent, primarily due to
the retail price. But, in the next decade or so, beef consumption is expected to grow by

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about 12 percent as prices decline.4 Such growth has the potential to undermine
sustainability efforts because industrial cattle farming pollutes the air, water, and soil.
Large cattle ranches produce manure that releases over 400 gasses into the atmosphere.
These gasses include hydrogen sulfide, methane, ammonia, and carbon dioxide.5 In
addition to atmospheric pollution, an increase in human consumption of beef is associated
with alarming antibiotic resistance in humans.6 So, growth in beef production is great for
the economy, but at what cost to the environment? Fortunately, some farms do use

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responsible, sustainable agricultural practices. This case is about one of those farms,
Prather Ranch.

Environmentally sustainable farms cannot be economically viable if consumers do not

purchase their products. When consuming sustainable beef, typical reactions by
customers are: it tastes great; it is produced without destroying the environment or
threatening public health; and sales support responsible farmers who choose to use sound
agricultural practices.7 Such reactions illustrate that there is an intrinsic value to
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sustainable products, and that consumers are willing to pay more for them. This is in line
with promoting the methods, practices, and entrepreneurial ideas that serve the target
market. By sharing past experiences and promoting the positive reactions of customers,
enterprises are encouraging other customers to try the sustainable products and
potentially have the same experiences. Many top restaurants serve sustainably sourced
meat, because consumers desire it. This has given rise to the popularity of the “farm-to-
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table” movement.

Sustainably raised meats also have many nutritional benefits. They contain less fat, fewer
calories, and higher levels of essential omega-3 fatty acids, vitamin E, beta carotene, and
other important nutrients. Furthermore, sustainably raised meat is produced without the
use of growth hormones, nontherapeutic antibiotics, or unsavory feed additives that
undermine public health.8 These are very strong arguments that should encourage
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consumers to consider sustainable meat.

4 Flavious Badau, “U.S. Beef and Pork Consumption Projected to Rebound,” U.S. Department of Agriculture,
Economic Research Service, September 6, 2016, https://www.ers.usda.gov/amber-
waves/2016/september/us-beef-and-pork-consumption-projected-to-rebound, accessed February 2018.
5 Canadian Farm Safety Association, “Fact Sheet. Manure Gas Dangers,” Ontario, Canada, 2002,
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http://nasdonline.org/static_content/documents/48/d001616.pdf, accessed February 2018.

6 Sherwood L. Gorbach, “Antimicrobial Use in Animal Feed – Time to Stop,” The New England Journal of

Medicine 345, 2001, pp.1202–1203.

7 Grace Communications Foundation, “Sustainable Livestock Husbandry,”

http://www.sustainabletable.org/248/sustainable-livestock-husbandry, accessed May 2017.

8 The Gracious Pantry, “ORGANIC OR SUSTAINABLE? WHAT’S THE DIFFERENCE?”, March 25, 2016,

https://www.thegraciouspantry.com/organic-vs-sustainable, accessed May 2017.

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 Analytics for Sustainable Products: The Case of Sustainable Beef
BAB427 / MAY 2018

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Sustainability “Stamps”

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“Sustainable” and “organic” are different. One does not necessarily imply the other.9
Industrial farms that are not sustainable can produce organic products. Thus, consumers
need to be educated about the process of identifying sustainable beef to know the
difference. One can accomplish this with “stamps.” There are three sustainability stamps
that currently exist in the beef marketplace:10

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1. Grass-Fed: Grass-fed cattle should be fed a natural diet of grass and not grains
or hormones, which can cause digestive issues or sometimes be life-threatening to
cattle.
2. Pasture-Raised: Pasture-raised cattle should be raised outdoors, not in a
confined environment.
3. Organic: There are regulations for what can be classified as organic. Organic beef
must meet the U.S. Department of Agriculture (USDA) organic standards, and it

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must be certified by a USDA-approved agency. Organic beef cannot be grown using
synthetic fertilizers and chemicals, cannot be genetically modified, and cannot be
irradiated.11

It is important to mention that beef products from a farm having only one of these stamps
may not be considered sustainable. However, a product from a farm that can combine at
least two stamps is “likely” a sustainable farm, but it is not guaranteed.
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Prather Ranch
Prather Ranch, located in Northern California, was a 30,000 acre ranch that was known
for sustainable farming. Prather’s name was synonymous with a “progressive and
sustainable ranching philosophy.” It was also well known for its “superior branded beef.”12
Certified by the Humane Farm Animal Care nonprofit organization, Prather provided a
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clean and stress-free environment for its animals and workers. It did not feed its cattle
antibiotics, which can lead to antibiotic overuse in humans. The ranch further provided
pharmaceutical and bio-medical companies with bovine materials, which were used for a
variety of medical components: collagen, bones, heart valves, pericardium, tendons,
pituitary glands, and skin. As of 2009, Prather had won many awards: the Leopold
Conservation Award (2007 and 2008), the Environmental Stewardship Award Program
(2005), the Governor’s Environmental and Economic Leadership Award (2005), and the
California Commercial Producer of the Year Award (2003).13
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The Prather Ranch Decision: Sustainability Stamps

Is it in the best interest for Prather Ranch to promote and educate consumers about
sustainability? If Prather’s product differentiation strategy was to preserve the
environment and the health of its consumers, then the answer should be yes. Then, the
next question was how? Again, Prather’s strength came from its ability to produce various
kinds of sustainable beef. Remember, sustainability is about “ability.” If customers could
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9 Ibid.
10 Grace Communications Foundation, “The Meat to Eat,” http://www.sustainabletable.org/1649/the-meat-
to-eat, accessed May 2017.
11 Ibid.
12 Prather Ranch, http://pratherranch.com, accessed March 2017.
13 Ibid.

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 Analytics for Sustainable Products: The Case of Sustainable Beef
BAB427 / MAY 2018

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depend on Prather to produce different kinds of sustainable beef, then Prather’s long-run

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(enterprise) sustainability could be assured. But, what was the market for the different
“stamps” of sustainable beef, and how did Prather decide on which were the most
appropriate of the three stamps for their target market? This is where business analytics
plays a role.

This case is a lesson in developing a business analytics model to help Prather make these

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decisions. Keep in mind that the purpose of using analytical models to make such decisions
is not that the models will produce better results than humans, but that models assist
decision makers in quickly evaluating the sensitivity of the results to changes in the inputs.

Assume, for this case, that Prather was considering one of the three sustainable beef
“stamp” products (Grass-Fed, Pasture-Raised, and Organic) for an upcoming marketing
promotion. In reality, Prather may wish to promote all three, but, for marketing purposes,

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it may make sense to temporarily highlight only one of its product lines in the campaign.
This strategy was no different from that of a restaurant promoting “specials.”

Prather was well-known for the three stamps: Grass-Fed, Pasture-Raised, and Organic.
For an upcoming campaign, it needed to decide on one. Based on history, it normally cost
Prather $100,000 to promote one of its products in a campaign. Another decision to
consider was whether or not to conduct a consumer survey of the potential market prior
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to launch. Assume the cost of a market research survey was $25,000. The results of the
survey would indicate two possible levels of consumer interest: high demand (optimistic
interest) and low demand (pessimistic interest). Potential revenue projections, based on
estimated demand levels, were as follows for each of the three stamps (Table 1):

Table 1
Prather Ranch Revenue Projections
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Sustainability High Demand Low Demand

Stamps Projection Projection
Grass-Fed Beef $3,000,000 $300,000
Pasture-Raised $2,000,000 $200,000
Beef
Organic Beef $4,000,000 $400,000
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Thus, as an example, if interest (demand) in Grass-Fed Beef was projected to be high, the
projected revenue was $3,000,000 versus $300,000 if demand was projected to be low.
(The time period, e.g. weeks or months, for these projections was not a concern in this
case.) Prather’s track record on product promotion was that 44% of their products
generated a high level of interest/demand. However, it was the 56% of projected low
demand that was of concern. A review of their records indicated that 40% of the time a
market research survey would result in a predicted high demand, and 95% of these cases
would result in a high demand market. In contrast, there was only a 10% chance of a high
demand market when the survey predicted a low demand. It seemed that Prather should
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heed the market survey results, but with a 44% high demand rate without the survey, they
were questioning whether the cost of the survey was justified.

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 Analytics for Sustainable Products: The Case of Sustainable Beef
BAB427 / MAY 2018

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Analysis Questions

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1. Specifically, what is the decision for Prather? Hint: there are two phases, or steps, in
Prather’s decision-making process.
2. Without use of any analytics or quantitative information, how would you go about
making the decision for Prather?
3. Based on the data provided in the case, build the decision tree for Prather Ranch,

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identifying each decision, outcome, and payoff, and assigning the proper probabilities
to each of the outcome branches.
4. Compute the Expected Monetary Value (EMV) for each alternative. Based on the EMV,
what course of action would you recommend for Prather that would maximize the
EMV?
5. How would you use the business analytics model you developed in Question 3 to
respond to questions regarding the uncertainty in the revenue and probability

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projections?
6. Discuss the risk associated with the decision. How would you quantify risk?
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No
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