Perishables Buyer August 2012 : Page 24
ROUNDTABLE: MEAT A COSTLY CONUNDRUM Higher meat prices are impacting consumer purchasing behavior. Sector experts describe how retailers can best move meat in a tight economy. BY RICH MITCHELL editor-in-chief A T A Higher meat prices are impacting sales of different varieties of proteins. Photo by Rich Mitchell he retail cost of meat has been ris-ing steadily over the last few years, causing many shoppers to cut their consumption. The average price per pound for the 52 weeks ending 12/25/11 was up 8.5 percent versus the year-earlier period, ac-cording to Hoffman Estates, Ill.-based Fresh-Look Marketing Group. Overall meat pound sales, meanwhile, were down about 6 per-cent. Four meat experts detail the state of the industry and the ways that meat merchan-disers can effectively operate. Trevor Amen is director of market intelligence for the Cen-tennial, Colo.-based National Cattlemen’s Beef Association; Patrick Fleming is director of retail marketing for the Des Moines, Iowa-based National Pork Board; William Roenigk is senior vice president for the Washington, D.C.-based National Chicken Council; and Kari Underly is president of Range Inc., a Chicago-based fresh meat and perishables research, education and marketing firm. August 2012 • Perishables Buyer 24
A Costly Conundrum
Higher meat prices are impacting consumer purchasing behavior. Sector experts describe how retailers can best move meat in a tight economy.
The retail cost of meat has been rising steadily over the last few years, causing many shoppers to cut their consumption. The average price per pound for the 52 weeks ending 12/25/11 was up 8.5 percent versus the year-earlier period, according to Hoffman Estates, Ill.-based Fresh- Look Marketing Group. Overall meat pound sales, meanwhile, were down about 6 percent. Four meat experts detail the state of the industry and the ways that meat merchandisers can effectively operate. Trevor Amen is director of market intelligence for the Centennial, Colo.-based National Cattlemen’s Beef Association; Patrick Fleming is director of retail marketing for the Des Moines, Iowabased National Pork Board; William Roenigk is senior vice president for the Washington, D. C.-based National Chicken Council; and Kari Underly is president of Range Inc., a Chicago-based fresh meat and perishables research, education and marketing firm.
PB: What is triggering the increase in meat prices and what is the effect on the retail sector?
Amen: Among the factors putting pressure on meats are lower supplies, growing global and domestic demand and higher input costs. That includes a reduced cow herd over the last couple of years as a result of severe drought in the south and plains.
Fleming: Corn prices have quadrupled over the last few years and soybean costs also have risen. Soybeans and corn are part of the mixed diet for hogs and the higher price eventually gets passed on to consumers.High corn prices results in part from the ethanol policy that began in the early part of the 21st century and which created another demand for corn. Rising energy prices also are contributing to higher operating costs.
Roenigk: 2011 was the worst year financially in memory for the chicken industry. A half-dozen suppliers filed for bankruptcy and many other companies lost money and cut production. As a result, there will likely be about 2 percent fewer chickens produced in 2012.
Underly: U.S. meat producers are exporting so many products that it is impacting prices domestically. The export market to such places as India, China and the Pacific Rim countries is huge.
PB: What effect are higher meat prices having on consumer purchasing behavior?
Fleming: Whenever shoppers face pricing pressures, they get smart in how they spend their money. As a result, the meat industry needs to look closely at the proteins they’re promoting and how often, and then make adjustments if necessary. Consumers are stuck in the looking-for-value mode and I don’t see that changing anytime soon.
Roenigk: Consumers are in a general holding pattern.They were burned the last few years because of higher prices and are cautious about opening their pocketbooks for meat. In an online survey of 1,000 households that was conducted for the National Chicken Council in early June, 27 percent of respondents said they would buy boneless/skinless chicken breast more often if the price was lower. Another 17 percent said they would buy more if the chicken Tasted better, which indicates that many shoppers might be interested in poultry that is marinated or pre-seasoned.
PB: What merchandising issues must retailers handle to sell more meat?
Amen: They need to understand the demographics of their specific customer bases along with the shoppers’ purchase behavior so they can customize merchandising programs and offer the appropriate items to meet consumers’ needs.
Fleming: Pork merchandisers face different sales challenges than beef and chicken marketers because pork is typically a planned purchase and not bought as spontaneously as the other proteins. Most shoppers look at ground beef and chicken breast as stockup and versatile items. The key is to get pork—which is not as price-sensitive—on consumers’ shopping Lists. It also is important that pork is included in weekly ads and that shoppers know that it is a good value and not difficult to prepare.
PB: What other ways can retailers effectively merchandise meat in light of higher prices?
Amen: They can provide consumers with data on how to choose and prepare items and also describe the nutritional benefits. Our market research reveals that many shoppers view the persons working behind meat counters as experts so it is important that the associates are properly trained. They can suggest meal solutions or help shoppers choose the right cuts. Consumers also can be given the opportunity to purchase large subprimals for a few dollars less per pound and cut their own steaks and roasts.
Fleming: Convenience still is a dominant force because many shoppers do not have a lot of time. As a Result, there should be more pre-seasoned, ready-tocook or pre-cooked offerings. Consumers are looking for anything that lets them get dinner on the table quicker. Our studies found that pork buyers spend more time shopping the meat case than other protein purchasers, so point-of-sale materials can be effective.They also are a segment that is not as affected by higher prices and are open to new preparation ideas.
Roenigk: Retailers should have products in the meat case that can stretch the food dollar. Kabobs that contain meat and vegetables, for instance, can be a meal solution. Retailers have to keep price points at levels in which consumers won’t look at the cost and walk away. They also need to find ways to show their appreciation to the shoppers that are purchasing Meats.
Underly: There should be more of a focus on value by offering such meal solutions as kabobs and fajitas.Retailers also need to talk about nutrition and the health benefits of meat, and use social media to offer recipes and get consumers talking back and forth about the proteins. In addition, stores with butchers should promote the meat cutters. It is a good way to have a point of differentiation with competitors who don’t cut meat in stores. The butcher can be turned Into a celebrity and talk to shoppers within stores or on a social media site. Stores, for instance, can announce that customers can have a live chat with “Jerry the Butcher” from 5 p.m. to 7 p.m.
PB: What are some of the key merchandising errors being made by retailers?
Fleming: Not providing the basic support that is necessary to get consumers to buy meat. Retailers, for instance, should say what it will cost shoppers to feed the whole family with a specific meat. They also should provide on-pack labels that have cooking instructions, and feature cooking ideas in advertising and at the point of sale. It is necessary to help consumers get over the apprehension of buying particular items for the first time. Coupons, recipes and cooking videos that support merchandising also can be available online.
Underly: One of the biggest mistakes is selling packages that are too big and too expensive. People are looking more at price per package than price per pound. Many consumers, especially those in smaller households, want smaller packages with smaller portions.Retailers that do sell larger packages should tell Consumers how many servings they can get from the package. Rather than calling it a “value pack,” say it serves eight or twelve people.
PB: How do you expect the meat merchandising landscape to evolve over the next few years?
Amen: There will be new opportunities for retailers to target influential segments, such as Hispanics, the growing Generation X families, health-conscious baby boomers and convenience-driven millennials.It is a matter of determining who your customers are and then having programs to meet the needs of the demographic groups.
Fleming: There will be a lot more prepared and ready-to-cook options. There also will be different Types of pork that meet different quality standards, similar to what is happening now in the beef sector.Pork doesn’t’ have such grades as Choice or Prime, but there are items that are classified as Enhanced or Unenhanced and different breeds.
Roenigk: Meat prices will remain higher than in the past. We’re not going back to the prices of five years ago. That is history as there now are too many builtin production costs involving feed, energy and labor.
Underly: Price is a big concern and shoppers will focus more on value. I don’t see the current price points coming down. People will get use to the higher prices but will consume less animal protein. With prices high, it gives consumers with health concerns further motivation to cut back.
“Many shoppers view the persons working behind meat counters as experts so it is important that the associates are properly trained.”
“Consumers are looking for anything that lets them get dinner on the table quicker.”
“Retailers have to keep price points at levels at which consumers won’t look at the cost and walk away.”
“People will get used to the higher prices but will consume less animal protein.”
A Higher meat prices are impacting sales of different varieties of proteins.
B Source: FreshLook Marketing Group.Figures are for 52 weeks ending 12/25/11.
C This Wegmans outlet in the Rochester, N.Y., area spotlights its butchers by having them prepare value-added offerings at the meat case.
D Chart Source: The Power of Meat 2012.Figures for 2012 are from a national sample of 1,340 U.S. consumers.
E A Bashas’ supermarket in Arizona uses the quality of its ground beef as a key selling point.
F Chart Source: The Power of Meat 2012.Figures for 2012 are from a national sample of 1,340 U.S. consumers.
G Pork, which faces unique merchandising challenges, is among the proteins with higher prices and declining sales.
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