CHICAGO -- The service deli counter, including store-label prepack items, accounts for about 60% of all lunch meat purchased, and the average household spends nearly twice as much on deli counter lunch meat as on manufacturer-branded prepacks.
These were among the findings of a study sponsored by the National Pork Producers Council and National Cattlemen's Beef Association, and conducted by the NPD Group, Rosemont, Ill.
The study: "Processed Purchasing Behavior at the Retail Service Deli and Pegboard," was intended to provide insight into the purchase dynamics and buyer demographics of lunch meats sold prepacked and lunch meats sold at the service deli counter; and also of processed meat and poultry.
The data was collected via a paper diary from a panel of 1,000 households each month, and focused on the period of January through December 1995. In many instances, quarterly trends were also reported, through September 1996. The research was released at the Annual Meat Marketing Conference in Nashville, Tenn., last month.
The study found that 57% of lunch meat was bought from a clerk-attended deli or as a store-label prepack, vs. 39% bought as prepack manufacturer-label product -- indicating that the category is currently being driven by products that are tied to the retailer's identity, rather than by branded products, even though the former is typically more expensive per pound.
In terms of dollar sales, lunch meat bought from the service deli counter or as a store-label prepack accounted for 63% of reported sales, vs. 34% for manufacturer prepack lunch meat.
"From a meat industry perspective, this study shows that consumers buy a lot of meat from the service deli," said Sharlet R. Brown, principal in S.R. Brown Marketing Communications, Camp Crook, S.D.
"Lunch meat deserves a substantial amount of space in those cases. Retailers may want to do more sampling of deli meats, especially to justify the higher prices on some items," Brown said.
Brown also said the data from this study should help to reinforce the importance of both the service deli and self-service pegboard display.
"This clearly shows how worthy [those areas] can be for store volume and sales to those people who manage square footage and product mix," Brown said.
On the other hand, prepack manufacturer-label product was predominant in the sausage, bacon and hot dog categories, with 46%, 70% and 79% of share, respectively, compared with prepack store label, with 33%, 14% and 8%, respectively; and 7%, 6% and 5%, respectively, for clerk-attended deli purchases.
Looking at all processed meats -- including lunch meat, sausage, bacon and hot dogs -- more than half (53%) of those sold are manufacturer prepack items, vs. about one-fourth (23%) that are purchased from the clerk-attended deli and 16% that are store-label prepack.
According to Anne Mixen, senior project director for NPD Group, before the results of this study were analyzed, no consumer-based data existed that revealed how the processed-meat business is sliced up among the service deli and the prepack, peg-rack segments.
Projecting the data to the total U.S. population using census figures, the study found that Americans spent nearly $10 billion in the purchase of more than 4.2 billion pounds of processed meat in 1995.
Projections by type revealed that Americans purchased more than 1.7 billion pounds of lunch meat alone at a cost of $5.3 billion. More than $1 billion was spent on each of the categories of hot dogs, bacon and dinner sausage. Breakfast sausage sales were projected at $500 million.
Supermarket/grocery stores accounted for 83% of all lunch meat purchased in 1995. Warehouse clubs accounted for 7%, the local deli had 4%, and the butcher/meat market had 2%, the study found.
Supermarkets accounted for 84% to 86% of the sales of hot dogs and bacon, vs. 7% for each in warehouse clubs, and 3% to 4% in butcher shops.
Almost three-fourths of all households were found to purchase some type of processed-meat item regularly. The average household purchased more than 43 pounds of processed meat in 1995, spending about $100.
The number of households purchasing processed meats rose slightly (5 percentage points or less) in the summer months, looking at data from July-August-September of 1995 and 1996, vs. the rest of the year.
The average household purchased 11.7 pounds of processed meat in the most recent quarter (July-August-September, 1996), the same amount as the previous year at this time, but dollars spent were up 10%, with $29.76 spent in the quarter in 1996 vs. $27.15 in the quarter in 1995. The biggest increase in dollars spent for total processed meats was in the first quarter of 1996, when the average household spent $25.38, up 14% from $22.17 spent in the first quarter of 1995.
Pork and meat-combination products accounted for two-thirds of all processed meats sold and 60% of dollars spent. Poultry accounted for 15% of pounds bought and 19% of dollars spent, while beef accounted for 11% of pounds sold and 14% of dollars spent, the study found.
Lunch meat accounted for more than 40% of all pounds of processed meat purchased, followed by sausage, with about a 25% share. Bacon and hot dogs each accounted for just under 20% of all processed meats purchased.
Of the four products, lunch meat, at $3.09, averaged the highest price per pound, followed by dinner sausage, $1.95; breakfast sausage, $1.92; bacon, $1.69; and hot dogs, $1.64. Average price per pound for the total processed-meat category was $2.31.
Hot dogs and bacon were most frequently sold "on deal," as perceived by the consumer, whether via a store sale or a manufacturer coupon, 45% and 44% of the time, respectively, while lunch meat was least often purchased on deal, 35% of the time, the study found. Lunch meat average prices per pound ranged from a high of $4.26 for sliced beef to a low of $1.95 for bologna. Only three other types of lunch meat sold for less than $3 per pound: cotto/ cooked salami, liver sausage/liverwurst, and loaves.
More than half of all households (54%) were found to purchase lunch meat regularly. Roughly one-fourth of all households purchased hot dogs, bacon and dinner sausages during a typical month.
Lunch meat made from pork or a meat combination accounted for nearly half of total lunch meat sold. At the service deli counter, pork and meat combinations represented 44% of the lunch meat sold, while beef accounted for 14% and poultry for 27%. (Fifteen percent was "other" or not reported.)
Among manufacturer prepack product, 53% of the lunch meat sold was pork or meat combination, 12% was beef and 30% was poultry. (Six percent was other or not reported.) Ham, bologna and turkey accounted for more than two-thirds of all lunch meat purchased, the study found. Ham was the leader with 31% of pounds sold, bologna accounted for 19% and turkey for 18%.
Sliced beef, including roast beef, corned beef and beef pastrami, accounted for 7% of lunch meat pounds sold. Sausages, salami, chicken, loaves, liver sausage, and variety packs each represented from 1% to 3% of pounds of lunch meat sold.
While more than 50% of all households purchased lunch meat regularly, the buyers were heavily concentrated in ham, turkey and bologna, with 30%, 21% and 18% shares, respectively. Sliced beef in its three forms represented 10% and the other varieties of lunch meat each accounted for 2% to 5% of households.
In the ham category, baked was the most popular, with 22% of customers having purchased it, while 15% bought boiled and 12% chose honey ham. The favorite turkey flavor was oven roasted, with a 33% share, followed by smoked, 24%; baked, 15%; and honey, 8%. The pork/meat-combination bologna was favored by 47% of households, compared with 22% who chose beef bologna and 11% who chose poultry bologna.
In terms of volume, the average household purchased 3.6 pounds of deli counter ham in 1995, compared with 1.6 pounds of manufacturer prepack ham. The average household bought 2 pounds of turkey from the service deli counter vs. 1 pound via manufacturer prepack.
In sliced beef, dry salami and loaves, purchases from the service deli counter exceeded purchases of manufacturer prepack in terms of volume. The exception was bologna, in which the average household bought 1.9 pounds of manufacturer prepack vs. 1.2 pounds from the service deli.
A segment of the study focused on hot dogs. In 1995 the average household bought 7.65 pounds of hot dogs at a cost of $12.55.
Hot dogs showed a more seasonal trend than other processed meats. Lowest volume and dollars spent per household were reported in the first quarter of 1995 and 1996, with higher volume and dollars recorded in the second and third quarters of each year (spring and summer).
Manufacturer prepacks accounted for 79% of hot dog pounds sold in 1995. Store prepacks accounted for 8% of hot dog pounds sold, and clerk-attended deli for 5%.
Pork-based or meat-combination hot dogs represented 59% of hot dog pounds sold, compared with 24% for beef hot dogs, and 12% poultry hot dogs. This distribution varied only slightly throughout the year.
Beef-based hot dogs, with an average price of $2.30 per pound, sold for almost $1 more per pound than poultry hot dogs, which had an average price of $1.33. Pork and meat-combination hot dogs had an average price of $1.54. Total hot dog average price was $1.71 per pound.
Bacon was also broken out in the study. The average household purchased more than 7 pounds of bacon in 1995, spending about $12.
Pork bacon accounted for 85% of total pounds sold, followed by other, 8%; turkey, 6%; and 2% not reported.
Bacon volume peaked during the summer quarter of 1995, at 2.01 pounds per household, but fell in more recent quarters, ranging from 1.56 to 1.80 pounds per household from the fourth quarter of 1995 to the third quarter of 1996.
The study suggested that the slight decline in pounds sold may have been the result of higher prices. The highest price per pound reported was in the third quarter of 1996, $4.17 per pound. Prices remained above $3 per pound from July 1995 to the last date studied. Only 3% of households said they purchase turkey bacon regularly, compared with more than 20% who purchase pork bacon in the average month.
Like hot dogs, bacon was most frequently purchased in manufacturer prepack form, 70% of the time, compared with 14% for store prepack and 6% for clerk-attended deli.
"This study shows us how important further-processed pork is in every category, not only in pounds moved but also in prices paid," said Eric J. Hentges, director of consumer nutrition and health research for the National Pork Producers Council, Des Moines, Iowa. "We will become more aware of the importance of how our product performs when it is further processed. We will look at the quality of the product, not only fresh, but also as it performs in a further-processed product."
"A huge market potential for beef is highlighted by this study," said Dean H. Conklin, executive director of veal and deli beef programs for the National Cattlemen's Beef Association, Englewood, Colo. "It provides us with an understanding of how important this segment of the industry is to our industry. The beef industry will pay more attention to this."
Lunch Meat Leads
Among processed meats, lunch meat is the leader by far for household penetration, the study found, reinforcing the category's importance for both the deli and meat departments.