MEAT SUPPLY EXPECTED TO KEEP PRICES DOWN

LAURA KLEPACKI

The nation's record high production of beef, pork and poultry last year is expected to continue in 1995.

As a result, the lower wholesale prices from the abundant supplies that appeared last year also are expected to continue, and are expected to give retailers further opportunity to move more meat.

"We will have a mountain of meat well into next year," said Joe Leathers, director of retail marketing for the National Pork Producers Council, Des Moines, Iowa, last month. "We are at maximum production capability and hogs are selling at a 24-year low."

Jerry Kelly, beef retail manager for the Beef Industry Council, Chicago, noted that the nation saw its largest supply of beef since 1986 last year, and cattle prices have fallen between $3 and $4 per hundredweight from 1993.

Meanwhile, poultry production is expected to continue at a rapid pace into 1995, according to the U.S. Department of Agriculture. Wholesale broiler prices in November were 10% below those in the same period the previous year.

Most of the reduced wholesale prices were passed on to consumers through special features, although some retailers did lower prices across the board, according to meat industry executives interviewed by SN.

"What we've seen is retailers have lowered the prices of their featured items," Kelly said of the beef category. He noted, however, that between 50% and 60% of beef is sold on feature, so the majority of beef is being sold at lower prices.

Beef ads increased 8.5% in the first three quarters of last year compared with 1993, he said. "Retailers responded by adding more product into ads and expanding meat ads to include more beef items," said Kelly.

By all accounts, lower prices are moving meat more swiftly through stores, but retail profit growth is questionable.

"They [retailers] are selling advertised items cheaper. And overall, if they are moving more product through the system, on one hand it is good, but you are also using more labor at the store," said Kelly. "The net effects depend on the individual operation."

"We sold more meat, but the dollar sales were the same," said Walt Frewin, director of meat operations at Randalls Food Markets, Houston.

Frewin added that the 51-store chain didn't see "dramatic" increases because its competitors also had reduced prices.

Randalls, he said, lowered its everyday prices and featured item prices. Ground beef was reduced between 10 and 20 cents per pound, depending on the grade. Pork prices also were lowered. However, poultry prices were stable. "I think our beef sales increased, especially during the summer, when we pushed it quite a bit," said Frewin.

"Pork sales stayed pretty level, but that sells best for us in the winter and we continue to have temperatures in the 70s."

A buyer for a leading wholesale company said the supply in most protein sources, except for seafood, brought very attractive prices.

"Those prices were passed on to consumers in hot specials mostly, rather than through everyday pricing," he said, adding that this has fueled more competition among protein sources than ever before.

"It is a fight to get pork or poultry or beef in the ad. The varieties became very competitive. I think everybody grew a little bit."

Mike Czeck, meat buyer/supervisor at Coborn's, St. Cloud, Minn., which operates 15 stores, said that "with beef and pork being a down market, our tonnage is up, but dollar sales are about the same or down.

"With the price driven down, we have sold a lot more beef than in previous years. I think consumers especially took advantage of the lowered ground beef and steak prices."

Czeck said Coborn's reduced its pricing for featured items and for everyday items. For example, the everyday price for ground beef had been $1.79 at the early part of the summer and then dropped to $1.59. "But the big drop was when we ran it on special for 99 cents per pound." Pork prices did not drop as fast as beef prices, noted Czeck. "We dropped about 30 cents per pound on the center-cut items and less on the end cuts."

Overall, he said, pork sales were strong, but beef really made the greatest gains. "Our consumers hadn't seen beef prices like that in a long time and they took advantage of it."

Poultry prices also dropped by about 10 cents per pound. Poultry sales remained steady, said Czeck.