Recession Boosts Meat Departments

MATTHEW ENIS

CHICAGO — Retailers are in a good position for meat department promotions as the grilling season approaches. According to recent reports from the U.S. Department of Agriculture, falling animal feed prices, rising cold-storage inventories, lower prices for pork and poultry, and declining demand from the restaurant industry for steaks and other high-quality cuts all helped push beef wholesale prices to 2½-year lows last month.

“Increased job losses and other aspects of current domestic economic conditions have dampened consumers' willingness to dine away from home except in fast-food and casual dining establishments,” wrote the USDA's Economic Research Service in its Feb. 17 “Livestock, Dairy and Poultry Outlook” report. “The decline in eating out has resulted in a shift away from higher quality beef to lower priced beef cuts and processing beef (e.g. ground products) and a narrowing of the spread between Choice and Select cutout values.”

The migration away from restaurants has already begun benefiting supermarket meat departments, according to recent data from The FreshLook Marketing Group, Schaumburg, Ill. Retail beef dollar sales increased 5.8% during the fourth quarter of 2008, off of a pound volume increase of 3.2%. Prices were up 2.5% during the period.

Similarly, dollar sales of chicken rose 7.7%, with volume up 9.4%, as retail prices fell an average of 1.6%. Pork sales also rose 5%, with volume up 4.8% on flat pricing.

These figures may look promising, but retailers should be aware that their customers are watching prices closely, and shopping with an eye for bargains and sales, noted Merrill Shugoll, president of Shugoll Research, a Bethesda, Md.-based research consultancy. Shugoll Research recently partnered with Chicago-based Midan Marketing to produce a report on how the economy is impacting consumer buying patterns in retail meat departments. The results of the study will be presented on Monday, March 9, at the American Meat Institute's annual Meat Conference in Denver.

“We found that two-thirds of consumers said that the economy had impacted their household grocery shopping habits in the past year, which is pretty significant,” Shugoll told SN. “Of those who reported a change, about a quarter said they were buying more items on sale than they had a year ago, 18% said they're buying less overall, and 9% said they're buying fewer convenience items, such as prepared foods and packaged foods.”

In addition, Shugoll said that 58% of respondents said that they had been eating out less, and 47% said they were preparing more meals at home from scratch. And supermarket meat departments appear to be benefiting more from these behavioral shifts than meat departments in other retail channels.

“We found that there was a net decrease in frequency of shopping for meat and poultry at butcher shops, specialty foods stores like Whole Foods and Trader Joe's, and food co-ops, farmers' markets and membership club stores,” Shugoll said. “We were not surprised to see a decrease in frequency for any of those formats, with the exception of club stores. … The drop there wasn't huge, but it was enough to pay attention to.”

By contrast, supermarkets and mass merchandisers saw a net increase in traffic in their meat departments last year.

“That was expected. Traditional grocery stores are very close to where shoppers live, and they have access to a lot of variety. Maybe they aren't making multiple trips to various outlets anymore. They're just going where they can do everything at once, and as long their grocery store has good sales, customers are keeping up their frequency of shopping there.”