The current recession has created a virtual perfect storm for retailers’ beef sales.
Consumers’ predilection for eating at home has obviously been beneficial for retailers as they are spending more money on proteins such as beef. Add to that, as the food industry has suffered, the beef supply available to retailers is up, resulting in lower costs.
“So this is what we have,” says Al Kober, director of retail for Wooster, Ohio-based Certified Angus Beef. “Costs are lower, feature prices are the same and retailers are selling more now than last year.”
With greater opportunity for retailers, many in the industry have made the increased push towards middle meats, and it seems to be paying off.
According to the August 2009 FreshLook Data information, funded and provided by The Beef Checkoff, total U.S. fresh beef dollar sales were up 3.7% for the four weeks ended Aug. 23. The 13-week change increased 3% and for 52 weeks dollar sales were up 4.7%. Total pounds were even higher, up 11.9%, 8.2% and 4.6% for four, 13 and 52 weeks respectively.
In fact, Kober says that 2009 was Certified Angus Beef’s second best sales year ever. He credits the success to retailers that have “stayed the course,” fighting the urge to trade down to lesser cuts in an effort to promote lower prices.
“Consumers are trading down in many categories,” says Kober, “but we have found when it comes to meat, a lot of consumers are not willing to trade down quality just to reach a price point. Too many retailers make decisions for their consumers, rather than listening to them and following their lead. Retailers read the newspapers and see everybody is trading down and think ‘I’ve got to cut quality and lower my prices.’ When you do that the quality conscious consumer says ‘well you are changing, I’ve got to go to another store to find what I want.’ Once they do that they are never coming back.”
Many industry observers note that while consumers are definitely seeking savings, they are also shopping based on value. Insiders also stress that it is essential for retailers to pay close attention to consumer feedback.
Whether they listen via focus groups, loyalty cards, consumer feedback lines or simply walk the store floor speaking with their customers, the retailers that are proactive and take a legitimate interest in their shoppers needs have been most successful in the meat case. John Niemann, vice president of beef sales and marketing North America for Wichita, Kan.-based Cargill says consumers also speak with their checkbook, meaning, if an item is not moving that used to move then consumers are sending a clear message.
“The retailers who understand the needs of the consumer who is watching his or her checkbook more closely are the ones who are really winning the day,” says Niemann. “If a consumer has left the world of aspiration and trading up and maybe moved into the mindset of desperation—of managing the checkbook, if they see you helping them during those times they are going to give you the spoils later by acknowledging you as a business that listens to their needs.”
Cargill also partners with retailers to improve category management, adjust product offerings to meet consumer needs and reduce shrink.
Addressing the situation, Cargill offers what the company calls “perfect portions.” Niemann says that they essentially take whole cuts of sub-primals such as a strip loin and cut them in half.
“These cuts are becoming a very favorable item for retail meat cases,” says Niemann. “It allows retailers to keep the meat case full with a product that is naturally aging in that air-sealed package versus needing to be cut open, running the risk of not selling the whole sub-primal and having shrink issues.”
As beef sales have continued to increase at retail, The National Cattlemen’s Beef Association has taken to examining retailers’ margins on middle meats and working with them, helping them take further advantage of the fact that there are more middle meat cuts available for retail. The Centennial, Colo.-based organization has several tools in place that help address retailer opportunities in the meat case.
“We have slice and save programs where the consumer can actually save by buying a whole tenderloin and cutting it to meet their specific needs,” says Randy Irion, director of channel marketing for the National Cattlemen’s Beef Association, who also works on Beef Checkoff-funded programs for retail. “We also have the Bargain Beef Bundles program which offers consumers savings when purchasing multiple packages of different cuts of beef in bulk. Consumers can purchase a variety of beef items suitable for all types of meals and all different budgets.”
The National Cattlemen’s Beef Association offers retailers a wide array of POS material to support both these programs. They have also updated the Beef Checkoff-funded retail marketing website, www.beefretail.org, to further help retailers. Upgrades include a more user friendly homepage, a revamped resources section that provides easy access to the materials retailers need on a daily basis such as beef cut charts, customer handouts and POS material and a new spotlight section that features articles on retailers who have increased beef sales by tying into Beef Checkoff-funded promotions and programs.
As consumers continue to cook at home many are aren’t as well versed in the kitchen as their parents. This provides an opportunity for retailers to help educate their shoppers on the different cuts available, what they are best used for as well as offer recipes. However, the need to educate doesn’t stop at novices in the kitchen.
Jay Theiler, executive director of marketing for Boise, Idaho-based AB Foods, says that the decline in food service has not only resulted in more beef being available at retail, but there are more cuts at multiple price points as well.
“The really successful retailers are capitalizing on the [new cuts] that are now available at retail, that used to be, from a consumer perspective, only available in top steak houses,” says Theiler.
Insiders agree that in order for these new cuts to gain consumer favor there needs to be a strategy behind how they are presented to consumers. Marty Carpenter, director of U.S. market development for the Calgary, Alberta-based Beef Information Centre, says that it is important to make these new cuts as convenient and foolproof as possible.
“There is a danger for the retailer, if for example, they are selling chuck steaks and that chuck steak ends up on the barbecue, that’s going to be a nasty eating experience,” says Carpenter. “The consumer will not enjoy that steak and will either not return to the retailer or avoid that whole category.”
The Beef Information Centre has addressed the need for convenience with its quick roast strategy—roasts that are cut smaller. Carpenter says this addresses the challenge of getting a nice piece of beef on the table in less than an hour while providing a palpable eating experience.
Beyond the new cuts available, Theiler agrees that providing value is important. However, he says that value can be expressed by more than just the traditional definition of “bang for the buck.” He calls it value and values, and says that AB Foods deep sense of mission and strong sense of ethical standards play well in the current climate.
“Our company, having a supply chain from start to finish—basically being an authentic beef company—has really benefited us regarding our retail partnerships,” says Theiler.
Industry reports estimate that 60% of consumers expect to continue shopping for the best deals even when the recession ends. Keeping in mind that consumers are generally slow to make changes in their shopping behaviors, most believe that retail beef sales will remain strong.
“This recession has been so dramatic and changed so many lives—from retirees to the very young—that people found out that they can cook,” says Terry Kizziar, vice president of sales business and development for Selma, Calif.-based Harris Ranch Beef Co. “I don’t think they are going to just start spending willy-nilly again. They are going to be far more frugal and I think sales will remain strong for at least a couple of years.”
In late-October Chicago-based Midan Marketing and Bethesda, Md.-based Shugoll Research presented An In-Depth look at Meat Through the Shopper’s Eyes at the 2009 World Wide Food Expo, providing insights from customer research and meat and poultry sales data. Michael Uetz, principal for Midan Marketing, says the information highlights consumer research findings that provide insights into changes in consumer attitudes, including which proteins, cuts and brand consumers are selecting.
Beyond the facts and figures the presentation relays, Uetz adds that a huge amount of the population had never experienced a recession. He cautions that retailers should not automatically go back to business as usual as the economy begins to recover.
“[The recession] has been a wake-up call for a lot of consumers,” says Uetz. “It has put the shopping process in a different light and consumers are looking for more opportunities to stretch their dollar—beyond the recession. Therefore as we think about pricing and looking at opportunities for attracting consumers to the store, we can’t walk away from providing extra value to customers, because they are going to be continually looking for those.”