Due to recent pricing and supply issues, U.S. meat sales have gone out to pasture. While fresh meat is still a vital component of retail store health, accounting for 11% of store sales, consumers are shifting their purchasing behaviors and attitudes about meat as they assess the thickness of their wallets in light of these challenges.
While the compound annual dollar growth rate for fresh meat in the U.S. has increased 3% over the past five years, the growth was largely the result of rising prices. Comparatively, fresh meat volume sales have been flat, a notable contrast from the 5% rise in retail prices. And consumers aren’t blind to the trend. Key fresh meat categories like beef and pork are losing volume sales as prices continue to climb. Unfortunately, sluggish volume sales aren’t the only thing weighing down the meat department.
In fact, overall consumer visits to the meat department are declining—the opposite of what’s happening in other fresh departments. Notably, trips for fresh foods and household spend on fresh continue to increase across channels, but recent Nielsen research pertaining to price elasticity cites that trips for fresh meat have decreased 5% over the past year–and consumers are purchasing less volume per trip. A sobering 41% of respondents to a recent Nielsen survey said they are purchasing fresh meat less often because of higher prices, and 37% are buying less-expensive cuts of meat to offset rising costs.
Consumers Hunger for Alternatives
In this environment, marketers and retailers need to understand how shifting pricing dynamics are affecting consumers in order to better engage with them. The research indicates that consumers have become more sensitive to price increases during the past three years. Fresh beef and pork sales reflect this trend, as average retail prices have increased 15.5% and 14.1%, respectively, while corresponding volume sales for each have dipped 6% during the 52 weeks ended Feb. 28, 2015.
This research also reveals another consumer behavior: Rather than switching to less-expensive cuts of meat, consumers are simply buying less meat, or not visiting the meat department at all. In fact, a staggering 97% of volume loss in fresh meat is due to consumers purchasing less fresh meat.
Nielsen’s research about the path to purchase has shown that consumers typically build their meals around their protein choices. And that means these shifts in consumer behavior will likely affect the other departments they shop in, and consequently, the products they buy. That could shift things around a bit, as dollar sales from the meat department are highly connected to nearly 70% of total store sales. So which areas of the store are suffering as a result of lackluster meat sales? The center of the store. Price increases in the meat case can have a ripple effect on products like pasta and canned vegetables.
The conundrum is that meat should be winning. That’s because more than half of consumers say they recognize the multiple benefits of protein and want more in their diets. The catch is that consumers are finding new sources of protein, prompting an explosion of protein claims throughout the rest of the store – from milk, to cereal, to yogurts and protein snacks—even candy. So how can the meat department (and the products across the store that are closely tied with meat) weather the storm in this changing environment and come out on top? While there is no silver bullet, there are some key strategies to help restore balance.
- Correct everyday pricing: Promotions are important, but research shows that over-promoting dilutes sales. Retailers that are really winning across the total store are posting strong everyday meat sales without over-relying on promotions.
- Price gap management: In order to get the price right every day, retailers should manage the price gaps between substitutable cuts of meat in order to discourage consumers from switching while maximizing overall sales. For example, Nielsen research indicates that 80%-84% lean fresh ground beef should be priced 45%-50% higher than boneless skinless chicken breast. When the price gaps between these two types of meat are greater, sales tend to drop off for one of them.
- Holistic approach to store sales: Understand how increased meat prices affect volume sales in categories across the store. Retailers can use meat category connections with other categories across the store to create meal solutions, cross-promotions, cross-merchandising and more. For example, move paper goods and condiments and salty snacks into the meat department during grilling season in order to create full eating occasion solutions for consumers.
It’s also important to remember that consumers won’t automatically return to the meat department as meat supply and pricing stabilize. That’s why it’s important to be strategic now as well as when pricing is less of an issue. As the store dynamic changes along with consumer cooking and eating habits, pricing isn’t the only available lever to pull for meat department success.
The insights in this article were derived from multiple sources. The sales data were derived from Nielsen Price Elasticity Research, Total Store Research and Nielsen Perishables Group FreshFacts®. The sentiment data pertaining to how consumers are coping with higher meat prices came from an English-language Nielsen Homescan Panel Omnibus Survey of 103,307 adults fielded in March 2015.