Meating in the Middle

Though overall fresh meat department sales are holding the line, fresh chicken now rules the roost as the highest dollar contributor.

Rising prices took a bite out of retail meat department gains over the past year, causing volume to remain steady or decrease for the majority of categories, save fresh chicken, which posted the highest increase in dollar sales in years. However, more favorable sales trends are predicted for the coming year in the all-important fresh meat department.

That’s what retail meat executives told Progressive Grocer for its 2014 Retail Meat Report, insights for which were tabulated from a proprietary survey distributed late last year to fresh meat category officials from around the country. The only study of its kind in the marketplace, results of PG ’s exclusive, retailer-driven meat department research were again generated from a cross-section of national, regional and independent retail meat executives responding to the yearly survey, which probes benchmark estimates of comparable category performance, demand trends, same-store sales and profits, promotional tactics, and competitive threats, among others.

Faced with higher prices and tighter supplies of beef, as well as consumers’ scaling back quality and quantity of their fresh meat purchases due to reduced disposable incomes, retail meat executives performed a delicate balancing act in the past year to deliver budget-friendly staples with limited production. Indeed, the rising cost of beef coincides with the decreasing total inventory of calf and cattle, which hit a 60-year low last year.

Consequently, the smallest proportion of respondents tabulated in PG ’s annual retail meat survey — 31 percent — reported sales increases during the 12-month period ended Nov. 30, 2013, while 36.2 percent of respondents reported decreases, rounded out by 32.8 percent reporting status quo meat sales, collectively good for a net 2.1 percent growth rate in overall department sales.

With the meat department long serving as the focal point of many grocers’ efforts to solidify their quality and service propositions, meat survey panelists project a rosier outlook for the coming year. As depicted on the adjacent chart, more than half (56.1 percent) of meat executive panelists predict departmental increases in the coming year, with 35.1 percent foreseeing unchanged levels. A significantly smaller 8.8 percent of survey participants anticipate meat department decreases in the year ahead.

As more retailers offer case-ready meat products, other retailers are elevating in-store meat cutters as a point of differentiation to enhance customer engagement, interaction and personalized service. And though specific formats, merchandising schemes and overall penetration vary widely by store type and location, the continued proliferation of case-ready products has had a significant impact on meat departments nationwide in the past decade.

Results of PG’s annual meat study vividly depict the same: Consider the central finding that among the 93 percent of respondents with case-ready products, 44.4 percent of their total meat department offerings are case-ready.

Meanwhile, an overwhelming 89 percent of PG’s 2014 meat survey respondents reported having at least one on-site butcher/meat cutter in their stores, 94 percent of whom are also charged with engaging shoppers in suggestive selling and/or offering purchase advice to consumers.

With lingering high retail prices blunting discernible volume gains, particularly in the case of the meat department’s key cash cow, beef, value-priced items took a commanding lead for overall demand trends, with two-thirds of retailers reporting an increase in demand.

Pork paced closely behind as a lead sales driver, largely as a result of lower prices that are expected to continue for 2014. Pork demand is trending at its highest levels since 2004, while U.S. pork consumption is at a 10-year high.

Another bright spot on the meat demand rundown is a growing array of value-added signature products geared toward convenience-seeking shoppers and inexperienced home cooks.

The most popular and profitable prepared center-of-the-plate specialties range from gourmet burgers, meatballs and stuffed entrées, to kabobs, meat loaves and breaded/seasoned oven-ready proteins that enable consumers to simplify meal preparation while still keeping them actively involved in cooking dinner via “active convenience.”

Other items generating stronger demand among meat survey respondents include turkey products (boneless/skinless cuts and grinds), grass-fed and organic meats, and smaller pack sizes and single-serve items. While alternative proteins, such as bison, venison and ostrich, have a following in certain markets, growth continues to remain limited in the average supermarket meat case.

Problem Index

In assessing the key challenges facing retail meat executives — who were again asked to rank the seriousness of various issues on a scale of one to six — attracting more shoppers to the department was cited as the top-ranked concern in this year’s Retail Meat Report. Several factors account for the assessment, but two in particular stood out, the first involving fewer daily meat eaters, and the other, the economy, or more specifically, the recession that began in 2008 and continues to crimp the economy.

Store associate-related considerations took the next two slots on the problem index. Attracting new department staff landed in second place, followed closely by training/motivating department staff to engage with customers, which is indeed troubling in light of the top-ranked dilemma. Retail pricing, country-of-origin compliance and profits were also cited prominently among survey panelists, while nutrition labeling, customer confusion/perception and food safety were deemed less worrisome by meat retailers during the past year.

During the 52-week measuring period ending Nov. 30, 2013, the majority of meat department categories experienced steady or increased average dollar sales compared with the prior year. Of the department’s 29 categories, 16 increased average dollar sales or held steady from the previous year, while the remaining 13 decreased dollar sales.

The fresh meat supercategory — which includes fresh and fully cooked products, and processed and ground meats — accounted for more than half of total sales during the latest 52 weeks, while growth remained steady compared with the previous year.

As noted above, average retail prices increased for the majority of fresh meat categories, which caused volume to remain steady or decrease compared with the previous year. Fresh chicken had the highest increase in dollar sales, up 4.3 percent compared with the previous year.

Fully cooked meat posted the largest dollar and volume growth of the meat supercategories. Each of the eight fully cooked meat categories increased volume sales compared with the previous year. Fully cooked chicken increased average dollar sales 2.6 percent compared with the previous year, and 2.7 percent in volume, despite a 2.9 percent increase in average retail price.

The meat department saw diminished emphasis on promotions in the majority of categories. All seven of the 29 categories decreased volume sold on promotion compared with the previous year. Additional insights about promotional activity continue on page 66.

Merchandising Still Matters Most

Although retailers now have more methods than ever at their disposal to capture customers’ attention, the importance of visual merchandising in the meat department — via both compelling case sets and eye-catching POP — remains the single most influential means of commanding attention, capturing eyeballs and, ultimately, inspiring shoppers to buy. That’s the resounding endorsement offered by retail meat officials responding to PG’s 2014 retail meat survey. That engagement process, however, most often starts before routine or would-be meat department shoppers even set foot inside the store. Enter weekly circulars and fliers, for which the retail meat department has long served as the crown jewel among all other departments — not only for elevating the store’s overall reason for being, but also as the key driver of the overall printed package of deals and specials throughout the store.

The promotions-driven meat department continues to rely heavily — for good reason — on temporary price reductions (TPRs) and BOGOs, which are being communicated in a medley of ways, including direct mail, social networks and digital marketing. Category management is also making continued inroads, and rightfully so, in the fresh meat channel, which is reaping further benefits with tactical guidance for more effective cross-promotions, timely “flash sales” of appropriate products, and mix-and-match bundles.