Steaking a Claim

Meg Major, EnsembleIQ

2/28/2015

The broader industry trends fanning the flames of retail food growth — namely traceable, free-from, purely natural, organic and smaller portion products — are the same factors propelling growth in the average supermarket meat department, as revealed in Progressive Grocer’s 2015 Retail Meat Review.

The gains with higher-end fresh meat cuts — which are increasingly appealing to a larger base of more discriminating, information-seeking consumers — have been a clear bright spot for grocers during a prolonged period of sticky high prices for the department’s leading cash cow, beef, domestic production of which remains tight due to lingering supply-and-demand economics. But when considering that the average retail price of ground beef was nearly 20 percent higher in September from a year earlier, let alone the steeper prices of steaks and roasts, retailers’ plates are clearly full with confronting the volatile market conditions and working to maintain consumer demand and remain competitive.

When asked to weigh in on meat department sales performance for the 12 months ending Nov. 30, 2014, more than half (52.8 percent) of retail executives participating in this year’s “state of the meat department” study reported increases, alongside slightly more than one-quarter (26.6 percent) who cited decreases (various explanations for which appear on the related sidebar on page 70). The remaining 20.7 percent of the 2015 retail meat study panelists, meanwhile, recorded status quo meat sales, good for an overall net change of 4.1 percent ahead of last year.

Insights for PG’s annual review were again tabulated from a proprietary survey fielded to retail meat executives from around the country in late 2014. As the only study of its kind, the exclusive, retailer-driven meat department research study provides a consolidated snapshot of benchmark performance and operations insights recorded over the past year by senior category directors, who were also asked to project what they foresee for the balance of the year.

To that end, when asked to predict how fresh meat sales will presumably play out during the current year, nearly two-thirds of panelists, or 67.4 percent, anticipate plumper trends in tandem with long-awaited equalized beef supplies. This more optimistic sentiment was further reaffirmed by the scant 7.6 percent who foresee potential fresh meat sales declines in the year ahead, with a full quarter of participants expecting no changes in either direction.

Consumer Demand

Among the key highlights of this year’s study is a fresh look at overall demand trends, which are underscored by the delicate balancing act retail meat executives are executing to simultaneously hone value-oriented tactics and enhanced premium offerings.

When asked how consumer demand has changed for several fresh meat categories, smaller portions/pack sizes increased in clout as the foremost department driver, as ranked by more than two-thirds (68.2 percent) of panelists. No panelists indicated decreases with smaller packs, while the remainder (31.8 percent) reported on-par results. Value-priced cuts (ground, flat steaks, etc.), meanwhile, also came on strong, with 59 percent of retail meat leaders seeing increases during the last year, alongside 31.8 percent whose sales of value-oriented selections remained steady. A significantly smaller proportion (9.1 percent) of panelists reported decreased sales of value-positioned proteins.

Other fresh meat department gainers include the growing free-from and purely natural categories, penetration of which increased for 58.5 percent of retail meat survey panelists, much more than the 14.6 percent who reported decreases, and nearly twice the 26.8 percent posting status quo sales.

Grass-fed beef and domestic wild-caught seafood are also gaining clout with 2015 Retail Meat Report participants, at 52.6 percent and 50 percent, respectively. Ditto for increased demand for premium-brand beef, which gained in penetration for 47.6 percent of panelists, paced next by organic fresh meat products, sales for which increased among 47.5 percent of the meat survey panelists.

Value-added products, such as oven- and grill-ready, marinated, kebabs, gourmet burgers, loaves and meatballs, continue to gain traction among 43.2 percent of retail meat executives, as do U.S. farm-raised seafood (38.2 percent), imported farm-raised seafood (37.5 percent) and locally raised meats (34 percent).

Case-ready

While case-ready meats continue to make inroads, as noted on the adjacent chart, in-store butchers remain an extremely important element for nearly 90 percent of PG’s 2015 Retail Meat Review participants. Indeed, numerous industry studies point to shoppers’ abiding desire for knowledgeable, visible, approachable meat department associates, who will not only solve the mysteries of purchasing and preparing specific cuts, but also suggest alternate cuts, portions and serving tips. To that end, a full 91 percent of meat study respondents affirmed that their butchers/meat cutters engage in suggestive selling and offering purchase advice to consumers.

Although in-store butchers remain an essential ingredient for most of this year’s Retail Meat Review panelists, grocers continue to rely heavily on case-ready meats, which are processed and packaged at a central facility and delivered to the store ready to be put directly into the meat case. In addition to helping retail meat executives manage labor costs and instocks, case-ready also offers advantages in safety, as a result of USDA-inspected standards and processes.

Moreover, case-ready programs are particularly advantageous for meat marketers in light of the inherent prominent branding opportunities, nutrition labeling, recipes and related usage ideas.

Among the 93.5 percent of respondents with case-ready products, 36.5 percent of their total meat offering consists of case-ready products for self-service fresh meats.

Prices Prompt Rampant Fluctuations

The meat department is in a state of change — in many instances, pricing fluctuations are driving consumers away from the meat case. All but five categories in the meat department maintained or increased prices compared with the previous year.

In fresh meat, price increases impacted volume sales in beef and pork — the first and third top-selling categories — with volume sales declining 2.4 percent and 5.5 percent, respectively. While less dramatic, chicken, the second highest-selling fresh meat category, also posted average retail price increases, although volume wasn’t substantially affected by higher retails.

Processed meat, the second-largest meat super-category, also experienced performance shifts similar to fresh meat. Bacon and dinner sausage, the second and third top-selling categories, respectively, posted average price increases of more than 5 percent.

Within fully cooked meat, fully cooked turkey — though a comparatively smaller meat category — posted the department’s largest increase in average retail price, up 70 percent, which caused volume to drop 38 percent compared with the previous year.

WHAT IS THE MOST SERIOUS PROBLEM FACING YOUR MEAT DEPARTMENT?

Higher wholesale costs, rising retail prices, competition, and a shortage of qualified, competent associates were the recurring issues cited as the most vexing issues plaguing retail meat executives, according to insights revealed in Progressive Grocer’s 2015 Annual Retail Meat Report.

Found below is a sample of verbatim responses that were shared with PG when meat study panelists were asked to answer the following open-ended question: What is the single most serious problem facing your meat department?

➤ Beef prices.
➤ Beef, pork, chicken costs.
➤ Competing in a market dominated by large national and regional chains.
➤ Competitive inability to pass on increased costs.
➤ Cost of goods.
➤ Educating customers on our value proposition as an independent.
➤ Customer engagement.
➤ Escalating retails.
➤ Lack of meat cutters.
➤ Finding qualified, energetic meat cutters who are also comfortable with selling. We are a sales-driven store, which requires good help. Butchers are becoming extinct.
➤ Finding qualified, energetic employees who are motivated to work hard for a great company, but for relatively poor industry wages.
➤ Hiring and training quality employees.
➤ Increased raw material prices.
➤ Retaining sales increases.
➤ Lack of adequate space for creative displays.
➤ Local meat out-of-stocks.
➤ Meat price increases that go up almost every week, and consumers are obviously buying less.
➤ Reacting to volatile markets and managing retails to maintain consumer demand and remain competitive.
➤ Shortage of certified-organic pork and lamb.
➤ Managing reasonable retail prices of “clean,” organic and 100 percent grass-fed beef.
➤ Managing wholesale costs of product with wages and benefits for a union shop.

WHAT OTHER PROMOTIONAL ACTIVITIES HAVE BEEN EFFECTIVE FOR YOUR COMPANY IN THE PAST YEAR?

The promotions-driven meat department continues to rely heavily — for good reason — on tried-and-true promotional methods that have long ruled the roost. And though meat marketers have more methods than ever at their disposal to capture customers’ attention, a few new tactics are proving increasingly influential for lassoing shoppers, including theme events, sampling, flash sales, cross-promotions and mix-and-match bundles.

Below is a list of top responses PG’s 2015 Retail Meat Review panelists revealed when asked to respond to the following open-ended question: What other promotional activities have been effective for your meat departments in the past year?

➤ One-day sales/mega-meat sales events/truckload events.
➤ 15 percent off meat sack sale.
➤ 4 for $20, which is proving to be highly effective.
➤ Bundled family recipe meals cross-promos (i.e., Buy X item, get Y item free).
➤ In-and-out deals on closeout processed meats are having a huge impact, as our customers are starving for deals in the meat department.
➤ Cases sales when the chicken prices decreases are working out very well.
➤ In-store radio advertising.
➤ We find that sampling events in the meat department are very effective.
➤ Through great customer service, great quality and a clean store, the customer ends up being our greatest promotion, as they talk among themselves and their neighbors of what a great store we have. The end result is more frequent shopping trips and added customers!
➤ Three-day specials.
➤ Our store-made, ready-to-cook items are doing extremely well.
➤ The most successful thing we can do is to simply do it right!
➤ We promote our stores best with honesty and integrity, trim correctly, stock quality products, and let customer satisfaction and return business take care of the rest.
➤ It’s not rocket science … it’s having good people!
➤ Themed events (i.e., meat sales with steaks and ribs for football promotions).
➤ Truckload sales.
➤ Two-day meat sales and high-visibility seasonal signage.
➤ Weekend beef and pork sales events.