Consumers may be forced to spend less, but grocers are making hay with fresh beef via savvy merchandising, smart promotions and creative products.
Although many shoppers continue to trade down and forgo extras, the beef category remained strong through the summer despite a still challenging economic climate.
Indeed, the variety of beef cuts available today enables shoppers to remain loyal to the category, even if they have to keep a close eye on their food budgets. By adding a bit of creativity to stalwart mainstays, products like fresh-prepared gourmet hamburgers are helping retail meat departments give customers tasty and affordable alternatives to more expensive cuts. Some consumers prefer to save money — and maintain their taste preferences — by carving up larger sub-primal cuts of meat at home, while others economize by taking advantage of large packs of meat and other promotions offered in the stores.
By using these strategies, retailers were able to post relatively solid summer beef sales following a generally decent year overall. In some segments, however, dollar sales were off slightly, while poundage was up — a sign of consumers buying more for less money — although per-pound prices were generally down.
Pounds Up, Dollars Down
For the 52 weeks ending June 27, 2010, total beef sales in pounds were up 3.5 percent to 4.4 billion, while dollar sales decreased 0.6 percent to $15.8 billion, according to Hoffman Estates, Ill.-based FreshLook Marketing Group. Ground beef was up to 2 billion pounds but dropped 1.6 percent to $5.8 billion, while loin poundage rose 1 percent, alongside a 2 percent dollar sales decline to $3.4 billion.
Rib and chuck saw bigger increases, with rib consumption going up 6.2 percent to 217.2 million pounds, and sales rising 3.5 percent to $1.9 billion. Chuck consumption increased 4.8 percent to 423.5 million pounds, and sales were up 1.7 percent to $1.2 billion. Average prices for all segments declined, from 2.4 percent (to $5.96 per pound) for rib to 5.5 percent (to $2.75 per pound) for ground, with the total dropping 4 percent to an overall average of $3.55 per pound, FreshLook reported.
"We do have a range of products in the beef category so consumers can trade down, but not necessarily out of the category," says Shelley Bradway, marketing manager for the Centennial, Colo.-based National Cattlemen's Beef Association (NCBA). "We've had strong sales over the summer, and we've seen increases in a lot of those key categories. It always goes back to educating shoppers, helping them pick out what is right for them and what they are looking for."
Summer beef sales were steady at Warrensville Heights, Ohiobased Heinen's Supermarkets, says Tom Heinen, president/COO for the 17-store regional grocer. "We ran some really good promotions, such as some family-pack promotions that we hadn't run in the past, and they were pretty successful." Focusing on display and promotional activity, he adds, "made it a decent beef summer."
Heinen's has been doing especially well with store-made prepared gourmet burgers, which it offers not only in ground beef, but also ground chicken and turkey. "The gourmet burgers have been very successful, and a great alternative for people looking to have different things on the grill," Heinen notes. While more expensive than hamburger, "they are less costly than steak. People can have a gourmet experience while not paying a steak price."
'The Most Differentiating Protein'
While beef has been trending downward in per capital consumption for decades, it remains a category where retailers establish an identity. "Beef in any meat counter is the most differentiating protein. It has the more unique flavor characteristics vs. poultry and pork. So having a good beef program is imperative to having a good reputation for meat," Heinen counsels.
Sales have been down storewide for two-store Day's Market Place, based in Heber City, Utah, because of a decline in nearby Park City's tourism business. But beef as a percent of store sales was steady this summer, although it faced tough price competition from a national supermarket chain, notes owner Carl Day.
"Our competitor is focused on hot beef prices, and that has affected us," explains Day. "So we are focusing on other cuts and pushing pork and chicken because of what they've thrown at us in their ads."
Day's also makes its own hamburger patties, "and they've been doing real well," says Day, noting that his stores also carry pre-packaged specialty burgers. "But the ones we make are selling better," he observes, pointing to quality and price. "We feel like we are giving a value for the quality of the burger, and it's got a good, solid taste," he notes.
"We had a good summer," declares Eric Anderson, president of Findlay, Ohiobased Fresh Encounter Inc., which operates 31 stores throughout Ohio and eastern Indiana under a variety of banners, including Sack 'N Save, Community Markets, Fulmer Community Markets and Great Scot Community Markets. "We specialize in meat — that is one of our calling cards in our stores. Regardless of where the economy sits, our consumer definitely comes to us as their source for protein."
While nearby supercenters have eliminated meat cutters, Fresh Encounter sees them as a competitive advantage. "[The competition has essentially] vacated that category, and that's fine with me," he says.
For the future, "it's still going to be a strong category for us. I don't see it backing down any time soon. The differentiation is having in-store meat cutters and specialists on staff. The guys that do that are the guys that are going to win," Anderson says.
Beef Demand Rising
Beef prices are at historical highs now, and might increase even more in the future, according to Chandler Keys, spokesman for Greeley, Colo.-based beef producer and exporter JBS USA. With people dining out less and buying more of their food at supermarkets, "you definitely have seen a rally in beef purchasing. Not only has the domestic marketing of beef in grocery stores had a good summer, you have also seen a real big uptick in exports, and that added demand tightens up supply," he says.
Looking to the fourth quarter, Keys says: "Demand for purchasing is growing globally. It's not as much about the domestic market as it is about the global market, and the demand for beef is growing, as well as demand for poultry, pork, lamb and goat."
When the economy improves in mature markets like the United States, Europe and Japan, consumers tend to buy durable goods with their income. But in places like India, Brazil, China and Africa, "the first thing that population looks for is to improve their diet, and the first thing they want is animal protein," he adds.
In the meantime, U.S. consumers are looking for more options in the beef case. "I think the recession has put people in the frame of mind that they are going to be eating at home more often. So, their menu options are going to expand, and they are going to be looking at different cuts of beef in the grocery stores, not just steak and hamburger," Keys notes.
Heinen expects higher prices later this year, and in turn, lower beef sales through year's end, "because everybody I talk to says supply is going to narrow, and I think that will hurt beef."
Pricing will remain solid because of the export demand, coupled with a tighter supply, adds Mike Martin, director of communication at Cargill Meat Solutions, the company's North American meat business based in Wichita, Kan.
"Optimally, in the best-case scenario, when the beef prices are solid, we would hope that, as the saying goes, the rising tide will lift all boats. It's good for us if our customers are doing well. How they market, position, price meat, that's their decision," Martin says.
"The retailers that we supply are staying the course," adds John Hagerla, VP, global marketing and sales at Windom, Minn.-based PM Beef Group. "Consumers are purchasing steak cuts and ground beef, and the retailers are holding their own as it relates to beef merchandising."
Hagerla sees retailers participating in programs with packers and with more creative merchandising. They also need to tie in with the nutrition and wellness aspects of the products in the meat case while listening to what the consumer wants. One way of doing this is through prepared gourmet burgers — "consumers are on products like that. It's about creating an opportunity for that consumer to try something different. Convenience is huge. Anything we can do to make that consumer's purchasing pattern easier is a win-win for the consumer and the retailer," he explains.
The NCBA has developed a "Slice and Save" program through the beef industry's checkoff promotional funds, says Bradway, which includes on-pack labels, brochures and online videos. "It helps consumers gain the knowledge and the confidence they need to purchase beef sub-primals, which are always at a lower price per pound," she says.
Another initiative the association is featuring is the "Bargain Beef Bundle." "This also offers consumers a savings, as they get to buy multiple packages of different cuts of beef in bulk," Bradway says. "This is great for consumers, because there will be several different beef items in this bulk package, and they will go with all different types of meals that they have planned, and it fits all different types of budgets."
Hispanic Beef Promo Yields Gains
A test program targeting Hispanic customers has generated impressive results for the National Cattlemen’s Beef Association, says Shelley Bradway, marketing manager for the Centennial, Colo.-based organization.
The test saw double-digit sales increases in several categories: rounds, up 35.3 percent; chucks, up 60.1 percent; ribs, up 26.9 percent; loins, up 41.7 percent; and offals, up 82.7 percent.
Additionally, grocery shopping trips increased from 8.2 per month to 11.1. Test-store shoppers said they ate beef more often on a daily basis, and their percentage of meals with beef grew from 62 percent to 77 percent.
"Shoppers said that they would shop for meat at Dillons much more often. They said this was somewhat due to the new POS elements and the meat case as well. It gave us a really good overall evaluation of the effectiveness of the materials," Bradway notes.
The 12-week program ran last year and involved point-of-sale elements promoting beef in three Kansas Dillons supermarkets. "The sales and percentage increases that we have seen from the test program with Dillons and other retailers that we have worked with in the past show that this can be a very successful program," she says.
Hispanic customers made sense to target because they spend 42 percent more on beef purchases than any other ethnic group — $326 annually per Hispanic customer vs. $230 for non-Hispanic shoppers, she notes.
"Having a good beef program is imperative to having a good reputation for meat." —Tom Heinen, Heinen’s Fine Foods