GROCERY’S PROTEIN PROBLEM: COPING WITH RISING PRICES ACROSS THE STORE

CONSUMER| 08-28-2014

Meat sales are a weighty matter. Largely priced by the pound, changes in the meat aisle can have a ripple effect on sales and consumer behaviors across the store. With potential protein supply limitations and corresponding shelf-price increases, now more than ever, it’s critical to understand how the meat department drives sales for shoppers' entire baskets. 

PUMPED UP PROTEIN PRICES

During the first half of 2014, rising prices contributed to volume declines in fresh pork and beef in North America, and in recent months, this trend has accelerated with steeper price increases and larger volume declines. On the flipside, chicken has picked up some of the slack and is capturing volume sales. However, prices are expected to continue climbing for beef and pork. 

Compared to 2011, staple proteins like beef and pork are now two to three times as sensitive to price increases, while chicken remains relatively stable. According to Nielsen pricing research, price increases for most pork and beef cuts this year have already surpassed the price point at which consumers shy away from purchases. This means we can expect continued volume declines for these fresh meat categories, andpotentially for the products commonly found in the same basket (like sauces, pastas and sides), as well as other more surprising products.

PROTEIN SALES CHANGES COMPARED TO AVERAGE RETAIL CHANGES

	% Volume Sales Change		Average Retail Change
	52 weeks ending June 28, 2014	4 weeks ending June 28, 2014	52 weeks ending June 28, 2014	4 weeks ending June 28, 2014
Fresh Meat	0.3%	-1.6%	4.3%	8.4%
Fresh Chicken	1.4%	2.3%	5.1%	3.7%
Fresh Beef	-0.1%	-2.1%	4.3%	9.8%
Fresh Pork	-2.1%	-11.5%	5.0%	17.1%
Source: Nielsen

AS GOES MEAT, SO GOES THE BASKET  

At retail, meat is an important indicator of total store health. Meat department sales (not including frozen meat) account for $53 billion annually and 11 percent of store sales. Nearly all U.S. households make a meat department purchase in a given year (compared to 26% of households shopping frozen meat) and meat department baskets are among the most valuable to the store, with a 70 percent higher ring than the average basket. The meat department’s ability to make or break sales across the store makes the current climate all the more concerning.

Meat department sales are strongly connected to sales in many non-fresh aisles including dairy, grocery, beverages and household. And previous Nielsen research found a direct correlation between increased prices of fresh staple proteins like beef and pork and decreased volume for complementary center-store products like pasta, rice, packaged dinners, canned vegetables and condiments. This strong interconnectivity confirms that meat pricing issues aren’t just protein problems.

But meat prices can also affect consumer shopping behaviors in other aisles, sometimes with products seemingly unrelated to a meat purchase. Take fresh beef for example. Unsurprisingly, fresh beef sales show an above-average correlation to products including seasonings and condiments, but it’s also closely tied to a variety of snacking products including fresh grapes, salty snacks and even sweets and desserts in the frozen and bakery aisles.

History has shown that when the shopper has to spend more money on their staple meat items, they have to cut purchases elsewhere in their basket.

HOW ARE CONSUMERS REACTING?

Nielsen’s study reveals that shoppers are coping with rising meat prices in a variety of ways. Since 2011, consumer switching between different cuts within a particular protein has become more common. But consumers have also changed how they switch between proteins. For example, for most shoppers buying fresh ground beef, the biggest substitute for the product isn’t another beef cut; it’s the generally lower-priced boneless/skinless chicken breasts.

Shoppers may also be taking meat out altogether. During the second quarter of 2014, the amount of households purchasing fresh beef, pork and chicken declined compared to the same time period in 2013. Additionally, shoppers are buying beef, chicken and pork less frequently. This means that not only is fresh meat losing buyers, those that remain are buying less often.

PROTEIN HOUSEHOLD PENETRATION AND SHOPPING TRIPS

	Beef	Chicken	Pork
Household penetration Q2 2014	71%	60%	47%
Household penetration Q2 2013	75%	65%	53%
Trips per household Q2 2014	3.9	2.8	2.3
Trips per household Q2 2013	4.1	2.9	2.5
Source: Purchases per household in the 13 week Q2 2014 period. Fresh Facts Shoper Insights® powered by Datalogix.

COMBAT PRICE PRESSURES BY FOCUSING ON SHOPPERS

The good news? More than 70 percent of U.S. adults stress the importance of protein (83%), healthy fat and whole grains (81% each) and calories (80%) when contemplating how to manage their diet and weight. And more than half of respondents in a recent health and wellness study want more protein, along with fiber, vitamins/minerals, calcium, antioxidants and Vitamin D in their diet.

Manufacturers and retailers can reclaim sales and customers by understanding what consumers are shopping for and how they're buying based on their dietary needs. CPG manufacturers can help combat the ripple effect by collaborating with retailers and fresh suppliers on value-focused solutions. Beyond price, retailers can highlight health benefits from different proteins or look for alternative cuts of meat that resonate well withdifferent cultural groups to keep shoppers in the store with full baskets.

To get ahead of the curve, put your shopper at the center of your strategy. Who are your meat shoppers and what are they looking for in terms of package size and price? Understand the nuances of the shifting meat landscape and how this affects shopper behaviors and baskets, including the many products and departments the meat department touches.