Specialty eggs, McDonald’s, health trends receive top billing at conference
Report from the Urner Barry Executive Conference and Marketing Seminar in Las Vegas
Health consciousness will only increase as a food trend. That's the view of Art Turock, president of Art Turock & Associates, who spoke at the recent Urner Barry Executive Conference and Marketing Seminar in Las Vegas, Nev. There is no gentle decline, no hiding place for retailers or suppliers who fail to spot consumer trends or adapt to changing markets, Turock said, citing a quote from Sir Terry Leahy, CEO, Tesco. Both McDonalds and Tyson saw the health consciousness issue and planned for it, he said.
Turock also cited trends he called the perfect storm: obesity, aging and the increase of diabetes in the United States.
Such trends indicate, he said, that healthy choices are less of a lifestyle and more of medical requirement. When ordering in a restaurant, what goes through the customer's head? According to Mr. Turock it is taste, convenience, price, and health. In the future, health will increase in priority, he said.
Turock's clients include the Food Marketing Institute, leading supermarket chains, food related associations, and large food manufacturing companies.
Another aspect to consider in today's market is freshness, which applies to egg and poultry products. Wal-Mart, he said, has concentrated on affordable and available food and will now add sustainability and packaging to the equation. One group of consumers interesting to watch, he said, is the 13- to 25-year-old age group, which some may think is too diverse. Turock also said that the U.S. middle class is declining.
All of these trends are worth watching and could have implications for how the egg industry markets its products. Turock listed several examples of changes that trends have created, such as specialty eggs. These are directed to more affluent groups with health concerns among the reasons for their popularity. Another example of a recent trend is convenience and the Campbell's Soup in-hand product, which allows consumers to put the whole can in the microwave and eat from the can. In addition, the take-out market is increasing by 6.8 percent a year and will probably grow further, he said.
McDonald's Philosophy: "Glocal"
Gary Johnson, senior director of worldwide supply chain for the McDonald's Corp., coined a word for the future: "Glocal". Meaning both global and local, glocal will be the McDonald's way of new product development and technology for the future, he said.
Johnson said that people the world over enjoy experimenting with food and trying new things. Because of this, there have been many changes in eating habits and behavior. Food consumption still continues to take into account nutrition and diet considerations. Also, Johnson said, food is regarded as a lifestyle for many consumers.
For McDonald's, it's important to listen carefully to what the consumer says, creating trust in the company, which is a must in today's world. He referenced several companies that have lost this trust like WorldCom and Enron and the results that happened.
Trust takes years to gain and only a moment to lose as was the case of the Mad Cow Disease issue. Johnson said that McDonald's maintains a transparent, open door policy and is proud to show its company to the world to maintain customer trust. He advised attendees at the meeting to keep this type of transparency alive in their companies.
Being a worldwide operation, McDonald's also looks at tastes from other cultures to see if they may apply elsewhere. Answering prepared questions, Johnson said that he feels China will become even a larger market for his company. McDonald's is a leader in testing new products throughout the world as well as the first to publish nutritional information in its industry, he said.
Global Egg Consumption has Dropped
Greg Tyler, vice president of international marketing for the USA Poultry & Egg Export Council (USAPEEC), said that worldwide egg consumption has dropped considerably. Advertising saying, "poultry and eggs are safe, just cook it," has been made available to all countries, he said. USAPEEC continues many different types of poultry, egg product and shell egg promotions in many countries by working with baking companies, advertising and conducting seminars and conferences, he said.
A panel of leading egg producers discussed how designer eggs have impacted the consumer and retailer relationship with traditional eggs, and how this might change over the next five years. Greg Deppeler, Urner Barry Egg reporter, moderated the panel. All four participants on the panel represented companies that feature designer eggs in their product mix: Bob Hodges, vice president and director of marketing at MoArk, LLC; Mike Sencer, senior vice president of the branded egg division of Hidden Valley Ranch; David Radlo, president and CEO of Radlo Farms, LLC, and Kevin F. Whaley, executive vice president and chief marketing officer of CCF Brands.
Panelists said consumers are well educated in the pros and cons of specialty eggs. They also said that packages sold in these categories are certainly much more colorful than regular eggs, raising the question as to whether regular eggs could be packaged more creatively.
Also, it is even more critical with designer eggs to be sure of the costs involved. At present, organic-produced eggs are the most costly. Some consumers are definitely looking at the health factors attributed to designer eggs and weighing costs against the benefits.
Questions were asked about the impact of the animal welfare issue on specialty eggs. It was the consensus that it was a factor and that the activists are boldly predicting no cage layers will be around within five years. The panel agreed that there needs to be more effort to confront the cage-free advocates. In addition, panelists said, there is a possibility that the specialty egg program could be aiding cage-free advocates. Even so, specialty eggs are actually providing what the customer wants, in addition to creating additional profitability.
Profitable 2007 Predicted
Bill Lapp, owner of Advanced Economic Solutions, spoke to the group about the economic situation in the egg and poultry industries. Lapp said employment growth is good and will grow in the future, but he is concerned on the housing front because of energy prices and the possibility of foreclosures. The fact that restaurant business is flat may also contribute to the problem, he said.
Lapp sees a slight drop in per capita consumption. Also, a potential problem is the rising costs of feed because of corn consumption for ethanol. Other factors are that the chick hatch is up and the egg breaking business is down 4 percent.
On the plus side, egg prices have remained very good and exports seem to be holding, so despite the negatives, Lapp predicts a profitable 2007. Higher egg prices from January through March have offset the rising prices of feed, but in the long run feed could wipe out the gains. Layer numbers and feed costs are the key drivers to profit for the egg industry in the coming months.
On ethanol, corn, and the ag economy, Lapp said the industry should be okay if oil stays around $60 per barrel and corn remains in the $4 per bushel range.
Joanne Ivy, president and CEO of the American Egg Board (AEB), reported on the activities that organization is doing with the promotion of eggs. For example, the National Veterinarian Association (NVA) and AEB have been working on an "Eggs for Pets" program. The veterinarians have advised AEB to develop some recipes, including eggs, especially for those people mixing their own pet food.
Other activities include the national accounts program, which works with fast food chains developing their breakfast items, retail marketing projects that show retailers how eggs are profitable in their stores, and Food Safety Training Videos. In addition, through AEB staff members Howard Helmer and Linda Braun, over $45 million worth of magazine and newspaper publicity has been obtained.
Urner Barry Reporter Roundtable
Randy Pesciotta, Urner Barry vice president of the Egg Division and Greg Deppeler, market reporter, conducted the roundtable reviewing the past year and pointing out some factors to look for in the coming year.
They said that it is obvious that the 74 to 75 cent per dozen egg price no longer is the break-even point. Exports in November created prices of $1.10 into the New Year and January was much better than expected. Another export order saved February and continued to maintain above cost prices.
It is generally felt that layer numbers will be kept in check and a summer removal schedule is likely to keep prices up, and should offset rising feed costs. Off-line breaking is decreasing while in-line is increasing.
Dried egg inventory is down by 17 percent. They pointed out that only by continued communication can Urner Barry attain a better outcome of its price discovery programs. The industry is encouraged to communicate with Urner Barry in any way to achieve this goal.
Farm Bill, Ethanol
Sen. Jim Talent, R-Mo., said that even though Congress definitely wants a farm bill passed, he is not optimistic, and said it will be a difficult job to get the legislation. He discussed several aspects of the bill that are under discussion, such as increased research as well as conservation payments.
Bruce McKnight, USDA Undersecretary for Marketing and Regulatory Programs, emphasized the importance of working with lower value crops to produce renewable fuels and not have the heavy reliance on corn.