Will consumers keep up with rising meat prices?

The meat department had much improved its in-stock position the week ending June 28 and assortment continued to recover from May lows. However, prices remained highly elevated and that was the big unknown relative to everyday demand versus year ago.

For the week ending June 28, the demand resulted in a 15.8% increase in dollars for meat sales, but volume dropped in line with the prior year at 0.6% (IRI).
For the week ending June 28, the demand resulted in a 15.8% increase in dollars for meat sales, but volume dropped in line with the prior year at 0.6% (IRI).

The meat department had much improved its in-stock position the week ending June 28 and assortment continued to recover from May lows. However, prices remained highly elevated and that was the big unknown relative to everyday demand versus year ago. The second unknown was consumer engagement with foodservice, with restaurants in most parts of the country reopened, albeit with social distancing measures in place.

Ultimately, the demand landscape resulted in a 15.8% increase for dollars — the 16th week of double-digit gains since the onset of the pandemic. However, it was price that drove the gain with volume nearly in line with the prior year, at -0.6%. This was the first time since the start of the pandemic purchasing in early March that meat pound sales were lower than the same week year ago. The dollar/volume gap did improve somewhat versus the prior week, at 16.4 percentage points 18.4 points during Father’s Day week.

Year-to-date through June 28, meat department dollar sales were up 24.1%, boasting double-digit growth for the months of March, April and May. This reflects an additional $7.1 billion sold versus the same time period in 2019. Year-to-date volume sales through June 28 were up 15.0% over the same period in 2019, reflecting an additional 1.26 billion pounds of meat and poultry sold versus the same time period in 2019.

Consumers notice higher prices

While assortment and availability improved, consumers continued to call out higher meat prices and fewer meat features on Retail Feedback Group Constant Customer Feedback system. “Not many sales on meat. Good sales on chicken but not on beef. I understand the current situation, but the beef prices are sooooo expensive and people cannot eat chicken everyday!” Another shopper pointed to switching stores because of the meat prices, “The prices are too high and I’ll go to shop elsewhere when I need meat now.”

IRI’s insights on the average retail price per volume show double-digit increases on the price per pound for beef and pork for the one and four week period ending June 28. However, the price gap versus year ago has shrunk several points when comparing the four week to the one week look for both beef and pork. On the other hand, prices for chicken are rising. In the four-week look prices were up 7.5% versus year ago and during the most recent week prices were up 9.4% Exotic meats are the only ones to be down in the shorter-term and four-week look.

“Despite increased production, retail prices on most pork and beef items are still reflecting earlier product shortages and few holiday promotions. Wholesale beef prices are now in-line with year-ago levels, with slightly weaker choice values on larger supplies of higher grading carcasses. Few retailers featured beef items for the holiday given recent high prices, but interest in ground product remains steady. Boneless strip loins were under the most pressure, as retailers look to pork and chicken items for holiday promotions. Prices for most pork items weakened on larger supplies and heavy retail inventories. We expect most pork items to remain under pressure after the holiday, with notable pressure in loins after several weeks of stronger demand,” Christine McCracken, Executive Director Food & Agribusiness for Rabobank, said, providing insight on likely price movements in the next few weeks.“

“Chicken prices continue to respond to the gradual improvement in foodservice and the recent drop in production, with composite values up nearly 4% in front of the July 4th holiday. Wings and tenders continue to outperform, while breast meat has struggled to find retail support.

What’s next?

Next week’s report covers Independence Day, which is traditionally a strong meat holiday. Based on the results of the spring and summer holidays thus far, July 4th sales will likely be extremely strong as more than half of shoppers expected to celebrate the holiday differently, with less travel and smaller, backyard celebrations according to IRI’s weekly survey of primary household grocery shoppers.

Engagement with foodservice continues to be in flux, particularly as the past few weeks have seen spikes in COVID-19 cases and hospitalizations in some regions that had previously relaxed restrictions. Between the continued impact of COVID-19 and significant economic pressure, the retail demand for meat will continue to track well above 2019 levels for the foreseeable future.

One of the biggest opportunities for the meat supply chain lies with helping consumers with meal planning. IRI’s weekly survey found that consumers, who were initially taking to preparing more scratch meals, are running out of meal ideas and craving variety. Pre-pandemic, it was exactly this meal fatigue that drove consumers to eat out.

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