There’s a new consumer reality facing poultry as consumers adjust to the economic meltdown of the fourth quarter of 2008. But there are significant opportunities for poultry as consumers adjust . . . if marketers work the value proposition and avoid a “race to the bottom.”

The new reality can be summed up in a statement attributed to Interpublic Group: “The recession is having a far greater impact on consumer spending habits than previous downturns and some behavior patterns will be permanently changed. Seventy-five percent of consumers have altered their purchasing behavior over the past year, in some cases trading down and in others making wholesale life changes.”

Chart: Supermarket fresh meat sales 

Understanding and tracking poultry category performance and sales dynamics is crucial to meeting this challenge. Consumers are trading up, trading down and substituting items. In other cases, they are trading out of the category.

There is significant new category and consumer complexity, said Steve Lutz, executive vice president, Perishables Group. He told listeners at the Chicken Marketing Seminar that understanding consumer segments at the retailer/store level is more important than ever. Poultry companies, he said, need to employ account-based value strategies to be successful.

Total category planning needed

Lutz advised poultry marketers to know performance details for their accounts and to align category best practices with consumer segments. This involves development of store-specific plans vs. total chain plans. It calls for a comprehensive plan to drive total category dollars and the application of all the retails tools – merchandising, assortment, pricing and promotion.  

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His conclusions are based on U.S. retail data from 13,000 supermarkets, loyalty card data from two chains representing 200,000 households and 1,600 in-store consumer intercepts in March.

The seminar is sponsored by the National Chicken Council (NCC) and the National Poultry & Food Distributors Association (NPFDA). Lutz’ presentation was sponsored by WATT PoultryUSA.

Changing consumer purchase patterns

Consumer fears impact purchase patterns, and price is the No. 1 shopping concern in 2009, according to Lutz. He said more than 50% of consumers have cut back on quality or quantity of food purchases. Price seems to dominate, and this is critical to understanding evolving consumer purchases decisions.

Lutz said the shifts in shopping patterns/priorities are characterized by five key trends:

  1. Consumers are trading down to less expensive items within a category.
  2. Consumers are trading out of categories or out of fresh departments entirely.
  3. Consumers commonly seek value by buying less per trip, buying more frequently and buying in larger quantities to “stock up” on specials.
  4. Consumers are shifting retail formats.
  5. Consumers are visiting restaurants less and supermarkets more.

Poultry positioned to rise on value proposition

With “value” playing a decisive role in new consumer purchasing patterns, poultry is positioned to make gains.

Consumers are fulfilling basic over discretionary needs, Lutz explained. Consumers, he said, are motivated by value-based decisions. This means that key meat products are comparatively expensive and vulnerable to substitution.

Scan data from 13,000 supermarkets through May 1 shows solid growth for the chicken category. “Value” items showed the highest growth.

Chart: Chicken dollar sales growth 

Lutz said promotional activity is up for the category, and there’s a “value” focus in promotions. Retailers are doing this, he said, because consumers are responding to value.

Loyalty card data for Q4 from 100,000 households (eastern chain) shows that consumers are trading out of high-priced beef items. The data show trip frequency for these items is down somewhat while volume per trip is down sharply.

At the same time, consumers are trading down to high-priced chicken and mid-priced beef. For these items, trip frequency is up and volume per trip is up.

Consumers are also trading down to low-priced chicken and beef items, for which trip frequency is up and volume per trip is up somewhat.

In-store intercepts: Beef is higher priced

Data from in-store intercepts supports the scan data and helps explain it. The consumer perception is that meat prices are up and that beef is higher priced.

Shoppers were asked, “Can you think of any fresh meat items that are priced higher than they were a year ago?” Eighty-one percent said yes, and of that group 82% said fresh beef was now priced higher. Fifty percent said chicken was higher, while only 23% of these shoppers said turkey was higher in price than a year ago.

Not surprisingly, shoppers are basing purchases on their perceptions. Product substitution is at 89% among shoppers who indicated they believed certain items were higher priced. When asked, “What items are you now purchasing instead of those higher-priced items?” their responses were as follows: chicken 43%, turkey 37%, pork 24% and beef 13%.

Lower-priced items, especially turkey, are benefiting from consumer perceptions of price. While only 23% indicated that they could think of fresh meat items that were cheaper than a year go, 44% of these shoppers said turkey was priced lower. At the same time, 31% said pork was priced lower; 25% said chicken was priced lower and 23% said beef was priced lower.

Challenges for poultry

Consumer demographics are driving outcomes in marketplace, and value is a key determinant. Value, however, means many different things related to demographics, occasion, purchase criteria, location/channel, package size and price.

There are challenges for poultry – especially for chicken – with consumers very conscious of pricing. Turkey, however, is poised to siphon customers due to consumer perception about its price.

Lutz cautioned that if poultry marketers race to the bottom of the value proposition, consumers will race with them.
Poultry marketers should formulate strategy based on the following facts:

  • Consumers are predisposed to purchase substitutes.
  • Consumers are showing signs of price resistance as cost sensitivity is high.
  • Consumers are responding to retail/supplier stimulus.

Understanding consumer segments at the retailer/store level is more important than ever for poultry companies. Know the category’s drivers, triggers and substitutes.