Understanding supermarket meat department sales trends is critical to the success of poultry marketers, says Sherry Frey, vice president, Nielsen Perishables Group.
Speaking at the Chicken Marketing Seminar, Frey told listeners that a holistic view of the store and consumer is critical to success for poultry marketers in a dramatically changing food retail environment.
Frey named consumer and retail grocery trends that have implications for poultry marketers:
- Fresh food and its shoppers are increasingly valuable to the total retail grocery store
- Alternative retail channels for food and meats are growing
- Fresh meat is driving total store meat success
- Consumer priorities driving trends involve value, convenience, quality/health and multicultural/global factors
Poultry is well positioned to profit from the trends, but marketers should leverage their products and programs against the changing needs of both consumers and retailers.
“Meat can drive total store success, if it ties to the shopper need,” Frey said.
Fresh foods increasingly valuable to the total store
Fresh foods – meat, produce, deli, bakery and seafood – contributed 29 percent to total store sales, according to Nielsen data collected earlier in 2014. The meat and produce departments contributed the lion’s share of those fresh foods sales at 39 percent and 32 percent, respectively.
Center store departments, on the other hand, are really struggling, Frey said.
Nonetheless, the challenge for meat and poultry is that while dollar volumes were up 4 percent on increased prices, volume growth has been anemic at only 1 percent. While meat and poultry prices are expected to moderate in time, she suggested the longer-term opportunities are in catering to the changing consumer and retail environment.
Alternative retail channels for food
Just one aspect of the changing retail landscape is the growing importance of alternative channels, including convenience stores selling meats.
While 66 percent of fresh meat and poultry is sold at traditional supermarkets, sales of these items are growing at mass merchandisers, warehouse/clubs, dollar stores, convenience stores and drug stores. So far, mass merchandisers and warehouse/club stores have led the way in fresh sales among the alternative retailers, but dollar stores and convenience stores are beginning to also gain in fresh sales of deli and bakery items.
Meat and poultry sales are also growing in the alternative channels. Frey cited the example of QuickTrip Corporation, Tulsa, Oklahoma, a $10 billion operator of 700-plus convenience stores in 11 states with a meat selection that includes ground beef, chicken breasts and pork chops.
Perishables purchase frequency up in alternative channels
While perishables purchase frequency is down 2.6 percent in traditional grocery stores, it is up in alternative channels compared to a year ago as follows:
- Drugstores up 7.1 percent
- Dollar stores 2 percent
- Convenience stores 1.4 percent
Dollar stores are seeing customer growth among high-income consumers, Frey said.
“In response, dollar stores are rolling out fresh formats and installing more coolers,” she said.
At the same time, the growth in the number of alternative channel stores in 2013 versus 2007 outpaced grocery stores:
- Grocery stores +7 percent
- Drug stores +21 percent
- Dollar stores +36 percent
- Convenience stores +32 percent
These trends, including the rise in online shopping, are causing traditional retailers to evaluate and alter their formats. Examples include Turkey Hill Dairy and Walmart-to-go with formats designed to complete fill-in trips and that blur the lines between formats. Similarly, traditional stores are forced to compete with alternative formats like Mariano’s Fresh Market, where customers are able to get fresh meats grilled in the store free of charge while they wait.
Fresh meat is driving total store meat success
For the 52 weeks ending April 26, 2014, Nielsen data showed fresh meat’s growing dominance over frozen meat. While total store meat sales registered 3.5 percent dollar growth and 0.9 percent volume growth, those figures hide the difference in performance between fresh and frozen. The fresh meat department rang up $52.2 billion in sales versus $2.2 billion for frozen meat. And the gap in sales is growing wider: Fresh meat sales grew 3.7 percent by dollar and 1.0 percent by volume. Frozen meat sales declined 1.1 percent by dollar and dropped 2.3 percent on volume.
Sales performance measured by household penetration (99 percent vs. 26 percent), trips annually (28.3 vs. 2.3) and spend per trip ($407.46 vs. $15.71) are even more revealing of fresh meat’s greater acceptance by consumers.
Proteins across the store: Chicken’s performance
So how does chicken perform in sales across the retail grocery store?
In terms of dollar share of sales, beef leads at 35 percent, followed by chicken at 29 percent and pork at 20 percent. Chicken and pork, however, registered higher dollar and volume growth than beef in the most recent 52 weeks ending in May.
Meat department leads store chicken sales
The meat department leads the deli and frozen foods departments in sales of chicken (see Meat department leads store chicken sales). However, the deli department is gaining ground in chicken sales, according to Nielsen data.
The deli department outpaced total store sales gains in chicken in dollar (9.3 percent vs. 5.8 percent) and volume (8.6 percent vs. 1.8 percent).
There's quite a bit of buyer overlap, Frey said. “Fresh chicken and deli prepared chicken have 56 percent buyer overlap compared to fresh and frozen with 27 percent buyer overlap.”
For now, consumer trading behavior is working in favor of chicken, she said. “Fresh chicken is losing to deli prepared chicken but winning from beef, frozen convenience meals/dinner and pork.”
More competition for deli department
Nonetheless, Frey issued two cautionary notes about the competition for the deli department business.
Chicken prices: There are indications that chicken is becoming too pricey in the deli department and exceeding consumer thresholds in price points. As a result, the meat and frozen departments may take back sales volume.
Frey cited a year-over-year rise in sales of chicken wings in the meat and frozen departments at the expense of deli wings.
Competition from pork: The pork industry is working on new value-added products to compete with chicken in the deli and frozen departments.
“Frankly, everybody wants a piece of chicken’s sales pie,” she said. “The deli prepared food business is the fastest growing sales segment, and everyone is trying to figure out how to help the retailer use some of the equipment now used to prepare chicken to prepare other proteins.”
Balancing the price value equation
“Meat is the most highly promoted fresh department in the retail grocery store,” Frey said. “A third of meat department sales are on promotion. Meat ads bring customers into the stores.”
While the number of ads for perishables is down, the number of ads for chicken is up. However, the price discounts are shallower in beef and pork but not in chicken.
The bottom line is that meat cuts are more price sensitive in 2014. “Price sensitivity among beef and pork cuts increased while chicken remained steady,” she said.
Consumer choice of chicken cuts changes as prices rise
As prices of all meats have risen, consumers have been switching from planned occasion-based meat cuts (roasts, whole chickens, value-added chicken cuts) to versatile quick meat cuts (chicken breast and wings, pork chops, ground beef).
“Ground beef and boneless/skinless chicken breasts have become top substitutes for all cuts,” Frey said.
Convenience plays key role in consumer decisions
Consumers are buying meat and poultry cuts that are portable, flexible in usage and quick to prepare or eat, Frey said. “They are eaters, not cooks, and they want to spend more time enjoying and less time preparing their food,” she said.
Those most engaged in health and wellness shop and spend
The National Marketing Institute’s health and wellness segmentation provides useful insight on shopping and spending patterns, according to Frey.
The segmentation provides useful details about five segments: Well Beings, Food Actives, Magic Bullets, Fence Sitters and the Eat Drink & Be Merrys.
For example, the Well Beings, the most proactive of consumers on health matters, are active shoppers and spend the most annually on food — $7,754 per household. They also make the most shopping trips (157) and spend the most per trip ($49.40)
Frey said it is of critical importance for meat and poultry marketers to own definable health messages to be able to win shoppers.
