Consumers showing price fatigue for proteins

Published on: Oct 18, 2013

WILLINGNESS to pay (WTP) for beef, chicken and ham fell sharply this month, according to the latest "Food Demand Survey" from Oklahoma State University.

For the first time in the six-month history of the survey, "significant moves" showed up in several key variables, likely driven by consumer uncertainty in the wake of the federal government shutdown and an ongoing salmonella outbreak in California.

The survey, published monthly by Oklahoma State economist Jayson Lusk, asks consumers a series of questions about their willingness to pay for a basket of staple meat and grocery items, as well as their purchasing intentions for the upcoming month.

"In the past month, there were significant reductions in WTP for most food products, including steak, chicken breast, hamburger, deli ham, beans and rice and pasta," Lusk said. "WTP increases were only observed for pork chops and chicken wings."

An uptick in wing prices is not unexpected given that football season — and tailgating — is in full swing. WTP for most beef and poultry products had shown a solid upswing in September, but October figures trended back toward what the survey had found in August. Lusk speculated that the salmonella issue was at least part of the impetus for the thriftier sentiment toward chicken.

"We saw a large increase in how much people said they heard about salmonella," Lusk explained. "Although awareness of salmonella increased markedly, stated concern for salmonella only increased slightly."

Awareness of the pathogen increased 21.3% compared with the previous month's survey. Lusk pointed out that 3.4% of participants reported having food poisoning in October, an increase of 27.7% from September and "a change that might be explained by people attributing prior illnesses to the outbreak in light of the news stories."

Those stories continued to unfold last week, with Costco expanding its recall of Foster Farms chicken products sold under the wholesaler's Kirkland Farms brand. As reported Oct. 14, USDA's Food Safety & Inspection Service accepted Foster Farms' plans to improve food safety operations at the three California plants implicated in the outbreak, and the plants continued operating under federal inspection.

Lusk's survey found that, overall, consumers reported a slight increase in grocery spending and a slight decrease in the amount of money spent on food consumed away from home. Weekly grocery expenditures were up 3.4% to $96.52, while away-from-home spending fell 1.7% to $44.84.

Consumers continue to anticipate spending less money on food in general, although they, perhaps correctly, anticipate that chicken and pork prices will increase over the next month.

University of Nebraska agribusiness specialist Tom Field, a beef industry expert, told agricultural broadcaster Ron Hays last week that enhancing beef demand has to be the industry's top priority, particularly in the face of high retail beef prices.

"The challenge for us now is how (to) get the non-user and folks who don't like to cook and don't spend any time in food preparation to stick with us, because when things get tough, out-of-home eating drops off a little bit, and we have the potential to lose that share if we are not prepared to help people use our product at home," Field explained.

Field told Hays that despite the economic recession of recent years, consumer interest in buying beef has remained fairly strong, even with a prevalent assumption that the beef business will lose market share to chicken.

"What the checkoff and related research community found was that beef consumers stuck with beef," he said. "They might have traded down from a white-tablecloth, premium muscle cut that they bought at the store and cooked at home. They might have traded down from a steak to a burger or to a flat-iron steak, something maybe a little lower in price, but they stuck with us."

Cargill Beef president John Keating told an audience of chicken industry executives earlier this month that he anticipates fairly stiff competition between beef and pork in the retail space throughout the next year.

Making sure consumers keep returning to the meat case — and connecting with the millennial generation — will be challenges for the beef industry over the coming year.

Volume:85 Issue:43

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