Bullish outlook for the meat marketplace

Anne-Marie Roerink, president of 210 Analytics, with the NAMI CEO Julie Anna Potts at the 2023 Annual Meat Conference in Dallas. / Photo: Russell Redman

The meat industry had its fair share of challenges but turned in a solid year in 2022, eclipsing the overall food and beverage market in volume and unit sales performance and posting record dollar sales. Consumer demand for meat remains strong. Household penetration was just over 98% last year—virtually the same as in 2021, despite higher food prices—while annual trips per shopper stood at nearly 50 and spend per trip at almost $16, according to IRI data.

Meat producers, suppliers, retailers and consumers continue to face an uncertain economic picture. All are grappling with the effects of global market instability, elevated costs, labor shortages, lingering supply-chain issues and high inflation—as well as the possibility of a recession sometime this year. On the plus side, retailers and suppliers have stepped up efforts to promote variety, value, convenience and meal solutions that will better engage the meat customer.

Julie Anna Potts, president and CEO of the North American Meat Institute (NAMI), and Anne-Marie Roerink, president of food retail research and marketing specialist 210 Analytics, sat down with WGB Executive Editor Russell Redman at the 2023 Annual Meat Conference in Dallas and shared their insights on the current state of the meat business. Here are edited excerpts of the discussion.

WGB: What’s your outlook for the meat sector in 2023, from the supplier, retailer and consumer perspectives? What are some of the tailwinds and headwinds?

JULIE ANNA POTTS: Let me start with tailwinds. High consumer demand for all meat and poultry products, and continued ways of preparing things that are new and different and channels for getting them. Headwinds, we still have labor issues. When I started four years ago at the Meat Institute, it was the No. 1 challenge that all our members—whatever size—talked about, and then with a pandemic on top of that. Yeah. So we’re working on that.

We still have supply chain wrinkles, right? That can be things such as, how do you package a product when maybe the film isn’t available now? There are things that people who go to the grocery store to buy meat don’t really think about that goes into the product. Those issues still exist, but they have gotten a lot better. And then, in trade, you’ve had potential rail strikes and port issus. Even though public policy is trying to address those things, that takes a long time. And, you know, our fear is that you lose market in other countries during the period of time that we in the U.S. are trying to fix our infrastructure problems. So those are things that we are all working on and keeping an eye on in our industry.

WGB: Anne-Marie, do you have anything to add to that in terms of headwinds and tailwinds for meat?

ANNE-MARIE ROERINK: Yeah. I think Juliana definitely covered all the issues with the supply chain, and that is really what is driving that higher price point. But this is not just in meat and poultry. In fact, the inflation that we are seeing in meat and poultry is below that of total food and beverages. But perception is reality, oftentimes. When we ask consumers, ‘Where are you seeing price increases?’, eggs are No. 1, and then it’s fresh produce, meat and poultry, etc. So it is something that people buy a lot. And people also believe that, in terms of the plate, meat and poultry is one of the larger expenditures relative to a dinner or lunch. That said, if we think about the fact that prices have increased 25% since 2019, and we’re still selling more pounds. That is just the biggest testament, I believe, to the strength of the demand for meat and poultry in the U.S.

Source: Power of Meat 2023 report, FMI-The Food Industry Association/North American Meat Institute

A look at meat industry performance

WGB: Julie Anna, how would you describe the performance of the meat industry in 2022, especially amid a difficult business environment?

POTTS: Terrific. Our companies have risen to challenges unlike anything I could ever have imagined when I took this job four years ago. Coming out of the pandemic, as they still have been in 2022, they’re addressing the labor issue through very creative ways of retaining and taking care of employees, especially in rural areas. Some of our companies are providing housing, they’re looking at child care, they’re providing educational stipends. They pay tuition, they provide financial literacy. And then they do a lot to support refugee communities that settle. So the work toward keeping a steady capacity to bring people their meat and poultry has been a tremendous thing that we’ve seen, with the numbers really going back to normal, in spite of all the headwinds that we talked about.

WGB: What factors do you expect to drive consumer demand for meat? What has been the impact of still strong food-at-home demand?

POTTS: It’s going to continue to go up. What Anne-Marie just said about this environment of inflation, demand is still high and sales are still high. People might complain [about pricing] and might change their behavior a little bit, but they’re still buying meat and poultry in record numbers. I think that’s the biggest success story of 2022 and, going into the future, the consumer trends. I heard Anne-Marie yesterday talk about small appliances like the air fryer and the Instant Pot, people eating more at home, and younger people starting to really lean into preparing their meals at home and entertaining at home. Those are all things—especially with Generation Z—that we are looking to bolster as we go forward.

WGB: Some of the retailers I’ve spoken to at the conference said people will pay extra to get the premium product, especially beef. Retailers said that’s one of the trends in beef, people are paying to get the better cuts and quality.

POTTS: Absolutely. USDA Prime Beef, it’s all good. What is available and what people are willing to pay for—even in inflationary times—is a demonstration of taste, quality and value. All of those things are relevant, as we learned from Anne-Marie’s Power of Meat presentation.

WGB: Which meat segments—beef, poultry, pork, etc.—are performing well and which are lagging?

POTTS: We had tremendous production of beef last year, and very strong with pork as well. With both eggs and poultry we have, unfortunately, as I think everyone is aware, avian influenza, that is hopefully on the decline. Looking ahead, we have a shrinking cattle herd, so that is going to impact the beef industry going forward. But beef and pork have been as strong in production here and with our trade partners around the world.

Impact of inflation

WGB: Speaking of inflation, it has relaxed a bit. But overall food pricing is still high, not just in meat. How is this affecting meat sales currently?

ROERINK: People are very busy figuring out how to balance the limited time that they have, their nutrition goals and, more than anything, how can I make it to the end of the month with my current paycheck? Of course, it’s not just food and beverages that are up. Life in general is more expensive, and it has really put a lot of pressure on the total food and beverage purchase, meat and poultry also.

What I just love seeing is the creativity that is coming out of this industry. We are an industry that have always done the price per pound, whole week. And then what determines what’s on sale? Well, what was on sale last year, because we need to lap these numbers. We’re now seeing retailers in the industry working together. What if we do a one-day sale or a three-day sale, or a mix-and-match sale with five packages of different items for $20. Sometimes that includes produce as well. We see different kinds of BOGOs out there, price freezes. I think the industry and the consumer are working together as much as they can to make sure that we continue to feed America.

Case-ready versus full-service

WGB: The vast majority of customers are still opting for items in the self-serve meat case, seeking more value versus going to the service counter. What’s going on there?

ROERINK: With a lot of retailers, actually, it’s probably the most popular call I get these days: ‘What do I do with my full-service counter?’ That’s not an easy answer. Because yes, the vast majority of purchases comes from self-serve because oftentimes purchases are routine and you can just race in and grab what you need. When you talk to consumers who shop in stores that do have a full-service counter, the question is, ‘Why? When do you go there?’

At the end of the day, full-service counters are probably about 5% of sales, if you’re lucky. They’re very small in sales, but they are a big driver of reputation. A lot of people believe that the meat there is of higher quality, it’s fresher. You’re able to look at it, pick exactly what you want, and it’s always that word ‘special,’ right? A special occasion, a special cut, a special thickness, getting some advice from the butcher. So the big thing there is, if we think about a case-ready world, if we think about more self-service, how do we continue to have a differentiated offering in terms of being able to offer some tips or say, ‘We understand if you’re a one-person household. That two-pound roast might not work for you. How do we cut it up for you?’ Etc. Again, a lot of creativity in the marketplace to make sure that people are able to manage all their needs in the meat department.

POTTS: Could I add to that? One of the things that Anne-Marie said for retailers to consider, especially the younger consumers, is in-store tasting. Sometimes, it may be difficult to pull off. But that’s where I see the trend that people want convenience, and they still want taste. Some of these value-added meat products can be featured, and that will bring people back to that part of the store. The meat counter can be that place where people gather to taste things.

ROERINK: I agree. Sometimes we are very worried about having the right packaging and the right messaging, and we forget the operational side of the business. At the end of the day, what gets people to buy the same cut again is taste. You know, my family loved it. If it tasted good. If the quality was good. So I think we really need to hammer that home as much as we can in our marketing and merchandising in-store and everywhere else.

Source: Power of Meat 2023 report, FMI-The Food Industry Association/North American Meat Institute

Supermarkets losing meat market share

WGB: Looking at retail channels, how do consumer meat purchases differ? Anne-Marie, you’ve said that traditional supermarkets have been leaking share to mass retailers.

ROERINK: Yeah, it’s a fascinating world. The traditional supermarket was always very strong in meat, not only in attracting people to the store but also with the conversion. If people were buying groceries, most of them bought meat there as well. And they attracted a lot of secondary shoppers who shopped in other channels. If you look at the long history of the power of meat, it is absolutely astounding how much distribution there has been from that traditional grocery store to supercenters, to club stores, to discount, to specialty. That’s what makes it hard for a lot of the packer/processors, because instead of being distributed in one targeted channel, now you really need to figure out who shops where, how should I be distributed, what should my assortment be?

So the world has become a lot more complex, in a way. It’s really driven by two big mega-trends. One being how different generations shop. We just see that older generations love that full-service supermarket. They believe the full-service counter is really important. And then you see some of those younger shoppers loving to shop at supercenters, clubs and specialty stores. That is a trend we’ve already seen over the years—in addition to, of course, now that layer of inflation where some people have completely switched stores to a format that really focuses on value. So that’s part of what we’re seeing in the numbers.

WGB: And at the club stores and mass retailers like Walmart and Target, you’re going to find more of the bulk- and value-pack meat offerings.

ROERINK: Yeah. And that’s important to keep in mind. The [American] Frozen Food Institute and I have done several studies. Each and every time we ask a question, the answer is consistent. And that is, ever since the start of the pandemic, 30% of Americans have expanded their freezer capacity. So a chest freezer or an additional fridge-freezer combo, in addition to all of those food-saver things that people now have at home and the improvements that have been made in packaging. All of that is driving very different meat purchasing throughout the store.

Supply chain status

WGB: Julie Anna, you’ve talked about the supply chain. Would you say the disruptions we’ve seen have largely been ironed out?

POTTS: Yes. I think what we had seen that created disruptions in the past several years has been ironed out or is on its way to being fully resolved. They are always going to be snafus or things that happen that are unforeseen. But the systemic supply-chain issues, I think, have largely been resolved.

WGB: The pandemic was such a big hit to food companies—all industries—but, to some extent, I think consumers were like, ‘OK, the pandemic is over with,’ and then companies could just brush themselves off and everything would go back to normal.

POTTS: It’s not that easy. I think consumers, through no fault of theirs, don’t think about what a domino effect there was, like the inability to get cardboard or wooden pallets or labels, things that are essential to getting meat products into the store. As we saw in the pandemic, walking into your grocery store and seeing empty areas in the meat case was deeply disturbing. But we know there was never a real shortage. There was just this disruption. And so, fortunately, I think we’re all better off now, and we all understand more about the supply chain now. But I do think that continuing communication around those issues with consumers is extraordinarily important.

ROERINK: I couldn’t agree more. And I think that’s the big difference actually. If you look 10 years ago, if there was an out-of-stock, a recall or something like that, you would just see empty shelves. These days, regardless of the retailers I go to, there are really good communications like ‘We’re a little low on chicken stock,’ or ‘We’re a little low on this for X, Y and Z reasons.’ And I’ve even seen communications about inflation, like ‘Because of drought X, Y and Z, this is why prices are up.’ That is the industry talking to consumers to make sure they have a deeper understanding.

POTTS: Absolutely. We can’t do it by ourselves. Retailers can’t do it by themselves. Processors can’t do it, the cow calf producer can’t do it [alone]. We all have to do it together.

Closer look at labor

WGB: Going back to labor, what are some of the issues that are lingering? Is it still shortages?

POTTS: Yes. A lot of times, plant locations are in very rural areas. Or the labor pool running the line might be competing with an Amazon warehouse or other jobs that don’t have the temperature variations you have in a meat plant. They’re hard jobs, and they’re very people-intensive. The companies have done a tremendous amount to ensure that their labor force is well cared for and that they desire work there. But it is just like everywhere else, where so many different sectors that have seen a competition for the same folks. It has been hard in meat packing and processing. I’m interested in knowing where some of the labor has gone long term and will continue to watch that.

WGB: Are there also issues around most meat being self-serve in stores but full-service counters requiring more worker training and knowledge?

ROERINK: We have continued to see the increase in what we call case-ready. That would be meat that is processed and cut and packaged in meat processing plants versus cut in-store. Well, that means that you’re moving the labor from the back-store cutting floor to the plants. As Julie Anna mentioned, some of those plants are in not densely populated areas, which means now you have more capacity going there, requiring more people, and that’s just going to take time for people to start moving to those communities. Something else that we saw during the early months of the pandemic was retail bringing back those in-store cuts just to be able to continue the supply. And the creativity has just been awe-inspiring, honestly.

Earlier at the conference, Roerink revealed the “Power of Meat” study, an in-depth look at the meat sector. / Photo: Russell Redman

Promotional ingenuity

WGB: Both of you talked about rising promotional creativity with meat. Do you expect promotions to look beyond just value and price?

POTTS: I hope so, because I think consumers are focused on taste and more information about the products—especially the younger ones, on the label claims. I hope that there are going to be real efforts by the retailers to enable that to play out as in a dialogue in the stores, whether that’s through sampling or information that can be posted on the meat case. You know, ‘I’m your friendly butcher, ask me about this particular cut that’s marinated a certain way’ or whatever. If people are really interested in that, whether they’re going to the big stores or the traditional supermarket, I think that’s still an opportunity for both retailers and our brands in the meat industry.

Plant-based meat decline

 WGB: Let’s talk about the plant-based meat. I think it was in your presentation, Anne-Marie, that we saw a big red pie chart for meat market share with a little spot for plant-based.

ROERINK: The pin prick.

WGB: Yes, the pin prick. We’ve seen lots of headlines about Impossible Foods, Beyond Meat and other plant-based meat brands seeing their sales really tail off.

ROERINK: Yeah. I always go back to, why did they have that big growth spurt? And that’s what we call growth by distribution. In other words, more stores are putting in items and they are putting in more items. Typically, when you add more assortment, you’re going to see sales growth. Then we reached a point of saturation where, all of a sudden, plant-based meat alternatives had to create their own sales because they were no longer growing in terms of the number of items. And that’s when we started to see that pressure of the year-over-year growth flattening out. And now it’s been down by double digits for two years in a row.

What is behind it is there was tremendous willingness among consumers to try plan-based meat alternatives because they had been pitching better for your health, better for the environment, no animal welfare guilt and things like that. Well, then people flipped over the package and saw that very long ingredient list, and there was some doubts in their minds—was this really healthy for me? But more than anything, we talked about the power of taste in the meat department, and I also did videos about plant-based meat alternatives. One for one, people said, ‘I’ve tried them and, well, we no longer buy them.’ They just did not deliver on taste. So I do believe that many of the makers of plant-based meal alternatives are aware of this, and they will continue to evolve on taste and cleaner ingredients. But since day one, my opinion has always been that this is a niche opportunity, with a small sliver of the population that has an interest in it.

And there’s a massive opportunity cost to over-SKU it. If you put in way more packages and a way bigger assortment than is really warranted by the sales and consumer interest, what are you not selling because of it? That is something really important to keep in mind.

Meat in the online arena

WGB: The last thing I want to touch on is the online channel. How do you see fresh meat’s growth prospects online? I guess it has the same issue that consumers have with buying fresh produce online: They don’t want others to pick it out for them.

POTTS: I think that, notwithstanding the challenges of the many ways that are available now [to buy food online], whatever makes it convenient for consumers is going to drive a lot of the decisions in how to market, package, or what have you, meat and poultry. People are becoming more comfortable with the online because retailers are doing a much better job of being selective and getting people better stuff than in the past. I think the online experience has also improved greatly. For our members, whatever makes it most convenient for the shopper is good.

ROERINK: I agree. Your point of, ‘I don’t want somebody else to touch it. I wanna poke it, I want to look at it, I want to sniff it and and lay eyes on it,’ that is going away a little bit. You have to keep in mind, who is the core online shopper. That’s the Millennial. They don’t know as much about meat as generations before them. So many of them feel, ‘I buy a certain brand, and that brand is going to provide the consistency. So if I always buy X chicken or X beef, what have you, then I’m OK.” The other thing is the investment in packaging. A lot of consumers do not like the idea of the chicken juices or anything of the fresh meat leaking all over their groceries. That was a big reason not to order online. Now there’s a lot of vacuum packaging that doesn’t leak. In online merchandising, consumers actually want to see the item in the packaging to give them reassurance that it is leak-proof. So it’s definitely a very different kind of shopping experience.