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Looking down the road: Megatrends and beef industry shifts

March 21, 2013

Dr. Tom Troxel
Dr. Michael L. Looper

The beef industry has undergone significant change in the past few years. On the production side, severe drought has caused structural changes in the industry. Herd size has dramatically diminished, input costs are high and some cattlemen are exiting the business instead of taking on herd rebuilding. Looking ahead, there are further significant changes in the marketing landscape that the industry must successfully adapt to in order to keep beef as the premier center of the plate protein.

Households composed of one or two persons now represent 62% of total households. In addition, some families are now eating more a la carte meals, where individual entrees are needed to meet each person’s desire. Retailers are going to need several merchandising options as they reach out to these consumers. A recent beef checkoff study found strong consumer interest in packages of small, 4-5 ounce expertly trimmed steaks in the meat case… as well as on the restaurant menu. Market research also has found that a limiter for beef consumption is that beef does not perform well in the microwave. This has led to testing of new packaging such as a microwaveable ground beef option with a pouch to collect grease as the beef is cooked.

Hispanics are anticipated to grow from 16 percent to 30 percent of U.S. households from 2010 to 2050. The percentage of Asian consumers in this country is expected to nearly double, from 5 percent to 9 percent. Not only will tastes shift, but the beef industry must be able to satisfy increasingly diverse consumer palates. This will create an explosion of taste options to enjoy, particularly for millennials who embrace ethnic flavors to a much greater degree than older segments of the population.

The marketplace is fractured into three major generational cohorts. The baby boomers remain the most economically powerful generation and, at its peak, was 76 million strong. Boomers want to stay vital and productive as they age and, as more become empty nesters, their discretionary income increases. Generation X is the smaller (49 million) that followed the boomers. They are the in-between cohort whose influence is increasing as the boomers retire. Third is the millennial generation which, at 80 million strong, is bigger than the boomers. Millennials are the market of the future and as this cohort moves through society it is changing everything. Also, it is important to note that many of us refine our taste buds when coming of age in our 20’s. Historically that has been the time frame when steak consumption climbs. We must stand ready to educate millennials as they go through this important gastronomical coming of age.

Millennials – consumers born between about 1980 and 2000 – use social media to make many of their decisions, as well as increase their knowledge base. Technology in communications is advancing faster than most consumers can keep up with it. Research has found that millennials are much more likely than other consumers to use a ‘shopping app’ at the supermarket – an app that tells them, for example, what’s on sale, where to find certain foods in the store and can provide recipes and suggest ingredients. What kind of electronic communication will drive millennial decisions and knowledge-building tomorrow?

The beef industry has come up with several new beef cuts (Denver Cut, Flatiron Steak, etc.) that have helped make steak-eating more affordable, and increased the value of the carcass to the beef industry. Today about half of U.S. households are low to moderate income households, and these consumers are typically higher frequency beef eaters. Innovation is needed to find affordable beef options for all income levels. As the industry moves toward a more comprehensive selection of great beef solutions, we must also remember many consumers today never talk to a butcher, and thus have a declining level of understanding of beef selection and cookery. Matching beef options up with the distribution channel that appreciates the unique strengths of each cut will require more precise distribution models in the future.

Nearly one-third of consumers believe that 40 minutes is too long to wait for their meals, from start to table, and 70% say an hour is too long. Add to that the fact that 70% of women now are working and it is easy to see that convenience is critical. While ground beef has been the “fall-back” product for the time-conscious, more convenient whole muscle cuts, including microwaveable roasts, could boost demand. So, too, could easy beef options which quickly assemble into one-pot meals, an increasingly popular choice for the home cook.

Pick up a steak at Walgreen’s on the way home from work? Grab lunch from a food truck outside your office? Have dinner at the nice restaurant in your favorite supermarket? Order your groceries online? Online grocery shopping is finally growing at a sustained and rapid rate. Food distribution is ever changing, with specialty stores, pharmacies and others beginning to add meat products to their offerings and supermarkets providing sit-down restaurants.

The many venues offering fresh foods are a challenge for beef and, in response, the industry is creating new packaging technologies, size variety, and new preparation methods to meet food distribution needs and consumer demands.

As we look down the road, the trends we’ve identified stand out as particularly relevant to beef producers. They have important implications for how beef is marketed and communicated about. It has been said that the future is what you make it. Obviously, no one can predict the future. However, it makes sense for the beef industry to take action today to manage what we see coming down the road tomorrow (Beef Issues Quarterly; Fall 2012. Vol. 4 No. 1).

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