US-Market: Supply influences shopping behavio...

Supply influences shopping behaviour

Imago Images / Levine-Roberts
Shoppers called out higher meat prices and fewer meat features.
Shoppers called out higher meat prices and fewer meat features.

GERMANY, Frankfurt. Two months into the COVID-19 pandemic, grocery shopping continues to evolve, and the meat purchase along with it. Throughout the nonstop evolution of shopping patterns, there has been one constant: the meat department has been the undisputed sales leader of the perimeter.

While the prior week sales gain of 50% seemed tough to beat, the prominent coverage of plant closures in the consumer media drove yet another wave of shoppers stocking up on meat and poultry. For the week ending May 3, meat department dollar sales were up 51.3% and volume increased 37.2%. Year-to-date through May 3, meat department dollar sales were up 23.3%, boasting double-digit growth for eight weeks running. Year-to-date volume sales through May 3  were up 17.1% over the same period in 2019.

Supply impacts dollar and volume performance

During the past two weeks, many stores put purchase limits in place for certain cuts or a limit for the total number of meat packages that could be purchased per customer. But supply is likely to continue to impact the dollar and volume performance in weeks to come. “Pork production rebounded 15% from historically low levels last week, but continues to trail 2019 by 24%,” said Christine McCracken, Executive Director Food & Agribusiness for Rabobank. “The beef industry has been slower to recover, with a +6% improvement since last week, and is still 32% below 2019 volumes. Nearly all US plants should be operational in the coming week, but labor shortages continue to limit industry volumes to 70 to 80% of normal. Labor challenges have forced the closure of plants in Europe and Brazil in the past week. US protein inventories are depleted, with retail and foodservice buyers drawing on the same limited supply.”

The supply chain woes have affected wholesale and retail prices. McCracken explained, “Beef prices spiked to new highs this week and more than double year-ago levels, driven by ongoing strength in chucks and rounds.

Tight pork supplies helped buoy prices to levels not seen since 2014. Renewed interest from foodservice drove sharply higher pork belly prices, that doubled in the past two weeks, while loin prices were up 39% over the same period. Chicken prices are also stronger on tighter supplies of beef and pork. Prices of boneless breast meat were +23% week over week, as the industry lacks labor to debone and as supplies of ground beef have become scarce.

A detailed look by area

Total meat department sales exceeded $1.6 billion for the week, with continued gains for the big three, that have seen double and triple-digit increases ever since the week of March 15. Beef and chicken, the two largest proteins, saw the largest increases in terms of dollars during the week of May 3 versus the comparable week in 2019. In absolute dollars, beef sold an additional $268 million, with ground beef generating 36% of these additional dollars, or +$95 million. Chicken generated $74 million more during the first week of May versus the same week in 2019. Processed meats, sausages, frankfurters and bacon continued to do extremely well also.

Market and channel shifts

Significant differences are observed when comparing dollar protein shares between the first week of March, when sales were much in line with 2019 and the early part of 2020, and the week ending May 3. While shares are influenced by holidays and differ from week to week, pork and beef’s share continues to be elevated in the one week and year-to-date views, whereas chicken’s share is down in both. The same look at volume shows the effect of pricing and the meat industry being out of balance at a macro level in terms of supply and demand.

Meat departments across channels and banners have seen tremendous sales and engagement during the pandemic, but out-of-stocks at primary stores also drove consumers to explore different channels and outlets. Important beneficiaries of new engagement were grocery stores as well as limited assortment powerhouse ALDI, according to IRI research. 

“Meat departments at grocery stores gained big since the onset of the pandemic with an 11% gain in new buyers for the four weeks ending March 22 and a 5% increase for the four weeks ending April 19 compared with the same time periods in 2019,” said Kristen Muzrall, Consultant at IRI. “Even more impressive was ALDI’s 21% increase in the number of households buying across meat categories during the four weeks ending March 22 and another 6% during the four weeks ending April 19. Walmart, too, did extremely well, particularly in April with an 11% increase in new buyers. COVID-19 has driven shoppers to purchase items they did not typically purchase, but also shop at new stores. This is likely to have longer-term implications on dollar share allocations.” In addition to new buyers, food formats of all types saw big surges in dollars spent per buyer throughout the pandemic.

Muzrall added, “Behind the enormous surges in meat sales is the story of consumer engagement. Between March 8 and April 12, the grocery channel, Walmart and ALDI saw double-digit increases in new buyers and spending per buyer at least four out of five weeks.” 

Source: By: Anne-Marie Roerink, President, 210 Analytics LLC