Consumer beliefs impact domestic beef market
Denver, Colo. – “In round numbers, about nine out of every 10 pounds of meat produced go into the domestic market. It’s exciting to talk about our export channels, but that domestic market is also still very important, and will continue to be going forward,” commented Director of Extension for Agriculture & Natural Resources and Professor of Agriculture Economics at Purdue University James Mintert during the International Livestock Congress (ILC) held in conjunction with the National Western Stock Show in Denver, Colo. on Jan. 11.
“We’ve done some research looking at beef demand and drivers in our domestic markets. We asked how does one measure beef demand, and is it just the quantity being consumed?” continued Mintert.
He added that the research in which he was involved aimed to include the measures of demand capturing both price and quantity. A beef demand index was created from the study, and index values were based against the year 1980, with that year’s number set at 100.
“Prior to 1980, beef demand was growing, then we saw some bad changes, and beef demand declined through the 1980s and 1990s. It was at about 50 in 1998, which is a huge decline in retail beef demand over two decades,” explained Mintert.
He blamed the drop in demand on changing U.S. consumer behavior. However, in the late 1990s demand started to increase again, and by 2004 the index number was back up to 63.
“There are things we can do to impact demand, and the four I will focus on are food safety, health, nutrition and convenience,” stated Mintert. He added that information in all four areas was collected from 1982 to present, and used to determine all figures presented during his speech.
“One challenge is how to measure those things. How do you measure food safety? We chose to measure it in our models by looking at food safety recalls by quarter. We went back to 1982, and there were some quarters with zero recalls, which is a good thing. But there are some other quarters where recalls really spiked, which is a bad thing that consumers notice and respond to.
“Looking at it from the average perspective, it doesn’t look like recalls have a big impact. But, when those recalls jump, they can have a devastating impact on the industry, both as a current impact and a lagged impact,” said Mintert.
He continued, saying that for every 10 percent increase in beef recalls, there is a 0.2 percent decline in beef demand. Consumers remember recalls for long periods of time, and that lagged impact keeps prices suppressed.
“Consumers expect their food to be safe. They want to walk in the store and pick up a product, and they don’t expect to have any problems when they get home. When they hear about problems, it has a negative impact on their behavior over long periods of time,” added Mintert.
In the area of health information, Mintert noted there are many current issues. His study chose to look at medical journals, counting the number of articles published mentioning heart disease and diet, and taking that one step further to those mentioning beef.
“There was a long term rise in articles published referring to heart disease from the 1980s up to about 2001, then it dropped off. The results of those articles indicate that beef demand does decline in response to information consumers receive about diet, fat, cholesterol and heart disease,” stated Mintert.
“For every 10 percent in medical journal articles, there is a 0.2 percent decline in beef demand. From the early 1980s to the early 2000s, that alone gave us about a nine percent decline in beef demand. That information is still out there, too, being accumulated and having a negative impact,” explained Mintert.
Nutrition is another area of concern for consumers, and Mintert noted that consumers also respond to nutritional information.
“Looking at the Atkins diet and the beef index chart, in the mid-1990s interest in the Atkins low carb, high protein diet starts to go up, then it drops off. We realized we needed to measure both the pros and cons relative to diets like Atkins, and see if that fad did have an impact on our industry.
“Atkins-type diets did give beef demand a boost. Media support of Atkins-type diets boosted beef demand about two percent. The take-home message is that when the consumer receives information about beef or meat that was positive, they also responded. They didn’t just respond to negative information,” noted Mintert.
He listed another example of a 10 percent increase in articles referencing zinc, iron and protein leading to a 0.25 percent increase in beef demand.
“When looking at convenience, we first looked at female employment outside the home, because as female employment outside the home goes up, the underlying thought is that there is less time available inside the home for food preparation,” explained Mintert.
“We saw some dramatic changes, and beef demand declined as female employment increased. Every one percent increase in female employment resulted in a 0.6 percent decline in beef demand.
“We also took a measure of the convenience of food consumed away from the home, which is usually because there isn’t time to prepare dinner at home. As food consumed away from the home increased by one percent, there was a 1.6 percent decline in beef demand,” said Mintert.
He added that the poultry industry has done a great job of benefitting from these two trends through new product proliferation and an emphasis on convenience.
“Think how much different the poultry display in the grocery store looks today compared to the 1970s. My mother would buy whole fryers on sale, then she and my dad would process them how she liked to cook them, and freeze them. My kids have never seen that,” noted Mintert.
“For every new product in the beef marketplace that has convenience embedded in it in some way, there are between 1.5 and two poultry products that come out,” he added.
“There are changing demographics in our country. We need to provide information that tells the positive story about consuming beef, and do it from credible sources. When we can tell a good story about beef and human nutrition, the consumer responds. It’s a challenge for our industry going forward to identify the ways that beef fits into a healthy lifestyle, and tell that story to consumers through those people who provide advice to them, like those in the medical professions.
“Communicate directly to consumers and those health and nutrition professionals, and make sure they’re seeing both sides of the story, and being cognizant of the positive aspects of beef consumption too. The consumers will respond,” concluded Mintert.