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Kay’s Cuts: High expectations about demand, as US grilling season approaches

Steve Kay, Cattle Buyers Weekly, 09/04/2018

A monthly column written exclusively for Beef Central by US industry commentator, Steve Kay, publisher of US Cattle Buyers Weekly

 

 

 

THE US beef industry can’t wait for the annual summer grilling season to start, when Americans dust off their barbecues and grill a ribeye or New York (thick cut sirloin) steak.

The season heralds the best two beef demand months of the year and will be especially important this year as market-ready supplies of grainfed cattle start to increase.

It’s only early April though, and the industry will have to wait another month before the smell of backyard grilling starts to waft through neighborhoods.

Hopefully, the weather will improve significantly during that time. As I write this, snow has cancelled the New York Yankees’ home opener baseball game and several games were washed out last weekend.

I mention the baseball season because it significantly boosts hotdog sales. Americans will consume more than 19 million hot dogs and 4.6 million sausages this summer at baseball parks.

The Los Angeles Dodgers just fell short of winning last year’s World Series but their fans ate more than three million hotdogs. Based on last year’s attendance, that meant that nearly 80pc of fans at Dodger home games ate a hot dog.

Hot dogs are made with both beef and pork, particularly the latter, and the pork industry will be hoping that ballpark consumption is even greater this year. That’s because China’s 25pc tariff on US pork imports kicked in on April 2, and might force more pork to stay in the US or have to find alternative export markets.

The US in 2017 exported 309,284 tonnes of pork and pork variety meat to China valued at US $663 million. This was the US’s third largest international market by volume and fourth largest by value.

Imposition of the tariff is certainly unwelcome news for the US red meat industry. But the impact might not be as severe as some think.

The impact on the entire US pork complex might be slight, as exports to China represent only 2.5pc of US pork production. Besides, most exports occur between the fall and the early part of the year. So any impact will likely not start until then. Should more pork stay in the US, that’s unlikely to impact beef sales, say analysts. Consumers this year have shown a clear preference for beef and have been prepared to pay more for it than for pork or chicken. Putting it another way, US beef demand has proved to be inelastic compared to the competing meats.

This is likely to remain, and there’s considerable optimism that consumers at home and abroad will continue to consume more US beef. US export beef sales have gotten off to a great start this year and domestic beef sales and demand are better than expected. The latter is partly because of the increased level of competition between grocery chains to keep customers and attract new ones.

Retail beef sales are benefitting from the most intense competition between chains in many years. Retailers for a long time have used beef to attract customers to their stores, giving rise to the phrase that beef was “King of the Meat Case.”

Beef’s pull diminished somewhat after the 2009 recession but retailers are once again using beef as their main drawcard to get people into their stores. They are also battling to keep customers from buying more food online, such as through Amazon/Whole Foods and meal kit companies, and at restaurants.

The Denver area in Colorado is seeing intense competition between major chains, says Jim Robb, director of the Livestock Marketing Information Center. The chains have heavily featured beef in their weekly fliers for the past two months. Retailers are using beef in an aggressive battle for customers. They’re also offering more meal packs for single people to families as part of a strategy to lure more customers who might otherwise eat out at a restaurant, says Mr Robb.

Beef demand is robust as a result of all this, especially as chains have lowered their beef prices, he says. In addition, consumers increasingly regard beef as the highest quality meat and pork of lesser quality, especially pork loin cuts.

Key retail trends

Retail chains are also using technology to attract customers. One chain, Kroger, has an App that tells you that if you’re running low on beef, come to a Kroger store because it has some great beef features, he says. In other words, retailers are using technology to attract more customers to their meat cases.

This fits in with a key trend identified in the 2018 Power of Meat report unveiled in February. This annual report is a vital tool for the beef industry to track what consumers are doing, thinking and wanting.

Americans’ food needs and wishes are changing significantly, and the US meat industry needs to understand new trends to continue to deliver what consumers want, says the report.

The theme of change sums up ten key trends identified in the report. Meat is big, lucrative and growing but “one size fits all” must make room for “one size fits one,” it says. The food retail industry is being reshaped by competitive forces, demographic shifts and mega-trends such as technology, convenience, health and wellness, and transparency.

The meat category, from trip planning to consumption, is changing along with it. Meat can remain a crucial area for driving customer loyalty and competitive advantages by addressing the various population groups’ increasingly different approaches to meat through targeted advertising, marketing and merchandising, it says.

 

Editor’s note: Since Steve filed this report last week, China has added various US beef products to its retaliatory tariff list. However US beef exports to China are insignificant, in comparison with the 309,000t of pork exports consigned to China last year.

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