July 27, 2007

 

US Retail Meat: Grocers attracting shoppers in slow period

 

 

Grocers are using various tactics to attract more shoppers to their stores in what is typically a slow sales period during the heat of the summer and just a few weeks ahead of the beginning of the fall school term.

 

Some supermarkets are utilizing marketing programs such as buy one, get one free; giving shoppers' a choice of any 10 items for US$10 from among a specified list of products; and from 15 percent to 20 percent off all products that the shopper can get in one grocery bag.

 

Others are focusing on offering more alternatives to cooking at home during the heat of the summer by featuring more pre-cooked, ready-to-eat foods and heat-and-eat items. The stores are competing with fast-food and carry-out restaurants for consumers' food dollars.

 

Economic factors also are affecting grocery sales and food choices. Earlier in the week, Supervalu Inc. (SVU), based in Eden Prairie, Minnesota, reported that its sales at the end of the latest quarter and so far in the current quarter have been weakened by consumers' concerns over a slump in housing, high gasoline prices and rising dairy and meat prices, according to a Wall Street Journal story.

 

Meat brokers and analysts agreed that these concerns are widespread and said grocers are trying to find ways to increase their sales and maintain or grow their margins.

 

Sales of beef through the meat counters over the past weekend and so far this week have been sluggish in most areas of the country, according to market analysts and wholesalers. However, they said that is typical for this time of the year, so sales are expected to improve within a few weeks, especially after families return from their summer vacations and the fall school term begins.

 

Families that are on vacation dine out more, so meat sales at the supermarkets tend to decline at this time of the year. Others families may be buying clothes or other goods in preparation for school and have less money to spend for meat, especially the higher priced cuts of beef.

 

Bruce Longo, market analyst at Urner Barry's Yellow Sheet, said the combination of summer vacations and back-to-school shopping could hamper retail meat sales over the next two to four weeks. This is a transition period that is not so friendly for the beef category, he said. Once schools are back in session, families will be having more meals at home, and sales of roasts and other cuts will improve.

 

Longo said there have been reports this week of better interest from grocers for beef rounds and loins for delivery three to four weeks out.

 

Meanwhile, grocers are trying to attract more customers through low-price features and more aggressive pricing on some of the premium cuts. Ground beef, including chuck and round, along with some steak cuts led the category's front-page promotions this week in the Dow Jones Newswires 10-city survey.

 

The average price of the 15 cuts of beef in the Dow Jones Newswires survey was US$3.80 a pound, compared with US$3.89 last week and US$3.67 last year.

 

In the pork category, grocers featured more products made from shoulder butts and loin ends this week. These items include pork steaks, country style ribs and butt roasts. These products allow the stores to promote the items at more attractive prices than chops and tenderloins.

 

The lower-priced cuts are also more suitable for the final week in the month when shoppers tend to have less money left to spend on food.

 

Wholesale pork prices have been under pressure this week due to slowed sales and ongoing hefty production. Hog slaughter and pork production are on a record-setting pace for the month of July.

 

A Midwest-based meat broker said wholesale pork prices could remain under some pressure through mid-August. At that time, increased demand by the stores for product to be included in Labour Day features might stabilize prices. Further weakness is expected into September as slaughter-ready hog supplies begin a seasonal expansion.

 

Bacon was the most widely promoted pork-based item in the printed advertisements this week due to the popularity of bacon, lettuce and tomato sandwiches at this time of the year. Bacon edged out country-style ribs, which were found in at least one of the grocery ads in each of the 10 cities surveyed but not quite as often as bacon.

 

The average price of the 13 cuts of pork in the Dow Jones Newswires survey was US$2.21 per pound, compared with US$2.59 a week ago and US$2.29 a year ago.

 

Wholesale prices for boneless/skinless chicken breasts have been easing a bit from their summer highs due in part to increased production in recent weeks.

 

The US Department of Agriculture's quotes for boneless/skinless breasts on a delivered basis into the northeastern US are down 5 to 10 cents from a month ago but up 25 to 30 cents from a year ago. Bone-in breast prices are flat to down slightly from a month ago and up about 16 cents from a year ago. However, leg-quarter prices have held steady during the past few weeks and are up about 12 cents from last year.

 

Eric Scholer, market analyst at Express Markets Analytics in Ft. Wayne, Indiana, said China has been a strong buyer of chicken leg quarters this summer, which has kept prices from weakening so far. He expects China to continue to purchase large amounts of the product due to improved demand for meats along with swine disease problems there that have reduced pork production.

 

In the domestic market, Scholer predicts chicken breast prices will soften further over the next four weeks by about 10 to 15 cents per pound. Broiler slaughters recently have been up about 3 ½ percent to 4 percent from a year ago and could remain in this range over the next two months.

    

Processors have trimmed the expansion in egg sets from year-ago levels by around 3 percent earlier in the summer to just 1 percent to 2 percent during the past four weeks. This reduction, although modest, is due to concerns of weaker breast prices and tighter margins this fall, Scholer said.

 

The average price of the four cuts of chicken in the Dow Jones Newswires survey was US$1.54 a pound, compared with US$1.58 a week ago and US$1.28 last year.