Animal Protein Sector Needs to Realign with 2020 Foodservice Survivors, CoBank Says

U.S. animal protein supplies have returned to normal and foodservice sales have improved since the onset of the pandemic, but a new report from CoBank’s Knowledge Exchange says foodservice sales may not return to pre-pandemic levels until the second half of 2022.

Affectionately known as the “great grocery grab of 2020,” the COVID-19 pandemic spurred one of the most abrupt changes in at-home food consumption not seen since the early 1980s. CoBank said this forced the most significant shift in meat supplies the industry has experienced, diverting massive volumes of meat and other food originally intended for restaurants into retail distribution channels and grocery stores.

“Trends in consumer demand for at-home and away-from-home consumption are central to the profitability and viability of the U.S. animal protein supply chain,” Will Sawyer, lead animal protein economist with CoBank, said in a release. “As the U.S. foodservice sector climbs out of the hole left by 2020, the animal protein sector will not only need to realign itself with the survivors of the last year, but also remain flexible.”

Uneven recovery
Although some foodservice channels have rebounded to achieve sales growth, as evidenced by the quick-service (QSR) and fast casual restaurant concepts that have recorded positive comparable-store sales since the summer, others haven’t been so lucky.

For example, full-service restaurants continue to face double-digit declines in sales, the report said. In November, sales were down 36% as compared to 2019 while total foodservice sales were down 17%.

“In-restaurant dining will be vulnerable as long as consumers remain wary of dining indoors and COVID-19 cases remain elevated,” Sawyer said in the report.

The varying performance of the different foodservice channels has had a direct impact on the performance of the various animal protein species. CoBank noted this is more apparent in U.S. beef consumption. Ground beef makes up a majority of beef volume through foodservice, however it represents only one-third of the value due to its low price point.

In the limited-service restaurant channels, ground beef has performed well, but the beef sector struggles because of the depressed full-service restaurants, hotels and education channels. High-value steaks and roasts that are primarily sold in these channels make up a quarter of the volume of beef sold through foodservice and account for nearly half of beef sales.

Fewer convenience products on the shelves
As at-home consumption grew, consumers faced the inconvenience of finding fewer value-added and convenient meat products at grocery stores, especially products processed by hand. Higher rates of employee absenteeism has been a challenge for meat plants since last spring.

“Weekly livestock slaughter has returned to at or above year-ago levels, which has been accomplished by shifting the meat plant workforce out of secondary processing (where these value-add and convenience products are produced) and into primary processing,” the report noted. “This shift in meat plant workforce has been especially felt in the pork sector where the vast majority of its products sold at foodservice are value-added and further processed items.”

Flexibility is critical to success
Sawyer noted that the beef and pork sectors have some flexibility to adapt, as major packers sell their products to a variety of retail, foodservice and export customers.

But the report said the poultry sector faces different challenges as many integrators and poultry plants focus either on retail or foodservice, but not necessarily both. Poultry producers who have been focused on retail and fast-food chains have fared o.k. during the pandemic, but others may need to continue focusing on cost and supply reduction until foodservice demand normalizes which could easily be two years away.

Read the full report here: The Great Grocery Grab of 2020 and the Ongoing Impact to U.S. Animal Protein

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