How the Consumer Dollar Drives Changes in the Industry

When the COVID-19 pandemic hit the U.S., consumers faced unknown territory in the meat industry that raised questions of resiliency. Since then, consumers have helped drive changes to the pork industry with their dollar.
When the COVID-19 pandemic hit the U.S., consumers faced unknown territory in the meat industry that raised questions of resiliency. Since then, consumers have helped drive changes to the pork industry with their dollar.
(National Pork Board)

What are consumers willing to pay for? This question looms in the minds of producers, business owners, and economists. When the COVID-19 pandemic hit the U.S., consumers faced unknown territory in the meat industry.

At the Iowa Pork Congress, Jayson Lusk, agricultural economist at Purdue University, shared how consumers impact the meat industry and ways the industry must prepare going forward.

MEAT AVAILABILITY

The question of how we improve resiliency in the packing industry rose from the pandemic. As Lusk describes, resiliency is much more than brick and mortar capacity -- it includes the people who work in the packing plants, the flexibility of the producer to provide finished animals when needed, and backups in the event regular operations are shut down or severely affected.

Unfortunately, packing capacity requires a large amount of capital when considering economies of scale. Cost of production is 80% to 100% higher for smaller plants, compared to larger operations, Lusk says. While having more small plants would slightly improve resiliency, it’s not cost effective.

When the availability of meat products decreased, consumers jumped on the idea of farmer direct products. Direct sales will never compete with large packers in cost of production, however the ability to compete comes in the form of quality. Direct sales to consumers drastically shortens the supply chain and increases availability in most cases.

MEAT ALTERNATIVES

When new, plant-based meat alternatives hit the market, animal activists praise the technology and many mainstream restaurants add a meat alternative to their menu. Like a shiny penny turned dull, Lusk’s data shows the demand for plant-based alternatives to meat has leveled and slightly declined over the last year and a half.

Customers demonstrate their willingness to pay for these products. For the meat industry, opportunity lies in bringing those consumers back. For instance, offering products such as mushroom sausage or another combination of a pork product might appeal to the vegetable-favoring audience. As plant-based alternatives gradually become more cost effective to produce and more affordable in the store, the meat industry will need to continue to find new ways to appeal to consumers.

PRODUCTION PRACTICES

Like a fad diet, the food industry adopts buzzwords that catch consumers’ attention, such as sustainable, natural and regenerative — to name a few. Oftentimes these words do not have a clear definition, Lusk says, which allows consumers to form their own reasoning and make choices based on their own thoughts and feelings.

As these trendy words continue to evolve, Lusk encourages the food industry to use science in defining these terms. Science provides consumers black and white information to help them make more thoughtful decisions.

INFLATION AND POLITICS

“As of December (2021), total inflation, food and non-food was running about 7% on a year-over-year basis,” Lusk says. Compared to other food at 6% inflation, pork sits at 15% higher than the previous year. Though producers know these inflated prices come from higher feed and labor costs, consumers determine if these prices are worth paying.

Political affiliation greatly influences consumer preference, Lusk adds. Data shows meat consumption to be a politically polarizing issue that has increased over time. Conversations with non-meat consumers will likely become more challenging as it becomes less on the topic of meat and more on politics.

The past few years have brought uncertainty, showing consumers react in many ways. Looking ahead, the importance of encouraging meat consumption will grow exponentially. Consumers make choices with their dollar, and the meat industry must capitalize on new and existing opportunities to claim market share.

 

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