A little less meat from now on

Pentru www.dailybusiness.ro

July 2, 2009

Not that long ago, I was writing in an editorial about the dairy industry going down vertiginously. In the meantime, I have updated my information, I have studied the prices’ game more and I have asked for additional opinions from people working in the industry, etc. In the end, I have received the confirmation that what I was evaluating a few weeks ago was totally right. Today I will try to offer you an image about what is going on in the meat and cold cuts industry. This is another sensitive industry that is well represented in people’s day-to-day shopping carts along with dairy products, eggs, bread, sugar, flour, oil and vegetables. Inevitably, due to our habits and food culture, we have to consume all these products.

Fresh meat or frozen meat is a commodity food. Fresh cuts are optional. And they are becoming more and more ”optional” due to their price/kilogram being higher in comparison to that of fresh or frozen chicken, pork or beef. Consumers are becoming increasingly conservative with how they spend their family budgets, they are starting to evaluate every penny, they are comparing the prices, the weight of the products and their quantitative efficiency. In the day-to-day shopping cart, fresh cuts are starting to matter less and less as they are replaced with products that are more cost-effective: fresh meat, vegetables and/or eggs. Eggs are another interesting product: at the moment, they are the cheapest intake of protein and vitamins on the market and they are considered to be among the healthiest products.

Therefore, consumers are moving to commodity products and they are starting to avoid meat dishes. This phenomenon is caused partly due to conservative family budgets and partly due to the growing trend that is starting to take into consideration the health benefits and the freshness of certain products. It’s a logical and obvious thread in the market. And yet I have noticed some very recent mistakes. One of the largest Romanian producers put into circulation freshly chopped chicken breast which was cut into small pieces. The product remained on the shelves, it registered poor sales and the store chains were forced to offer promotions over promotions in order to get rid of the remaining stocks. The mistake belongs to both the producer and the stores because we cannot expect, today, that the consumer will buy unnecessary” commodities” like this while also asking for a higher price. This case is identical to that of the sour cream with parsley placed on the market by a large dairy producer. Show me a housewife who doesn’t want her to be the one to add parsley to the soup!? Hence the poor sales efficiency of the product, which was often shown on TV. And expensive, in vain. Fresh cuts have become a product for children’s sandwiches at school or – not that often- a quick snack at home, which has led to a drastic reduction in consumption. Under these circumstances, some producers will no longer be able to cope with the new realities of the market and will close their doors, leaving only a few of the big investors or those without loans who will have to find suitable solutions. Unfortunately, prices will have to fall, the diversity of products will have to increase, and ensuring visibility on the shelf will become a priority in any company. The most important thing, however, is that the producers will have to pay close attention to consumers’ needs and consumption trends. This should automatically lead to a radical reorganization of the strategic way of thinking about products, sales and marketing.

As in the dairy industry, the meat industry will have to play by the rules. So far I have witnessed the Blitzkrieg of conquering the market, lively, entrepreneurial, with high risks, but also with high profits. After tomorrow, the market will be conquered and maintained with a war of attrition, on the margins of natural profit where the whole amount of factors that lead to profit will count. Brands will count from now on, but differently. And let me tell you a secret, which is not a secret for some who are trying to predict what will happen in the next two to four years. Non-branded consumption of fresh or frozen meat will increase to a point where it will no longer be profitable to invest in packaging, marketing, brand development, advertising and so on. Consumers will just want a good piece of meat. Just as the consumption of local or private label brands is skyrocketing in dairy products due to the low price – the same thing will happen to the meat industry. After all, what do we all want? A good and healthy meal: milk, yoghurt, cheese, meat, vegetables and a dessert. What does it matter that the chicken breast is called ”A” or ”B” !? Price and quality will come first, in the case of these commodity products. From here, we can develop a whole strategy and tactical measures of reorientation, reorganization, rebranding, etc., that will lead to massive restructurations of companies, product portfolios and brands, methods and sales channels. The new rigours imposed by consumers will have their say, sooner or later.