Meat Trending Toward New Highs for Summer Sales

June 25, 2020

By Jim Dudlicek, NGA Director, Communications and External Affairs

Less traveling this summer due to the pandemic could mean higher overall meat sales for grocery retailers, but higher prices due to supply issues may stifle spending for traditional meat holidays like Father’s Day and the Fourth of July.

Meat department sales have experienced fierce growth as folks sheltering in place have eaten more meals at home. While many restaurants are being allowed to offer limited dine-in service as states gradually reopen for business, supermarkets continue to benefit from foodservice outlets being closed for several months to all but carry-out or delivery customers.

Year-to-date through June 7, meat department dollar sales were up 24.2%, with double-digit growth posting in March, April and May. That’s $6.2 billion more sold versus the same period a year ago, noted Anne-Marie Roerink, president of 210 Analytics LLC. YTD volume sales for the same period were up 16.1% over 2019, an additional 1.2 billion pounds of meat and poultry.

“Supply chain issues continued with prices highly elevated over this time last year. Yet, demand remained above last year’s levels in both dollars and volume, even as restaurants around the country started seeing improvements in reservations, transactions and continued record levels of takeout business,” Roerink said. “At retail, purchase limits started to resolve, though geographic differences were significant. During the first week of June, dollar sales grew 19.4% versus year ago and volume grew 1.9%, its lowest gain since the first week of March. Shoppers may be using their freezer stash as back up and are also highly engaged with seafood, frozen meat and frozen seafood sales, that have all been highly elevated for weeks.”

Additionally, consumers continue to embrace hot dogs as a commodity of crisis comfort, with sales up 17% three months into the pandemic. The strength in value pack sales points to elevated everyday demand as well as perhaps the first signs of recessionary buying, Roerink asserted.

What does this mean for the coming months, in the traditional height of outdoor cooking season?

Christine McCracken, executive director of food and agribusiness for Rabobank, expects the supply and pricing landscape to look very different in the upcoming weeks. “Plentiful protein supplies and lackluster foodservice interest continue to weigh on beef, pork and chicken values,” McCracken said in Roerink’s June 7 market report.

McCracken noted wholesale beef prices fell sharply during the first week of June (down 19% from the week prior) as harvest levels averaged just 2% below a year ago. Pork prices also fell, with loins down sharply as retailers began to look for less expensive alternatives, while hams and bellies were slightly higher. “We expect harvest levels to remain elevated throughout the summer as packers work through the backlog of pigs delayed due to plant closures,” she said.

Chicken prices remain depressed despite estimated slaughter down 6% from a year ago due to production cuts. “We expect further production declines in the coming week and for prices to begin to stabilize,” McCracken said. “Jumbo breast meat continues to trade at a steep discount but should begin to see slightly improved values as the impact of production cuts take effect and foodservice sees further improvement.”

Beyond the analysts’ perspective, what are the expectations of folks in the trenches?

To be sure, independent grocers are doing whatever they can to source high-demand products amid supply hiccups, offer customers advice on alternative values, and maintain reasonable prices as much as possible despite tight margins.

“I would not expect beef pricing to be as low as it has been in the past few years, at least not for the next few months,” Daniel Rosacci, CEO/president and second-generation family owner of Tony’s Meats & Market, a three-store operation near Denver, said in a May 22 blog post, “Meat Outlook for Summer 2020,” on the grocer’s website. That’s despite an ample supply of beef even with COVID-related temporary plant closures that are boosting production times and costs.

Rosacci observed his wholesale cost jumped as much as 180% between January and May for end meats, which is to blame for rising grind prices, with primals up as much as 120%.

“With beef being held in the fields for longer, eating and gaining weight, I expect to see larger cattle. Larger cattle equate to larger meat cuts for a while,” Rosacci said. “The extra feed the cattle is consuming now should result in some exceptionally well-marbled meats soon.”

Rosacci said he doesn’t expect any drastic increases in poultry pricing, which remain steady but historically rise in late summer due to warmer weather. Meanwhile, some wholesale pork prices have almost doubled, but is still a fraction of the cost of beef, with most high-quality pork cuts remaining under $8 per pound, he observed.

Increases in meat costs have given it better price parity with seafood, in which Rosacci sees great opportunities, such as Norwegian and Alaskan salmon, and Mexican shrimp. Tony’s also has high hopes for its new value-added, grill-ready meat selections.

Despite the volatility in supply and pricing, consumers largely understand the pressure under which retailers are forced to operate and appreciate their efforts to deliver high-value, price-conscious selections, particularly smaller-size packages, Roerink noted. IRI data shows significant upward year-over-year pressure on retail prices for the week ending June 7 for beef, particularly grinds; pork prices were more favorable versus the week prior, though still up 17.2% over a year ago.

“The meat demand landscape continues to evolve as restaurants around the country are allowed to reopen,” Roerink said. “Fewer consumers are traveling compared with prior years. Summer get-togethers and holiday celebrations may still look very different, particularly in hard-hit areas. Additionally, grocery sales overall may have been affected by shortened hours due to local curfews, particularly in urban areas.”

Roerink concluded that, between the continued impact of COVID-19 and significant economic pressure, “it is likely that demand for meat in retail will continue to track well above 2019 levels for the foreseeable future.”