Beef producers need to realize how much is at stake as consumer demand for their product steadily declines, says an industry analyst.
“Of all the sectors the cow-calf producer thinks the least about consumer demand issues and, in reality, it hurts them the most. That’s the irony,” said Kevin Grier of the George Morris Centre.
He explained demand is the relationship between price of the product and quantity sold. In other words, how much are shoppers prepared to buy at a certain price? The basic economic rule is that as price increases, less is eaten and as price decreases, more is eaten.
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The amount Canadian consumers have been willing to spend on beef has been declining for some time. Last year even though the inflation-adjusted price of beef fell, per capita consumption dropped.
Figures released by Statistics Canada show average per capita beef consumption dropped from 22.6 kilograms per person in 1997 to 22.4 in 1998.
In 1998, producers would have made $10 to $15 more per head if demand was only as bad as it was in 1997, said Grier. That is equal to about $50 to $60 million lost, based on 1998 Canadian slaughter cattle marketings.
“The bottom line is you have to combine the per capita consumption with the price, and when you do so, you find declining demand for beef again in 1998.
“I think beef producers have to understand this means that millions and millions of dollars are not being spent in their industry and in particular it means something to the cow-calf producer,” said Grier.
Chicken demand increased again last year and pork demand stayed reasonable, but producers shouldn’t attribute the beef freefall to that, he said. More likely culprits are lack of cooking convenience and product inconsistency.
Those factors translate into poor demand, which results in lower producer prices. If left unchecked, demand for beef will continue to fall regardless of price.
“We can keep on dropping our price but that’s a losing strategy. We can’t just say it’s because we’re not priced competitively because that’s a path that puts it off to somebody else’s problem,” said Grier.
During the 1980s and 1990s the industry has worked to price beef competitively by building large plants and feedlots that run more efficiently. In 1980 the price of beef was 30 percent higher, he added.
New and improved
Grier thinks the industry needs to continue improving product characteristics.
Joan Perrin of the Beef Information Centre said nobody finds the latest Statistics Canada numbers on beef consumption surprising.
“Of course we would like it to be more. Certainly this consumption figure is not going in the direction this industry would like.”
The centre realizes many consumers today live a fast-paced lifestyle and don’t have time to let a beef stew simmer for hours. Many want to prepare meals in less than 30 minutes.
The emphasis for new product development is to package beef that can cook in 10 minutes. New products are already available that allow stews to cook within an hour, while steaks can be tenderized and marinated in 20 minutes before grilling.
Although research has been ongoing for more than four years, only in the last year have multinational companies been selling new convenient beef products. These products aren’t yet reflected in consumer consumption figures, said Perrin.
Another challenge is that North American studies show one in five steaks may not be tender and that makes consumers wary.
“The consumer wants a product that is consistent every time they buy it. If they get a bad eating experience they may not go back to purchase beef again.”
Health concerns
An aging population, increasing number of people who tend not to choose beef products because of their culture and health concerns are other considerations, said Perrin. In general, many consumers aren’t eating as much meat as the Canadian Food Guide recommends, she added.
The good news is beef exports are strong and more people are buying it when they eat out. Last year consumers ordered eight percent more beef at restaurants than in 1997. Total food service increased by seven percent. Hamburgers account for almost 50 percent of all sandwiches eaten at restaurants.
Neither Perrin nor Grier would say what level beef demand should be at or quote a reasonable consumption goal.
“As far as I’m concerned it is where it is, but it would be nice if we ate that amount at a higher price. That’s the point,” said Grier.
