As the Super Bowl approaches, all you have to do is watch the commercials to see what everyone wants to buy, says Leo Feler, chief economist at Numerator.
“Grocery spend has been pretty equal,” he said at the Ohio Pork Congress. “The pullback is in general merchandise like apparel, tools, sporting equipment, etc. Those sections are hurting, but the grocery section is doing pretty well.”
Numerator data shows if there is a recession, groceries will be one of the last categories affected by people holding back on money.
Why? Consumers are creatures of habit. In fact, despite inflationary pressure, data shows consumers are very reluctant to switch their behavior.
“They have meals that they know how to make,” Feler says. “They have foods that their children like. They are very reticent to try something completely new. Usually, when we see consumer switching, it’s by a small margin. They might try a new recipe, but they’re consistently cooking, more or less, the same things.”
Pork’s Best Bet? More Shopping Behavior Changes
In a recent study, Numerator looked at the healthiness of consumer eating by week. Despite all the inflation, despite all the changes in food prices and the relative price of beef versus chicken versus pork, research shows consumers are consistently maintaining the same healthiness patterns, Feler says.
“What that tells us is that even when they are substituting, they are trying to substitute for something that is roughly an equivalent in terms of healthiness,” he explains. “They’re not going from eating chicken and beef and pork to eating breakfast cereal for dinner. That’s a big switch that consumers would have to make, and that would imply a very different change in the healthiness of their consumption.”
One of the things consumers are doing is switching retailers. This is often the “first lever people will try to pull,” he says. Instead of shopping at a Kroger store, they may try to save money at an Aldi’s store. He also says consumers will then try switching from buying brand name products to buying private store label items, but essentially, they are buying the same thing.
“Then, we may see a consumer switch from eating beef, for example, to eating chicken or pork,” Feler adds. “That usually happens after a lot of other switching behaviors we tend to see.”
Because consumers already have ideas in mind of what they want to eat or fix for their family, it’s often more difficult to see grand buying responses to price drops or promotions.
The Race at the Meat Case
Beef prices have inflated the most of any food item since January of 2020, Feler points out.
“Beef is now a luxury for so many consumers,” he says. “We do see consumers shifting, but not entirely away. People are still buying hamburgers. People might still buy a lower quality cut of beef than they would normally, but we are seeing a modest increase in chicken and in pork. It seems like pork and chicken are actually acting as roughly equal substitutes to the movement away from beef.”
Pork purchase frequency is up modestly amongst households that already tend to purchase pork often.
“Economists often think about the intensive margin and the extensive margin,” he explains. “The intensive margin is, ‘I already purchased pork. Now I buy more of it.’ The extensive margin is, ‘I almost never purchase pork, and now I have become a more frequent pork purchaser.’”
He says pork is seeing an increase in this intensive margin. Households that already tend to buy pork are just buying a little bit more of it more frequently, Feler notes.
“Pork is like the beer of America,” he says. “Everyone buys it – rich people, poor people. Steak has become a fine wine. High income consumers buy a lot more steak than low-income consumers, but both buy pork.”
Opportunities for Pork to Capture More Demand
Feler believes pork has a great opportunity to capture share amongst households that don’t know how to cook pork and don’t have pork as a staple in their daily meal rotation now.
“There are an enormous number of households where the majority will fix a chicken entree, maybe a beef entree, but are not putting pork at all on the plate,” Feler says. “This is an opportunity for pork simply because it’s easier to come from behind and capture more share than it is to be the dominant protein on a dinner plate and grow that even further.”
The survey data shows that consumers prepare meals based on what they already know or recipes they learn from family and friends.
“That essentially means you have this continuation of whatever is already being made, or however things are already being cooked,” he says.
With more multicultural influence today in American meals such as tacos with pork carnitas or pork wontons, there will be more opportunity over time.
“As our population demographics shift to more Hispanic/Latino and more Asian, pork consumption will naturally increase,” Feler says. “One of the things that we even see in our Numerator data is that immigrants bring their traditions with them and they assimilate, but they assimilate over generations. They generally cook some of the same types of dishes they historically ate back home that their parents and grandparents made. Over time, they will assimilate to traditions that have been long standing in the U.S., but it does favor pork consumption as a greater share of the population will be Hispanic, Latino and Asian.”
How Weight Loss Drugs Are Reshaping Protein Purchases
The use of GLP-1 weight loss drugs has increased substantially over these past two years. Numerator data says around 20% of households currently have at least one household member on GLP-1s.
For households who have at least one member on GLP-1s, they cut back around 5% to 6% on overall food consumption, he adds.
“You have to take this as an entire household effect when we’re thinking about food consumption,” Feler says. “The overall household cuts back their spending by 5% to 6%, but they do increase spend on things like yogurt and meat snacks. It seems that they are prioritizing sources of protein and cutting back on carbohydrates and snacking.”
He says there is potential for protein intake to be prioritized by households who have at least one member on GLP-1s.
“That’s only likely to continue increasing because GLP-1 weight loss drugs are now available in pill form,” Feler says. “They are increasingly less expensive, and they are more likely to be covered by insurance.”
Roughly a quarter of households who aren’t on GLP-1s say they would be interested in taking GLP-1s at some future point in time, data shows.
“Just to give a sense of the magnitude, if we have around 20% of households on GLP-1 weight loss drugs at 2.5 people per household on average, that’s about 9% of the U.S. population,” he says. “That corresponds to other data sources that we see as well.”
The Unknowns of Protein Obsession
Many questions remain when it comes to consumer buying behavior and the impact of recent changes to dietary guidelines.
“There is a lot of newfound interest in adding protein to foods,” he says. “What I don’t yet know and what we don’t yet see in the data is if consumers will say, ‘I had a smoothie with protein. Therefore, I don’t need to consume as much protein from meat sources, because protein was already added to my smoothie, my coffee drink, etc.’”
With this protein craze underway in the past year and seeing people adding protein however they can get it to more and more foods, there’s a lot to watch for in the data.
“I don’t see people switching from buying meat to just having a smoothie with added protein yet, but I can see a case for that type of switching to start happening in the future,” Feler says.
To remain relevant, he says the pork industry needs to listen to what consumers are saying.
“They want things that are not ultra-processed, they don’t want added sugar,” he says. “Oftentimes, it isn’t about the pork itself. It’s about what else is going along with the pork. If the recipes consumers know and are trying to make and are learning on platforms like Tiktok all involve adding something sweet to a pork dish, well that doesn’t coincide with what consumers also saying.”
There are great opportunities to grow domestic pork demand right now, Feler says.
“You have a lot of share to gain,” he says. “Yes, our population growth might be slowing, but you can grow by capturing shares. And you can capture a lot of shares, especially from people who are currently buying beef, simply because beef has become much less affordable.”
