Would you buy a steak, roast, or package of hamburger online?
Changes in the way consumers are purchase food ingredients may offer new opportunities, and challenges, to the beef industry.
Don Close is a senior analyst of animal protein at Rabo AgriFinance, and recently completed a report entitled Food Fight! — Online and Brick and Mortar Battle for Business. How Can Beef Ensure a Seat at the Table?. He spoke about the report at the National Cattlemen’s Beef Association’s convention and the 2018 Alberta Beef Industry Conference.
“We’ve taken a look at the pace of transition from conventional grocery stores to online groceries, home deliveries,” says Close.
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Meal kit company consolidation
The report, largely inspired by Amazon’s purchase of Whole Foods Market for USD 13.7 billion, also looked at the interest in meal kits (pre-proportioned food ingredients and directions delivered via subscription services).
With incredible amounts of competition, and the need to retain subscribers, Close isn’t sure any meal companies are very profitable.
“I think it’s inevitable that we will see a really big consolidation within those meal kit suppliers that think that’s a trend that will continue.”
Another interesting piece that came out of the report was that, looking back, many analysts had predicted the closure of large numbers of conventional stores, but Close doesn’t see this translating in the future.
“What we’re finding is more of a hybrid is developing — that people in the future will be ordering and paying for their food online, but still using conventional grocery stores as a collection point, or pick-up point.”
Who’s the expert?
While some may be uncomfortable with ordering produce or meat online without having a chance to visually inspect it, others will find it a relief.
Close says from his own research, it seems baby boomers and people involved in production agriculture are less likely to trust anyone else to select their meat and produce, whereas millennials tend not only to be more comfortable with it, but in some cases actually willing to pay for someone more knowledgable to make those selections.
The future for beef producers
The move to online shopping will mean stores have access to a larger pool of customers, and could offer more options.
“When we make the transition to online shopping, we don’t have geographic constraints of how far are you willing to drive to the grocery store; we don’t physical constraints of just how many products can we stuff into the square footage.”
The expanded pool of customers could increase the opportunity for niche marketing strategies, and Close says we could see much more specialization in production.
As a result, the price differences between classes and quality of cattle will likely widen, accompanied by a broadening of the spread between farm and retail prices. Of course, large scale changes to the industry are dependent on how the supply chain evolves.
But it’s not all roses.
Right now, as Close writes, the packing industry is built for “large-scale production of a commodity product,” meaning specialty products are inefficient, and more space will be required to keep them segregated.
And while meal kits could offer consumers value-added cuts they would otherwise overlook, and suggestions for how to cook them, competition makes the price per plate critical, and could mean beef doesn’t make the cut at all.
For now, Close suggests producers re-assess and re-structure their buyer/seller alliances and verification of production practices.
“I’d be looking not only for those marketing or production opportunities for cattle with specific characteristics, but I would also be looking for building that network, to have that source of raw material.”