CHICAGO -- Supermarket meat departments are complacently allowing profitability to slip away, according to a retailer who spoke during the American Meat Institute's International Meat Industry Convention here.
The performance of many meat departments is sinking, and not only because of depressed prices, but also due to lack of innovation, said John Story, senior director of meat and deli operations for Fairway Foods in Minneapolis.
Story made his remarks just weeks after the National Live Stock and Meat Board said it would delay the opening of its Meat Marketing Technology Center, a facility intended to offer training in technology-based meat department management to retailers. NLMB said it postponed opening the center to "gather more information." Story chided his colleagues in the retail food business for not adequately participating in systems, including the value-based meat management system to be taught at the center, which could give meat departments a much-needed boost.
"We should be asking ourselves this question constantly in the retail meat business," he told attendees at a session on retail meat pricing. "Is meat competitive? Is [it] competitive to other proteins?
"And at this point, from what I'm seeing as far as retail supermarkets and marketing programs are concerned, I'm going to say to you that meat is not competitive. Meat is not growing in the category, and the [other parts of the store] are growing.
"I think retail meat departments
in most supermarkets today are the poorest looking departments, the poorest appearing departments, the least merchandised, the least innovative, and certainly the least imaginative when it comes to the presentation."
Sliding sales in the meat department support his viewpoint, Story said. "I see our distributive sales going down, not because the value of the product has changed tremendously, but because customers are not buying it to the degree that they used to.
"The type of packaging we're using, the way we're using it, the manner in which we're presenting it, I think leaves a great deal to be desired in the retail meat department in today's supermarket."
Other departments, such as produce, the cereal aisle and frozen foods, are providing more of what the consumer wants, he said, while the meat department appears to be standing still, or even diminishing in some cases.
"All you have to do is go to the supermarket today and take a look at the cereal section, and then compare it to what it used to be -- the size, the amount of items, variety, and then look at the prices. Then go over to the fresh fruit and vegetable area, see the size of the area they have today, and the way they're demonstrating and showing and merchandising fresh fruits and vegetables, and see [the] different types of packages.
"Those are the areas that are taking over the store today at retail. Then go back over to the retail meat department. You're seeing a shrunk-down department today, one that's certainly a little bit smaller than it used to be, in some stores.
"Is meat competitive to the other commodities that are being sold? I frankly don't think that it is. And I don't think the customer thinks that it is, because if they did, we wouldn't see those others expanding to the area that they are."
Story also acknowledged the competition from fast food and full-service restaurants. "All the facts and figures tell us that there's more food being consumed outside the home," he said.
Meat departments are not competing adequately in this arena either, in Story's estimation. He added this caveat: "The consumer is the one who is going to determine whether it is competitive or not."
At a time when the NLMB is still struggling to gain retailer acceptance of its Value-Based Meat Management System, Story asserted that current pricing systems are not working.
"[There are] problems with percentage systems, [there are] too many inaccuracies. Either the pricing is too low to reflect the kind of profitability we want, or it's too high to reflect the movement that we want."
He alluded to an unwillingness among retail meat executives to put in place the information-gathering practices necessary to ensure accurate and profitable pricing.
"The problem mostly is that we don't know enough about what's happening, so we need to get better systems in to examine that situation."
Illustrating the problem, he explained that a colleague from another chain recently had an opportunity to buy a quantity of chuck at a good price, featured it at 88 cents per pound, and ran out of the product mid-week.
"The point is, in today's sophisticated system of doing business, why would you make a pricing decision like that, that would put you in that kind of a situation? It reminded me of what we've been doing for the last 25, 30 or 40 years. It doesn't make very much sense.
"We could use the cents per pound system for pricing, and we certainly can increase the accuracy. The point is that you can do this if you have some knowledge about what your actual cost to do business is."
Again, neglect on the part of retail meat management is to blame for this lack of knowledge, Story said.
"Two weeks ago, a survey of all retail food companies in the country put out by FMI [indicated] that only 43% of the retailers are currently using the Uniform Retail Meat Identification Standard voluntary system for retail meat cuts. Some said they'd never even heard about it.
"Unless you have some uniform meat identity as far as cuts are concerned, it's going to be difficult to develop systems that allow you to make comparisons from one place to another."
"We must remember that any system, especially the cents per pound system, should put the highest price possible on a product. The other thing we need to remember is that the highest price would depend upon our competition, in this case the stores that we're operating against, and the price must be acceptable to consumers to produce the volume desired."
An effort is now under way to gain retailer acceptance for an updated system that identifies and groups retail meat products, and paves the way for category management, Story said. NLMB has labeled that system Value-Based Meat Management.
"We've got the system all together, we just have to start utilizing it at this point."
Earlier, Jens Knutson, AMI's director of regulatory and industry affairs, who chaired the session on pricing, echoed retailers' dissatisfaction with current pricing methods.
"I have been hearing a current concern about the ability of certain meat items to carry their weight in the meat case," Knutson said.
"We have seen changes in the amount of space devoted to different species, and specifically I have heard from several major retailers concerns about what I will characterize as subsidization of beef and poultry. There is a perception that the contribution to profits of beef is not what the retailers want," Knutson said.