Consumer Preferences for Beef Alternatives

The journal Food Policy just published a paper I co-authored with Ellen Van Loo and Vincenzina Caputo entitled, “Consumer preferences for farm-raised meat, lab-grown meat, and plant-based meat alternatives: Does information or brand matter?” I blogged about the working version of this paper this past fall when we finished the first draft, so I won’t re-iterate all the main findings (I should also note the paper at Food Policy is open access, and as such the results are freely available).

What I thought I’d do here is convey some results from the study that are not in the published paper but that are based on the models described therein.

First, a big unresolved question that often comes up when discussing the introduction and evolution of plant-based or lab-based alternatives is whether the the projected market share for the new alternatives is “stealing” sales from beef or rather drawing new people into the market who wouldn’t bought beef to begin with. Using the models estimated in our paper (in the “control” no information, no brand condition), I project that before any alternatives are introduced about 74% of consumers would buy ground beef on a grocery shopping trip (assuming the price is $5/lb) and 26% would refrain from buying ground beef. After the alternatives are introduced (at an assumed price of $9/lb), it is projected about 12% of shoppers would buy one of the beef alternatives. Thus, of the buyers of the new alternatives, I project about 57% (6.9/12.1) would have instead bought conventional ground beef whereas the remaining 43% (5.2/12.1) wouldn’t have bought beef in the first place.

The paper in Food Policy shows some results related to the relationship between demographic characteristics and projections of which alternatives people would buy. To help make these findings a little more digestible, below is a table that shows the demographics of people predicted to choose conventional beef vs. people predicted to choose one of the beef alternatives (assuming all are the same price). Unsurprisingly, the people who are predicted to choose a beef alternative are way more likely to be vegetarian than are people predicted to choose beef. It is also the case that alt-beef buyers are much more likely to be younger and are somewhat more likely to have a college degree than conventional beef buyers. There are not big gender differences.

The table below shows a similar breakdown but instead of focusing on demographics, I report the importance consumers say they place on 12 different factors when buying food. Predicted beef buyers place greater importance on safety, taste, appearance, and naturalness. By contrast, people projected to buy one of the beef alternatives place more importance on novelty, environment, and animal welfare. (note: in general differences greater than about 0.1 are significantly different than zero at the 0.05 significance level).

Finally, one of the most interesting results of the survey were responses to open-ended questions we asked about people’s perceptions of the competing products. Here are some word clouds Ellen created.

These data were collected about a year and a half ago, and given the novelty of the products, it is possible perspectives have changed, particularly following COVID19. Fortunately I have some follow-up work planned with Glynn Tonsor and Ted Schroeder. Be on the lookout for some of those results hopefully some time this coming fall.

America’s Indispensable Industry

That’s the title of an editorial Glynn Tonsor and I wrote for the City Journal.

Here’s an excerpt:

“In the future, owners of large food-processing and packing facilities may look to more regionally distributed facilities to mitigate supply risks that occur from a total plant shutdown. It may be prudent to sacrifice some economies of scale in order to provide insurance against plant shutdowns caused by human-spread illnesses. Such analyses will surely start soon, warranting a balance of security during pandemics with economic efficiency during normal times.

Besides economies of scale, the concentration of meat processing is a function of high regulatory and oversight costs, which may deter the emergence of a larger number of smaller processors. Requiring federal inspectors and testing regimes is prudent from a food-safety standpoint, but as we’re now seeing, such measures may create other risks when the barriers to entry are too high. In fact, adjustments in some of these regulations may well help the industry navigate current Covid-19 challenges.

Another solution is to reduce labor use through increased automation. The nuts-and-bolts assembly of automobiles or even computer chips doesn’t carry over well to animals that come in widely varying shapes, sizes, weights, and even colors. Advancements in robotics, machine learning, and artificial intelligence, however, are beginning to allow more automation in the processing of animal carcasses. We need to invest in research in digital agriculture and automation to help eliminate tedious—and sometimes dangerous—jobs, while reducing the likelihood of disrupted food supplies resulting from illnesses in processing plants. This approach, combined with the likely continuation of workforce health monitoring, may permanently alter labor relations in the meat-processing industry.”

More Meat Market Madness

Plant closures and slow-downs from COVID-19 have reached such levels that it will be impossible for consumers not to notice effects on meat prices or availability in the coming weeks. If the full page ad in the New York Times wasn’t enough to convince you, below is some updated data on animal processing numbers and wholesale beef and pork prices.

Estimated daily hog and cattle slaughter are both down about 40% compared to this time last year.

Less meat being produced means less meat available for grocery stores to buy. As a result grocery stores and consumers are bidding up the price of the available supplies. Wholesale beef prices have skyrocketed, and have reached a level (at least in nominal terms) we haven’t seen in at least a decade. Wholesale pork prices have also increased significantly from the dip a few weeks ago, but as of today, they remain below where they were in 2019.

Unprecedented volatility in meat markets

The words "unprecedented” and “uncertain” are being thrown around a lot these days, and it is precisely because the words have never been more true. I’ve been positing on happenings in the meat and livestock markets in the wake of COVID-19, and thought it might be useful to try to illustrate just how unusually volatile these markets have been.

Consider the weekly changes in wholesale met prices (all data are from the USDA compiled by the Livestock Marketing Information Center). Below are weekly changes in pork prices over the past decade. For the week ending April 4, 2020, wholesale pork prices were down $16.32/cwt (or $1.63 per pound). This is the largest change in wholesale pork prices since at least the year 2000 (I haven’t looked at data prior to that). However, just two weeks prior (the week ending March 20, 2020) wholesale pork prices were up $7.58/cwt. This was the largest weekly increase in the past decade. So, within a three week time period, we’ve witnessed the 3rd largest weekly price increase and THE largest weekly price decrease in at least a decade.

We see a similar outcome for beef. For the week ending March 20th, 2020, we witnessed the largest weekly increase in the wholesale price of beef (an increase of $35.88/cwt) we’ve seen in at least a decade. And just two weeks later, the price fell $16.58/cwt, the largest weekly price decline in at least a decade. Prices fell again $13.10/cwt the following week, for the 3rd largest weekly price decline in a decade. Within a three week time period, we’ve witnessed THE largest weekly price weekly increase and THE largest weekly price decrease in at least a decade.

I’d call that volatile!

All meat isn't created equal

There has been a lot of recent discussion about the impact of COVID-19 on food prices and availability. The recent closure of several meat packing plants has focused attention on meat prices in particular. There is a tendency to lump all cuts together as “pork” or “beef,” but as we’ll soon see, price impacts can differ significantly depending on which types of pork or beef we’re talking about.

First, let me state the obvious. Animals come in fixed proportions. A cow has 4 legs, 2 ears, and 1 tail. Likewise, meat from a cow comes from seven primary anatomical regions (these are the beef “primals”). One of the primals is the chuck, which comes from the front, shoulder area. About half the chuck typically goes to producing ground beef, and the other part primarily goes to roasts. It is possible to cut “steaks” out of the chuck, but they tend to be lower quality. By contrast, the rib and loin primals (along the back of the animal) contain the high dollar steaks (ribeyes, strip steaks, tenderloin). It is possible, of course, to turn a tenderloin into ground beef, but typically one would be crazy to do it because steaks from a tenderloin sell at double, triple, or quadruple the price of ground beef.

Ok, now what happened to the wholesale prices of primals in the wake of COVID stay-at-home measures? The figure below shows changes in prices of four beef primals relative to the their prices at the beginning of March.

Apparently, all beef isn’t created equal. The prices of round and chuck have increased more than 40% since the beginning of March. These are the primals that tend to be lower priced and are more frequently used to create roasts and ground beef. As it turns out, these are also the beef cuts consumers can afford and are more easily able to utilize at home, and the cuts seem to have benefited from the shift in meat buying from restaurants to groceries. By contrast, loin prices fell about 9% before rebounding a bit. We apparently eat more steaks when we have the money and ability to eat away from home. The price of the “short plate” fell about 30% before rebounding to “only” a 17% decline. This primal includes cuts like the skirt steak that are frequently used to make fajitas and part of the brisket; cuts heavily used in Mexican and BBQ restaurants.

We can see a similar story for pork. All pork isn’t created equal. There are six pork primals. The figure below shows price changes for four of the primals since early March. The prices of bellies and hams fell more than 50% before recovering somewhat. Bellies, of course, are the source of bacon. Apparently, bacon is eaten much more away from home than at home. The trends for ham and butt (inaccurately named because the pork butt actually comes from the shoulder) are a bit harder to explain, but interestingly, pork loin prices increased and remained fairly steady, now selling about 50% higher than at the beginning of March.

Why did prices of pork loins respond so differently than beef loins? It may be the price point. On April 17, 2020 the wholesale price of pork loin was about $0.92/lb, whereas the wholesale price of beef loin was about $2.62/lb.