Curious trend in sales of plant-based meat alternatives

I came across a report from IRI showing changes in sales of plant-based meat alternatives during March, April, and May relative to the same time last year. The figure below shows some dramatic sales growth during the early part of the pandemic. Of course, the large percentage growth is partly explained by the fact that plant-based sales were starting from a low base (i.e., if you go from 1lb to 2lbs, that’s 100% growth, whereas if you go from 100 to 101lbs, that’s only 1% growth).  The rest of the report shows the enormous difference in relative magnitudes as plant-based sales are only about 0.66% of total dollar sales (or 0.33% of total lbs of meat sales) .

What I want to focus on here though isn’t the spike in sales in March, but rather what happened later. Why wasn’t there a similar spike in sales in April and May? It was in late April and early May that beef and pork production were being most adversely affected from plant shutdowns. During this time, wholesale meat prices were skyrocketing and there were stories in every major media outlet about the possibilities of meat shortages. Data from USDA and the Bureau of Labor Statistics shows retail ground beef prices in grocery stores, for example, jumped more than 10% from April to May (after rising about 5% from March to April).

So, at time when beef prices rose dramatically, retailers were limiting how much beef consumers could buy, and there was overall limited availability of beef, the growth in sales of plant based meats began to fall from almost 80% at the end of April to 57% at the end of May.

At the time the economic environment was most opportune for consumers to switch from beef and pork to plant-based alternatives, it seems that few made that substitution. The figure below shows the trends in volume (or lbs) market share. The share of plant-based sales did indeed rise over the period in question from 0.22% of all lbs purchased to 0.33% of lbs purchased. I’m a bit surprised it wasn’t more.

One of the inferences we can draw from these data, which is also consistent with the research we recently conducted, is that a lot of the purchases of plant-based alternatives are coming from consumers who wouldn’t have bought much beef or pork to begin with.

I look forward to seeing how these trends continue to evolve.

A couple new papers

In the past couple days, I’ve had a couple papers published with some recent Purdue MS graduates.

The first paper is with Lacey Wilson in Food Policy (I blogged about a previous version of the paper back in February). Here’s the abstract:

“Previous studies, as well as market sales data, show some consumers are willing to pay a premium for redundant or superfluous food labels that carry no additional information for the informed consumer. Some advocacy groups have argued that the use of such redundant labels is misleading or unethical. To determine whether premiums for redundant labels stem from misunderstanding or other factors, this study seeks to determine whether greater knowledge of the claims - in the form of expertise in food production and scientific literacy - decreases willingness to pay for redundant labels. We also explore whether de-biasing information influences consumers’ valuations of redundant labels. An online survey of 1122 U.S. consumers elicited preferences for three redundantly labeled products: non-GMO sea salt, gluten-free orange juice, and no-hormone-added chicken breast. Respondents with farm experience report lower premiums for non-GMO salt and no-hormone-added chicken. Those with higher scientific literacy state lower premiums for gluten-free orange juice. However, after providing information about the redundancy of the claims, less than half of respondents who were initially willing to pay extra for the label are convinced otherwise. Over 30% of respondents counter-intuitively increase their premiums, behavior that is associated with less a priori scientific knowledge. The likelihood of “overpricing” redundant labels is associated with willingness-to-pay premiums for organic food, suggesting at least some of the premium for organic is a result of misinformation.”

Lacey is currently employed as a data scientist at 8451.

The second paper, led by Aaron Staples, and co-authored with Carson Reeling and Nicole Widmar just appeared in Agribusiness. Here’s the abstract:

“Commercial and regional brewers are increasingly investing in environmental sustainability equipment that reduces input use, operating costs, and environmental impacts. These technologies often require prohibitively high upfront costs. One potential solution for these brewers is to market their product as sustainable and charge a premium to offset some of the costs. We undertake a stated preference choice experiment targeting a nationally representative sample of beer buyers and elicit preferences for multiple attributes related to environmental sustainability in beer. We find that, on average, beer buyers are willing to pay $0.70/six‐pack for beer produced using water and wastewater reduction technologies, $0.85 for carbon reduction practices, and $0.98 for landfill diversion practices, though water sustainability practices appeal to a largest share of beer buyers. We also find that preferences for sustainability attributes are widely distributed among beer drinkers, largely irrespective of sociodemographic characteristics. The positive price premiums across sustainability attributes suggest beer buyers value sustainable brewing, and brewers could attract new consumers by simultaneously communicating their commitment to sustainability and differentiating their product”

Aaron is in the PhD program in agricultural economics at Michigan State.

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.

Economic Impacts of COVID-19 on Food and Agricultural Markets

That’s the title of a new report I co-edited with John Anderson at the University of Arkansas, which was released today by the Council of Agricultural Science and Technology (CAST) and the Agricultural and Applied Economics Association (AAEA). We brought together 17 short articles by more than 30 outstanding food and agricultural economists to address a broad range of impacts brought about by the pandemic. Here are the list of topics covered.

Hopefully the report will help improve understanding of our food supply chains, give an appreciation of the magnitudes of the disruptions, and lead to more informed policy responses.

You can read the whole thing here.

Thanks to all the authors who contributed and to the reviewers who gave prompt and excellent feedback.

Domestic Meat Shortages and Exports

The USA Today ran a story about meat shortages and exports in which I was quoted. There are several crisscrossing narratives running through the piece, so I thought it might be useful to clarify a few points.

On the one hand, the article discusses the volume of meat US packers exported to other countries, with the presumption being that it’s wrong to export meat abroad when we have shortages at home. But, then the article also argues:

“But Americans were never at risk of a severe meat shortage, a USA TODAY investigation found, based on an analysis of U.S. Department of Agriculture data and interviews with meat industry analysts.”

If that’s true, then the argument about exports seems irrelevant.

In any event, were we at risk of shortages? It is clear the packing sector took a significant, unprecedented hit and was producing far less beef and pork compared to last year. Here’s a figure I created based on USDA data on processing volumes.

It’s also important to clarify what is meant by “shortage.” Why weren’t there more empty shelves in late April and early May given the reduction in processing volume shown above? The answer: prices. We are going to consume whatever meat gets produced, whether it is a small or large amount. If there is a larger than expected amount of meat being produced, prices need to fall to induce us to consume more than we otherwise would have. By contrast, if a smaller amount of meat is being produced than expected, prices need to rise to induce us to cut back and consume less than we otherwise would have.

Thus, prices are the mechanism by which scarce resources (like meat) get allocated. Retailers sometimes use other non-price mechanisms (like: limit of 2 packages per customer or long wait lines) to ration scarce supplies if they don’t want to pass on the full cost increases to consumers. Higher prices and other mechanisms like store buying limits are what helped prevent many grocery store shelves from being completely empty (i.e., having “shortages”).

So, did beef and pork prices rise to help allocate the significantly lower quantity being produced? Absolutely! Here’s a graph of changes in wholesale beef and pork prices based on USDA data.

Finally, when discussing trade, I think it is really important to get the timing and trends right. If we want to explore how trade patterns responded to the plant shutdowns and reductions in domestic supplies, we need to look at data in late April and May. As the initial figure above shows, it was really only in mid April that we started seeing very significant reductions in processing volumes, with the “bottom” occurring in early May.

So, what happened to US meat exports? Here are some figures from the US Meat Export Federation (USMEF).

The USMEF defines an export as: “an actual shipment from the U.S. to a foreign country” whereas an “Export sale is defined as a transaction entered into between a reporting exporter and a foreign buyer. Sales can be cancelled or adjusted in following weeks, thus “net” sales are reported as the difference between new sales and any cancellations or adjustments.”

These figures show a sharp drop in sales of beef and pork at the time we starting seeing the worst of the packing plant shutdowns and closures. Actual exports (i.e., movement of meat across the border) also fell, albeit at a slower rate than sales, revealing the lagged nature between when a “sale” is made and when the meat leaves the country. It’s one of the reasons the data showed exports persisting for a few weeks even after plants began to close: the meat had already been sold weeks prior to the plant shutdowns occurring.

Why would exports fall in response to the COVID-related packing plant shutdowns? Perhaps it was patriotic duty on the part of packers to feed American consumers. I suspect the over-riding motivation was economics. As the price data illustrated above clearly shows, packers could fetch a higher price for their meat here at home. That is, packers didn’t have to be coerced into reducing exports as there was a strong economic incentive to sell into domestic markets. Again, we see prices serving as a key mechanism to re-direct meat supplies to help prevent “shortages.”