Dashboard on the Food Service Industries

My team at the Center for Food Demand Analysis and Sustainability (CFDA) at Purdue has created a new data dashboard highlighting the economic profile of the food service industries across the 50 United States.

In terms of total sales and total employment, California, Texas, Florida, and New York lead the pack. For example, in the restaurant sector, California has over $100 billion in restaurant sales and employs over a million people.

However, these are also the most populous states. Which states rank highest on a per-capita basis? DC, Hawaii, Rhode Island, and Maine have the most restaurant establishments per resident. North Dakota, Montana, and Wisconsin have the most drinking places per resident.

Find these, and many more statistics related to the gender, race, and age of employees in the food service industries in the new data dashboard.

Market potential of new plant-based protein alternatives: Insights from four US consumer experiments

That’s the title of a new article, co-authored with Glynn Tonsor and Ted Schroeder, that was just released by the journal Applied Economic Perspectives & Policy.

Here’s the abstract:

“This article reports results from four studies determining the US market potential for plant-based meat alternatives in different contexts and settings. The first study shows that a pair-wise choice between beef and a plant-based alternative was not significantly affected by the presence of nutrition facts panels or ingredient lists. A second study, framed as a food service meal choice, reveals that the introduction of a plant-based burger has roughly the same effect on beef sales as does the presence of a chicken wrap. The final two studies estimate own- and cross-price elasticities of retail demand. We find small cross-price elasticities between plant-based patties and ground beef. Each of the aforementioned results varies for regular meat consumers as compared to consumers who self-identify with an alternative diet such as flexitarian, vegetarian, or vegan. Combined, this study increases understanding of the impact presented by plant-based offerings in the US protein market.”

A bit more detail from the conclusions …

“Regular meat consumers are much less likely than those declaring an alternative diet (vegan, vegetarian, flexitarian, or other) to select a plant-based item when a beef item is available. The median willingness to pay and market share differences are substantial and documented in this research. Characteristics of consumers most likely to select plant-based proteins include younger, those with children under the age of 12 years, having higher household income, residing in a Western state, and affiliating with the Democratic party. Replacing a chicken item with a new plant-based protein offering on a food service menu has a small (less than 3%) impact on the frequency of selecting beef burger meals. Changes in the price of beef and chicken have a much larger impact on consumer decisions to buy beef than the impact of changes in the price of plant-based offerings. This means plant-based burgers are relatively weak substitutes for beef. Plant-based burgers have more elastic demands than hamburger and chicken breast for regular meat eaters. This suggests regular meat eaters will be more responsive to adjusting consumption to plant-based proteins as their prices change.

A key question relates to the ultimate US market share of plant-based protein products. This research indicates that if facing a binary choice between a plant-based alternative and traditional beef, around 25% of consumers select a plant-based alternative. However, a few caveats are worth mentioning. Some of the individuals who choose the plant-based alternative are unlikely to consume much (if any) beef. In this sense, growth in the market share of plant-based alternatives is not entirely coming at the cost of reduced beef demand and indeed if a plant-based alternative simply replaces a substitute competitor (like a chicken sandwich) or reflects overall growth in protein demand, the impacts on beef demand are likely to be negligible. Nonetheless, the fact that roughly a quarter of consumers indicate they would choose a plant-based alternative suggests there is ample room for this market to grow relative to the current position of limited market share. That is, our estimates suggest we will likely continue to witness growth in the plant-based alternative market even if all that changes is increased availability (and prices remain fixed at the status quo and consumer preferences and beliefs remain unchanged). Strong growth rates could occur for plant-based items, yet a smaller market share resulting. In fact, early in the COVID-19 pandemic, this occurred as retail sales of plant-based items jumped, but so did many other protein items (Meatingplace, 2020). Accordingly, plant-based item retail market share declined despite the growth of overall sales—an observation that conveys caution on using market-share measures.”

What is a Foodie?

Merriam-Webster defines a foodie as, “a person having an avid interest in the latest food fads.” Wikipedia describes a foodie as “a person who has an ardent or refined interest in food, and who eats food not only out of hunger but also as a hobby.” According to the same source, the word originated in the 1980s and it is apparently some “food insiders” do not like.

Despite the fact the descriptor has been used with increased frequency over the past couple decades, it is not a concept or term I’ve seen analyzed in any depth in academic or industry circles, a phenomenon that is a bit strange given the rising interest in food and emergence of the “food movement.”

To delve into the concept a bit, I added a couple simple questions on a nationwide online survey of over 1,200 U.S. households I conducted about a year ago. I first asked, “Have you previously heard the term: "foodie"?” 87.1% said “yes” and 12.9% said “no.” For the people who said “yes.” I asked, “would you call yourself a “foodie””? 38.2% said “yes.,” 48.3% said “no,” and 13.5% said “I don’t know.” This means out of the entire adult U.S. population, about a third has heard the term “foodie” and considers themselves a “foodie.”

How do these self-declared foodies differ from the rest of the population? To answer this question, I compared the 463 people who had heard the term “foodie” and described themselves as one to the 585 people who had also heard the term but definitively said “no” they were not a foodie. Here are some of the biggest differences:

• Foodies are younger. Of people who described themselves as a “foodie”, 35.4% are younger than 35 years of age; of people who said “no” they’re not a foodie, only 21.7% were younger than 35.

• Foodies have higher education. Of people who described themselves as a “foodie”, 38% have a college degree compared to only 18.5% of non-foodies.

• .Foodies have higher income. Incomes of foodies are about 12% higher on average than non-foodies.

• Foodies are more likely to be vegetarian or vegan. 5.8% of foodies said they were vegetarian or vegan compared to only 2.2% of non-foodies.

• Foodies are more likely to have children at home. 34.8% of foodies have a child under the age of 12 at home compared to only 16.8% of non-foodies.

• Foodies are more likely to be politically liberal and be members of the Democratic party. Of people who described themselves as a “foodie”, 47.3% are Democrats compared to only 38.1% of non-foodies.

• Foodies spend more money on food. Self-declared foodies spend about 45.8% more each week on food at home (i.e., through grocery stores) and about 18.8% more each week on food away from home (i.e., restaurants) than non-foodies.

There were not particularly large differences in region of residence (foodies are a bit more likely to live in the Southern U.S.), gender (foodies are a tab bit more likely to be male), or race (foodies are a bit more likely to be non-white).

We also asked people the extent to which they agreed or disagreed with various statements about food. Here’s the breakdown showing the mean response of each group on a 1 = strongly disagree to 5 = strongly agree scale.

Foodies are more likely to agree that they are “passionate about food” and that they are “a food connoisseur.” They are slightly less likely to see food in utilitarian terms - viewing food as a fuel or as a necessity.

Previously, I mentioned foodies spend more on food, but perhaps that’s because they are also higher income? To explore this question, I estimated Engel curves that show how spending on food varies with income for both foodies and non-foodies. As the figure below shows, at any given income level, foodies spend more of their income on food than do non-foodies. This holds both for food at home and for food away from home.

It is also the case that at any given income level, foodies spend a higher share of their income on food at home vs. food away from home than non-foodies (note: these data were collected in February 2021, so results might be somewhat affected by COVID shutdowns).

Taken together, the figures above suggest foodies are a highly relevant category of consumers for grocers - they spend more on food and a larger share of their income on food through grocery than do non-foodies.

Finally, we asked an open-ended question of people who had heard the term: “In a few words, describe a "foodie““ Here’s a word cloud constructed from the responses.

Consumer Food Insights - February 2022

I’m pleased to share the 2nd edition of our new Consumer Food Insights (CFI) survey (check here for more background and results from the inaugural release).

Overall, we observed a high degree of stability in a number of our measures including the Sustainable Food Purchasing Index, preferences for food policies, and food/diet happiness and satisfaction, and shopping behaviors. While it perhaps isn’t exciting to report little to no change in many of these measures, it does suggest reliability in our survey methods and points to the fact that we are getting at fundamental measures of consumer attitudes and behaviors that are stable across time. It also suggests that when we do observe significant changes in the future, we can be more confident that fundamental shifts are occurring rather than just picking up sampling error or spurious fluctuations.

We did observe an increase in consumers’ food price inflation expectations and a corresponding increase in consumers’ spending on food at home and away from home. Increasing inflation expectations are a bit worrisome because expectations of future price increases can lead to a self-fulfilling prophesy. That is, if consumers expect prices to continue rising, they ask and demand more compensation from their employers and clients, which leads to increased demand for goods and higher prices.

That said, it is interesting that consumers’ perceptions of how much food prices have increased over the past year is quite a bit lower than the official data on food price increases reported by the Bureau of Labor Statistics. The Bureau of Labor Statistics reported that prices of food at grocery increased 7.4% over the course of the past year (see our handy data dashboard on food price changes); however, the consumers in our survey said, on average, said they thought food prices had increased “only” 5.2% over the past year. Apparently consumers’ aren’t “feeling” inflation as much as the official data suggests. This may be a result of the fact that consumers can adjust to higher prices in a variety of ways by, for example, substituting to lower price alternatives or shopping on sale or at discount retailers.

When we directly asked consumers how they were responding to increased food prices, the most common answer (selected by 31% of respondents), was that they had made little to no change in their shopping habits, which suggests wage and income growth, coupled with savings, have not led to major shifts in consumers’ buying habits. The second most common answer, selected by 24% of respondents, was that they sought out more sales and discounts. Fewer than 1 in 10 said they searched for better prices online or spent less on other goods to maintain food consumption.

Through another ad-hoc question, we delved into mandatory GMO labeling. As of January 1st, 2022, certain foods that are genetically modified in a way that is not possible through conventional breeding are required to disclose that they are “bioengineered” or “contains a bioengineered ingredient.” Food companies can choose how they wish to disclose – either via a new symbol/label on the food product, through text on the food package, or through a QR code or phone number on a food package.

Given the newness of this policy, we were curious how food companies were responding and whether consumers were aware of the new disclosure requirements. Over two-thirds of respondents indicated that they have not seen the bioengineered label on food packages. Of that group, 87% had never seen the labels before, with the remaining 13% being familiar with the label but not yet encountering it in the store. Only 19% of consumers were sure they had seen the label in the store. Of this group, only 37% said they always check for it when shopping.

Impact of plant-based meat alternatives on cattle inventories and greenhouse gas emissions

That’s the title of a new paper just published in Environmental Research Letters I co-authored with Dan Blaustein-Rejto, Saloni Shah, and Glynn Tonsor. Here’s the abstract.

“New plant-based meat (PBM) alternatives that aim to mimic the taste and texture of beef could have significant economic, environmental, and animal welfare impacts if they replace traditional animal-based meats and reduce livestock production. Whether PBM alternatives can achieve these ends depends on the extent to which consumers are willing to substitute for PBM alternatives, the structure of the meat industry, and the inter-linkages of the livestock industry with the other parts of the economy. We construct and calibrate an economic model to estimate how a reduction in PBM prices, or increase in demand for PBM, in the United States affects cattle production. For every 10% reduction in price or increase in demand for PBM, we estimate U.S. cattle production falls approximately 0.15%, U.S. cattle producers’ economic welfare falls by $300 million year per year, and U.S. consumer welfare rises by $513 million year per year. Key variables affecting model outcomes include the supply elasticity of cattle, the share of the total cost of cattle used to produce ground beef, and cross price-elasticity of demand between PBM and ground beef. Increases in U.S. demand for PBM alter trade patterns, leading to a reduction of beef imports and an increase in beef exports, a phenomenon that further reduces global greenhouse gas emissions and land use given the relative efficiency of U.S. beef production. For every 10% reduction in the price of PBM alternatives, we estimate that the global reduction in emissions is equivalent to 0.34% of U.S. emissions from beef production and 1.14% when including reduced land-use change emissions. Even substantial reductions in prices of PBM alternatives are unlikely to have substantive impacts on the U.S. cattle population and emissions, suggesting the need to also pursue alternative mitigation strategies, such as innovations to reduce the methane emissions per head.”

As indicated, the modeling results are partially driven by the relatively low cross-price elasticity of demand between plant-based meat alternatives and traditional meat that we have found in previous studies, mainly based on surveys. I just ran across this new paper in the Journal of Economic Perspectives and Policy by Shuoli Zhao, Lingxiao Wang, Wuyang Hu, and Yuqing Zheng that estimates these cross-price elasticities using grocery store scanner data based on actual purchase histories. They find, surprisingly, that plant-based and traditional meet are demand complements rather than substitutes. This would mean that a fall in plant base meat alternative prices would lead to an increase in the quantity of beef demanded! (note: the estimated effect is small - a 1% reduction in plant-based prices would lead to a 0.003% increase in beef demand). They find only chicken is a demand substitute for plant-based meat alternatives. Thus, the Zhao et al. paper re-enforces our finding that a reduction in plant-based meat alternative prices is likely to have very small impacts on U.S. cattle inventory - at least based on current preferences and current market structure.

You can read our new paper here.