What to Eat when Having a Millennial Over for Dinner

That's the title of a new working paper co-authored with Ph.D. student Kelsey Conley.  There is a lot of talk about how millennial's food preference may differ from previous generations, but much less is available in terms of hard evidence.  Here's what we write as the challenge with a lot of the previous research in this area (this criticism is also be true of previous blog posts I've written on the subject, such as this one and this one): 

A key downside of the previous research in this area is that today’s millennials are typically compared to today’s older generations. This sort of analysis presents a confound because older people are likely to differ from younger people at any point in time. That is, an “age effect” is confounded with a “millennial effect.” The more difficult question is whether today’s young people are different than younger people decades ago. To address this issue, cohort analyses are often conducted (Pitta et al., 2012). However, cohort comparisons are also confounded by a myriad of factors that change over time. For example, falling prices or rising incomes may lead young people today to make different purchases than young people in previous decades. To sort out this conundrum, this paper uses a difference-in-difference estimator to identify the causal effect of millennials. Using high quality government survey data [the Bureau of Labor Statistic’s Consumer Expenditure Survey], we compare the difference in food spending between the young and old in 1980 to the difference in young and old in 2015. We refer to the resulting estimate as the “millennial effect” that provides insights into whether millennials truly have different food preferences than other generations. To our knowledge, no previous research has used difference-in-difference methods to determine the millennial effect in a theoretically consistent demand framework.

Some summary statistics and preliminary analysis:

To preview our subsequent analysis, a crude difference-in-difference effect can be calculated. In 1980, the young spent $25.48-$38.98=-$13.5/week less than the old on meat. In 2015, however, the young (millennials) only spent $14.28-$18.43 = -$4.15/week on meat than the old. Thus, the millennial effect (or difference-in-difference) for meat is -$4.15+13.43 = $9.28/week. So, even though spending on meat has declined among both the old and the young from 1980 to 2015, it has declined even more among the old than the young. Thus, this crude estimate suggests young people are spending $9.28/week more in 2015 than they otherwise would have because they are millennials.

Our main findings are likely to be somewhat unexpected.  We find that the "millennial effect" is positive on food expenditure shares for three meat categories (beef, pork, and poultry), eggs, cereal, and fresh fruit.  A statistically significant negative ‘millennial’ effect is found for non-alcoholic beverages and food away from home.  This doesn't mean millennials are spending less of their food budget eating out (or spending more of their food budget on meat) than young people from the 1980s, only that they're spending less of their food budget eating out (and spending more of their budget on meat) compared to older folks today than in the past.   

China's Food Economy

Bloomberg has a great feature article on food and agriculture in China with excellent visuals.  The article makes the case (correctly in my view) that China will have to rely on technology to sustainable feed its growing population.  

But China’s efforts to buy or lease agricultural land in developing nations show that building farms and ranches abroad won’t be enough. Ballooning populations in Asia, Africa and South America will add another 2 billion people within a generation and they too will need more food.

That leaves China with a stark ultimatum: If it is to have enough affordable food for its population in the second half of this century, it will need to make sure the world grows food for 9 billion people.

Its answer is technology.

Check out the whole thing to see graphs on rapidly increasing protein consumption and high levels of fertilizer use in the country compared to the US and other locations.

New Competition for Meal Kits

About a year and a half ago I was interviewed by the Atlanta Tribune about a story they were running about prepared meal kit services (think Blue Apron, HelloFresh, or my family's favorite Martha and Marley Spoon)  One of the questions they asked me was whether I expected the market to grow  Here's what I said then.

Hard to say. It will depend on the ability of the box services to continue to offer competitive offerings with grocery stores and restaurants, and it will depend on how these other food service outlets respond in turn. For example, restaurants already offer take out. And, what’s to stop Walmart or Kroger from offering their own boxes ready for pickup?

As it turns out, I heard a story on NPR this morning by Dan Gorenstein with Marketplace covering precisely this topic.  Apparently Kroger and Publix are, in fact, going to create their own prepared kits.  It's doesn't take a genius to see that this was going to happen.  Gorenstein interviewed Northwestern economist Mike Mazzeo who said supermarket chains are "well positioned" to take a bite out of the growing business.  Mazzeo said  

Supermarkets can get things at lower prices. They have access to all of the ingredients for these meals. They don’t have to do marketing. They can just put it on their shelves.

That is, grocery stores can provide a similar service at a fraction of the cost.  In some ways the grocery story offerings will be more convenient because one doesn't have to sign up for a subscription and pre-plan which and how many meals to buy and plan to be home when the box is delivered.  But, it would require you to go to the store, and that's part of the convenience of the meal delivery service - not having to visit the store.  

While I'm sure Blue Apron et al. can't be thrilled to see new competition from grocery stores, this is a good sign for consumers.  We'll have wider availability of options at lower cost.  

Escalating health care costs . . . for pets

I was intrigued by this article by Stanford and MIT professors, Liran Einav, Amy Finkelstein, and Atul Gupta in the most recent issue of the American Economic Review (ungated version here).  We are all aware that Americans spend a lot on health care, but there seems to be a lot of disagreement as to why.  Some say it's too much government regulation.  Others say too little.  These authors point out, however, that spending on pet health care roughly mirrors that on humans despite the fact that this is a largely unregulated industry. 

The authors write:

The fact that despite these differences—often mentioned as potential explanations for the large and rapidly growing health-care sector in the United States—some pet health-care patterns appear qualitatively quite similar to the analogous human health-care pattern, strikes us as noteworthy. It should give us pause before attributing the large and rising health-care costs in the United States solely to the prevalence of insurance and government involvement. The similar growth patterns in US human and pet health care may also suggest that technological change in human health care may have spillover effects on related sectors, including perhaps pet health care or human care in other countries.

A couple figures from the paper.

Food Demand Survey (FooDS) - May 2017

The results from the May 2017 edition of the Food Demand Survey (FooDS) are now in.

Some observations from the regular tracking portion of the survey:

  • Willingness-to-pay for the "premium" cuts from each meat species (steak, chicken breast, and pork chop) all increased this month compared to last; exactly the opposite was true for the the lesser-valued cuts (ground beef, wings, and deli ham).  Willingness-to-pay for non-meat items declined significantly.
  • Awareness and concern for a list of 17 items all fell this month compared to last. Concern for antibiotic use rose to the top three behind E Coli and Salmonella.
  • Compared to last month, consumers increased expenditures on food at home but reduced expenditures on food away from home.  
  • Fewer people declared vegetarian status or indicated suffering from a food borne illness this month than has been the case for more than a year.

Several new ad hoc questions were added to the survey this month.  

The first set of questions was added in response to some queries by Ranjith Ramanathan who is a meat scientist at Oklahoma State. He was interested in some issues related to how consumers buy and cook ground beef.  To focus in on ground beef eaters, we first asked: “Do you eat ground beef patties (i.e., hamburgers)?” About 88% of the participants answered “yes”.  Those who answered yes were then asked several questions related to cooking and buying ground beef patties. 

Ground beef eaters were asked: “How do you determine the doneness of ground beef patties when cooking hamburger?”  Choice options were: A) By using a meat thermometer, B) By visual observation (i.e., looking at the color of meat in the center of the patty), C) By cooking a certain length of time, or D) Other ways.  

Approximately two-thirds of the participants who said they eat ground beef patties, stated they determine doneness by visual observation.  Next most common, selected by about 18% of respondents, was determining doneness by length of cooking time.  Only about 13.5% said they used a meat thermometer to determine doneness.   

The next question asked: “What is your preference for the cooked internal color of ground beef patties?”  Response options were: Red, Pink, Brown, or Another color.

The majority of participants, about 69%, stated they prefer the internal color of ground beef patties to be brown.  About 26% of participants stated pink as their preferred cooked internal color. Only 5% of participants stated they would want a red center in their ground beef patties.  Less than 1% stated they would want another color. 

Participants were then asked: “To what internal temperature (degrees Fahrenheit) does the USDA recommend cooking ground beef patties?”  Respondents could answer on a slider scale that ranged from 100 to 200 in one degree increments.

The average temperature stated by participants was 162 degrees Fahrenheit (the median was 161).  The figure is remarkably close to the actual USDA recommendation of 160F.  Nonetheless, a large share of participants were incorrect in their assessment.   Thirty one percent stated a temperature less than 160 and 54.5% stated a temperature higher than 160.  Even providing a five-degree margin of error, 28% stated a temperature less than 155 and 37% stated a temperature greater than 165.  Thus, 28%+37%=65% of respondents gave an answer that was at least 5 degrees higher or lower than the USDA recommendation.  Below is a histogram showing the distribution of responses.

Next, participants were asked: “How is the ground beef you normally buy packaged?”  Response categories included text and photos of six different packaging options including: vacuum sealed, in a box as frozen patties, in butcher wrapped paper, as a chub, film wrapped, and in a tray.

Of those who eat ground beef, about one third stated they buy packaged ground beef in a tray.  Ground beef in a film wrapped packaged was selected by about 28% of participants.  About 18.7% of respondents stated they buy ground beef packaged as a chub.  8.5% said they normally buy ground beef in a box as frozen patties.  Only 5.6% of participants said they normally purchase ground beef in a vacuum sealed package. 

Finally, as I was grading final projects from one of my classes, I noticed one team, comprised of Ph.D. students Bernadette Chimai and Pedro Machado, asked an interesting question on a survey they'd posed to students.  I modified it an included it on FooDs.  Here is a screenshot of the question asked:

Participants most frequently stated that free range chickens were the most efficient (i.e., used the least amount of feed to produce a pound of meat) followed by grass fed cattle and grain fed chickens.  However, response patterns were not necessarily symmetric.  Thirty percent of participants believed feedlot cattle were least efficient (i.e., used the most feed to produce a pound of meat) followed by 25%, who indicated grass fed cattle as most inefficient.  About an equal number of respondents thought free range pigs were both most and least efficient.  

To help summarize the results, I calculated the difference in the percent of respondents who viewed an animal and production system as most efficient and subtracted it from the percent who viewed it as least efficient.  Overall, free range and grain fed chickens were ranked highest in perceived efficienciency followed by free range pigs.  Grain fed pigs and feedlot cattle were perceived as least efficient.