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Diving into beef demand and what drives it

The Beef Demand Determinants study gives beef producers deep-dive insights into what drives consumer demand for beef.

By B. Lynn Gordon

In a time of uncertainty, decision-makers having access to as much information as possible to guide the industry is like knowing the game plan for the other team — it doesn’t always lead to a win, but it sure helps.

The Beef Demand Determinants study is one method of providing a current multifaceted assessment of domestic demand factors. The study, funded by the beef checkoff, is conducted about every five years. Researchers conducting the 2017 study were Glynn Tonsor and Ted Schroeder, agricultural economists at Kansas State University, and Jayson Lusk, professor of agriculture economics at Purdue University.

“Monitoring and understanding consumer preference for beef is a cornerstone of the checkoff, and this study is one tool we use to gain a better understanding of what consumers consider when making purchases of beef,” says Jackie Means, Van Horn, Texas, chairwoman of the Checkoff Evaluation Advisory Committee and a Cattlemen’s Beef Board (CBB) member. 

Means emphasizes the importance of conducting a continual evaluation of the consumer environment and says, “It is equally important to take a deep dive into the demand question from time to time, and the Beef Demand Determinants study is the deeper dive.”

Four key findings in the assessment of beef demand identified were: less sensitivity to price; smaller economic impact from pork and chicken as a substitute for beef; media presence on topic focus areas; and changing demographic trends.

Declining price sensitivity

Over the past decade, the quantity of beef that consumers have purchased has become less sensitive to changes in beef prices yet more sensitive to consumer incomes. Researchers believe this conclusion is tied to loyal beef consumers who continued to buy beef, even while faced with record-high retail prices.

Consumers who might otherwise have been priced out of the beef market, due to higher prices at grocery stores or food service, continued to allocate part of their income — income which has risen in the past decade — toward the purchase of beef.  “This outcome is critical,” Tonsor says. “It supports an increased focus on the eating quality experience, even when higher production costs were passed on to the consumer.”

Protein pairing

Traditional thought focused on pork and chicken being a strong substitute to beef, yet this study found the substitutability not to be as strong as traditionally thought. Tonsor’s personal analysis of this conclusion centers around two changes he has witnessed.

“First, an increasing share of meat purchasing decisions are made by two-income households who may be less able or willing to switch products than in the past, given adjustments in value of time and food preparation knowledge or comfort. Second, some specific products are now complements,” he notes, referencing the popularity of bacon burgers.

Media matters

Discussion and coverage about beef in print media and medical journals have changed notably over time, specifically in areas of topic focus and volume of coverage. Having an impactful presence in the media shapes perceptions, reported the researchers.

In the study, media topics were not ranked as the marginal impact (e.g., how demand changes with a 1% change in media coverage on topic X) and variability in volume of media coverage (e.g., some issues such as taste are less variable than safety).

Rather, a short list of media topics that have significant impact and vary over time were measured. Topics focused on animal welfare, sustainability, safety, cancer and climate, with results indicating an emerging area of negative media impact focusing on climate change.

Changing demographics 

Demographic trends show favorability for beef demand. The anticipated growth of Hispanic and African-American populations within the U.S. is projected to positively influence beef demand.

Study recommendations

Researchers provide the following recommendations after measuring the current demand drivers and encourage the effective use of industry resources to sustain or further enhance demand:

  • An ongoing focus on beef quality aspects such as taste, appearance, convenience and freshness. These quality attributes remain key and focusing on these foundational beef quality traits will be more productive than focusing on “hot topics of the day” in the media.
  • Hot topic factors that drive long-term perceptions are likely to be most impactful over time. This is because they have the largest net impact on beef demand, and the industry should focus on that, while keeping in mind that loyal beef consumers were not responsive to hot topics when it came to their purchase of beef.
  • Increased collaboration and a cohesive approach with the U.S. pork and chicken industries. These industries and the beef industry face many common challenges; this can help use the beef industry’s limited resources and provide a team approach to the competition arising from plant-based protein.
  • Targeting beef product development, messaging and marketing to consumers. Paying attention to race, income, age, political ideology and product type considerations is recommended.

Producer impact

“It is important for us, as producers, to understand the demand for our product,” Means says. “This allows us to direct our checkoff investments to programs that grow consumer preference for beef.”

But it’s important to understand the difference between consumption and demand, she says. “Consumption is not demand; consumption goes up and down with herd size, or with the amount of beef we supply. Demand is what a consumer is willing to pay for beef, which is influenced by their preference for beef.”

Market developments in 2017 highlighted the critical role of beef demand in the U.S. beef cattle industry. “Both beef supplies and cattle prices increased in 2017 relative to 2016 — an outcome only possible with demand growth,” Tonsor says.

On behalf of the CBB, Means says, “Overall, the response to the study is positive. The study has confirmed the importance of several longstanding determinants and has presented new insight for the future.” Without studies such as this, the demand benefit aspect of these investment decisions is made with much less research-based guidance and hence, is less likely to be fruitful.

 

Gordon writes from Sioux Falls, S.D., and is a regular contributor to BEEF magazine.

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