Meat Matters [1]
costco wholesale supermarket news

Price-Per-Pound Drives Consumer Beef Sales

Many of you likely are acquainted with warehouse club Costco’s renowned beef program [3]. If not, I encourage you to visit one of its warehouses. The meat department is at the back of the store. But long before you reach the meat case, you’ll see a huge, white banner above it with “USDA Choice [4]” in red letters.

Costco is the nation’s largest retail seller of Prime and Choice beef, moving well over 500 million lbs./year. It doesn’t break out its beef sales, but total meat sales in fiscal 2012 were $5.1 billion. Costco also sells chicken, but sold just a mere $331 million worth, or 62 million chickens, in 2012. When it comes to protein, Costco is a huge supporter of beef.

That’s why beef lovers like me buy virtually all their beef at Costco. The reason is simple. Costco's beef program [5] offers beef of outstanding quality at the lowest possible price. As with its other merchandise, Costco adds only 13% to what it pays for its beef. The result is that Costco offers incredible value (quality vs. price) in its meat cases, which also include fresh pork and lamb. One example is its Kirkland Signature (house brand) organic ground beef. It sells a 4-lb. pack, divided into convenient 1-lb. units, for $16.99.

Costco’s value equation extends to its Prime beef offerings. I regularly buy Prime sirloin tips (cut more like steaks) for $7.99/lb. and they eat superbly, whether grilled or put in a stew or a chili. Speaking of chili, Costco currently sells Angus Beef Chili, a fully cooked entrée in its refrigerated section. It’s among the best store-bought chilies I’ve had and serves four people for less than $9. It’s another great value and way to sell beef.

Costco, however, isn’t immune to higher wholesale beef prices [6] and their impact on consumers. Costco has seen its sales of beef steak items decline 8% in volume the past couple of years, although sales dollars were up 7%.

Ground beef [7](it also sells it in large trays) remains a big seller. But interestingly, Costco has seen a double-digit increase in its ground turkey sales the past two years. That’s partly due to Costco’s focus on the item, but it also reflects the rising price of ground beef vs. turkey.

You’ve guessed by now that I’m an unabashed Costco fan. But the point of mentioning the warehouse behemoth (its sales in 2012 were $100 billion) is to reiterate the importance of the value equation and that beef is both a center-of-the-plate item [8] and a meal ingredient. The price of beef is only going to increase over the next three years. So the beef industry needs to work even more assiduously to improve overall beef quality and to foster the development and marketing of more ready-to-eat convenience products [9] containing beef.

Not surprisingly, the number-one driver of Americans’ meat-purchasing decisions is price per pound [10], followed by total package cost, product appearance, nutritional content, preparation knowledge, preparation time and ease of preparation. That’s according to the 8th annual Power of Meat study, which surveyed 1,425 shoppers last December.

 

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The survey also shows that sales and promotions drive purchasing decisions, in addition to meat coupons, ads and circulars, and meat markdown, all of which are value-related. This confirms that consumers are making protein choices more on price per pound than relative value, and that they’re “cherry-picking” retail features and special promotions as much as possible, especially in their beef purchases.

The study found that the supermarket continues to be the primary place where shoppers purchase meat – 66% of shoppers, in fact. That compares to 19% of consumers who purchase meat at super centers, and 9% at club stores. I’m sure Costco would like to raise that last percentage. 

Steve Kay is editor and publisher of Cattle Buyers Weekly (www.cattlebuyersweekly.com [12]). See his weekly cattle market roundup at beefmagazine.com [13] every Friday afternoon.

 

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