Category Review - Packaged Meat

Where's The Beef?

September 13, 2012
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Packaged meats need fresher ideas to thrive.
 
Slower volume sales due to price increases and the lack of innovative new products that resonate with consumers were among the culprits holding sales in the lunchmeat category to an increase of only 1.8 percent in 2011, just 0.2 percent when adjusted for inflation, according to a May 2012 report from Mintel International  Group Ltd., Chicago. Mintel says a stronger economy also might be prompting consumers to seek more convenient lunch options.
 
Virtually all households consume lunchmeat — 94 percent eat some form of it — but 32 percent of them said they were buying less pre-packaged or deli counter lunchmeat this year, affected partly by the common consumer perception that such products are overly processed. Nearly half (47 percent) of consumers said they would eat more lunchmeat if it looked and tasted less processed.
 
Mintel suggests that brands and private label in the category ramp up more natural, premium offerings with higher price points that will help raise the bottom line, as well as increasing frequency of usage — or consumption per usage occasion — among households already engaged with the category.
 
The category should be mindful that 63 percent of consumers say that it’s too expensive to eat out regularly. And although interest in low-sodium, low-fat and heart-healthy foods continues to grow, so does interest in convenient, grab-and-go offerings that appeal strongly to on-the-go consumers.
 
EYE ON THE NATIONAL BRANDS
 
Johnsonville added a new line of sausage to its portfolio with the addition of pork and chicken sausage. The product combines a blend of herbs and spice, the freshest cuts of pork and naturally lean chicken, and is available in traditional brat and mild Italian varieties.
 
Oscar Mayer introduced a complete line of meat products that is free of artificial preservatives, flavors and colors. Oscar Meyer Selects includes hot dogs, bacon and cold cuts.
 
Private label captures 16.2 percent of the luncheon meats category as measured by SymphonyIRI Group, Chicago, with a total of $585 million in sales for the 52 weeks ending July 8 in supermarkets, drugstores and mass merchandise retailers other than Walmart (and not including club stores or convenience stores). Sales of private label luncheon meats are down 4.7 percent year-over-year, SymphonyIRI adds, dropping 4.75 percent in sliced meats and 2.44 percent in the much smaller non-sliced subcategory.
 
Other types of packaged meats fared somewhat better overall and within private label sales for the year ending July 8, SymphonyIRI found. Sales of private label refrigerated meat were up 3.9 percent to $545 million, about 45.7 percent of the total sales within that category, which saw sales rise 4.3 percent overall. Private label pork product sales had a particularly strong year, up 45.4 percent to $4.7 million.
 
Private label also held significant shares of the breakfast meat and frozen meat categories, at 19.9 percent and 19.3 percent, respectively. Private label sales rose 6.9 percent to $702 million in breakfast meats and 4.3 percent to $271 million in frozen meats, both higher rates of increase than those subcategories overall, which were up 3.6 percent and 1.4 percent, respectively.
 
At $6.5 billion in sales, up 5.7 percent from 2009-11, deli-counter lunchmeats led the category in sales with their higher price points and consumer perceptions of superior quality and freshness, Mintel reported. But the slow growth could mean that consumers are switching to more convenient options such as ready made sandwiches.
 
Refrigerated sliced lunchmeat saw 2.1 percent year-to-year sales growth to $5.8 billion, helped by price increases and some degree of product innovation. But Mintel sees limits to the subcategory’s potential given perceptions of over-processing. Mintel’s consumer survey showed 70 percent of deli counter products are fresher than prepackaged, and 63 percent say they can taste a difference.
 
Finally, refrigerated non-sliced lunchmeat, the smallest subcategory by far with only 2 percent of the market, saw sales decline from 2009-11 probably because of lack of new product innovation and lack of convenience compared with pre-sliced offerings, Mintel says, suggesting that brands and private label highlight how these products can be cubed or diced in a manner that works better for meal solutions such as salads.
 
Among different channels, supermarkets saw growth of 10 percent from 2006-11 in the lunchmeat category to $8.3 billion in sales, about two-thirds of the total sales in the category, thanks to the availability of the full line of products, Mintel reported. 
 
On the private label side, the number of products has grown greatly during the past few years, yet sales have held steady at 16 percent of the category. Although this market share is stronger than in some other food categories, the lack of growth suggests that consumers are not warming to non-branded lunchmeat, Mintel believes. 
 
Mintel’s Global New Products Database showed that 2011 saw a new record high for lunchmeat product launches, roughly evenly split between new packaging, new variety and new product. Among the types of innovations during the past year have been premium and healthy, convenience, and those focused on animal welfare. 
 
Advertising efforts in the category continue to focus heavily on family images, but since the percentage of households with children is declining, brands and private label must realign marketing efforts to focus on both older and younger consumers, Mintel says.
 
Both Asian and African-American consumer segments also present opportunities for growth. Only 75 percent of Asian consumers consume deli meat, compared with 88 percent of all adults, possibly because they’re more likely to be concerned about product quality and health, and they don’t see lunchmeat as measuring up. African-Americans are more likely than other consumer segments to use lunchmeat for other eating occasions; 25 percent consume it as a snack vs. 14 percent of the general population.
 
Without significant innovations in the aforementioned areas, Mintel forecasts the lunchmeat category will grow only 6 percent from 2011-16, declining 3 percent on an inflation-adjusted basis, to somewhere between $13 billion and $13.6 billion in sales by 2016.
 
packaged meat performance
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