The Future
It's coming, and it could be scary, but taking advantage of alliances, partnerships and technology could make it smoother for the meat industry
by Ken Krizner, senior editor
This just in from the newsroom: America is undergoing a revolution. The aim of the revolution is to make life faster, easier and more convenient for Americans. Today's consumers want their food that way-faster, easier, more convenient, with a greater emphasis on quality.
Here is additional information about the revolution: It has been ongoing since the early 1970s, and it is expected to last about another 25 years.
The idea that the United States is in the middle of a 50-year revolution surprised processors during the 1995 AMI/FMI Meat Marketing Conference held in Atlanta in April.
Noted futurist David P. Snyder explained that the revolution is the transformation of the U.S. economy from industrial-based to technological-based. He compared this period in history to a century ago when the U.S. economy was evolving from the steam engine to the electro-mechanical engine. When the evolution began around 1870, the U.S. economy was weak, compared to those of the great European powers-England and Germany. When it was completed around 1920, the U.S. economy was the strongest in the world.
The late 20th century was the time when Americans were going to reap the rewards of the technological revolution.
But a funny thing has happened: Consumers are working harder and longer for less money. Since the technological revolution began, increases in wages have not kept up with increases in inflation.
What this means, of course, is that consumers have less disposable income to spend for food, and less time to eat that food.
Snyder warned that this fact will probably hold true for at least the next two decades.
This puts the onus on meat processors to produce products that are based on quality and convenience.
George Bryan, senior vice president of Sara Lee Corp.'s Meat Division and AMI chairman, said that after years of wandering in the desert, processors have begun to answer consumers' calls for quality.
"We must be sure that we are clear on consumer perceptions and then address [quality] concerns," he noted. "In some instances, there has been a wide gap in what we thought consumers wanted or believed and in what they actually wanted.
"For example, in the mid-1980s, studies showed that consumers believed their meat was too fatty," Bryan pointed out. "We assumed that consumers were referring to the marbling in the product. What they were actually concerned about was the level of trim that remained on the product. From our point of view, that was easily trimmed by consumers. But nevertheless, the fat trim bothered consumers-a clear negative.
"We've responded by trimming our meat down to a one-quarter inch, or even one-eighth inch or less," he added. "We've allayed a real fear about fat by offering a product that looks-and is-leaner than ever. We've neutralized the negative, and now we've got a positive story to tell."
Technological advantages
The other side of the equation is that consumers want convenience. Alliances and technology are ways to aid convenience. Years ago, it was not uncommon to see out-of-stocks in retail meat cases. Today, this could mean financial Armageddon.
In an effort to enhance convenience-always keeping in mind that consumers are the ultimate judges for all segments of the processor-retail chain-effective partnerships must be developed, attendees were told. These partnerships include an Efficient Consumer Response system and case-ready beef and pork.
"Partnerships [between processors and retailers] need to generate shared savings, value for consumers and increased department traffic," cautioned Robert J. Moeller, president of Moeller and Associates, a Chaska, Minn.-based strategic and marketing consulting service. "We need partnerships in which we are willing to share information with former adversaries."
A potential consequence for the meat industry of not forming partnerships is meat departments continually losing business to service delis and produce sections, a trend that has been occurring since the beginning of the decade. "Processors cannot stand still and allow the deli and produce sections to take a bite out of meat case sales," Moeller warned.
An effective relationship would remove excess costs and require the creative uses of power, noted Nirmalya Kumar, visiting professor of marketing at Northwestern University's Kellogg Graduate School of Management.
ECR could save the food industry more than $30 billion annually. It is a strategy in which retailers, wholesalers, brokers and suppliers unite to bring better value to consumers. The grocery industry spent $3 billion on the concept in 1994, and estimates are it will spend $4.5 billion this year.
Meat industry executives believe that processors must jump aboard the ECR bandwagon to help satisfy consumers' demands for convenience.
Another type of partnership is case-ready fresh meat, in which retailers and processors work together to prevent out-of-stocks, as well as provide a more consistent cut of beef or pork. After years of fits and starts, it appears that case-ready meat is ready to establish itself in the meat case.
"If processors are unrelenting, they will be successful [in case-ready]," advised John Allen, a professor at Michigan Sate University's Food Industry Institute. "The focus of case-ready must be to serve consumers, to streamline the meat case, and to improve boxed meats."
Case-ready can also be a tool to serve the consumer who shops at a future meat case, based on a meat management system. "Case-ready can give retailers a better handle on the economics of the meat case," said Thomas Pierson, also a professor at Michigan State's Food Industry Institute. "Processors must use the information and technology available to quicken the process of providing a full-scale meat case to consumers."
Answering the consumer call
"Once, consumers were accustomed to having product out of stocks," Bryan noted. "Today, that is almost unforgivable. Once, retailers were more accustomed to buying what was available in the marketplace. Now, retailers want the marketplace to be flexible and adapt to their requirements. This is achievable, but only with a strong commitment to technology and to each other."
Moeller believes the next step in the evolution is to transform the meat case into a meal center.
"The more things change, the more they stay the same," he noted. "Consumers will continue to look for meal solutions, speed will be of the essence as the day becomes more compressed."
The answer is in more aggressive promotions at the meat case and more center-of-the-plate programs that focus on meat. Move away from being a passive, commodity-driven industry, and move toward becoming a meal source.
"Processors have to stop talking meat and start talking marketing," Moeller cautioned.
That would be revolutionary.
New training center to utilize information technology
to transform meat case
As supermarkets plunge into the future, meat processors and retail meat managers fear that the meat case may be left behind. That sentiment was very evident at the AMI/FMI Meat Marketing Conference.
Fresh meat faces an erosion of influence in the evolving supermarket world. Where at one time it was the traditional center of supermarkets, fundamental weaknesses in the way meat is bought, merchandised and marketed at retail are hurting sales.
The message from the conference? If things do not change, the meat case will continue to lose sales to produce and deli sections.
"What we are talking about is changing the culture and nature of our business," said John Story, senior director of meat and deli for Minneapolis-based Fairway Foods.
In an attempt to circumvent this potentially damaging trend, the National Live Stock and Meat Board will open the Meat Marketing Technology Center at the University of Chicago in September. The center's mission is to effect change in the retail meat marketing department with implementation of improved information and management systems so the meat industry can be more consumer-driven to regain market share and profitability.
"We feel that the growth and enhancement of the meat industry will depend on how well we manage information-particularly at the store level, stresses Ken Johnson, NLS&MB vice president of meat science. "This center is geared to address that challenge."
The retail meat department can be repositioned to manage the dynamics of change, Johnson says. Utilizing accurate consumer marketing information can improve management of inventory and turn the more than $1.5 billion in lost sales from out-of-stocks into increased sales volume.
Enhanced marketing information can help solve problems produced by declining employee product knowledge and skill levels. NLS&MB research also shows that retailers must be able to quickly gather accurate front-end scanning data to make intelligent meat marketing decisions.
Improved data and information will allow marketing decisions to be customized to better serve customer types and store formats.
The center's first priority will be the Value-Based Meat Management system, a two-part, two-day course that is designed to improve the collection and evaluation of sales information, as well as identify any additional system needs. The curriculum will cost a company $20,000.
"We'll spend the first part of the course talking about the meat department plus why it's different from other departments," Johnson notes. "Then we'll cover information flow within the retail meat department, the retail store and the [retail] company. Next, we'll cover data.
"We're trying to address how to collect data, manage and transfer information-whether it's buying, processing, merchandising or marketing in the case-into usable, actionable information," he adds. "Finally, we'll present a series of retailer merchandising case studies."
The program's aim is to help transform retail grocery store meat cutting departments into consumer meat marketing and merchandising centers.
Participants will learn how to move the industry to "cents per pound" or value-based pricing, and lay the foundation for case-ready products; create pricing models for fresh meat; market the fresh, retail meat case; use the meat case as a marketing tool; implement nutrition and safety labeling; provide practical Hazard Analysis and Critical Control Point system applications; and implement plans to improve store-level food safety standards.
Gazing into a crystal ball
David P. Snyder, lifestyles editor of The Futurist magazine and a social forecaster, dazzled executives of the meat and supermarket industries with a 75-minute presentation of what the future holds for the United States, and how it could relate to the industry. Here is a sampling of what he had to say:
-- The United States is nearing the mid-point of a 50-year period of technological assimilation-shifting from labor-intensive to technological-intensive production and management. The result has been a temporary decline in economic performance, social prosperity and public revenue.
-- The number of multi-generation households will grow rapidly in the next two decades, which means families will become over-extended and distressed.
-- There is a growing gap between rich and poor with a resulting increase in socio-political polarization among ethnic groups and economic classes. Eighteen percent of workers earn below poverty-level wages in 1995, compared with 12 percent in 1979.
-- Eighteen percent of adults ages 25 to 34 live with their parents in 1995, compared with 8 percent in 1980. One-half of those who leave home are back within 30 months.
-- The long-term social pain caused by the techno-economic restructuring will be at its greatest between now and 2000, and can reasonably be expected to generate urban unrest and lawlessness, extremist politics, hate groups and hate crimes, and home-grown U.S. terrorism.
-- Sixteen- to 24-year old people, who eat more red meat than any other segment, will not have the money to spend on food. But this will change in 2009, and consumption can be expected to reach 1973 levels.