Consumers may be reaching their affordability ceiling when it comes to products such as ham.
The meat industry, beleaguered with supply and labor challenges, may be on the brink of pushing consumer budgets too far. Per coverage in May and June by The Wall Street Journal (WSJ) of the beef and pork sectors, steak prices are set to shoot back up due to dwindling cattle supply and higher costs associated with raising livestock.
The price of ground beef, already more than 20% higher than 2020 prices, per the Bureau of Labor Statistics’ (BLS) Consumer Price Index, may shoot up further — right in time for summer barbecue season.
Pork, conversely, has an oversupply issue due to lower global customer demand and decreasing margins due to rising production costs and new regulation compliances. Processed products have experienced the highest price increases due to the meat industry’s nearly sector-wide pressures, according to the BLS, with ham prices up 6.5% year over year and lunchmeats up 8.3% during the same period.
As in many other sectors, the cost of these industry challenges continues to be passed on to the consumer. But with meat product prices already sky-high, there may be a limit to how much consumers can continue to absorb. And as noted in the PYMNTS’ May “Consumer Inflation Sentiment” report, consumers are already seeking lower-cost alternatives when it comes to buying fresh meat.
The price of perishables such as beef or pork can only be cut so far before quality may come into question. As the Journal of Food Engineering detailed in a 2014 paper, the quality of livestock care and feed has a direct impact on ensuring meat quality. With 27% of consumers already buying these products from merchants with lower prices, some simply may not be able to afford the higher prices predicted to come or already here.
When or if pork or beef prices exceed consumer budgets, some shoppers may have no choice but to cut back on these purchases and seek alternatives such as chicken (up a comparatively paltry 3.4% year over year), fish (up 2% during the same period) or go meatless altogether, as fresh vegetable prices rose only 1.4% year over year, per the BLS data.
When it comes to beef and pork, sector producers forced to raise prices risk their products moving from essential to “nice to have” for many consumers. And as discretionary spending has yet to see a rebound, in doing so, they could risk pricing themselves out of many consumers’ meals.
When it comes to beef and pork, sector producers forced to raise prices risk their products moving from essential to “nice to have” for many consumers. And as discretionary spend has yet to see a rebound, in doing so, they could risk pricing themselves out of many consumers’ meals.
The post Meat May Be on Chopping Block as Consumers Continue Cost-Cutting first appeared on PYMNTS.com.