Feature Big Markets, Small Markets, Storytelling, and Trust Jeff Gaye
A smaller portion of an expanding global protein market still translates to good news for the beef industry, says Professor David Hughes. Hughes, Emeritus Professor of Food Marketing at Imperial College London, writes a weekly food market blog as “Dr. Food.” He spoke with Beef Business after his presentation at the recent Canadian Beef Industry Conference. He suggests that beef is in a good position to grow in volume sales even as its share of the overall protein market shrinks. He also says that moving away from a monolithic idea of commodity beef, and into more specialized products, is a good thing for the industry. He says his conclusions on the global protein market, based on pre-Covid research, may need to be moderated with new data. “Just about every country will experience some sort of recession, some of them pretty aggressive recessions, and that means smaller household incomes. And that means that people will be pinched. And when they’re pinched, they will tend to trade down,” he said. Nonetheless, he said there is a genuine consensus that “over the next five years or so, there will be a continued strong growth in protein overall and particular growth for meat.” The biggest market has always been, and will continue to be, for plant protein. But as the world’s population and economy grow, the demand for meat will grow with them. And beef, Hughes said, is “the clear premium item.” “It doesn’t matter where I go in the world,” he said. “You go to a retail store in Thailand, for example, and beef will be there. And it’s about three times the price of chicken. Three times the price of pond fish. Beef is placed at the premium end of
SEPTEMBER 2020
the market in almost all countries that I visit.” As people’s incomes increase in the socalled emerging world, Hughes said, “they want to eat more meat. It’s that simple, and that’s sort of brilliant.” The world market for beef protein should remain buoyant even in the Covid economy, he said, thanks to another pandemic: African Swine Fever, which has left China short of meat and looking to buy. “We would have expected, given that everybody is going into recession, that meat prices would have softened significantly. However, we’ve got a 20-million-tonne meat hole in the Chinese market and they’re a country which is not going into recession,” Hughes said. “Chinese demand for meat overall is holding up international prices. China has become far and away the largest importer of beef. It’s always been the largest importer of pork and it’s becoming the largest importer of chicken. So they’re just sucking meat from around the world to fill that 20-million-tonne hole.” A “differentiated market” Hughes talked about the opportunities presented by a market that is becoming fragmented—different customers are looking for different traits in the beef they buy. While the established beef industry may see this as a threat to the way they do business, Hughes says there is money to be made from differentiated product. “Unfragmented or undifferentiated I see as being weak, because that suggests the commodity: the commodity beef. And whenever I hear that phrase, the commodity beef, it immediately means two things: low margin and cyclical behavior,” he said.
The word “beef,” he explains, is a noun. When you offer a simple noun, the consumer’s choice is purely binary: yes they want beef, or no they do not. “The margin is in adjectives. What sort of beef? The trick is to find out what adjectives mean something to consumers and they’re willing to pay more for,” he said. With generic commodity beef, a consumer with certain environmental concerns might choose something else. Another consumer who fears growth promotants might be inclined to just say no. Other consumers have flavour preferences. With differentiated products, the industry has an opportunity to sell beef to all these people. “Isn’t it funny how the wheel turns? When I moved to Canada in 1973, Dominion was a significant supermarket chain. ‘Mainly because of the meat’ was their catch phrase,” he said. “If they sold grass-fed beef, what they meant, it was D-Grade. It meant it was the older beef from the dairy herd, sold at a substantial discount. “And then suddenly if you look over the last 20, 30, 40, 50 years, suddenly now in Whole Foods, grass-fed is perceived to be premium. The adjectives and the value change over time.” Commodity beef constrains total consumption, and differentiation or segmentation expands total consumption, he said. Marketers can then cater for the specific needs of subgroups. But, he says, “it also brings cost.” Hughes speaks of the Canadian Wheat Board and the Fonterra dairy co-op in New Zealand as examples of commodity organizations that dealt in—and continued on page 30
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