Making Money from Meat

A recent report from the NFU/MLC about the meat market in the top 4 retailers helpfully outlines market sizes, growth rates, volume and value sales by cut, and how much of each cut can be got from the animal. Analysis of the data gives two clues about how to improve profits.


1. Sell all the meat from the animal, not just the premium cuts

Most relevant to direct sellers, carcass balance as it is called makes the difference between profit and loss. It is easy enough to sell fillet or sirloin steaks or legs of lamb, but trickier to find an outlet for slow cook cuts of beef or shoulders of lamb. The problem is magnified by seasonality, with roasting joints or casserole meat struggling for sale in the summer. Direct sellers might want to identify possible customers for the cheaper cuts, be realistic about the price which will be achieved for them, and ensure that any financial analysis includes these lower prices.


2. Target premium/ added value market segments.

This applies to all producers, not just direct sellers. The idea is to identify the market segments which consumers are prepared to pay a bit more for, and sell product into those segments. The NFU/MLC report explains how retailers divide the market up into different segments or tiers, and gives the relative sizes of each segment. Most retailers have a basic segmentation of value (or cheapest), standard, and premium. But there is a trend to "standard plus" and "super premium" products in an effort to encourage consumers to pay a higher price. These new products are backed by marketing claims such as healthy (meaning with less fat), outdoor reared, welfare friendly, a specific breed, free range, increased hanging time, special butchery techniques, and of course organic.

The amount sold in these added value sectors is still small, sausages being the exception:
Beef
Premium 4%
Organic 1.2%
Health 4.6%
Lamb
Premium 1%
Organic 1.4%
Health 1.2%
Pork
Premium 1.5%
Organic 1.0%
Health 2.3%
Sausages
Premium 29.5%
Health 5.1%
Organic no figures
Bacon
Premium 2.1%
Organic 0.2%
Health 1.3%

The size of the added value premium sector may be small currently but it is the holy grail for retailers and it will continue to grow. More to the point, the difference in prices paid by consumers is huge. On average, value beef sells at 57% less than standard, premium sells at 61% more than standard, organic 47% more, and healthy 8% more. In lamb, premium is also sold at 61% more than standard, organic 55% more, and healthy 104% more.
A good look at what consumers are prepared to pay more for could be useful for farmers with the opportunity to better match their system to consumer trends.