Retail meat demand is growing. Pork is leading the way for all proteins.
Jarrod Sutton, VP Domestic Marketing, National Pork Board
Don Wick: 00:04 From the Pork Checkoff in Des Moines Iowa, it’s Pork Pod. Pork Pod, a look at the hot topics in today’s pork industry. The Pork Checkoff is working for you through various forms of research, promotion, and consumer information projects. I’m Don Wick speaking on behalf of the Pork Checkoff. And today our guest is Jarrod Sutton, who is the Vice President of Domestic Marketing for the National Pork Board. Jarrod, new statistics are out that relate to the demand side of the equation for U.S. pork. Enlighten us with those numbers, if you would.
Jarrod Sutton: 00:32 Yeah Don, it’s really a pretty terrific story right now for protein in general, but specifically for pork. So USDA tracks the consumer pricing index for retail meat products and it has a pretty proprietary formula to determine demand for those commodity products. And right now we’re seeing an increase, actually it’s up about three point eight percent versus a year ago, and the average retail price for pork. And some people might scratch their heads and ask how that’s a good thing. That’s a really good indicator of demand. When retailers or food service companies are able to charge a little bit more for the product that we produce, then that would suggest consumers are willing to pay that price for the product. So obviously the more we can charge, the more revenue is generated and the more potential for profitability for all stakeholders, but specifically for producers.
Jarrod Sutton: 01:31 So we’re averaging over three dollars and ninety cents a pound average for pork prices at retail. And again that’s up three and a half, almost 4 percent from a year ago. So a really good sign, especially this time of the year, Don, in the fourth quarter when we’ve got a tremendous amount of product heading our way. It’s a really good indication that there is strong consumer demand in the marketplace. The second metric to really support that is also through USDA metrics, through both the Bureau of Labor Statistics as well as the Economic Research Service at USDA, to calculate real per capita expenditures for pork. So what does that mean? That means how much are people spending per person on fresh pork at the retail or food service space and real per capita expenditures for pork is up 9 percent versus a year ago.
Jarrod Sutton: 02:32 That’s a really significant number, Don. We’re comparing ourselves against competing proteins. I said earlier it’s a good story for protein and it is. Beef real per capita expenditures are up 4.1 percent versus year ago. And chicken is actually relatively flat, it is not statistically significant, point two percent less in terms of real per capita expenditures. So it puts into perspective the number of plus 9 percent for pork. I think that’s driven obviously by the strong demand for U.S. pork products in the international space. But clearly the product that we’re selling here domestically, we’re selling it at a higher price. And with the inventory that we have and the pigs that continue to come to market, it’s really a terrific story for the consumer’s willingness to pay an overall demand for our products.
Don Wick: 03:26 I would guess that also means that we’re putting a product together that is appealing to that consumer. The folks in this part of the food chain really worked hard to put some innovation together.
Jarrod Sutton: 03:40 Yeah, I think that’s really key is responding to the customer’s demands. So we need to think as producers about our customers, obviously the packers that we’re selling are pigs to. We also need to think about our customers in the retail and food service space. We need to think about our customers in the international market. And then obviously we need to think about consumers. They’re the ones that are ultimately buying our product. We need to understand how they’re thinking about our product, what motivates them to buy it in the hopes of finding ways to sell them more, and understand what those barriers to purchase might be that prevent them from purchasing more. If we can, through innovation as you say, create some new opportunities to connect with consumers, then that’s the story of demand.
Jarrod Sutton: 04:30 We continue to evolve as our consumers palates evolve. And the exports are a great story! And look at where we’re selling an awful lot of pork loins to Japan, who has a pretty strict specification for the product that they will buy from the U.S. It has to meet a certain color standard and that’s the number one criteria for Japan. We sell a lot of pork shoulders to Korea. And there is a lot of reasons behind that. The fat and the flavor and the tenderness of a slow cooked pork shoulder is in high demand in Korea. We sell a lot of hams to Mexico. So when you think about all the pieces and parts that come from the pig, and the customers and their demands for those products, we as an industry continue to innovate and think about meeting those demands both for today, as well as emerging demands for tomorrow. And all of that is represented in the numbers that I shared earlier that suggest industry is doing a really good job and is having success in that space.
Don Wick: 05:36 Are we seeing anything specific from the U.S. customers that they’re looking? Color? Flavor?. What’s driving that consumer in the United States?
Jarrod Sutton: 05:44 Interestingly here at home in the U.S., what we’re seeing is the influence of global culture and global cuisines. It’s all about food, Don, and when you look at Asia, when you look at Latin America, even when you look at Europe, the influence is really strongly protein, and more so pork, than any other protein. And so, especially in the Asian and Latin cuisine, that infiltration, if that’s the right word, here domestically in the U.S., creates tremendous opportunities for our product. The Asian consumer looks at pieces and parts as ingredients into traditional meals. Flavor comes from the pork. The Latin consumer thinks about it a bit differently, as main entree items, but still very much connected with the flavor of pork. And so the trend is, and the theme across multiple global cuisines is flavor. And here domestically that’s penetrating in retail, but it’s also penetrating in all of the various options we have available to us for food service and restaurants all around the country.
Jarrod Sutton: 06:57 So whether it’s Asian cuisine, whether it’s Latin cuisine, or whether it’s Latin in Asian infused cuisine, which we’re seeing more and more of those restaurant concepts start to pop up, pork is at the center of the menu. And so you see the innovation that’s happening based on people in the food industry, primarily chefs, spending time traveling around the world and also as the population in the U.S. continues to diversify, that cultural relevance and food cuisine from other countries is working its way into the American palate. And once again it just creates tremendous opportunities for U.S. pork producers and driving demand for our product here at home. I would say, Don, finally is two things that come with flavor is really the pH level or the color of the product.
Jarrod Sutton: 07:53 The darker the product in terms of muscle meat protein, it has a greater ability of retaining moisture. And the moist and tender taste of meat protein is always, time and time again, proven in research to be true consumers’ number one preference. So color is really important. The second piece flavor comes from the fat. And so the right amount of fat through intra-muscular marbling is really really important to growing demand in the future. We’ve seen it succeed with bellies, and bacon specifically, but even fresh belly. We’ve seen it proven time and time again with pork shoulders over the last 10 to 15 years. Look at the value of the pork shoulder and what that’s done for the overall cut out value. And we have seen and continue to see its growth in ham as well and fresh leg muscle cuts. So color and fat are really two critical components to meeting the consumers expectations of flavor.
Don Wick: 08:54 So we’ve had some success this year. What are your expectations as you go from here?
Jarrod Sutton: 08:59 Well moving forward domestically, our marketing strategy is really designed under this mission statement to drive demand and elevate pork to be the protein of choice by creating opportunities through insights and innovation that lead industry stakeholders towards profitable growth. We’re in the business of identifying opportunities, investing to explore those opportunities, and then encouraging industry to get behind and really bring those opportunities to life on a much greater scale. So we’re in the business of collecting data to start all of that, to generate data, which is a strategic imperative for our business moving forward as a pork industry representative. And understanding how the consumer demographics changes, how the consumer psychographic changes are influencing how consumers are thinking about and buying food products today, and specifically meat products, to be able to find opportunities for pork to realize new growth with new consumers.
Jarrod Sutton: 10:13 So think about the generational shift from boomers, now millennials are the largest percentage of U.S. population and have the greatest buying power. With that shift comes a different set of expectations. The same with the growing and emerging population of multicultural consumers in the U.S. and Hispanics specifically. Tremendous opportunities for pork as really a focal point centerpiece critical component to their cultural cuisine. And so with those changes, it’s important to understand how pork fits, or doesn’t, and be very smart and strategic about positioning and marketing our products for this emerging and growing population. So for 2018, we’ve got to build this insights driven, consultative capability that really shows how this market intelligence can help industry grow. We’ll be doing things that industry either won’t do or just can’t do. I think that’s a really unique value that the Pork Checkoff can provide.
Jarrod Sutton: 11:19 There’s some mission critical activities that we need to continue working with key stakeholders on, that is staying close and relevant with the McDonald’s and the Wal-Marts of the world to ensure that we’re exceeding their expectations and instilling confidence in them to invest in innovation, product development with pork. We’ve got to put down, finally, a tremendous amount of focus on the pork loin, because we’ve seen for a number of years the pork loin pull down the value of the cut out and the pig. And I just can’t take it anymore, Don, there’s too much opportunity there. We’ve got to position that pork loin differently and our team is very focused on driving value in the pork loin in 2018 and we’ll do that by ensuring their merchandised correctly with the right cut names, the cuts coming from the pork loin. We’ll focus on the proper cooking temperature and describing it in consumer’s terms so that they can have the optimum eating experience, the best eating experience with pork. And then working through the processes to ensure that there is a consistent quality offering, either at restaurants and food service, or at the retail point of purchase, to ensure that that color and the intra-muscular fat are delivered on a consistent basis or the ranges between those two. Really really important moving forward and then doing so in a sustainable manner by demonstrating pork industry’s commitment to doing the right thing every day and positioning pork as that responsible, sustainable protein of choice.
Jarrod Sutton: 13:01 That’s what 2018 is looking like, Don, and we’re confident that demand will continue to stay strong and we’ll realize new growth through new product innovation as a result of some of these initiatives.
Don Wick: 13:11 Jarrod Sutton from the National Pork Board. Thanks to you for listening to this edition of Pork Pod. For more information on this topic or the Pork Checkoff itself, visit pork.org.