Effect of Current Consumer Trends on Future Beef Consumption

Much attention has been given to the elevated inflation rates of nearly every consumable good and service (if you’d like to read additional analysis on this topic as it related to beef by this platform, please follow this link). However, less attention has been given to other consumer indicators and their impact on consumer preferences and purchasing behavior. U.S. household financial health has large implications for beef demand. If consumers are feeling financially strained, then purchasing behaviors are more likely to shift. This article aims to evaluate the potential implications of consumer financial indicators on the demand for beef products.

U.S. household debt has remained relatively constant since the tumultuous period from 2007 – 2013, when households accumulated a large amount of debt, before shedding a large percentage of this debt following the great recession¹. Figure 1 shows that as of Q4 – 2022, U.S. household debt has reached $16.90 trillion, which is one of the highest balances since the heights of the Great Recession. While these levels are not unprecedented, they may have an impact on household budgets and purchasing decisions. While household debt may be rising, so is real personal income². Real personal income, an inflation adjusted measure of income U.S. workers earn from their labor, experienced a roughly 20% increase (likely due to COVID-19 relief payments), before dropping in the consequent months². An increase (albeit slightly) in real personal income indicates that consumers may be able to handle slightly higher debt levels better than they would if real personal income was decreasing at the same time that household debt was increasing. 

As Figure 2 shows, the personal savings rate has been declining since the 2021 spike (again potentially due to the various stimulus measures), and while some decline in the savings rate is to be expected after such a spike, the current rate of savings (3.4%) is one of the lowest rates recorded since 2005³. It should be expected that at least part of the negative connotation associated with a low personal savings rate (future financial uncertainty) could be mitigated by the fact that consumers’ real incomes have been increasing and unemployment remains at a healthy level (3.4% as of January 2023)^3,4.

While some consumers are likely able to remain in a stable financial position while saving less, those towards the lower levels of the income distribution may be feeling more financial pressure from rising prices relative to their personal savings levels. Previous research has also shown that lower income consumers spend more of their total income on food budgets on average⁵. 

According to the Consumer Beef Tracker, managed by NCBA on behalf of The Beef Checkoff, consumers earning over $150,000 per year are willing to pay $3.71/lb. more on beef steak than consumer households earning less than $50,000 per year in 2022⁶. Additionally, consumers earning more than $150,000 per year were willing to pay $1.11/lb. more for ground beef and $0.97/lb. more for chicken breasts than consumer households earning less than $50,000 per year in 2022⁶. As Figure 3 shows, willingness to pay has historically been at elevated levels for higher income levels and is continuing to increase for those higher income households. Meanwhile, lower income households have seen a slide in willingness to pay throughout 2022⁶.

Additionally, 14% of consumers with an annual household income of less than $50,000 per year stated that they were planning on eating less beef in the 4th quarter of 2022, while 11% of consumers with an annual household income of $100,000 - $149,999 per year stated they were planning on eating less beef in the same timeframe⁶. When asked why they were planning on consuming less beef, consumers in all the income brackets (less than $50,000 per year - $150,000+ per year) selected “price is too expensive” more than any other option⁶. However, it is important to note that the Consumer Beef Tracker does not differentiate between beef cuts for this question, so there is the possibility that consumers would prefer to purchase cheaper cuts of beef in lieu of avoiding it altogether. 

Figure 4 highlights the percent change in retail sales (both in terms of dollars and pounds sold) of some historically economical cuts of beef. Consumers appear to have been turning to more economical cuts of beef at the retail case, possibly in response to recent price pressures. As these economic issues continue to weigh on consumers budgets, more budget friendly cuts may continue to see elevated sales at the retail case, a sign that shoppers are interested in keeping beef in their diets and acknowledging that turning to more economical cuts may be a more favorable option.