The Future of Animal Agriculture in North America - Farm Foundation

The consumer food demand pyramid, illustrated in the
figure below, presents a simple model of the consumer choice
process (Kinsey, 2000). The idea of a food demand pyramid
suggests that low-income consumers focus first on meeting
survival needs (the base of the pyramid). Obtaining sufficient
calories, lower priced foods and safe foods are basic concerns.
At lower income levels, food safety may imply foods that are
not spoiled. More information about food quality and safety, as
well as higher income, lead consumers to expect foods to be safe
from microbial contamination and other health hazards.
Consumer Food Demand Pyramid
Source: Kinsey, 2000
At higher income levels, consumers begin to use their
dollars to purchase products that satisfy preferences above and
beyond basic nutritional needs, such as better taste, variety and
convenience. For example, developing countries increase meat
demand as the economy improves. Once needs lower on the
food pyramid have been met, consumers at higher income levels
want expanded information about their food, and how food
products affect health and lifestyle. High-income consumers
also begin to be concerned about the impact that individual
food consumption decisions and choices have on other people,
the environment and animals. Thus, as incomes increase, the
demand for food products with different characteristics evolves,
presenting both opportunities and threats to existing and
potential food producers. Higher income consumers provide
opportunities for niche producers that are willing and able to
produce to this diverse set of standards (see Economics of
Production, Processing and Marketing Chapter). However, lowto
moderate-income families in developed countries and people
in developing economies still demand an increasing amount of
affordable animal proteins.
Retailing
The retailing landscape has changed significantly during the last
two decades. Twenty years ago, traditional groceries in the
United States represented 90 percent of at-home food purchases;
Consumer Demand Issues 41
today, they represent less than 70 percent. At-home food sales
in nontraditional stores, including large retail giants like Wal-
Mart, Costco and Target in the United States, and other types
of nontraditional stores, such as buying clubs or convenience
stores, have dramatically increased in market share (Leibtag,
2005). Wal-Mart represented 11 percent of all food-at-home
sales in 2003, up from 3 percent in 1998. Today, Wal-Mart is
the largest food retailer in both the United States and Mexico.
In Canada, increased consolidation and concentration in retail
food markets has meant that the large retailers control a larger
share of retail sales than in the United States or in Mexico.
The increased power of nontraditional grocery retailers,
combined with consumer preference for convenience,
easy-to-handle, prepackaged meat and other food products,
have resulted in low-cost, nearly-identical-quality products
available to all customers.
An important customer for meat processors is the food
service industry. It has increasingly demanded prepackaged
products and cuts to substitute for costly labor input at the
service end. At the same time, new technologies in processing
and distribution have led to changes in the marketing of meats,
with increases in the sale of cut-up, or boxed, meat and poultry,
or sale in prepackaged units.
While there is growth in large, retail giants in the food
retailing industry, small retail units have become an increasingly
vigorous segment of the food retail market. This trend is reflected
in Wal-Mart’s development of small-scale “neighborhood”
stores, and growth in direct sale and distribution of meat
products. Specialty stores, Internet-based markets, smaller sized
retail markets, and direct marketing methods for meats have
strengthened the presence of this niche market segment of food
retailing. The changes are driven by:
• higher income consumers choosing to avoid large
grocery chains;
• some revitalization of downtown areas;
• growth of select, high-quality brands; and
• growth of formal and informal markets to meet
demand from ethnic consumers for different meats
and meat products.
Food retailing also includes the rapidly growing food-awayfrom-home
category. Total away-from-home expenditures,
defined to include all food dispensed for immediate consumption
outside of the consumer’s home, amounted to $415 billion in
2002. That is about 58 percent greater than annual away-fromhome
expenditures in 1992 (Stewart et al., 2004). Food-awayfrom-home
expenditures as a share of total U.S. food
expenditures reached 50 percent in 2004 (Figure 6). Higher
income and time-starved consumers in North America are
buying more convenience with their meals. These expenditures
include meals at fast-food as well as sit-down restaurants.