LMC: Farmgate Puts Pressure on Retail Prices

NORTHERN IRELAND, UK - In the last quarter of 2011, it became clear that the higher farmgate prices that were evident throughout 2011 right across the British Isles, were starting to generate upward pressure on retail prices.

21 February 2012

3 minute read

Europe

The latest market research report from Kantar Worldpanel shows that the average retail price of beef in the four weeks ending 22 January 2012 was 11 per cent higher than the same period last year at approximately £6.80/kg. This has had some interesting consequences on beef sales in volume and value terms.

Volume sales of beef in January were down by four per cent compared to the same period last year. This is unsurprising. Higher prices generally lead to reduced demand. However, as we well know, supplies of beef generally have been weak on the domestic market in the last few months and this may well have contributed to reduced consumption.

Compared to the same period last year, a smaller proportion of shoppers purchased beef. According to Kantar 57 per cent of shoppers purchased beef this January. This equivalent figure last year was 58 per cent. The average weight per purchase was down from 1.7kg last year to 1.6kg this year.

In volume terms, only stewing showed an increase in sales (+1.2) relative to last January. Mince sales were down four per cent and roasting sales were down by nine per cent. Frying and grilling sales were down by 11 per cent year-on-year. However, despite these reductions in volume sales, revenue from beef sales was up by six per cent. This is quite positive and perhaps demonstrates a robust consumer base that can absorb price increases to some degree, given that the price increase was not matched by a proportionate decline in demand, meaning of course that expenditure remains strong.

Reduced Lamb Consumption

Retail lamb consumption continued to be under pressure in January 2012. At farmgate level, in mid-January, prices were about eight per cent higher than in the same week last year. Retail lamb prices for the four weeks ending 22 January were 13 per cent higher than in the corresponding period last year.

This is a significant increase and as a result lamb demand has fallen off significantly. In January demand was 23 per cent lower than last January. The proportion of consumers putting lamb in their shopping trolley fell to 18 per cent from over 21 per cent last year. Of those 18 per cent of shoppers that did buy lamb, the average weight purchased was just less than 1kg.

Lamb chop sales were back by 23 per cent year on year, with leg roasting sales down by 15 per cent.

Unlike the retail beef market, lamb sales fell more than proportionate to the increase in price and this meant that expenditure fell by 13 per cent year-on-year, which is an obvious concern. All eyes will be on the retail lamb trade in the coming months to see how it performs during the Easter trade which came under some pressure last year.