Pork profit segment: a 10-percent increase in meat department sales may be in store for retailers exploiting opportunities in category management programs. (category report).

The Stock Market goes up and down, company layoffs increase, major businesses retreat behind bankruptcy, and medical costs soar. Food prices also take a hit. In the past few years beef, chicken, and pork-wholesale prices have fallen far below expectations. Although the economic outlook for meat marketers remains fuzzy and uncertain, wholesale prices governing beef and chicken should increase in coming months as supplies tighten and export demand increases. As the exception, pork prices are expected to be low and supplies plentiful.

"In the near term both hog prices and retail pork prices will be lower," reports Steve Meyer, economist with the National Pork Board (NPB). "Hog prices will be down because of seasonal increases in supply and retail prices will be down as featuring picks up during the fall and holiday seasons."

Although retailers use perishables to differentiate themselves from their competition, they no longer respond to lower wholesale prices by dropping retail prices and increasing sales by pounds. Retailers are under pressure as never before to meet profit goals.

"Retailers today are more concerned with dollar sales and profit than with pound sales," a former retail executive confirms. "Tonnage has fallen off the screen as a business driver."

Hot in-store features and advertising drive pound demand. As a former retail executive explains, more pounds require extra labor and labor is limited and expensive. "When I decided what to put on an ad, I asked myself, `How many incremental dollars will it bring in? What will this feature do to the rest of my case?", he says. "If my meatcutters are busy cutting this feature item, what is going uncut? What will this feature do to my mix and department profit?' The same dynamic is at issue whether the retailer is cutting meat in the back room or buying it case ready.

Economic experts see the same trend. "Over the past several years, retailers' reactions to lower meat prices have been muted," reports Kelly Murphy, branch manager of the Boulder, CO, office of Peacock Trading Inc. "Retail margins have expanded. For example, last quarter retail prices on chicken did not go down despite the glut of poultry meat created by the trade dispute with Russia."

Category management: A boon for retail pork

This sort of thinking leads to category management, to which pork responds especially well--as a category that has traditionally been poorly managed. "At the national retail chain where I worked, the analysis we did as part of our category management showed us that consumer demand for thin cut chops was going unmet," a retailer says. "We saw a double-digit increase in our pork dollar sales from setting up a program that kept thin cut chops in our case all of the time."