Mike
Well-known member
Monopoly in the meat case? Some fear smaller packers may be losing the space race in the retail market.
Illinois Beef Association Executive Director Maralee Johnson said producers are concerned about the amount of retail case space controlled by nationally branded meat companies vs. smaller or regional processors and "how much competition they can keep out by the amount they can control."
Food manufacturers and wholesalers often pay major chains for prime display space -- some retailers charge five-digit "slotting allowances" to stock new products. Johnson fears retail consolidation and a move to branded, case-ready meat could threaten opportunities for producers to enter the retail market.
University of Nebraska ag economist Azzeddine Azzam suggests major packers could gain market power while "elbowing out" rivals through higher retail marketing costs.
If a smaller firm cannot successfully bid for space, it can be forced from a market, said Azzam, who referred to the impact slotting has had on the potato chip and bakery sectors.
The jury is still out on whether slotting allowances feed anti-competitive practices or actually generate greater competition in the retail market.
Azzam sees evidence of both.
"It's a very important issue, long-term, for producers," Johnson said. "If we can't sell the end product, whether it's beef or pork, and can't get shelf space to do things differently, we can't add value through the (market) stream."
The battle for dominance in the meat case crosses even species lines: Azzam noted beef, pork, and chicken compete with each other for case space and market share.
Poultry giant Tyson's acquisition of IBP and its beef and pork market clout offers the company the potential to "buy out the shelf space" for all three product lines, he said, noting IBP "really competed with Tyson when it came to consumer demand."
When Tyson bought IBP, "that competition pretty much disappeared," Azzam said.
Azzam sees three major options to help producers and smaller packers maintain retail visibility. "Vertical coordination" between packers and producers allows them to control product quality and supply "from the feedlot all the way to retail" and to build their own brand recognition.
An increasingly "differentiated" food market, where Latino and Asian produce sections are emerging and consumers are seeking "organic" vegetables and antibiotic-free meat, offers niche marketers new and segregated retail slots.
Meat marketers also can set up shop on the Internet. Cyberspace technology and express shipping capabilities have helped web-based companies such as Omaha Steaks and the startup LoneStarSteaks.com to bypass slotting issues.
"I don't think the beef industry has yet to realize the potential of the Internet," Azzam said. "I think the Internet, by having this direct contact with consumers, is going to be fantastic."
Illinois Beef Association Executive Director Maralee Johnson said producers are concerned about the amount of retail case space controlled by nationally branded meat companies vs. smaller or regional processors and "how much competition they can keep out by the amount they can control."
Food manufacturers and wholesalers often pay major chains for prime display space -- some retailers charge five-digit "slotting allowances" to stock new products. Johnson fears retail consolidation and a move to branded, case-ready meat could threaten opportunities for producers to enter the retail market.
University of Nebraska ag economist Azzeddine Azzam suggests major packers could gain market power while "elbowing out" rivals through higher retail marketing costs.
If a smaller firm cannot successfully bid for space, it can be forced from a market, said Azzam, who referred to the impact slotting has had on the potato chip and bakery sectors.
The jury is still out on whether slotting allowances feed anti-competitive practices or actually generate greater competition in the retail market.
Azzam sees evidence of both.
"It's a very important issue, long-term, for producers," Johnson said. "If we can't sell the end product, whether it's beef or pork, and can't get shelf space to do things differently, we can't add value through the (market) stream."
The battle for dominance in the meat case crosses even species lines: Azzam noted beef, pork, and chicken compete with each other for case space and market share.
Poultry giant Tyson's acquisition of IBP and its beef and pork market clout offers the company the potential to "buy out the shelf space" for all three product lines, he said, noting IBP "really competed with Tyson when it came to consumer demand."
When Tyson bought IBP, "that competition pretty much disappeared," Azzam said.
Azzam sees three major options to help producers and smaller packers maintain retail visibility. "Vertical coordination" between packers and producers allows them to control product quality and supply "from the feedlot all the way to retail" and to build their own brand recognition.
An increasingly "differentiated" food market, where Latino and Asian produce sections are emerging and consumers are seeking "organic" vegetables and antibiotic-free meat, offers niche marketers new and segregated retail slots.
Meat marketers also can set up shop on the Internet. Cyberspace technology and express shipping capabilities have helped web-based companies such as Omaha Steaks and the startup LoneStarSteaks.com to bypass slotting issues.
"I don't think the beef industry has yet to realize the potential of the Internet," Azzam said. "I think the Internet, by having this direct contact with consumers, is going to be fantastic."