Turmoil is coming for meat. Things are about to change quickly and inexorably for large meat companies. This will mimic the experience of another high volume, protein commodity: eggs.
When I got into the egg business almost 20 years ago, almost all eggs supplied were from large producers and from hens kept in high efficiency production schemes that maximized output. With a few exceptions, these plants prioritized throughput over safety, quality and the humane treatment of the animals. As we were marketing eggs – rather than producing – we depended on several different suppliers types of suppliers. We tried to chose the best suppliers and the humane conditions for the birds was an important criteria. However, at the scale of production we needed, there weren’t a lot of choices. Cage free hardly existed and I don’t think the term ‘pasture raised’ had even been coined yet.
By 2016, a period of 12 years after which we sold the company, we were selling 40% of our product as cage free with plans to go to 2/3rds within a couple of years. This was reflective of profound changes in the egg consumption. By 2019, 24% of all egg production had moved to cage free and the United Egg Producers states that by 2026 64% of eggs will be cage free. These eggs are sold to the consumer at a 50% to 300% premium versus ‘commodity eggs; even large restaurant chains are paying as much as 50% more for eggs from cage free hens.
This is an incredibly quick reorganization for a $6 billion dollar industry. There were some regulatory changes during this time, most particularly in California, with two ballot propositions that moved the production, then the sale of all eggs, to cage free sources. The FDA, concerned with salmonella outbreaks and food safety in healthcare settings, specified pasteurized products only for at-risk populations. Most states followed along. A few large foodservice companies and restaurant chains included hens and eggs production in their initiatives for the humane treatment of animals.
But what drove it more than anything else was the consumer.
Consumers became increasingly dissatisfied with the way the egg industry operated and looked for, and chose, alternatives. There are many ways in which the current state of the meat industry parallels that dissatisfaction. And it will radically alter the way meat is produced, who produces, how people consume it or if they will consume it at all.
For starters, general suspicion of large companies is an over-arching theme. In April, news of a coming meat shortage only fueled panic in the food supply. It turns out, there really wasn’t a shortage but a PR campaign designed to relax OSHA standards for workers, suspend food safety regulations. create a liability shield during the pandemic and, with the help of state governors, force workers back into the plants. This was not exactly a monument to goodwill and transparency. The meat industry is highly consolidated with the top 50 beef plants producing 98% of the nations production and just 15 pork plants producing 60% of the output. The lack of trust by the public for big companies transcends the food industry but is ratcheted up emotionally when it comes to things we put in our bodies. This distrust cross-pollinates with all the other reasons that consumers fled conventional eggs and will do so now with meat.
There is nothing in recent history of the meat industry quite like the 2010 recall of 500 million eggs due to salmonella. The risks of food-borne illness with eggs isn’t entirely the same as most of the risk in eggs in hidden inside the shell whereas we can often smell or even see if meat is questionable. Nonetheless, I believe the recall was a turning point, making people pay attention to what happened to eggs before they got to market. Meat has had more of a slow burn in regards to food safety and recalls, mostly being for E coli in ground beef, with the most recent recall being just last month. Most meat is consumed thoroughly cooked, unlike eggs, so represents less risk. But risk remains and the recent stories about the relaxing of inspection of food plants, outbreaks and more than 16,000 COVID illnesses at meat facilities , and 102 worker deaths, can only cause deterioration of confidence in the industry.
There is an ‘ick factor’ that kicks in when industrial food production is exposed. Myths about the wholesome family farmer or rancher don’t stand up well to the reality of protein production of today. Americans have been alienated from their food for generations and are shocked when confronted by the facts. Exposure to the maelstrom of bloody offal in processing plants whether from animal rights expose´videos or news reports about COVID outbreaks of meat and poultry processing plants does little to make the public comfortable.
Of course, before the meat reaches the production floor, it was an animal. Humane reformers like Temple Grandin have added an ethical elements to the kill step in the slaughterhouses that supply larger restaurant chains. But the conditions that pigs and chickens are kept in many facilities are roundly excoriated and gain ever greater visibility with the public.
Finally the industry struggles with other issues like workers conditions – poorly paid, largely immigrant labor force doing one of the most dangerous jobs in the nation – and perceptions that meat protein is unhealthy, though this been ameliorated (from a revenue perspective) by diets like keto and Atkins that emphasize meat consumption. Livestock are a major contributor to global warming, releasing methane that contributes 10% of total greenhouse gasses. Then there’s environmental degradation caused by large animal populations….
At this point I feel obligated to say that I am a meat eater. My diet would be best described as traditional, western. I have made some small changes to my eating patterns and I will likely make more in the future. I suspect I will continue to eat meat in one form or another for the rest of my life. But these are numerous and daunting forces that are manifesting themselves in people younger, less traditional or western, highly concerned about the environment and humane treatment of animals, fearful and often repulsed by the way the food is produced.
In the short term, meat sales seem stable and actually prices have risen significantly of late, amid allegations of price fixing. (See above, trust issues) But the restructuring of the meat industry and meat consumption has already begun. From my experience in the egg industry it will come from a consumer aware and making choice based upon their values and concerns.
The suspicion of large corporations and large scale production causes a preference to small and, by extension, local sourcing. To a degree, this is driven by food safety concerns. Most outbreaks of food-borne illness seem to come from large companies; to be fair, those are the ones that tend to get news coverage. But food safety, corporate behavior and the ‘ick’ factor all work together to raise suspicions and distrust of the major industry players. As it was in eggs 20 years ago, it was once difficult to trace exactly where products came from. The general increase in visibility of today’s reality, however, makes identification and attribution of sourcing easy. Transparency may not favor the incumbents without a significant commitment to change.
Companies can successfully market on values, by addressing issues people have with the larger industry. A great example is Vital Farms, an egg company founded in 2007 that emphasized the treatment and living conditions of its hens. The company went public this year and currently has a market capitalization of $1.4 billion. An entire industry of humane certification has emerged and many consumer shop for these labels. There are a number of companies already advertising humanely raised beef and they will surely proliferate.
Companies can ‘anti-market’ their size: buy from me because I am not the big producer.
Indirectly, large corporations respond to consumer attitudes in the form of their social responsibility initiatives. Because of the size of certain foodservice companies and restaurants companies, change is forced upon their suppliers. Panera moved to crate-free pork as early as 2014. Compass Group has worked with Humane Society to craft policies for all their animal based purchases. Both, not coincidentally, made the move to cage free eggs several years ago.
Changes in policies and regulation can force dis-aggregation and it does not necessarily mean more regulations. Actually highly regulated environments often favor larger industry incumbents and that is indeed the case in the meat industry. While the movement within the current administration to devolve industry oversight, some regulations make it harder for new entrants and smaller competitors. The PRIME Act currently before Congress would allow ‘custom’ slaughterhouses to operate without the established inspection regime. I am not at all sure this is a good idea from a food safety perspective but it is similar to the changes in regulations that allowed people to start marketing eggs from small farms and backyard flocks. Of course, larger producers oppose it, as competition is always good except for when it effects me.
Resistance to competition is both a source and outcome of consolidation. As noted previously, meat processing has fewer and fewer companies through mergers and buy-outs, so the livestock that does come from smaller or family farms has fewer potential buyers. This squeezes them out and forces more production to Concentrated Animal Feeding Operation (CAFO) which are often the locus for the worst humane and food safety practices. Cory Booker has introduced the Farm System Reform Act to further regulate CAFOs and creates incentives for operators to move to alternative livestock methods. A vegan and ranchers working together against big meat
Of course, these challenges to the established meat industry are contextualized with a relatively static audience for the product. The greatest obstacle for the long term will come from shrinking demand:
Reduction: Meatless Mondays are here to stay. Many consumers may chose to simply reduce the amount of meat they consume for health concerns, although this has often meant switching for one animal protein to another. Other factors, like the environmental or ethical issues listed above, may drive changing dining patterns, such as moving meat away from center plate.
Substitution: In 2011, the start up Hampton Creek introduced a mayonnaise using a plant substitute for eggs. The company attracted celebrity investors, eventually bringing in $220 million in total funding. They created a significant buzz but slight impact in the category and nothing compared to this years froth regarding meat substitutes. Over $1.2 billion has been invested in plant based proteins so far this year. The category is already a billion dollars and growth in retail for 2019 was 63%. The market could be worth $74.2 billion by 2027 which would make a huge dent in meat sales. The question then becomes how does this change the habits of consumers?
The race for lab-grown meat rivals that of the search for a COVID vaccine. So far, the best tasting stuff costs about $50 an ounce. And you’ll have to take their word for it that it is tasty; the intellectual property involved is highly guarded. It may be that there are some things – burgers and pulled pork – that the lab is likely to get to before it can mimic the mouth feel of whole muscle. These are already in the wheelhouse of plant based products. While there is less of an ick factor, there may be resistance to ‘frankenmeat.’ But the proliferation of companies and the amount of investment involved makes it seem more like the Manhattan Project than the quest for the Holy Grail.
Rejection: Vegetarians are about 6% of the population and actually that number is fairly stable over the last 20 years. The numbers skew younger, likely baking-in some growth. While some still consuming dairy, fish or eggs, most are committed meat avoiders and are concerned with health and humane concerns more than environmental issues. The availability of meat substitutes may blur the line between vegetarians and non-vegetarians, but the first iterations of meat substitutes offer few health advantages. Vegans, on the other hand, are growing and represent more than 2% of the population. They are highly committed and their ethos means any growth is a permanent loss for the meat industry.
The large producers in the industry are about to experience a lea change. A significant percentage of the population is lost to them. New competitive products are entering the market which offer environmental, ethical and, perhaps, health advantages. Patterns of consumption are changing. Their core audience is aging and is increasingly distrustful of their production methods and probably the companies themselves. Even among those consumers who will continue to purchase traditional meat will want products that are cleaner and healthier from companies that are more ethical and more transparent. The reshuffle will be more jarring than what we experienced with eggs. The category will look completely different in just a few years.