| Against this backdrop, families preparing for the time-honored tradition of a backyard barbecue this Fourth of July are increasingly hunting for bargains. In the first half of 2024, many consumers have traded down, reducing the size of their purchases, taking advantage of promotions or delaying big-ticket purchases such as cars and appliances. This trend proved consistent across age groups but was more pronounced among Gen Z and millennials, according to a McKinsey & Company consumer insights survey. Fifty-six percent of Gen Z and millennial shoppers polled—compared with 45% of older generations—said their primary strategy was to reduce the quantity or package size of the items on their grocery list.
Still, millennials remain prone to giving in to their urge to splurge. Their well-documented willingness to travel and attend pricey concerts reflect this reality even as they have become more selective under the prevailing financial constraints. A reported 78% of Gen Y respondents polled said they would rather spend money on an experience than material goods. Perhaps the prospect of student loan forgiveness, the pending wealth transfer from the Baby Boomer generation and a “you only live once” mentality may be boosting their penchant for “experiences over things.”
Let’s Make a Deal
With many consumers forced to exercise more discipline, savvy shopping will come in handy before firing up the grill. “To find bargains in beef this grilling season, look for featured promotions at your local supermarket or club store,” said Lance Zimmerman, senior beef analyst at Rabobank. “Beef prices may be at historical highs but many store owners are willing to take a loss by putting various cuts of meat on sale knowing shoppers will fill their carts with other menu items—beer, burgers, hot dogs, sides and salads. They want to boost foot traffic and win loyal customers.”
Looking to save a few bucks on proteins? Prefer chicken as your barbecue centerpiece? You can trim your budget by trading breast meat for parts, such as drumsticks, wings and thighs. “In tough times, chicken maintains its value,” said Christine McCracken, senior poultry analyst at Rabobank. “Right now, dark meat is gaining popularity. Consumers are finding that thigh meat can be just as tasty as breast meat—and it’s less challenging to grill.”
Fortunately for consumers, despite suffering from fatigue from the inflation marathon, they can find attractive deals on quality meats and drinks this summer. Recreating a restaurant experience at home is now more palpable as the food industry has made strides in enhancing taste, efficiency and safety.
“The quality of beef available to the consumer has never been better,” Zimmerman says. “In the past 20 years, we’ve seen the availability of USDA prime and choice meat increase 60% as improved cattle management has created more marbling. Those fatty flecks pack a lot of tenderness and flavor while making it easier to grill. Even if you overcook quality meats a little, they won’t turn into shoe leather.”
Where’s the Beef?
The expectation of tighter U.S. beef supplies is leading the market higher as severe drought and challenging business conditions forced U.S. cow-calf producers to liquidate cows over the last five years. Consumer prices should continue to ratchet higher, hitting new record highs throughout the summer grilling season. Higher U.S. prices have caused beef exports to shrink but domestic beef demand has held up well. Trading down to different cuts and grades of beef—like switching from steaks to burgers—can offset the pinch consumers are feeling from inflation and economic hardship.
In poultry, demand for chicken has improved as consumers seek lower-cost, high-value proteins. Rising beef prices have led many restaurants to offer more chicken options on their menus. Retail stores are also putting more chicken on sale. Breast meat has found its way back to the top of the circular, while lower-cost thigh meat and legs are getting good traction as budget-friendly protein alternatives.
Bloated Inventory
The beer industry is coping with a series of issues including a glut of inventory, an inability to raise prices after 14 years of hikes and a continuing long-term trend of losing market share to spirits and ready-to-drink cocktails. Nearly every beer category, except imports, saw negative growth in 2023. However, for the diehards, no barbecue would be complete without a cold beer as evidenced by its 27% share of the total barbecue cost. Non-alcoholic beer has been a surprising new revenue stream for brewers, pacing the 31% rise in sales across non-alcoholic adult beverages in 2023. Look for this newbie to find a place at the barbecue table this year.
Americans Love Their Cheese
U.S. consumers can’t get enough cheese, especially in the summer. Consumption continues to grow as a whole and across nearly every cheese variety. U.S. dairy processors are investing in new capacity, with new cheese plants opening this year to meet growing demand—both at home and abroad. Adding cheese to your burger this Fourth of July will be cheaper than the nachos served during a December football game but it is still marginally more expensive than it was a year ago.
Demand for butter remains robust, pulling cream away from ice cream in recent months. Ice cream prices are up from year-ago levels, contributing to the increase in the total index. Consumption is not as high as it once was as competition among desserts continues to intensify, with some consumers shying away from ice cream in pursuit of a healthier diet. Still, a recent International Dairy Foods Association survey showed that more than 97% of Americans enjoy ice cream, with vanilla as the most popular flavor.
Flat Is the New Up
Soda prices have held up well with increases still sitting above inflation. Sales volumes are flat, which is fairly solid performance given above-inflation pricing and tough economic conditions. Soda has benefitted from flavor innovation, tailored sizes and package types and a focus on gut health—a notable source of growth. Meanwhile, energy drinks and sports drinks have been the standouts among non-alcoholic beverages, powered by strong innovation and newer entrants taking market share.
A Mixed Bag
Last year, we saw elevated inflation across the board and fresh produce was no exception. California’s drought sent lettuce prices to more than $100 a carton, well above the average range of $15 to $20 per carton. Prices have since come down significantly, which is good news for consumers stocking up on the popular burger topping. We expect leafy greens to have steady supplies, good quality and decent prices. Potatoes, also hit hard by drought, bounced back due to an aggressive planting season and increased water availability in 2023. This year, grocery shoppers have seen potato prices drop to about half of what they were a year ago. Yet, we’re still seeing sticky inflation in potato chips with prices rising more than 25% in the past two and a half years.
Separately, tomato prices have moved higher in 2024 as dry weather in Mexico has curtailed production and overall availability. There has been a lot of change within the category as snacking tomatoes have become a larger portion of overall production. Their chief characteristics—smaller, sweeter and multi-colored—make them more appealing to families with kids who can bring them to school as a snack or grab a handful at this year’s barbecue.
Premium Buns for the Win
Bakery goods have felt the impact of price increases in 2023, resulting in lower sales volumes. It’s not that Americans are eating fewer burgers—they eat more than 50 billion every year—but they became more aware of waste and opted for smaller packages. Hamburger and hot dog bun prices have been stable, in line with overall grocery inflation. Recent price hikes have been a boon for private-label bread and premium baked goods, as consumers trading down from eating at restaurants opt for differentiated products at home. Don’t be surprised if you see a pretzel bun at this year’s Fourth of July barbecue.
Rationale and Methodology
The Rabobank Barbecue Index assumes an average American BBQ situation—a mix of family and friends—on Fourth of July weekend. That includes 10 adults with each consuming the same amount of food and beverages. We assume each person will consume one cheeseburger with lettuce and tomato, one chicken sandwich with lettuce, tomato and a slice of cheese, two handfuls of chips, two beers, a soda and a few scoops of ice cream. As a means of comparison, the BBQ Index parallels the Bureau of Labor Statistics as a data source. We selected the monthly data series “average price index, U.S. city average.”
About Rabobank
Rabobank Group is a global financial services leader providing wholesale and retail banking, leasing, and real estate services in more than 38 countries worldwide. Founded over a century ago, Rabobank today is one of the world’s largest banks with over $660 billion in assets. In the Americas, Rabobank Wholesale Banking North America is a premier corporate and investment bank to the food, agribusiness, commodities and energy industries.
Rabo AgriFinance, a subsidiary of Rabobank, is a leading financial services provider for farmers, ranchers and agribusinesses in the United States. Together, we provide sector expertise, strategic counsel and tailored financial solutions to clients across the entire value chain. Visit www.RabobankWholesaleBankingNA.com and www.RaboAg.com. |
