As rumblings of a recession continue, questions about its impact on consumer spending loom over the retail sector. On the meat side, food and agriculture tend to be somewhat “recession proof.” While consumers may shift to cheaper meat options, there is a lag in the impact on the meat industry. It could be six to nine months before meat could feel effects of an economic downturn.
Meat is not 100 percent immune, points out Bill Chappell, equity analyst for Suntrust Robinson Humphrey in
As consumers look to economize, private label suppliers should benefit when the quality of the product is about equal to branded cuts, or when quality isn’t a major factor in the decision.
“I wouldn’t underestimate the power of private labels in this category,” says Ann Gilpin, equity analyst for Morningstar Inc. “I think the no-brand, private label meat producers will have the upper hand.”
In the near term, however, meat and poultry producers and processors are more concerned with feedgrain costs than a recession. “A big issue facing the meat industry right now is higher commodity costs…all the meatpackers say they’re going to raise prices, but that’s easier said than done,” Gilpin says. “Last year it worked pretty well, but it’ll be more challenging this year.” Companies supplying Wal-Mart and other large retailers with a lot of leverage would have a harder time boosting meat prices than those supplying smaller regional retailers, say the analysts.