Food Consumption and Marketing

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Food Consumption and Marketing

• Consumer tastes and preferences shape the food
  and fiber system

• Ultimately the consumer will impact all
  production and marketing
• activities in the economy.

• ?? CONSUMER SOVEREIGNTY

Consumer is King/Queen
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Consumer Desires?

• What?

What does a consumer want to eat?

• Why?

Why does the consumer want to eat?

• How Much?

What will the consumer pay?

• When?

When does the consumer want it?

• Where?

Where does the consumer want it? Home? Away?

• How Often?

How often does the consumer want it? Holidays?
Special occasions? Daily?
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What Do You Want to Eat Today?

• Demographics (size of population)
• Population growth, age, occupation, education,
  household size, ethnic background

• Economic
• Income, number of family members in the
• workforce (who in the family is working?)

• Socio-cultural
• Culture, lifestyle, social class, religion,
• mass media influence

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Modern Society

• No longer purchasing a farm commodity

• Purchasing a meal

• Prepared and ready to eat.

• Bundle of attributes added to food

• No longer want plain orange juice but calcium
  fortified.
• No longer want just milk but 2, no fat or
  lactose free.
• Just heat and eat is the convenience desired
  by consumers.
• Meal in a bag is the fast food drive through
  trend.

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Total food expenditures as a of Disposable
Personal Income
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Per Capita Consumption vs. Disposable Income

• Increase in per capita expenditures for food but
  a definite decrease in food
• consumptions a percentage of consumer disposable
  income as consumers
• spend a smaller share of their earnings for food.

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Why are total food expenditures rising?
(more dollars spent per capita for food)

• Increasing population and quantities of food

• Rising retail food prices

• Preferences for more expensive foods and
• marketing services

• Eating away from home more often
• Increasing demand for more convenience foods.

8
Food away from home

• 47 of 1996 food expenditures
• Doubled since 1965
• Fast food share 34 in 1990

• Current eating trends indicate that this will
  continue to
• be increasing more important in how consumers
  will
• spend their food dollars.

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Slower growth rates in per capita food
expenditures

• Limits profit potential For farm producers and
  food marketing firms.

• Intensifies competition for the consumers food
  dollar.

• Encourages diversification by firms,
  introduction of new
• food products, and increased market
  integration.

• Provides incentives to increase exports.

• Governors Trade Mission efforts to promote new
  markets.
• Beef industry trying to locate new overseas
  markets.

• Food industry is a mature business with a steady
  to
• modest growth in per capita food expenditures.

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Demographics of Food Consumption

• Food market expands in proportion to the rate of
  population growth

• Immigration increases cultural diversity

• Regional differences

• Fish is popular on the coasts
• Beef is popular in the Midwest
• Cajun is popular in the South

• Urbanization

• Age and Education

• Older population with Baby Boomers aging.
• Retired people living longer.
• Better educated about food nutrition and
• food safety.

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Changing Demographics

• 1950 1970 1990
• U.S. Pop 152 204 250
• Households 40 63 93
• 1-2 people 39 46 57
• Female head 3.7 5.6 10.9
• Both work 24 41 58
• Metro 56 69 78

(Urbanized society today)
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The Household

• Smaller households, and more women in the work
  force

• 6 of all U.S. households are traditional
  2 parents (only one
  working) with 2 or more children

• smaller food packaging
• more eating out
• more purchasing of marketing services and
• convenience foods

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Understanding consumers

• Involves more than economics and demographics

• Attitudes

• Healthy lifestyles is the trend.
• Want organic foods.
• Demand safe foods.

• Symbolism

• Drinking wine signifies being a part of high
  society.

• Consumer lifestyles

• Fast paced and more affluent lifestyles lead to
  a demand for
• more convenience and fast food technology.

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Classification of Shoppers
One Stop Socialites
Middle of the Road Shoppers
( take the time to find price and quality )
( go to the mall to see the people )
No Nonsense Shopper
Discriminating Leisure Shoppers
( price driven only )
( searching for quality )
Back to Nature
Time Pressed Meat eaters
( organic and health conscious )
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Income

• Effective food demand is both the willingness and
  the means to buy a product or service.

• In developing countries consumers have a need
  (desire) for
• better food but do not have the necessary
  purchasing power
• due to a lack of income for spending.

• United States is characterized by high consumer
  income levels
• with a high effective demand for food.

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Income Elasticity of Demand
EI Measures the percent change in the quantity
demanded for a product (food) due to a
change in consumer income levels.
EI
change in Quantity Demanded change in
Consumer Income
? QD ? I
EI
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Income Elasticity (cont.)

• Normal Good quantity of a product purchased
  rises along with rises in income.

• Inferior Good quantity of a product
• purchased decreases with a rise in
• income.

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Rising Incomes

• Consumers do not generally increase the total
  quantity of food as income rises, but substitute
  higher priced foods and marketing services

• Reduction of consumers share of income
• spent on food

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Rising Income (cont.)

• Broadening of product bundle desired by the
  consumer (demand more from food)

• Increases the value of time to the consumer
  (convenience foods allow a more
  busy lifestyle for consumers)

• Intensifies concerns for quality

• Concern about the social impacts of the food
  industry

• (biotechnology vs food safety)
• (environmental impacts)
• (animal welfare concerns)

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Two-stage budgeting

• Food is only a portion of the consumers budget
• Consumers have a fixed budget

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Hierarchy of Consumer Preferences
? Income ?
Status/ Causes
Living Well
Promotes Health
Convenient
Tastes Good
Variety
Nutritious, Safe, Affordable
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Consumer Food Trends

• More Natural and organic food
• Up 36 /year

• Ethnic Fusion
• Up 6-7 year

• Improve Health- vitamins, herbs, homeopathic

• Functional foods and neutraceuticals
• Foods that contain naturally occurring nutrients
  that
• promote and maintain health

• Grab and Go packaging- portable foods

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Meal Preparation Time
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Important Issues

• Where does the product fit into the consumers
  budget?
• Where does the product fit into the market?