Parkdale Meats

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Butcher Shop Business Plan

Market Analysis Summary

The American Meat Institute provides the following statistics about the American meat industry:

The meat and poultry industry is the largest segment of U.S. agriculture.  Total meat and poultry production in 2007 reached more than 91 billion pounds.

In 2007, the meat and poultry industry processed
9 billion chickens
34.2 million cattle
271 million turkeys
2.7 million sheep
109 million hogs and lambs

In 2007, American meat companies produced
36.6 billion pounds of chicken
26.5 billion pounds of beef
21.9 billion pounds of pork
6 billion pounds of turkey
334 million pounds of veal, lamb and mutton

Top Livestock Producing States 2007
Cattle - Colorado, Texas and Nebraska
Hog - Iowa, North Carolina and Illinois
Chicken - Georgia, Arkansas and Alabama
Turkey - Minnesota, North Carolina and Arkansas

There are 6,032 federally inspected meat and poultry slaughtering and processing plants in the United States.

U.S. meat consumption was 55% red meat (beef, veal, lamb, pork, and mutton), 8.2% fish, and 36.8% poultry in 2007.  Americans spend 6.4% of disposable income on food at home.

Meat is sold through retail establishments including restaurants, grocery stores, and butcher shops.  Independent butcher shops have decreased in number over the last ten years, as sales of meet have fallen slightly and moved increasingly to grocery stores and big box retailers.  However, this has created an opportunity for specialty butcher shops in markets which provide only basic options through these larger retailers.

Market Segmentation

Parkdale potential customers are divided into the following groups as shown in the market analysis table:  

Parkdale High-Income Households: Annual household income of over $100,000 in Parkdale (80% of which consist of two adults).

Parkdale Medium-Income Households: Annual household income of $50,000 to $100,000 in Parkdale (50% of which consist of two adults and 50% of which consist of one adult).

Neighboring Town High-Income Households: Annual household income of over $100,000 in the five towns bordering Parkdale (80% of which consist of two adults).

Caterers: Upscale catering businesses in a 15 mile radius of Parkdale.

Restaurants: Upscale restaurants in a 15 mile radius of Parkdale.

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Parkdale High-Income Households 3% 9,000 9,225 9,456 9,692 9,934 2.50%
Parkdale Medium-Income Households 3% 25,000 25,625 26,266 26,923 27,596 2.50%
Neighboring Town High-Income Households 3% 25,000 25,625 26,266 26,923 27,596 2.50%
Caterers 4% 25 26 27 28 29 3.78%
Restaurants 5% 60 63 66 69 72 4.66%
Total 2.50% 59,085 60,564 62,081 63,635 65,227 2.50%

Target Market Segment Strategy

Market segmentation for Parkdale Meats is based on the specific market opportunity in the Parkdale area.  While low-income households are perfectly content with purchasing the meat options at local grocery stores and big box retailers, households with a greater level of disposable income are interested in expanding their options for home cooked meats.  Furthermore, these customers entertain in their homes to a greater extent than low-income households and prefer to offer high-quality or rarer meat options at these events.

It is expected that customers from neighboring towns will be more likely to travel to Parkdale if they have higher levels of disposable income to allow for the time and gas expense of this travel.  For this reason, high-income households will be targeted at first in neighboring towns.

Caterers, especially those serving high-end corporate and private events, and upscale restaurants seek high-quality specialty meats at wholesale prices.  Parkdale Meats will sell in bulk to catering businesses and restaurants at a substantial discount from retail prices, while still allowing for margin.  Caterers and restaurants will be required to order in advance to allow for specialty orders of meats and not deplete the products available at the retail location for immediate purchase.

Industry Analysis

The American Meat Institute provides the following analysis:

"The meat industry is unique because it relies on live animals as its raw materials.  Within livestock production, there is a classic, livestock price cycle.  Prices rise and fall as producers raise more animals in response to high prices or low supply, and then cease producing when livestock inventories become high and prices fall.  At the low points in the livestock price cycle, some livestock producers have called for reviews of meat packing industry structure to determine if the structure may be causing a price decline.  Each review has found that industry structure is not to blame for livestock prices.  Rather, the basic laws of supply and demand most often are the cause."

Elsewhere, researchers find a wave of consolidation occurring in the meat industry since the 1990s, spurred by the growth of several major grocery chains such as Wal-Mart.

In general, "consumers are eagerly buying more conveniently prepared food products of consistent quality, despite the sluggish growth of overall food spending" write researchers Barkema, Drabenstott and Novack, "...and nearly 40 percent of the consumer's food dollar is spent in restaurants and other eating establishments".

Despite, and in fact because, of these changes, there is a growing need for sales of specialty meats to the niche market who can afford and desire them, as they are no longer served well by grocery stores and large retailers. 

Competition and Buying Patterns

Competitors for Parkdale Meats fall into the following categories:

  • Grocery Stores (Stop & Shop, A & P, Gorman's Market, etc.) - 7 stores in greater Parkdale area
  • Big box retailers (Wal-Mart and Costco)
  • Butcher shops (Red's Meats and Bay Avenue Butchers)

Grocery stores provide basic meat options at relatively low prices.  They are chosen by customers interested in buying meat along with all of their grocery and food needs, and not traveling far from their home.  These customers will sacrifice some quality and options for price and convenience.

Big box retailers serve clients interested in the lowest price and able to sacrifice some convenience (longer waits and longer travel times) for the lowest price.  They offer meats of the same range of options and quality as grocery stores.

Red's Meats has been in existence for 25 years and primarily serves customers who value the store's history.  These customers have typically been buying meats at Red's for at least five years and live within five miles of the store in Parkdale.  The customers are aging, on average.  Because its meats are only slightly higher quality than grocery stores, Red's does not serve caterers and restaurants, but sells products primarily to medium income households.

Bay Avenue Butchers was established ten years ago and focuses only on high-quality red meat and not poultry.  They sell meats to caterers and restaurants, but these businesses would likely consider using a different vendor which could provide a wider range of options.  Bay Avenue Butchers has high prices for its retail meats and serves only high-income households.

Indirect competitors (and also potential competitors) include restaurants, as consumers interested in specialty meats may choose to eat out instead of cook the meal themselves. 

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