Understanding consumers and managing costs

11-11-2013 | | |
Speakers and dignitaries that shared the stage during the Marketing Session at the 2013 IEC Conference were from left to right: James Kellaway (Australia); Masanda Peter (South Africa); Carsten Sandau (Denmark); Joanne Ivy (IEC Chairperson); Vicki de Beer (South Africa); Kevin Lovell (CEO of the South African Poultry Association); Pier Passerini (South Africa); and Cesar de Anda (Mexico).
Speakers and dignitaries that shared the stage during the Marketing Session at the 2013 IEC Conference were from left to right: James Kellaway (Australia); Masanda Peter (South Africa); Carsten Sandau (Denmark); Joanne Ivy (IEC Chairperson); Vicki de Beer (South Africa); Kevin Lovell (CEO of the South African Poultry Association); Pier Passerini (South Africa); and Cesar de Anda (Mexico).

Approximately 400 of the egg industry’s business leaders gathered in Cape Town, South Africa in September this year, for the International Egg Commission’s 2013 Global Leadership Conference.

By Jacques Claassen

A study among egg consumers in four European countries and two American federal states revealed big differences between seven segments of consumers, which indicate a good opportunity for value creation and differentiation. Although a high level of impulse purchasing of eggs occurred, a major finding was that 60% of shoppers left the store without buying eggs, even if they had the intention of buying some upon entering.

The survey, which was conducted at the end of 2011 in the United Kingdom, France, Germany, Italy and the US states of California and Pennsylvania, was for Danish company, Hartmann, which specialises in egg packaging. A 25 minute questionnaire was used to conduct fieldwork online. The sample size in every country or federal state was 1,000 primary grocery shoppers (solely/jointly responsible for grocery shopping) who had personally purchased eggs in the three months prior to the survey. Quotas were set on age, gender and region within each country/state.

Carsten Sandau, who presented the findings of the survey at the 2013 Global Leadership Conference of the International Egg Commission (IEC) in Cape Town, South Africa, concluded that egg sales showed high growth potential both in terms of volume and value creation.

Animal welfare

The results of the survey were summarised into seven segments of egg consumers, Table 1. Segment 1 indicated that happier chickens will lay better eggs, while animal welfare was also a high priority for Segment 4. They were most likely to state that they would never consider buying eggs from caged hens, but in general there was considerable opposition to buying such eggs. Although Segment 5 agreed that they were willing to pay more for eggs laid by hens that had a better quality of life, they were also more likely to agree that it did not matter how hens had been raised; eventually they bought what they liked.

Consumer behaviour

The health benefits of eggs were most recognised by Segment 1 and Segment 3, who were most likely to agree that they used eggs to create healthy meals. Both these segments even said you could make so many things with an egg. Segment 3 even said eggs were a staple food item that they always liked to have at home, but Segments 2 and 7 were less likely to consider eggs in such a way. Segment 3 and Segment 6 tend to be more likely to buy larger sized eggs (and less likely to buy medium or smaller eggs). Both these segments were also more likely than the other segments to be buying eggs in larger packs.

Segment 4 tend to buy their eggs in smaller pack sizes and buy locally produced food whenever possible. This sector was also willing to pay more for organic and fair-trade groceries, while these shoppers also try to buy eggs that use recycled packaging.

Segment 5 had the most planned approach to meals of all the segments and also appeared to have the greatest repertoire across the different sizes of egg. On the other hand, Segment 6 appeared the least planned, being more likely to choose what they will eat close to mealtimes.

Segment 5 and Segment 3 were most likely to agree that they tend to eat eggs when there was little else left at home. Although the egg brand was important to Segment 5, price also played a role. “In order to make a decision I listen to adverts and other people or choose the most attractive packaging,” said respondents who were characterised as belonging to Segment 5. Being very concerned about what other people thought of them, Segment 5 also appeared to offer the greatest potential for disruption at the point of sale. This was the segment most likely to buy eggs unplanned, but also to not buy eggs when planned.

Sandau pointed out the following reasons for not buying eggs when shoppers across the segments had planned to do so:

  • The retailer didn’t have the type/ size/pack size required or had sold out of eggs completely (59%)
  • The eggs were too expensive (28%)
  • The packaging was damaged (18%)
  • The shoppers forgot to buy eggs (12%)
  • The shoppers did not need eggs or already had some or enough (3%).

On the other hand, shoppers stated the following reasons for buying eggs when they had not initially planned to do so:

  • They remembered that they needed some (66%)
  • They did not really have a list but when they saw the eggs they thought of how they could use them (18%)
  • A special offer or promotion in store (17%)
  • Inspired by a recipe they saw in store (11%)
  • Inspired by another product they saw or bought in store (8%).

Top purchasing criteria

According to the survey the top

five criteria for consumers when

purchasing eggs are:

  1. Freshness
  2. Good taste
  3. Best before date
  4. Eggs from well-cared for hens
  5. Eggs from the purchaser’s own country.

The survey showed that it is important to display the following information on the egg packaging: Size of eggs; price; type (e.g. free-range or barn or caged eggs); origin (region or country); date eggs were laid and best before; whether recycled material is used for packaging; and brand. Asked whether the findings would differ in less affluent countries, Sandau said the same shopping behaviour was experienced in Poland. Subsequently the research was extended to two more Western European countries and to Poland.

Production costs

Also speaking at the conference, IEC Economic Analyst and Senior Economist at the LEI Wageningen University, Peter van Horne, said that thanks to the increased availability of locally produced feed, production costs in the US and Argentina were 25% lower than in the EU. Production costs in Spain and Poland were also lower than compared to other European countries. Van Horne said production costs of eggs were at an all-time record high level in the EU, increasing by 26% from 2010 to 2012.

He expressed hope that feed prices in Europe would drop to 2010 levels in order to once again achieve good margins. In the EU, feed was responsible for 58% of production costs in 2010, but this soared to 64% in 2012 (Figure 1). Housing contributed 16% of production costs in the EU in 2012. With regards to the cage ban in Europe Van Horne said that a barn or aviary system was 22% more expensive. It resulted in a higher feed intake and also required a higher labour input. According to him though enriched cages look promising. Although the introduction of this housing system initially led to a 7% increase in costs, this figure has come down to 5-5.5%.

Van Horne pointed out that good egg production was achieved in enriched cages with no extra feed intake, while mortalities were equal or lower.

To maintain reasonable margins Van Horne expressed hope that egg prices can also be increased. Europe, however, saw relatively low prices during the summer of 2013 – although not a record low. He also stated that the cost for producing the same egg all over the world varies hugely.