We know industrially-produced meat is bad for our health and the health of the planet, but a new study suggests it’s also bad for business. The study, What Drives Meatier Returns?, conducted in partnership between Changing Tastes, an industry consulting firm, and the Analytical Consulting Lab at the Kellogg School of Management at Northwestern University looks at the stock market performance of thirty publicly-traded restaurant companies that own well-known casual and fast food brands. The authors pair this analysis with interviews with top industry players, data on U.S. meat consumption trends, and other industry research, to conclude that restaurant chains have an important business opportunity in reducing the total amount of beef they offer their customers and swapping industrially-produced beef for higher-quality beef (defined as grass-fed, hormone-free, and/or raised without antibiotics). The study has some limitations, such as the small sample size noted by the authors, and so these findings are likely not conclusive. Nonetheless, they align with the trends we are seeing in our work here at NRDC.
Specifically, the study found that a 1% increase in industrially-produced beef offered to diners correlated with a 1.4% decline in shareholder returns. In discussing what might be driving these dynamics, the authors highlight changing tastes among the dining public as a major factor. These include diners switching from red meat to other types of proteins; trading up to higher-quality meat; and a willingness to pay more for that higher-quality meat.
The environmental and health risks of industrially-produced meat—in particular red meat—are well-documented. Not surprisingly, these consumer trends certainly appear to track the medical and scientific consensus.
The livestock sector contributes 14.5% of global greenhouse gas (GHG) emissions. That’s on par with tailpipe emissions from fuel burnt in all the world’s vehicles. Most of those emissions come disproportionately from red meat. Beef is about five times more GHG-intensive as chicken and 34 times more GHG-intensive as legumes like beans and lentils, pound for pound. NRDC estimates that if Americans ate just one less quarter-pound of beef a week, it would be like taking 10 million cars off the road for one year!
Red meat consumption has also been linked to increased risk of cardiovascular disease, diabetes, obesity and certain cancers. The American Heart Association, American Institute for Cancer Research, and a host of other premier medical and public health experts all say we should eat less meat and emphasize that diets featuring less meat and more fruits and vegetables are beneficial to maintaining a healthy weight and reducing the risk of diet-related chronic diseases.
The 2015 Dietary Guidelines Advisory Committee—a panel of experts advising the U.S. Departments of Agriculture and Health and Human Services on national dietary guidelines—concluded that reducing consumption of red meat and processed meat, while increasing consumption of plant-based foods, such as vegetables, fruits, whole grains, low- or non-fat dairy, seafood, legumes, and nuts, is associated with both better health outcomes and less environmental impact.
Many Americans have heeded this advice, and red meat consumption in this country has dropped about 25 percent since the mid-1970s. Many are also looking for healthier, plant-based alternatives. According to the 2016 National Restaurant Association “What’s Hot” survey, nearly 60 percent of professional chefs listed meatless items among the top culinary trends. The food research firm Technomic surveyed 1,500 people online and found that in order to attract millennial customers—the demographic most coveted by the fast and fast casual restaurant industry—restaurants must offer vegetarian and vegan meals. Their report showed 45% of younger consumers and 30% of older people either regularly eat vegetarian and vegan food or follow a vegetarian diet.
The study also found that those restaurant chains that offer higher-quality beef, such as beef that is grass-fed, hormone-free and raised without antibiotics, also perform slightly better than others over the same time period.
It makes sense that restaurant chains responding to these consumer trends are seeing their actions translate into profits. Motivated by personal health, environmental concerns, animal welfare, taste, and quality concerns, many consumers are seeking alternatives to conventional meat and poultry products. For example, as I discussed here, 10 of the 18 chains recently evaluated by the American Customer Satisfaction Index, which scores customer satisfaction at fast food restaurants, have now made some public commitment to antibiotic stewardship in their meat and/or poultry supply chains. This list includes top performer Chick-fil-A, as well as Papa John’s, Panera Bread, Subway, Chipotle, Pizza Hut, Taco Bell, and McDonald’s.
NRDC has profiled some of these leaders successfully and profitably marketing healthier and more sustainably-produced meat here. Their leadership shows how the sourcing choices of large meat buyers drive on-farm changes in the practices of the meat and poultry industry. In many instances, the stories of these companies track the findings of this new study, especially when it comes to higher prices for higher-quality meat driving larger, not smaller sales.
Nonetheless, there’s a lot more work to be done. Most meat served by America’s top restaurant chains still comes from animals raised in industrial facilities and with the routine use of antibiotics. In just a few weeks, NRDC and our partners will be releasing our own report profiling leaders and laggards in the chain restaurant industry on antibiotics use policies and practices, so stay tuned!