According to Mr. Van Horn, "Business also directly contributes to the holiday by aggressively marketing new products and services to meet evolving consumer preferences." He adds, "For just the Thanksgiving meal alone, consumers can now choose from preparing the turkey and all the trimmings themselves, dining out in restaurants that serve a traditional Thanksgiving meal, or even taking advantage of a more recent trend whereby consumers can buy a complete pre-packaged Thanksgiving meal that is ready-to-eat after a short period of heating everything up before the meal is served."
Turkey Producers Are Well Prepared To Meet Demand
With consumer tastes favoring more health conscious foods, turkey producers have enjoyed a consistently growing market. Since the early 1970's, Turkey production in the U.S. has tripled.
According to IBISWorld analysts, in recent years it has been estimated that 16-20 percent of annual turkey consumption is attributed to Thanksgiving and as much as 30 percent of consumption occurs during the combined Thanksgiving to New Year holiday season. At current prices, Thanksgiving alone may account for 640 million dollars of industry revenue, a number that makes raising turkey a relatively important business for producers across the United States.
Even though turkey consumption is at its highest during the holidays, savvy consumers can often benefit from the annual "holiday turkey sale" phenomenon. Over the past 10 years, the average price decline for frozen turkey between September and December has been approximately 8.5 percent. However, prices do vary by region. An example of "super promotional" turkey sale prices can be found in Los Angeles where major regional grocery store chains are selling premium frozen turkeys for as little as 37 cents a pound and "two hour" Butterball turkeys for only 47 cents a pound.
Two elements contribute to this seasonal tendency. Grocers often use turkey as a discounted item, recognizing that for each Turkey sold, there is an opportunity to supply as many of the ingredients necessary for the holiday dinner. From the supply side, there is a significant seasonal influx of part-time producers. IBISWorld estimates that there are about 2,900 full time establishments and another 2,500 involved in producing turkeys as a sideline to other agricultural productions.
In 2007, the holiday sales phenomenon may occur, yet it may also be constrained versus that experienced in recent years. Higher feed costs, heat-related production problems in some growing regions, and generally rising food prices, as well as increased fuel-related transportation costs, may combine to dampen the magnitude of the seasonal price decline.
Domestic Food Distribution Impacts Thanksgiving Meal Costs
The domestic food distribution system should again be recognized for its long-term success in efficiently delivering the wide range of ingredients that contribute to a complete Thanksgiving dinner. While the total cost for this year's meal will be higher than that from a year ago, consumers will not be facing the double digit (20 to 40 percent) price increases which are affecting many global commodities such as oil, soybeans and grains, among others.
For those consumers who prepare their own Thanksgiving feast, the cost of the turkey normally accounts for about 40 percent of the value of the meal. The other "major" costs for ingredients include milk, stuffing, pumpkin pie, cranberries, and sweet potatoes, all of which may be priced moderately higher than they were in 2006.
Last year, an American Farm Bureau survey benchmarked the cost of preparing a Thanksgiving dinner for 10 at $38.10. With food prices running about six percent over that from last year and with recent frozen turkey prices at up to eight percent above what they were last year, the same meal this year may approximate $40.50 to $41.00.
"Even with a sizeable increase this year, the cost of this year's Thanksgiving meal in real terms remains less than what it was 10 years ago," added Mr. Van Horn.
Food Away From Home
For consumers short on time, spending more than half a day preparing a Thanksgiving dinner may not be practical. With a little advanced planning, more time efficient alternatives are now available.
As grocers and restaurants have increased new "take-out" or prepared meal offerings, the concept has also been applied to the traditional Thanksgiving dinner. Every year the offerings seem to expand, and consumers can chose from a variety of choices, each targeted to specific consumer preferences -- traditional or "free range" organic turkeys to complete Kosher or organic dinners.
The price ranges for these prepared dinners vary widely, yet they can easily cost as much as three to four times the cost of preparing the dinner at home. For example, Whole Foods in Los Angeles offers a complete ready-to-eat dinner for 6 (including "natural" free range turkey) for $99.99. For added convenience, consumers can order their Thanksgiving meal online and pick it up when they need it on Thanksgiving morning.
More consumers are also eating out at selected restaurants on Thanksgiving. Historically, this activity has been concentrated in establishments that are used to serving a limited pre-defined menu to large audiences," said Mr. Van Horn. "Private clubs and hotels are good examples." He added, "Since Thanksgiving is considered a family holiday, restaurants can be expected to be busy both before Thanksgiving day and over the long weekend. Full-service restaurants in particular are sensitive to family holiday periods as dining out is increasingly a family experience."
Shopping And Black Friday
Not surprisingly, retail shopping accounts for the second most significant consumer activity during the long holiday weekend. Black Friday, waiting lines for stores to open, and super specials are synonymous with the day after Thanksgiving.
Looking further out, retailing conditions this holiday season will be even more challenging than those in the recent past. Heightened economic uncertainty, combined with the continuing convergence between different forms of retailing, including mail order, online, as well as brick and mortar, makes retailing one of the most competitive industries in the economy.
The consumer outlook for the 2007 holiday season contrasts reasonably good employment and income data versus declining consumer confidence and reduced credit availability. IBISWorld is expecting retail sales growth of 3.7 percent for the holiday season. This outlook is consistent with the cyclical slowdown that started a year ago.
To put the current cycle in perspective, Mr. Van Horn noted, "As the technology bubble collapsed in 2000, the peaks and troughs of holiday sales growth rates ranged from five to eight (+5 to +8) percent at the peak and only 1.3 percent to 3.4 percent during the 2000-2002 trough. As the current milder economic cycle has again slowed, holiday sales growth rates peaked at a 6 to 6.3 percent in 2004-2005, eased to 4.6 percent last year, and will ease further in 2007.
