D'Agostino's Scores Hit with New Meat & Poultry Products

This morning, while driving to a meeting, I heard a great marketing story reported on WQXR, the radio station of the New York Times.

It seems that some grocers are improving sales and margins by marketing meat which may fit some or all of the following descriptions: humanely raised, humanely butchered, free range, unfenced, organic, drug-free.

According to the report, D'Agostinos, the venerable NYC grocery chain, has seen sales of meat increase 25% by unit volume, at prices that are 40% higher than similar cuts of meat that are not so described as above.

This may well be one of the best examples of Schumpeterian innovative behavior I have seen or read about in the past year. It reminds me of Frank Perdue's original, and successful, efforts to brand and differentiate his chickens from the rest of the poultry sold by grocers.

In this case, grocers have identified a psychological preference among their customer groups, and actively provided products which satisfy those preferences. Whether or not the meat and poultry taste different, clearly, some consumers will buy those products which they believe have resulted from animals which were treated in ways that they feel are important.

What's more, they will still buy those cuts of meat or poultry at prices far in excess of similar cuts without the humane or organic labels. So the grocer enjoys increased sales of a much higher margin product.

So much for food price inflation. These shoppers are, in one fell swoop, increasing their food spending by far more than inflation can.

Once again, we see how basic marketing pays off in tangible, financial results. By discovering consumer tastes and preferences, for which they will pay more, grocers marketing these new types of meat and poultry have increased the revenues and profits of their butcher's department.