Tastes and Preferences

     We usually think about demand in the two dimensional way that we are restricted to visualizing it in with a graph.  That is, the amount demanded is a function of price.  In actuality there are several other factors which determine demand that are embedded in those graphs but not visualized.  For instance, we know that the level of income influences demand as does the availability and price of substitutes and something called tastes and preferences.  For instance, if you hate carrots, lowering the price is not likely to induce more quantity demanded, though we might show the demand curve for carrots for a group (like people in the U.S.) as a function of the price.

     One of the big questions coming out of the financial upheaval currently inflicting the global economy and the various scares related to the H1N1 virus (among other things) is whether or not large groups of people are having their tastes and preferences reset.  There is some emerging polling data by food groups which suggest the shift away from national brands to store brands and private brands may not be a temporary money-saving tactic but a longer lasting preference reset.  This may happen if the previous ten years comes to be thought of as a time of wasteful exuberance and a new mood of practicality and pragmatism begins to entrench itself.  

     Some of the other areas where tastes and preferences are being potentially reset may be in the demand for gasoline.  My little town of Columbia, Missouri is touting itself as a "bike-friendly" community and is spending more than $20 million of tax money on rearranging and marking the streets so that bikes have their own lanes and certain busy intersections become more safe and easily negotiated if you are on a bicycle.  Our town newspaper editor believes there is evidence that people are actually relocating to Columbia because of these amenities.  If tastes and preferences shift in this direction, even if gasoline prices fall, there will be less demanded at each price compared to five years ago as this other factor underlying demand shifts.

     Modifying tastes and preferences for meat is the goal of entities like HSUS and PETA who hope by educating the public about the way animals are raised in this country (regardless of how representative and factual their representations may be) they will cause a preference shift away from meat consumption so that regardless of future price, less will be demanded.  Some are hypothesizing that the gasoline price shocks and the general rising awareness of respect for the environment will result in less consumption so that even when prices fall, we will not return to the same levels of consumption which have characterized historical use rates.

     Each commodity organization, regardless of the product (pork, beef, lamb, etc.) has a demand enhancement focus which attempts to influence tastes and preferences which recipes, advertisements linking meat consumption to traditional events (like Sunday BBQs and holidays) as well as celebrity chef endorsements and nutritional information.

     While we seem certain to add a substantial number of inhabitants to planet Earth over time, a factor which will increase total demand for food, a question arises as to whether there will be a shifting landscape in tastes and preferences (at least once an individual gets beyond meeting survival needs).  This may be especially true in the developed world where a kind of consumption guilt mongering is taking hold and being reinforced by ethical arguments, environmental and social responsibility arguments and just plain personal conservation and frugality motives.  All of this will potentially reshape the coming strategic environment for global meat production and consumption.