Lowering prices for meat alternatives increases profits by 30%

    The market for meat alternatives is booming; it's impossible to imagine supermarkets without them. Under a commission by ISMI (International Shopper Marketing Institute), we have estimated the optimal prices for these products for maximum profits. We did this by looking into consumers' brains with EEG.

    Our results made clear that profits for vegetarian burgers can be increased by 30% if its price is reduced by 38 cents. Additionally, the product packaging plays an important role in pricing: the product's price elasticity is strongly dependent on the strength of its packaging design. Check the details below.

    Client ismi logo
    TECHNIQUES USED
    EEG
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    How does the brain respond to prices and packaging of meat alternatives?

    Under a commission by ISMI (International Shopper Marketing Institute), we designed this exploratory study to investigate how consumers' brains intuitively respond to different meat substitutes' prices and packaging.    

    Consumers' willingness to pay was measured using EEG. In the study, participants were presented with packages of meat alternatives at different prices on a computer. At each price presentation, participants had to indicate whether they thought it was 'expensive' or 'cheap' under time pressure. While performing the task, participants' brain activity was measured using EEG. This measures the electrical currents on the surface of the brain. During the task, the EEG measured the intuitive brain response at each price point. The measures result in what we call the Feel Good Price, which predicts the expected demand, revenue and profit for the different prices.

    Participants were shown three different meat substitutes' packaging designs at different prices. The designs included one discount design, one regular design and one premium design (see below). The packages were unbranded and comparable to the private labels for vegetarian burgers at two big Dutch supermarkets - Albert Heijn and Jumbo. 

    drie_verpakkingen_vleesvervangers_ISMI_prijsonderzoek_v2

    Results

    As a starting point, we used the current retail price of Albert Heijn and Jumbo meat alternatives: €1.59. We expected  €1.59 to be a good price for a discount packaging design. Together with all the other prices, we calculated the Feel Good Price and created the demand curve. From this demand curve we derived the expected revenue curve and estimated variable costs, and computed the expected profit curve. The expected profit curve revealed that the expected maximum profit for the discount and regular packaging designs was actually at a price lower than €1.59. For the discount design, the maximum profit can be reached at €1.21 and for the regular design at €1.24 (see below).

    discount_vleesvervanger_winst_prijspunt

    regular_vleesvervanger_winst_prijspunt

    On the other hand, the price for maximum profit for the premium packaging design is at €1.35. The price could go up to €1.70 without losing much (expected) profits, as the profit curve does not decrease much up to €1.70. Therefore, we concluded that only meat alternatives with premium packaging designs are able to come close to reaching maximum profit at a price of €1.59 (i.e. the current price of private label meat alternatives at Albert Heijn and Jumbo).

    premium_vleesvervanger_winst_prijspunt_v2

    Conclusion

    Our research shows that the price of €1.59 is too high for meat alternatives in discount packaging. Since the discount packaging resembles the meat alternatives of private labels from Albert Heijn and Jumbo, this suggests that the current retail price of €1.59 is too high for private labels meat alternatives. The results of this exploratory study indicated that with a price decrease of 38 cents, profits can actually increase by 30%. 

    drie_verpakkingen_vleesvervangers_ISMI_prijsonderzoek_AH_en_Jumbo

    As meat substitutes contribute to sustainability, it's important to increase their popularity. This exploratory study indicates that demand for meat alternatives can increase if its prices are lowered, resulting in higher profits. Furthermore, our study shows that premium packaging designs increase the expected value of the product which also increases demand. Nonetheless, the recommended price for premium packaging designs remain at €1.59.

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    Walter Limpens

    Senior Client Executive

    Want to know more about the research possibilities?

    Andries van der Leij

    Head of Research & Development

    Want to know more about our research techniques?

    Contact

    Are you interested and want to know more? Contact Walter and he'll tell you more and answer your questions.

    Walter Limpens

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    Do you have a questions about our research techniques? Don't hesitate and contact Andries.

    Andries van der Leij

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