4th AnnualCattleman’s Workshop

January 19, 2008Blue Mountain Conference

CenterLa Grande OR

Looking at The Changing Beef Industry

Current/Future Consumer Expectations

From a Retail Perspective

Al KoberDirector of Retail

Certified Angus Beef LLC

Certified Angus Beef Retail

• Retail Sales are 50% of total CAB sales

• 2007 sales - 290,000,000 pounds Top Retail Accounts1. Meijers 2. Schnucks 3. Giant Eagle4. Price Chopper5. Giant PA

Certified Angus Beef Retail

• >4500 licensed retail stores in the United States

• Average sale per store 50,000 pounds yr

• Highest single store sales average 650,000 yr

• 490 licensed retail accounts

The Changing

Retail Beef Industry

The Changing Retail Beef Industry

• Private Label vs. Branding• Case Ready• Food Safety• Packaging• Retail Formats • Natural/Organic• VAP• The Hispanic Factor

Private Label vs. Branding

• The main driver- To be different• All store banners are brands• Private label only as good as store

image• Brands equal consistency.• Quality must be intrinsic, not

superficial• Branding and commitment to

quality are important to consumers

Case Ready

• Food safety• Known costs• Variety• Out of stocks• Consistency• Economical advantages• Liability• Perceived to be lower quality

Food Safety

• E-Coli• Salmonella• BSE (Mad Cow)• Recall• Limited impact on sales

Packaging

• CO• MAP (Hi-Lo-Ox)• Mother Bag• Overwrap• Vacuum Sealed• Leak proof advantages

Retail Formats

Retail Formats• Conventional-15,000 SKUs• Super Market- 40,000 sq ft -25,000

SKUs• Warehouse- low prices, little service,

and limited variety• Super Warehouse- Hybrid-Super store/

warehouse- (Cub Stores)• Limited- 2,000 SKUs- (Aldi, Save-a-lot)• Specialty/Gourmet- Natural-Organic -

(Whole Foods) • Ethnic-(Sedanos-Twin City)

Retail Formats. cont.

• Convenience Store (Wa-Wa- 7-11)(With or with-out gas)

• Super Centers- Drug/Mass Merchandiser, food and non-food.- (Wal-Mart, Meijer’s)

• Wholesale Club- (Sam’s, Costco, BJ’s)

• Dollar Store- limited sku’s – price driven (Bottom Dollar)

Pricing Strategies

• Hi-Lo- High retails-low sales prices

• EDLP-Every Day Low Prices• EDHP- Every Day High Prices• Hybrids EDLP-staples HI-LO

perishables

Natural/Organic

• Perceived Value• Feel good food• Growing categories• Definitions- vague• Primary store- Supermarket-72%• Major area of consumer

confusion

V.A.P.

• Ready-to-eat- Rotisserie Chicken, Hot bars, etc.

• Ready-to-heat- Chilled or frozen fully cooked entrees

• Ready-to-cook- Seasoned, marinated, meal groups

The Hispanic Factor

• Growing buying power• Cuts and cutting methods• Big beef eaters• Eat at home• End meat users(Chucks and

Rounds)• CAB’s highest tonnage stores

Current Issues

Consumer Expectations and

Demands

Consumer Expectations and

Demands• A Great Eating Experience

(Taste)• Perceived Value• Convenience• Information/Knowledge• Food Safety• Nutrition

A Great Eating Experience

• The goal of the beef industry• Taste ( tenderness, juiciness,

flavor)• High quality beef taste better• Consistency (10 CAB specs)• Confidence (Brands)• You are in the Food business

Perceived Value

• Quality costs more to produce• Must be ROI• Over 40% of shoppers will

switch stores to get better quality.

• The customer will pay more if they believe it is worth more.

Convenience

• Major driver for consumers• Consumer’s time restraints• Not willing to sacrifice quality

for time• “I did it myself”• Failure of early HMR products

(Quality)

Shopping Process

• The Search- for the desired cut• The Sorting- Right size, weight,

fat• The Evaluation- review,

appearance• The Selection- Put into cart or

back into case

Information/Knowledge

• What are they looking for• Consumers want to know more.• On pack best method, for now,

but…• Quality statements, preparation,

nutrition• COOL

Food Safety

• Major concern of all consumers

• Same as production channels

• E-Coli, BSE, Salmonella, recalls

• Consumer’s mis-conceptions of COOL, Natural, Organic

Nutrition

• Somewhat important to 90% of customer

• Perception-Organic, natural as better

What consumers look for on nutrition label

• Saturated fat, sodium, trans fat, calories, cholesterol, sugars, protein, fiber, calcium, iron, vitamins C,A,B, zinc

Consumer’s Perception of Quality Beef

• Bright red• Non-leakers, not bloody• Little Fat• Tightly wrapped• Superficial/visual vs. intrinsic

Future Consumer

Expectations and Demands

2008 Retail Industry Trends

Chuck Jolly- Cattlenetwork.com

• 1. Natural Meats- Never Never Never, Grass fed, with-draw, tested (Do not make it just a marketing slogan)

• 2. Health Specific- Baloney with calcium, bottled water with caffein

• 3. Greener than Thou- Carbon conscious?• 4. Functional Foods- Pharmaceutical

advantage. Probiotics in yogurt• 5. Nostalgia-on-a-plate- Blue hair specials

Meat Loaf and mamma’s pot roast

2008 Retail Industry Trends

• 6. Lifestyle Products- Self-heating package

• 7. Brand Partnering- Oscar Meyer/Ritz• 8. Locavorism- Eat locally produced

food• Local co-ops

• 9. Heat-and –Serve is the New Scratch Cooking

• 10. Full Fat Feeding- Berkshire Pigs (These consumers are more concerned with taste then health)

Consumer’s Future Expectations and

Demands • More Information (Too many labels)

• Increased Safety assurance• Higher quality• More variety• Confidence (Is COOL the answer?)• More feel good stuff (Green-

Sustainability)• Associates know more than they do.

What is Certified Angus Beef

Doing to Meet these Needs?

Supply Developmen

t

Retail and MarketingDivision

More Information

• CAB has redesigned the CAB logo label to include more quality facts

• Extensive consumer research project• New consumer marketing (Using

experts)• Quality statement- “A cut above

(more selective) than USDA Select, Choice and Prime”

• Black trays= higher quality

Increase Food Safety Awareness

• These are industry production issue

• CAB works closely with the industry to support food safety issues

• Education of store associates on food safety issues

• An aggressive VAP development team

Higher Quality

• CAB lead the industry in re-defining the value of yield grading and introduced new consistency and quality specs.

• CAB works with the industry to protect the beef production process against anything that would impact quality.(White paper, feed additives/beta 2-agonists etc.)

Retail Partner’s Education

• Cutting tests• Plan-a-grams• Ad and supply availability support• Value based merchandising• Salesmanship• A confident sales associate produces

confident consumers• CABU- Meat cutting and Meat

Merchandising School

Cutting Tests

• A cutting test provides yields, profit potential, realized sales value

• Beneficial when writing profitable ads, selecting ad items, evaluating suppliers, choosing fabrication styles, etc.

• Many retailer do not know how to do them or how to use them

More Variety

• CAB is leading the industry with muscle profiling and introducing new beef cuts from underutilized primals. (Chucks and Rounds)

• Production of brochures showing step by step procedures in pictures and word

• Instore and industry demonstrations

Chuck Roll Merchandising Ideas

Chuck Roll Merchandising Ideas

NCBA Initiative

• CAB has partnered with NCBA to assist the launch of the NCBA 2008 major marketing effort.

• Chuck Roll muscle profiling producing new steak cuts

• CAB is designing the POS, recipes• Using our relationships with key

retail partners to launch in early 2008. (Meijers, Food City)

NCBA Initiative

• The initial retail launch will be exclusively Certified Angus Beef

New cuts • Chuck Eye Steaks (Standard cut)• Chuck Eye Roast- (America’s Beef Roast)• Country Style Ribs (Neck end of Chuck

Eye Roll)• Denver Steaks (Serratus Ventralis)• Possibly the Chuck Flank (Splenius)

Conclusion• Trends change and fads come and go.• What remains consistent is, Consumers want a

product that will deliver An enjoyable eating experience one bite at at time every time.

• Not only tender but one that “Tastes Great”• With lots of that great beef flavor• Bursting with juiciness in every bite.

Only one Brand delivers this more consistently

that any other.

Certified Angus Beef

• Highest Quality Beef

• Highest Quality People

• Integerty

2007

Was Certified Angus Beef’s

Best Year Ever

PredictionBecause of all you do

2008 will be Certified Angus Beef’s

best year everAgain

Thank You