The Red Meat Market Today

What is driving or hinderingthe red meat market?

May 8, 2014

Agenda

• Market Drivers– Beef Sales and Forecast– Price– Health – Consumer Preference

• Beef Consumption• Millennial Generation

2

Market drivers

3

Obesity Trends Among U.S. Adults

Beef Cow Inventory:Is a Larger Herd on the Way?

Years

Mill

ion

Hea

d

4

5

Another 700 million people in the next decade

Remember only 4 percent is in the U.S.

World Population Growth

6

Market drivers – Cost of Food

7

In the News – Rising price of Food

8

Source:

Red Meat Sales and Forecast

Mintel/based on Information Resources, Inc. InfoScan Reviews; Bureau of Economic Analysis; FreshLook Marketing Group

Total U.S. sales and fan chart forecast of red meat, at current prices, 2008-18

9

Source: Mintel/Based on Information Resources, Inc., InfoScan Reviews; Bureau of Economic Analysis; FreshLook Marketing Group

Beef sits atop the red meat category

Total U.S. retail sales of red meat, by segment, at current prices, 2011 and 2013

Beef Pork Other0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

34,864

14,225

1,375

36,951

14,712

1,465

2011 2013 (est.)

$ m

illion

10

Total Meat CategoryPound Share % in Total US Over Time

11

How Much Are Consumers Willing to Pay?

12

Reasons Reportedly Consuming Less Beef

Limiting cholesterol or fat

Health reasons

Other meats seem healthier

Eating more plant-based protein

Concerned about “factory farming”

More concerned about price

Too expensive relative to other meat

Prefer other meal options for taste

Among consumers (17%) who feel they are eating less beef

Source: Consumer Beef Index,July 2013

13

Obesity Trends* Among U.S. AdultsBRFSS, 1990, 2000, 2010

(*BMI 30, or about 30 lbs. overweight for 5’4” person)

1990

No Data <10% 10%–14% 15%–19% 20%–24% 25%–29% ≥30%

2010

2000

Market Drivers - Health

14

“Global obesity is a mega-investment for the next 25 years. Obesity may be the most pressing health challenge facing the world today and it will shape thinking by policy makers and

boardrooms around the world”

Industry Responding to Shifting Environment

15

Obesity Rates

Obesity will drive the health discussion in America• Obesity drives many other chronic

health conditions … coronary heart disease, diabetes

• Average American youth watching 50 hours of electronics, including 25 hours of TV per week

• Fat and calories are in the cross-hairs

What this Means for Red Meat:• Nutrition debate will continue … labeling, “good

and bad food” dialogue, search for solutions• Americans will seek guidance, diets, strategies

for eating

Sources: (1) ISIPP Publishing(2) Virginia Tech Cooperative Extension(3) Center for Disease Control and Prevention, 2008(4) UN Food and Agricultural Organization, 2004

U.S. Population Classified Overweight

34%

U.S. Population Classified Obese

34%

16

Source: Mintel

More consumers cutting back on red meat

“You’ve indicated that you are eating less red meat this year compared to last year. Please tell us why. Please select all that apply?”

I’m buying better quality red meat this year, but less of it

I’m dieting and that means eating less red meat

I’m watching my cholesterol and that means less red meat

It’s too expensive to buy as often as I’d like to

I’m trying to eat healthier and that means eating less red meat

0 10 20 30 40 50 60

16

19

32

36

57

All (Base: 729)

% of consumers

17

Reasons Reportedly Consuming Less Beef

Limiting cholesterol or fat

Health reasons

Other meats seem healthier

Eating more plant-based protein

Concerned about “factory farming”

More concerned about price

Too expensive relative to other meat

Prefer other meal options for taste

Among consumers (17%) who feel they are eating less beef

Source: Consumer Beef Index,July 2013

18

U.S. Consumer Interest in Protein Grows

• Protein is #1 nutrient that is growing in interest, among consumers who read labels.

• Aging consumers concerned about muscle mass expected to turn attention to protein foods.

19

Source: 2012 Food Marketing Institute Shopping for Health Survey

Source: Institute of Food Technologists, 2012

• “It is important for food and beverage marketers to highlight wherever possible that their products are a good source of lean protein.”

NPD Food and Beverage Industry Analyst, IFT 2014.

Market drivers – Consumer Shifts

20

State of the Consumer• Several other forces are shaping what the American

household looks like• 1-2 person households are now 62% of the total households

Source: U.S. Census Bureau

62%

38% 1-2 person households3+ person households

What this Means for Beef:• Lots of merchandising options in the store are needed 21

From 2010 to 2050:

• Hispanics are anticipated to grow from 16% to 30% of households

• Asians from 5% to 9%

• African Americans from 14% to 15%

• The newest ethnic trend is “multi-racial” … only 2% of population in 2010, but it is a sign of the time for Millennials

0%

5%

10%

15%

20%

25%

30%

16%

5%

14%

2%

30%

9%

15%

2010 2050

?

State of the Consumer – Ethnic Changes

Source: Bureau of Labor Statistics

What this Means for Red Meat:• Beef must work to maintain

and broaden its appeal to all ethnic groups

• Culinary tastes will shift 22

State of the Consumer – Busy Lifestyles

• 70% of women are working

• Average work night dinner expectations:

What this Means for Red Meat:• Convenience one of the drivers of growth • How do we make all red meat more convenient?

40 minutes from start to table

60 minutes from start to table

Too long for 31% of consumers

Too long for 70% of consumers

Sources: (1) Bureau of Labor Statistics(2) Convenience Framework, Dec. 2010

23

• A study conducted by FMI – Food Marketing Institute found:– 72% of shoppers decide what to have for dinner that day– 1 in 4 shopper (24%) decide what to have for dinner within one hour

before eating!

• Only about half of shoppers make most dinners at home with the ingredients they have on hand. – Half of shoppers buy frozen, fresh, prepared, or ‘fill in ingredients’ for

a meal or get take-out from restaurants for dinner at least a few days a week.

• To most consumers it is acceptable to take 30-40 minutes to prepare and eat a red meat meal – other meals the expectation is 20 minutes! FMI, Shopping for Health 2011 Study

24

State of the Consumer – Lack of Planning

Source:

Red meat consumed by 90% of consumers at least once a month

Mintel“How often (if at all) do you personally eat each of the following items at home?Please select one per type.”

Lamb (fresh or frozen)

Other red meat (e.g., buffalo, ostrich, venison; fresh or frozen)

Ham (other than deli meat)

Pork portions, fillets (bought fresh or frozen)

Beef portions, steaks, fillets (that is cooked at home from frozen or fresh)

Beef (that is bought ground – Either fresh or frozen)

0% 20% 40% 60% 80% 100%

15

18

51

67

74

83

25

20

33

19

17.5

10.5

60

62

16

14

8.5

6.5

At least once a month Every 2-3 months or less frequently Do not eat% of consumers

Base: 2,000 internet users aged 18+25

Consumption Frequency – Servings Per Week

Past WeekServings (mean)

July 2013

Source: Consumer Beef Index,July 2013

26

Source:

Hispanics are above average red meat consumers

Mintel“Do you personally eat each of the following at least once a month at home?”

Ground beef

Beef por-tions,

steaks, fil-lets

Pork por-tions, fillets

Ham Other red meat

0

10

20

30

40

50

60

70

80

90 85 82

70

61

24

82

7267

49

17

Hispanic (Base: 298) Not Hispanic (Base: 1,702)

% o

f co

nsu

mers

27

28

the millennial

• Born 1980 through 2000• 80 million strong• The Net generation, Gen Y,

Echo Boomers

• Optimistic• Always connected• Institutions are irrelevant• Fast multi-taskers• Connected with parents• Feel entitled• Educated, little experience• Not loyal to brands or

employers

Millennials

The Millennial Generation: “Things aren’t perfect. I need you to be...”

SOURCE: Millennial Generation and Beef, Conversion, December 20112929

Millennials may pay more for food

30Source: Jefferies AlixPartners

Base: Split sample (N = 505) Ranked by at-home importance Q.32a: How much do you agree or disagree with each of the following statements when eating each food type at home.

Agree Completely/Somewhat

Key: Significantly lower than non-segment ( )

What Millennials Think What Millennials Want

Millennials don’t know how to cook beef and have disappointing results with steaks & burgers.

Consumer Beef Index – Feb. 2013Millennials & Beef - 2011

Millennials: Beef’s Performance & Information Needs

31

Millennials: Beef’s Performance & Information Needs

Agree Completely/Somewhat

Base: Split sample (N = 505) Ranked by at-home importance Q.32a: How much do you agree or disagree with each of the following statements when eating each food type at home.

Key: Significantly lower than non-segment ( )

Consumer Beef Index – Feb. 2013 Millennial s & Beef - 201132

Source: Mintel

Prepared products appeal to youngest consumers, men

“Do you tend to buy red meat products that have been partially prepared for you?”

Age 18-24 (Base: 206)

Age 25-34 (Base: 297)

Age 35-44 (Base: 308)

Age 45-54 (Base: 331)

Age 55-64 (Base: 246)

Age 65+ (Base: 285)

0

5

10

15

20

25

30

35 32

1815

11 13 12

% b

eef

an

d r

ed

meat

con

sum

ers

Age 18-24 (Base: 108)

Age 25-34 (Base: 188)

Age 35-44 (Base: 219)

Age 45-54 (Base: 250)

Age 55-64 (Base: 200)

Age 65+ (Base: 218)

0

5

10

15

20

25 22 20

14

47 9

% o

f p

ork

con

sum

ers

33

Beef and red meat consumers

Pork consumers

Source:

Improved packaging may appeal to consumers

Mintel

“Please indicate which of the following statements, if any, about beef and pork products you agree with. Please select all that apply.”

I would like to see more on-package recipe ideas

I would like to see more individual-sized portion packs of red meat

I would like to see more resealable meat packages

0 5 10 15 20 25 30 35 40

18

22

30

23

26

35

Female (Base: 889) Male (Base: 850)

% of consumers

34

Market drivers

35

Obesity Trends Among U.S. Adults

36

The Red Meat Market TodayThank You!

37