1. Jan. 27, 2004 National Cattlemens Beef Association Supply Chain Evolution Push Pull

2. Where is the Consumer Going? Family income, in real dollars, peaked in 1990. Consumers are trying to shift time from food preparation to wage-earning activities. Looking for quick, easy and low-cost first. Demographics will accelerate these trends.

3. More Family Members Working = Less Meal Preparation Time More householders working: 32% adult women in 1960 => 65% in 2000 4.4 million single households in 1960 =>15 million in 2000 Meal preparation time shrinking: 1960, average dinner preparation time = 2 hours 2000, average dinner preparation time = 30-45 minutes

4. Baby Boomers & Echo Baby Boomers are Entering Age Groups which Spend Less Time on Meal Preparation

5. Half of Growth Will Be in Food Service and Deli U.S. Meat Expenditures, Wholesale Value by Distribution Channel 80 - 70 - 60 - 50 - 40 - 30 - 20 - 10 - 0 - 10 2 6 17 13 3 6 46 4860 16 4 6 6 5 1990199620022007 Retail, Fresh/Frozen Meat Dept. Foodservice Retail Deli Retail, Processed Self Service 40

6. Growth in the Retail Meat Department Will Be Fueled by New Products Heat & Eat Foods Ingredient Meats: - Prepared meat & poultry - Breaded & sauced entrees - Finger foods (nuggets, wings, etc.) - Meal kits - Refrigerated/frozen entrees & dinners - Case-ready meats - Marinated or prepared entrees - Ground Beef - Chicken breast (IQF & fresh)

7. Summary - Consumer Wants to Spend Less Time Cooking Products with lower preparation time will be the ones on consumers radar screen Products must fit time (labor) criteria before other factors will influence decision: Safety Health Taste Cost

8. Where are Retailers & Restaurant Operators Headed? Retailers are struggling to support the demand for more prepared foods: Food service operator facing more competition - Labor availability tightening and costs going up - Experience with food preparation limited - Food safety issues loom on the horizon - Margin management is an issue, especially w/HMR - Number of restaurants reaching saturation point - Consumer gravitating toward niche concepts - Labor tight and inexperienced (harder to execute niche concepts)

9. Where are Retailers & Restaurant Operators Headed? (Contd) Retailers looking to suppliers for solutions to: Food service well ahead of retail, but still looking to suppliers for help with: - New convenient products - Easier, idiot-proof preparation - Lower cost - Built-in safety - Help with pre-pricing and margin management - New niche products - Easier, idiot-proof preparation - Lower cost - Built-in safety

10. How Will Processors Meet These New Demands from their Customers? The flow of information from the customer to the processor/producer is more efficient in some operations than in others. This is where most supplier/customer relations are working and the most money is being recouped. Some processors are more focused on the customers primary requirement – ease of preparation. Others are having trouble prioritizing product attributes.

11. Push to Pull Commodity... Farmers Food Manufacturers Food Retailers Consumers Branded... Quality ControlDistribution An integrated coordinator and supplier. ProcurementMarketing Follows a give em what you got strategy, product is what it is Follows a give em what they want strategy, product has personality, the customer is empowered to control this product experience Commodity Processors Food Distribution Farmers Food Manufacturers Food Retailers Consumers Commodity Processors Food Distribution

12. Consumer Responses – the Integrated Poultry Model Marketing and product development are focused on one thing - How do we sell more chicken profitably? - The company owns assets through all stages of production: -- Feedmill, hatcheries & growout -- Slaughter, cut & bone -- Further-processing -- Cooking & meal preparation -- Marketing & distribution -- The shared goal of maximizing returns to these assets, therefore, focuses on pulling more product through the whole system. -- Marketing & product development identify new products that consumers want. -- The rest of the company figures out how to make & distribute new products. The company looks at what the consumer wants, and then looks within its organization to figure out what needs to be done to get the customer what he wants.

13. Consumer Responses – A Non- Integrated Meat Packer Marketing at a beef or pork packer is focused on - How do I get the highest price for the meat that I produce? - The company assets are all in one stage of the supply chain - slaughter and boning. -Goal number one is to produce products at the lowest cost. -Efficiencies come from long runs of standardized products. -The shared goal of maximizing returns to this asset, therefore, focuses on pushing more of the standard set of products off to the next stage of the supply chain. -The whole idea of finding out what the consumer wants, and reconfiguring the products that the processor makes to fit the attributes that create consumer pull runs counter to the goal of producing standardized products at the lowest possible cost.

14. Evolving Retailer Requirements Large Corporate Chains (regional in scope) 1. Specification Driven 2. Consistency and Uniformity A. Trim B. Size of Primal C. Packaging D. Color E. Apparent Freshness 3. Trace back capability 4. Service 5. Productorigin 6. Brand name

15. 7.Health and Safety Issues 8.Price A.Cost Plus Models B.Formulas 9.Benchmarking 10.Low Cost Producer 11.Risk Management Strategies 12.Case Ready Product 13.Private label Driven Evolving Retailer Requirements (Cont )

16. Medium Corporate Chains (Regional in Scope – Independent and Distributors) 1.Brand Driven 2.Quality at a Price 3.ConsistencyFrom a Commodity Point of View 4.Money orPromotional Driven From a Leverage Point of View. 5.Case Ready 6.PrivateLabel

17. Regional Distributors and Independent Grocery Stores 1. Commodity Driven 2.Price Driven 3.Do not Understand Cost at Store Level or at Distribution Level.

18. Retail Issues in General 1.Nearly all of our customers are developing case-ready and pre- packaged programs – both private label and branded. 2.Good meat cutters are hard to find. 3.Product liability is becoming an increasingly important factor. 4.Primal cuts are getting too large. 5.Risk management and pricing programs.

19. SYSTEM ANALYSIS IDENTIFY OBJECTIVES ESTABLISH COMMITMENT IDENTIFY ACCOUNTABILITY DEVELOP STRATEGIES DEVELOP ACTIVITY LIST ESTABLISH REVIEW TIMETABLE FOR ACTIVITY LIST REVIEW RESULTS