1. Ted Schroeder Agricultural Economist Kansas State University Montana Livestock Forum and Nutrition Conference Bozeman, MT – April 21, 2009 Build Consumer Beef Demand: Prescription for Prosperity www.NAIBER.org

2. Ted’s Thesis Prosperity of cattle & beef industry is driven by consumer demand All new $ that flow into your industry originate from consumers

3. Ted’s Thesis Prosperity of cattle & beef industry is driven by consumer demand All new $ that flow into your industry originate from consumers Yet, we continuously make policy, production, and marketing decisions that fail to appreciate this well documented fact!

4. Source: USDA, Dept. of Commerce & J. Mintert, K-State Dept. of Ag. Economics Price Deflated By CPI, 1980 =100 for Choice Domestic Beef Demand Index US Beef Demand, 1980-2008 US Beef Demand, 1980-2008

5. Does Consumer Demand Affect Producer? $10/cwt of fed, $14/cwt of feeder price increase directly attributable to retail beef demand increase - John Marsh, Montana State University

6. 1. Safety assured 2. Tender 3. Flavorful 4. Consistently high quality 5. Healthy & Nutritious (Nutraceutical) 6. Environmentally friendly production 7. Animal friendly production 8. Locally produced 9. Convenient to prepare 10. Competitively priced What Consumers Collectively Demand Experience/ Credence Attributes This means: explicit labeling and brands are essential to convey and assure information

7. Economy and Beef Demand Economy and Beef Demand

8. Declining Consumer Income Causes Spending to Decline Source: Bureau of Economic Analysis Personal Consumption Expenditures Personal Disposable Income

9. Consumer Saving Begins to Ramp Up Source: Bureau of Economic Analysis

10. Consumers Pull Back on Food Purchases

11. Consumers Are Trading Down Whole Foods

12. Food Safety, Health, Nutrition, Product Development, & Quality

13. Atkins Diet Boosted Beef Demand But Atkins Fad Is Over Source: LexisNexis

14. Medical Journal Info. on Heart Disease Peaked, Still Having a Negative Effect Source: Medline 1982-2004 contributed a 9% drop in beef demand

15. Medical Journal Information “Over 10 years, eating the equivalent of a quarter-pound hamburger daily gave men in the study a 22% higher risk of dying of cancer and a 27% higher risk of dying of heart disease. That's compared to those who ate the least red meat, just 5 ounces per week.” Source: Sinha, et al. Arch. Intern. Medicine, March 2009

16. What the press didn’t say…. Men who eat most red meat study found: A - have 26% higher risk of dying of injury and sudden death B - have 58% higher risk of dying of all other causes (besides cancer, heart disease, or sudden injury) Women who eat most meat study found: C - have a 6% lower risk of dying on injury and sudden death D - have a 61% higher risk of dying of all other causes “Over 10 years, eating the equivalent of a quarter-pound hamburger daily gave men in the study a 22% higher risk of dying of cancer and a 27% higher risk of dying of heart disease. That's compared to those who ate the least red meat, just 5 ounces per week.”

17. Beef Recall Problems Source: U.S. Food Safety Inspection Service

18. Food Consumed Away from Home Growth Benefitted Poultry and Hurt Beef Demand Source: U.S. Department of Commerce

20. Is a Steak a Steak?

21. Consumer Awareness About One of Beef’s Positives Is Increasing Source: LexisNexis

22. Can Exports Save US? Can Exports Save US?

24. Brazil Beef Production Growth

25. Rodrigo Miranda Vieira WELL EDUCATED, YOUNG EAGER, ENERGETIC, & CONFIDENT Our global competition is:

26. Looking Forward Weak U.S. economy hurting beef demand Weak U.S. economy hurting beef demand Product quality & BQA remain important Product quality & BQA remain important Food safety problems reducing beef demand Food safety problems reducing beef demand Consumers respond to positive nutritional information Consumers respond to positive nutritional information needs to be exploited Convenience is important Convenience is important  Lack of new products holding back beef demand  At home & at HRI level Export Market is potential major growth area, Export Market is potential major growth area, but we gotta get after it!

27. Ted’s Thesis Prosperity of cattle & beef industry is driven by consumer demand All new $ that flow into your industry originate from consumers Yet, we continuously make policy, production, and marketing decisions that fail to appreciate this well documented fact!

29. Source: Foreign Ag Service, USDA

34. Markets at each stage supposed to coordinate but system failed - highly varied product - little price-quality distinction - no incentives to improve

35. 1. Safety assured 2. Tender 3. Flavorful 4. Consistently high quality 5. Healthy & Nutritious (Nutraceutical) 6. Environmentally friendly production 7. Animal friendly production 8. Locally produced 9. Convenient to prepare 10. Competitively priced What Consumers Collectively Demand Experience/ Credence Attributes This means: explicit labeling and brands are essential to convey and assure information

36. SAFE? U.S. beef industry lost $3.2 to $4.7 billion in 2004 alone because of lost exports (Coffey et al., 2005)

39. Survey of 1,000 US, Canadian, Mexican, & Japanese Consumers, 2006

40. Respondent Country Country of OriginCANADAUSJAPANMEXICO Unknown14%11%3%18% Australia58%46%70%31% Brazil35%29%18%26% Canada92%52%31%42% Japan43%36%85%30% Mexico21%17%13%66% United States70%82%8%46% Percentage of Respondents Indicating Beef from Various Origins is “somewhat” or “very” safe food

41. Convenient to Prepare?

42. Convenience Matters Shredded Cheese Sales Increase 84% Source: AC Nielsen and NCBA

43. Bagged Lettuce Sales: Convenience Convenience Matters Source: AC Nielsen and NCBA

44. 1. Fresh Branded Case-Ready Products

45. 2. Meal Packages Single dish quick fix meal consumer expenditures expanded 83% in 2001 to $141 million – AC Nielsen 472 beef products introduced in 2001 Compared to 70 in 1997 - NCBA

46. 3. Food Service Food service continues to grow Diversity of product needs Quality control in volume are critical Contracts

47. What do they require? Product integrity – quality, consistency High level of accountability of input supplier Product safety assurances – mega responsibility/risk Production practice assurances (including location?) Traceability Consistent continuous supply

48. Five Critical Industry Errors Postures That What Don’t Work – Long Run: 1.“blind loyalty” - defensiveness 2.“hiding from truth” - secretive (internal & external) 3.“camouflage” - fine print never ever, naturally raised, natural… 4. “consumers are stupid” 5. “scare tactics”

49. Five Industry Recommendations Postures That What Will Work – Long Run: 1.“give ‘em what they want” 2.“show and tell your story” 3.“invest in technology for consumers” 4.“coordinate” – information/send value vertically 5. “give ‘em your 1-800 number” If we don’t do these, somebody else will!