The Red Meat Market Today

1. The Red Meat Market Today What is driving or hindering the red meat market? May 8, 2014

2. Agenda • Market Drivers • Beef Sales and Forecast • Price • Health • Consumer Preference • Beef Consumption • Millennial Generation

3. Market drivers Obesity Trends Among U.S. Adults

4. Beef Cow Inventory:Is a Larger Herd on the Way? Million Head Years

6. World Population Growth Another 700 million people in the next decade Remember only 4 percent is in the U.S.

7. Market drivers – Cost of Food

8. In the News – Rising price of Food

9. Red Meat Sales and Forecast Total U.S. sales and fan chart forecast of red meat, at current prices, 2008-18 Mintel/based on Information Resources, Inc. InfoScan Reviews; Bureau of Economic Analysis; FreshLook Marketing Group

10. Beef sits atop the red meat category Source: Mintel/Based on Information Resources, Inc., InfoScan Reviews; Bureau of Economic Analysis; FreshLook Marketing Group Total U.S. retail sales of red meat, by segment, at current prices, 2011 and 2013

11. Total Meat Category Pound Share % in Total US Over Time

12. How Much Are Consumers Willing to Pay?

13. Reasons Reportedly Consuming Less Beef Among consumers (17%) who feel they are eating 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 Source: Consumer Beef Index, July 2013

14. Market Drivers - Health 1990 2000 2010 Obesity Trends* Among U.S. AdultsBRFSS, 1990, 2000, 2010 (*BMI 30, or about 30 lbs. overweight for 5’4” person) No Data <10% 10%–14% 15%–19% 20%–24% 25%–29% ≥30%

15. Industry Responding to Shifting Environment “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”

16. 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 U.S. Population Classified Overweight 34% U.S. Population Classified Obese 34% • 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: • ISIPP Publishing • Virginia Tech Cooperative Extension • Center for Disease Control and Prevention, 2008 • UN Food and Agricultural Organization, 2004

17. More consumers cutting back on red meat Source: Mintel “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?”

18. Reasons Reportedly Consuming Less Beef Among consumers (17%) who feel they are eating 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 Source: Consumer Beef Index, July 2013

19. 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. 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.

20. Market drivers – Consumer Shifts

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

22. State of the Consumer – Ethnic Changes • 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 • What this Means for Red Meat: • Beef must work to maintain and broaden its appeal to all ethnic groups • Culinary tastes will shift Source: Bureau of Labor Statistics

23. State of the Consumer – Busy Lifestyles • 70% of women are working • Average work night dinner expectations: 40 minutes from start to table 60 minutes from start to table Too long for 31% of consumers Too long for 70% of consumers • What this Means for Red Meat: • Convenience one of the drivers of growth • How do we make all red meat more convenient? • Sources: • Bureau of Labor Statistics • Convenience Framework, Dec. 2010

24. State of the Consumer – Lack of Planning • 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

25. Red meat consumed by 90% of consumers at least once a month “How often (if at all) do you personally eat each of the following items at home? Please select one per type.” Mintel Base: 2,000 internet users aged 18+

26. Consumption Frequency – Servings Per Week July 2013 Past Week Servings (mean) Source: Consumer Beef Index, July 2013

27. Hispanics are above average red meat consumers “Do you personally eat each of the following at least once a month at home?” Mintel

28. the millennial Millennials • 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

29. The Millennial Generation: “Things aren’t perfect. I need you to be...” 29 SOURCE: Millennial Generation and Beef, Conversion, December 2011

30. Millennialsmay pay more for food Source: Jefferies AlixPartners

31. Millennials: Beef’s Performance & Information Needs What Millennials Think What Millennials Want Agree Completely/Somewhat  Millennials don’t know how to cook beef and have disappointing results with steaks & burgers. Key: Significantly lower than non-segment ( ) 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. Millennials & Beef - 2011 Consumer Beef Index – Feb. 2013

32. Millennials: Beef’s Performance & Information Needs Agree Completely/Somewhat   Key: Significantly lower than non-segment ( ) 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. Consumer Beef Index – Feb. 2013 Millennial s & Beef - 2011

33. Prepared products appeal to youngest consumers, men Source: Mintel Beef and red meat consumers Pork consumers “Do you tend to buy red meat products that have been partially prepared for you?”

34. Improved packaging may appeal to consumers “Please indicate which of the following statements, if any, about beef and pork products you agree with. Please select all that apply.” Mintel

35. Market drivers Obesity Trends Among U.S. Adults

37. The Red Meat Market Today Thank You!