The Red Meat Market Today What is driving

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

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

Market drivers Obesity Trends Among U. S. Adults 3

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

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

Market drivers – Cost of Food 7

In the News – Rising price of Food 8

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

Beef sits atop the red meat category Total U. S. retail sales of red meat, by segment, at current prices, 2011 and 2013 40, 000 35, 000 34, 864 36, 951 $ million 30, 000 25, 000 20, 000 14, 225 15, 000 14, 712 10, 000 5, 000 1, 375 1, 465 0 Beef Pork 2011 Other 2013 (est. ) Source: Mintel/Based on Information Resources, Inc. , Info. Scan Reviews; Bureau of Economic Analysis; Fresh. Look Marketing Group 10

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

How Much Are Consumers Willing to Pay? 12

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 13

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

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” 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 crosshairs 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 U. S. Population Classified Overweight 34% U. S. Population Classified Obese 34% Sources: (1) ISIPP Publishing (2) Virginia Tech Cooperative Extension (3) Center for Disease Control and Prevention, 2008 (4) UN Food and Agricultural Organization, 2004 16

More consumers cutting back on red meat I’m trying to eat healthier and that means eating less red meat 57 It’s too expensive to buy as often as I’d like to 36 I’m watching my cholesterol and that means less red meat 32 I’m dieting and that means eating less red meat 19 I’m buying better quality red meat this year, but less of it 16 0 10 20 30 40 % of consumers 50 60 All (Base: 729) 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? ” 17

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 18

U. S. Consumer Interest in Protein Grows • Protein is #1 nutrient that is growing in interest, among consumers who read labels. Source: 2012 Food Marketing Institute Shopping for Health Survey • Aging consumers concerned about muscle mass expected to turn attention to protein foods. 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. 19

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 1 -2 person households 38% 62% 3+ person households Source: U. S. Census Bureau What this Means for Beef: • Lots of merchandising options in the store are needed 21

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 30% 25% 20% 15% 16% 14% 15% 9% 10% 5% ? 2% 5% cia l Af ric an M ul ti- er -A m Ra ica ns ns As ia sp an i Hi What this Means for Red Meat: • Beef must work to maintain and broaden its appeal to all ethnic groups • Culinary tastes will shift cs 0% Source: Bureau of Labor Statistics 2010 2050 22

State of the Consumer – Busy Lifestyles • 70% of women are working • Average work night dinner expectations: 40 minutes from start to table Too long for 31% of consumers 60 minutes from start to table 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: (1) Bureau of Labor Statistics (2) Convenience Framework, Dec. 2010 23

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 FMI, Shopping for Health 2011 Study expectation is 20 minutes! 24

Red meat consumed by 90% of consumers at least once a month Beef (that is bought ground – Either fresh or frozen) 83 Beef portions, steaks, fillets (that is cooked at home from frozen or fresh) 11 7 74 Pork portions, fillets (bought fresh or frozen) 18 67 19 51 Ham (other than deli meat) Other red meat (e. g. , buffalo, ostrich, venison; fresh or frozen) 18 15 Lamb (fresh or frozen) 0% 33 20 62 25 60 20% 40% 60% 9 14 16 80% 100% % of consumers At least once a month Source: Mintel Every 2 -3 months or less frequently Do not eat “How often (if at all) do you personally eat each of the following items at home? 25 Please select one per type. ” Base: 2, 000 internet users aged 18+

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

Hispanics are above average red meat consumers 85 90 82 % of consumers 80 82 72 70 70 67 60 61 49 50 40 24 30 17 20 10 0 Ground beef Beef portions, steaks, fillets Hispanic (Base: 298) Source: Mintel Pork portions, fillets Ham Other red meat Not Hispanic (Base: 1, 702) “Do you personally eat each of the following at least once a month at home? ” 27

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 the millennial 28

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

Millennials may pay more for food Source: Jefferies Alix. Partners 30

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. 32 a: 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 Millennials & Beef - 2011 31

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. 32 a: 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 32

% beef and red meat consumers Prepared products appeal to youngest consumers, men 35 Beef and red meat consumers 32 30 25 18 20 15 15 11 13 12 10 5 0 % of pork consumers Age 18 -24 (Base: Age 25 -34 (Base: Age 35 -44 (Base: Age 45 -54 (Base: Age 55 -64 (Base: Age 65+ (Base: 206) 297) 308) 331) 246) 285) 25 22 20 20 Pork consumers 14 15 10 4 5 7 9 0 Age 18 -24 (Base: Age 25 -34 (Base: Age 35 -44 (Base: Age 45 -54 (Base: Age 55 -64 (Base: Age 65+ (Base: 108) 188) 219) 250) 200) 218) Source: Mintel “Do you tend to buy red meat products that have been partially prepared for you? ” 33

Improved packaging may appeal to consumers 35 I would like to see more resealable meat packages 30 I would like to see more individual-sized portion packs of red meat 26 22 23 I would like to see more onpackage recipe ideas 18 0 Female (Base: 889) Source: Mintel 5 10 15 20 25 % of consumers 30 35 40 Male (Base: 850) “Please indicate which of the following statements, if any, about beef and pork products you agree with. Please select all that apply. ” 34

Market drivers Obesity Trends Among U. S. Adults 35

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Thank You! Today The Red Meat Market 37