Consumer Preferences

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• Consumer Preferences Trends Shaping the Global
  Playing Field
• presented by
• John Hinners
• U.S. Meat Export Federation
• Illinois Livestock Business Development
  Conference
• July 15, 2002
• Bloomington, Illinois

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Presentation Outline

• U.S. Meat Export Federation (USMEF)
• Global Strategic Priorities
• Consumer Concerns
• Fresh versus Frozen
• Transportation issues in China
• Consumer Marketing Trends in Japan
• Category Management
• Store Branding
• USMEF Export Forecasts
• Challenges Opportunities

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History Mission

• USMEF was formally organized in 1976 and is a
  non-profit trade association working to create
  new opportunities for beef, lamb and pork.
• USMEFs mission
• To increase the value and profitability of
  the U.S. beef, pork and lamb industries by
  enhancing demand for their products in targeted
  export markets through a dynamic partnership of
  all stakeholders.

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USMEF - A True Federation

• A sample of USMEF members in 2002
• National Agriculture Organizations (National
  Cattlemens Beef Association, National Pork
  Board, United Soybean Board, American Farm
  Bureau Federation, American Sheep Industry.)
• Private Industry (Excel, IBP, ConAgra,
  Smithfield, Simplot, Sara Lee, Johnsonville
  John Morrell, P.M. Global Foods.)
• State Agriculture Organizations (Nebraska Beef
  Council, Illinois Pork Producers Association,
  South Dakota Soybean Council, Kansas Grain
  Sorghum Commission, Illinois Corn Board, Indiana
  Farm Bureau.)
• Supply Service Organizations (Elanco Animal
  Health, Pioneer, a Dupont Company, Chicago
  Mercantile Exchange, Illinois Department of
  Agriculture, AgStar Financial Services, Louis
  Dreyfus Corporation.)

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USMEF Offices Representatives
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USMEF Global Strategic Priorities

• Total Carcass Utilization
• Trade Support
• Buyer Education Loyalty
• Market Presence
• Industry/Product Image
• Market Access
• Food Safety

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Exports Add ValueAn Example of Four Cuts













Short Rib






Short Plate






Liver






Tripe

TOTAL VALUE ADDED 710 MILLION EQUIVALENT TO
19.72 PER HEAD


Prices will vary over time. This example
approximates the value of the average price
spread between domestic and export prices for
these items in 2000. Based on 36 million head
slaughtered.
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Consumer Concerns

• Lack of trust of imported product
• Product safety
• Fresh vs. frozen product
• Labeling

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The New Era of Better Informed Consumers

• Consumers, both domestic and international are
  demanding assurances of food safety
• In addition to safety, consumers want to know
  where the product was produced, who produced it
  and is it fresh

Mike John, Missouri cattle producer Tom Martin,
Illinois corn producer promote U.S. beef in Korea
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Fresh vs. Frozen

• Overseas consumers continue to call for fresh
  product
• Can an imported product ever be fresh?
• Does fresh product conflict with food safety
  and/or product integrity?
• What does the USMEF consumer research indicate?

Corn Fed to Tenderness promotion in Taiwan
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What the World Consumer is Asking For

• Freshness is the Most important factor
  consumers take into consideration when they
  purchase meat
• Open ended survey question to over 7,000
  consumers.When making a beef or pork purchase,
  please tell me what is most important to you in
  making your decision?
• In Japan, Freshness was the number two
  priority with Domestic Beef ranking no. 1 with
  24

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Perception of Freshness

• Traditional outdoor markets known as wet
  markets remain the market of choice for
  consumers in Hong Kong, Korea, Taiwan, and Mexico
• In response, USMEF has begun to infiltrate wet
  markets with messages about U.S. red meat

Wet Market meat stand
USMEF beef promotion in Taiwan wet market
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Transportation Issues in China

• Most meat is delivered at the lowest cost
• Consumers in China want a safe product, however
  are not at the stage to pay more for product
  delivered in refrigerated trucks
• China consumers fully cook all red meat and
  poultry to compensate for poor refrigeration
  system
• Modern retailers are requiring refrigerated
  delivery

Boxes of meat delivered on a bicycle in China
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Transportation Issues in China

• Signage at a Carrefour retail store in Shanghai
  promotes a safety and inspection message to
  consumers

Signage reads.Carrefour meat is supplied by
licensed reliable sources. Freshest meat in
China
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Consumer Marketing Trends

• Japan is our 1 export market with Mexico at 2
• Japan accounted for 55 of total U.S. pork
  exports on a value basis 37 on a volume basis
  in 2001
• The trend of marketing beef pork in Japan is to
  shift to from commodity to Branded

Smithfield brand pork stickers provide
production, safety and processing location
information.
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Trust is Key in Japan

• 4 of consumers said they have never trusted
  labels on food
• Sharp drop in consumer confidence in food
  labeling - particularly meat products due to
  false-labeling scandals in the industry
• 78 of Japanese consumers do not trust
  information provided in food labels according to
  a May 2002 Japanese Consumers Cooperative Union
  Survey
• 92 of the 4,326 survey respondents read food
  labels before making a purchase
• 85 believe wording on food labels should become
  standardized for ease of consumer understanding

U.S. red meat promotion in Japan
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Mislabeling Implications in Japan

• Loss of consumer trust
• Japan will mandate, hype traceability
• Japanese trade will ask U.S. suppliers for
  source-verified product
• What was excessive will be the norm
• Enhanced trend toward branded
• Suppliers must speak directly to consumers
• Will consumers pay extra for truth?

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Japan Beef Consumer Research

• Women were decision-makers
• Safety was No. 1 beef import issue
• 94 wanted safety information
• 74 would buy imported beef if they knew safety
  standards
• Australia recognized as safe
• Know little about beef nutrition
• TV, newspapers, magazines are most influential
  media

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What Japanese Women Request

• They wanted to be fully convinced that U.S. beef
  is safe and tasty enough to serve their families
  without concern
• They wanted to hear beef providers firsthand
  accounts of how carefully they produce quality
  beef
• They want objective facts to verify the safety of
  beef
• They preferred to hear from other women

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Category Management is Changing to Meet Consumer
Needs

• Retailers analyze sales and profit by menu and
  specie
• To decide product variation
• To allocate space at meat case
• To expand both sales and profit

Retail management is changing
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World Retail Competition Store Brands

• Retailers are viewing the meat case differently
  today
• Major retailers are looking to differentiate from
  competitors
• Todays retail trend involves introduction of
  Store Branded meat
• Change is taking place with beef, pork, lamb,
  chicken groceries
• Retailers are moving away from price-driven
  commodities
• The Brand Approach allows retailers to enhance
  level of customer loyalty

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Store Brands Becoming the Norm

• Branding will grow because a brand represents a
  promise of quality
• A tremendous amount of marketing and dollars will
  be placed behind a brand
• A brand can build customer loyalty repeat buyers

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Producer Identification in Retail Meat Case
Consumers are given the opportunity to identify
with the livestock producer who cared for the
livestock
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Ready To Cook
Younger generations are looking for cooking
easethe less cooking there will be, the more
convenience there has to be
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USMEF Export Forecasts2002-2005
921K MT in 2005
Growth from 2002 to 2005 218K MT
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Where is the Growth?
Market Growth as a Percent of 218K MT Total Growth
USMEF Estimate
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Distribution of Exports(Pork Pork Variety
Meats, Forecast 2005)
USMEF Estimate
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Pork Exports as a Percent of Domestic Production
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Factors Driving Growth in U.S. Red Meat Exports

• Rising Per Capita Incomes
• Growing Middle Class
• Changes in Diet
• Declining Self-sufficiency in Leading Import
  Markets
• Expanding Market Access
• USMEF/Industry Marketing Initiatives

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Challenges

• Food Safety Issues.
• Foot Mouth Disease.
• Bovine Spongiform Encephalopathy (BSE).
• Animal identification source verification.
• Increasing global competition
• Australia, Brazil, Canada Denmark for pork.
• Argentina, Australia Canada for beef.
• Non-tariff barriers
• EUs hormone ban.
• Non-recognition of FSIS inspection systems.
• High tariffs.
• Trend in Japan to differentiate.
• Barley Wheat fed vs. corn soy.

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Opportunities Current Future

• Improved market access.
• Global economic growth.
• Current animal health issues are bolstering U.S.
  position as a safe and high quality meat
  supplier.
• Future opportunity will continue to be in the
  Asian regions and Latin America.
• Half the worlds population and GDP growth to
  2005 will occur in these two regions.
• With 80 of U.S. exports already destined for
  these two regions, the U.S. is well positioned
  for future growth.
• China and Russia to become increasingly more
  important to U.S. pork and beef industries.

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U.S. Exports of Feed Grains through Beef and Pork
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U.S. Exports of Soybeans through Beef and Pork
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Call USMEF for Advice Assistance

• U.S. Meat Export Federation-Denver, CO
• 303-623-6328
• www.usmef.org

Your questions are only a phone call away with
nearly 100 USMEF staff and consultants ready to
serve you.