Consumer InsightsMarket Research Team

John Lundeen, Alison Krebs, Colleen Moore, Shawn Darcy

Key Business Questions Research/IntelligenceInsights/Project

1. How can we best tell our production story? • Image Content Analysis and Production Image Campaign

2. Who sells the beef at retail? • IRI Panel Data

3. Are we selling more beef at retail and foodservice?

• IRI Scanner Data/Meat Solutions, Foodservice Volumetric

4. Who buys and eats the beef - in-home (today and tomorrow)?

• IRI/Panel Data, NPD/National Eating Trends, Consumer Beef Index

5. What is the upside for beef in restaurants? • Chef Value Study. MillennialListening Panel

6. How do we take advantage of the “smoked beef” trend?

• Chef New Product Investigation

7. What about selling beef online? • Consumer Beef Index, IRI Panel Data, Millennial Listening Panel

Agenda – Answering the Key Questions

2

HOW CAN WE BEST TELL OUR PRODUCTION STORY?

Consumer Image Index, Online Content Review, Producer Image Campaign

3

Importance of Meat Industries Openly Sharing

Information

77% 38%42%

39% 38% 37%

2012 2013 2014 2015 2016

Disagree that Beef Openly Shares Information

Transparency perceptions, increasing but still room for improvement

46% 45%

Beef Chicken

Beef vs. Chicken

Agreement

Source: Consumer Image Index 2016 – October – November 2016 4

Stewardship Content Evaluation Testing

5

Antibiotic Infographic Feedyard/ Sustainability Kirkland Feedyard

Grass-fed? Antibiotics Resource Use

Source: MSW*ARS Research Stewardship Content Evaluation – October – December 2016

Antibiotic Use

Grass Fed

FactoryFarming Practices

Resource Use

Sustain-abilityInfographic Video

It was from a credible

source 74% 78% 78% 85% 79% 82%

Shift in Concerned

Target Group

-12.6 -11.5 -20.3 -24.1 -9.3 -16.3

Stewardship Content Evaluation Testing

Source: MSW*ARS Research Stewardship Content Evaluation – October – December 2016 6

LegendHIGH interest (Red) MODERATE interest (White) LOW interest( Blue)

Stewardship Content Evaluation Testing –Antibiotics Infographic

Reader Path Tool

Source: MSW*ARS Research Stewardship Content Evaluation – October – December 2016 7

Reactions Playback Antibiotic Concerned

Favorable Execution 54%Informational / Educational 12%

Graphics/Images well put together 9%

Too Busy 3%

The vast majority of consumers like the infographic

84%T2B

26%

57%

Enjoyment

Stewardship Content Evaluation Testing – Antibiotic Infographic

8Source: MSW*ARS Research Stewardship Content Evaluation – October – December 2016

Consumers - in their own words

9

What do you like about the Infographic?

Source: MSW*ARS Research Stewardship Content Evaluation – October – December 2016; Quotes reflect consumer perceptions on the content pieces tested, used for market research purposes only

“just how easy it was too understand and read”

the clean information is so educational”

“The images, and the colors, are striking, leads to want to read the

information”

“THE LAYOUT AND DESIGN MAKES YOU WANT TO READ

MORE OF IT”

“The facts outweigh what I've heard about antibiotics in beef”“It made me feel good knowing

that the animals are being treated humanely and when sick not

suffering.”

“Everything! Everything I read taught me something that I had no idea about. I

was completely wrong about antibiotics…”

10

Sustainability/Feedyard Video

Shifts in very/extremely concerned

Gen Pop Sustainability Concerned

Use of other growth technologies -5.7 -8.2What cattle are fed -7.0 -9.9Animal abuse/inhumane treatment -5.7 -7.3Use of chemicals at slaughter facilities -6.3 -7.7Food safety/food borne illnesses (E. coli) -10.0 -10.7

Sustainability (combined) -9.0 -16.3

Source: MSW*ARS Research Stewardship Content Evaluation – October – December 2016

50

55

60

65

70

75

80

85

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160

Sustainable Prac. Conc. Gen Pop

“being socially responsible “

“because it touches on multiple important

issues”

“I like that everything from the cow is

being put to use.”

“because of what the farmer feed his cattle it gives us better quality

meat in our grocery store for our families”

“It makes me feel more positive toward people

like him who realize how important it is”

INTE

RES

T LE

VEL

SECONDS

The upfront talk of the meaning of beef sustainability and how feed

yards comply garners very positive interest for the first fourth.

The “privilege, not a right,” employment, and other social/

community aspects of beef sustainability keep interest increasing gradually for the

remainder of the spot.

Stewardship Content Evaluation Testing -Feedyard/Sustainability Video

PEAK: 76.9 END: 76.9

11Source: MSW*ARS Research Stewardship Content Evaluation – October – December 2016; Quotes reflect consumer perceptions on the content piece, used for market research purposes only

12

Sustainability/Feedyard Video

• Based on the content analysis that was done, Sustainability at the Feedyard video was posted to FactsAboutBeef.com (https://factsaboutbeef.com/2017/01/24/sustain

ability-at-the-feedyard/) and on YouTube (https://www.youtube.com/watch?v=2_KvrL8MlN

I).• This content is being promoted

through a digital amplification campaign targeting consumers on the “Beef. It’s What’s for Dinner Facebook page and through YouTube.“

Video above is not clickable, please use one of the links to the upper right .

13

Producer Image Building Campaign

Denver

3 Focus Groups in Each City

WHO SELLS THE BEEF AT RETAIL?

• IRI Panel Data

14

What is Panel vs. Scanner Data?

Scanner DataSummarizes overall consumer purchasesWhat and how much purchased from whereMore detail, total of actual sales

15

Panel DataLinks demographics to purchases100,000 households Reflect overall population Who purchased how much

of what from whereSelf-reported vs. actual

Why Purchase This Data?

Gaps in scanner dataNo retailer-specific informationMissing retailer types

Panel data benefitsEnables better sizing of retailAdds demographic insightsLower cost

16

Four years of sales data2012-2015

Two years of demographic data2014, 2015

Product CategoriesFresh beef Total beef Ground beef Steaks Roasts Other

What Panel Data Did We Buy?

17

2012-2015: Retail Beef Purchases Have Declined by 1.25 Occasions Per Year

18Source: IRI Panel Data, 2012-2015

0

2

4

6

8

10

12

14

TOTAL BEEF ROASTS STEAKS GROUND BEEF BEEF OTHER

Annu

al P

urch

ase

Occ

asio

ns

Purchase Occasions Per Household by Category

2012 2013 2014 2015

560,000 Fewer Households Purchased Beef in 2015 vs. 2012

19Sources: IRI Panel Data, 2012-2015; www.statista.com

40%

50%

60%

70%

80%

90%

100%

TOTAL BEEF ROASTS STEAKS GROUNDBEEF

BEEF OTHER

Perc

ent o

f HH

Buy

ing

Share of Households Purchasing Beef by Category

2012 2013 2014 2015

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Perc

ent o

f Lbs

/Cap

ita

Beef Share of Meat & Poultry Disappearance

Beef Share Linear (Beef Share)Source: USDA & CattleFax

Since 1980, Beef’s Market Share Has Declined 0.4% per Year

-0.3% since 1996

20

Scanner Data (MULO) Captures ~87% of Fresh Beef Sales

MULO = Scanner Data87%

Beyond MULO13%

RETAIL BEEF SALES ($)

21

Conv/Gas4%

Costco42%

Dollar1%Drug

0%Internet

5%Military

10%

Remaining2%

Specialty36%

NON-MULO BEEF SALES ($)

Sources: IRI Panel Data, 2012-2015 and IRI/Freshlook Total US MULO, 52 weeks ending 12/27/15; Categorized by VMMeat System

ARE WE SELLING MORE BEEF AT RETAIL AND

FOODSERVICE?• IRI Scanner Data/Meat Solutions, Foodservice Volumetric,

Government Sources

22

-4%

5%

-15%

-20%

-15%

-10%

-5%

0%

5%

10%

Dollars Pounds Price (from highs)

Perc

ent C

hang

e

2016 vs. 2015 Change in Retail Beef Sales (Jan-Nov)

Retail Volume Up 5%+ on Lower Prices

Yes!

23Source: IRI/Freshlook, Total US MULO ending 11/20/16; Categorized by VMMeat System

Retail Prices Down 15% from Highs; Steak and Roast Sales Are Strong

-4%

5%

-15%-12%

0%

-17%

3%

11%

-13%

2%

16%

-17%-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Dollars Pounds Price (from highs)

Perc

ent C

hang

e

2016 vs. 2015 Change in Retail Beef Sales (Jan-Nov)Overall Ground Steak Roasts

24Source: IRI/Freshlook, Total US MULO ending 11/20/16; Categorized by VMMeat System

Ground Beef Share Correcting to More Historical Levels

45%

50%

55%

60%

65%

2009 2010 2011 2012 2013 2014 2015 2016

Perc

ent o

f Tot

al B

eef S

ales

Ground Percent of Total Beef Sales (Pounds)

Total Foodservice Retail (Meat Case)

25Sources: IRI/Freshlook, Total US MULO ending 11/20/16; Categorized by VMMeat System; Technomic Foodservice Volumetric Study

Consumers Are Taking Advantage of Increased Beef Featuring

26

2016 Retail Beef Sales: Key Takeaways

Steak & Roast volumes rebounding Ground Beef steady

Featuring robust

Featuring leading prices lower

27

Retail Price Deflation Is Pressuring Restaurants

28

Restaurant Traffic Is Lagging –Especially Casual Dining

29

64%

13%

11%

7%4%

1% Ground Beef—5.022 B

Pre-cut Steak—1.012 B

Roasts (subprimal)—0.838 B

Other Beef—0.505 B

Pre-Cooked Roast Beef—0.321 B

Ribs—0.117 B

30

2016 Beef Foodservice Volume Purchases Increased 1.0%

Pounds change 2016 vs. 2015 = +79 million lbs.

2016Annual total7.816 B lbs.

48 3910 2

-5 -17

Roasts* Pre-cut steak Pre-CookedRoast Beef

Ground Beef Ribs Other Beef

Source: 2016 Techomic Foodservice Volumetric Study

Filet Is Rebounding

Item Operator Purchases(Million Pounds)

OperatorPenetration

Penetration Improvement

Filet Steak +13 8% +1%

Tenderloin Roast +6 15% +2%

Source: 2016 TechnomicFoodservice Volumetric Study

31

Beef Foodservice Dollar Purchases Continue to Exceed Those of Chicken

0123456789

Pounds

Bill

ion

Poun

ds

Foodservice Purchases (Pounds)

Beef Chicken

0

5

10

15

20

25

30

35

Dollars

Bill

ion

Dol

lars

Foodservice Purchases (Dollars)

Beef Chicken

32Source: 2016 Techomic Foodservice Volumetric Study

WHO BUYS AND EATS THE BEEF - IN-HOME (TODAY AND

TOMORROW)?IRI/Panel Data, NPD National Eating Trends

33

More than 7 in 10 consumers eat beef in an average week… 2.6 eatings per week.

71.8 72.8 72.6

2.5 2.5 2.6

0

5

10

0

25

50

75

100

2013 2014 2015

WeeklyPenetration

Years (ending Aug)

Source: The NPD Group/National Eating Trends® Years ending in AugustData: Total Population; Based off an avg. week;In-Home & Carried From Home

Beef Consumption Trend (In-Home/Carried) WeeklyPenetration

“Disclosed with permission of The NPD Group solely for the purpose for which it is being provided by NCBA (a contractor to the Beef Checkoff). The reproduction, dissemination, or use of this information

for any other purpose is strictly prohibited without NPD’s prior written consent.”

31 billion servings of beef

34

31 billion eatings – who and why

35

“Who” Analysis: • By generation• By life-stage• By income• By ethnicity• By education level

“Why” - Helps Provide Focus to Communications, Culinary Direction, Merchandising Recommendations

0

20

40

60

80

100

120

140

MillennialsBorn 1976+

Gen X 1965-1976

YngrBoomers

1956-1964

OlderBoomers

1946-1955

Retirees1936-1945

Seniors pre-1936

Uni

t Ind

ex

Beef Unit Purchasing by Generation

Total Beef Ground Beef Steaks Roasts Other

Millennials Purchase Fewer Roasts, Seniors Less Ground Beef and Steaks

36Source: IRI Panel Data, 2012-2015

96 94 78

114 121117

55 50

39

30 23

30

Total Pop. Millennials with Kids Millennials without Kids

Seafood

Pork

Poultry

Beef

When Millennials have kids … animal protein (with exception of seafood) climbs.

37

Source: The NPD Group/National Eating Trends®; 2 years ending Aug 2016

Data In-Home & Carried From Home

Animal Protein AEPC (In-Home/Carried)

“Disclosed with permission of The NPD Group solely for the purpose for which it is being provided by NCBA (a contractor to the Beef Checkoff). The reproduction, dissemination, or use of this information

for any other purpose is strictly prohibited without NPD’s prior written consent.”

37

Higher Education = Less Spending on Beef

38

0

20

40

60

80

100

120

140

HH Educ -Graduated HighSchool or Less

HH Some College HH GraduatedCollege

HH Post GraduateSchool

Dol

lar I

ndex

Beef Spending by Education Level

Total Beef Ground Beef Steaks Roasts Other

Source: IRI Panel Data, 2012-2015

39

“I try to limit my red meat consumption”% response

16 23

1916

18 21

28 24

19 17

College Ed. non-CollegeEd.

13 17

13 13

2227

2623

26 19

College Ed. non-CollegeEd.

Caucasians Ethnic Groups

College educated ethnic groups are more likely than college educated Caucasians to agree with

trying to limit red meat consumption.

Note - Hispanics are English speaking; * Ethnic Group = African Americans, Hispanics, all other non-white race/ethnicitiesSource: The NPD Group/National Eating Trends® 2 years ending Aug 2016

Data In-Home & Carried From Home

47% 52%

“Disclosed with permission of The NPD Group solely for the purpose for which it is being provided by NCBA (a contractor to the Beef Checkoff). The reproduction, dissemination, or use of this information

for any other purpose is strictly prohibited without NPD’s prior written consent.” 39

0

20

40

60

80

100

120

140

HHw/younger

Chldrn

HH w/olderChldrn

YoungSingles -18 - 44years of

age

OlderSingles -

45+

YoungCouples -18-44 nochildren

OlderCouples -

45+ nochildren

Buye

r Ind

ex

Younger Singles Purchase Beef Less Often

Total BeefGround BeefSteaksRoastsOther

Younger Singles Purchase Beef Less Frequently

Source: IRI Panel Data, 2012-2015

Singles

40

One person households … a growing demographic, about 1/3 of American households

41

AEPC 2016

Source: The NPD Group/National Eating Trends®; 2 years ending in Aug 2016Data: In-Home & Carried From Home

Change in Total Beef Consumption by Household Member Size (In-Home/Carried)

0 30 60 90 12015% 10% 5% 0% 5% 10% 15%

1

2

3

4

5+

% Change vs. 2014

10%

28%

18%

21%

23%

% of Eatings

83 beef eatings per year

“Disclosed with permission of The NPD Group solely for the purpose for which it is being provided by NCBA (a contractor to the Beef Checkoff). The reproduction, dissemination, or use of this information

for any other purpose is strictly prohibited without NPD’s prior written consent.”

100 beef eatings per year

41

Asians and Blacks Have Weaker Beef Purchase Patterns

42

0

20

40

60

80

100

120

White Asian Black Other (mostlyHispanic)

Buye

r Ind

ex

Beef Purchase Frequency by Race (Ethnicity)

Total Beef Ground Beef Steaks Roasts Other

Source: IRI Panel Data, 2012-2015

43

Caucasian and Hispanics have the most frequent beef consumption, and are also the groups with the smallest declines

AEPC 2016

*Hispanics are English/Bilingual speakingSource: The NPD Group/National Eating Trends®; 2 years ending in Aug 2016

Data: In-Home & Carried From Home

Change in Total Beef Consumption by Race/Ethnicity (In-Home/Carried)

0 30 60 90 12015% 10% 5% 0% 5% 10% 15%

Caucasian

African Am.

Hispanic*

Other

% Change vs. 2014

66%

11%

18%

5%

% of Eatings

“Disclosed with permission of The NPD Group solely for the purpose for which it is being provided by NCBA (a contractor to the Beef Checkoff). The reproduction, dissemination, or use of this information

for any other purpose is strictly prohibited without NPD’s prior written consent.”

34% (of eatings)

43

WHAT IS THE UPSIDE FOR BEEF IN RESTAURANTS?

Chef and Beef’s Value Study

44

45

Chefs & Beef’s Value

Hypothesis: Beef Meals, while having a higher cost, deliver a greater profit than other protein meals.Do beef meals provide a greater value (profit) than other protein meals?

Are restaurant operators looking to add more beef items to their menus?

What would inspire additional beef menu items?Hypothesis: Beef Meals, while having a higher cost, deliver a greater profit than other protein meals

Source: Chefs & Beef’s Value Study 2016

46

Chefs & Beef’s Value

572 total operatorsmix of casual, upper casual, and fine dining

Source: Chefs & Beef’s Value Study 2016

• Filet Mignon• Ribeye Steak• Sirloin Steak• Beef Fajita• Beef Burger• Chicken Breast• Chicken Fajita• Chicken Sandwich• Salmon• Shrimp• Tilapia• Shrimp Fajita• Pork Chop• Pork Ribs

47

Dish

Whatever is

included on the plate?

+Additional

items ordered

= Meal

Menu PriceFood Cost

% of time ordered $ Profits% of Food Cost

Chefs & Beef’s Value

48

Chefs & Beef’s Value

Source: Chefs & Beef’s Value Study 2016

Menu Price

%Dish Food Cost

Dish $ Profit

Add On Revenue

Meal $ Profit

Beef costs more Beef delivers greater profit dollars, add-ons, and larger check sizes

Compared to:

$28.09 33% $18.28 $17.33 $31.77

%Meal Food Cost

30%

* Based upon median data

$16.25 26% $11.68 $11.97 $20.84 26%

49

Chefs & Beef’s Value

Beef Burgers offer a better menu value than Chicken Sandwiches

Source: Chefs & Beef’s Value Study 2016 * Based upon median data

Compared to:

$11.50 25% $8.25 $10.16 $16.24 25%

Menu Price

%Dish Food Cost

Dish $ Profit

Add On Revenue

Meal $ Profit

%Meal Food Cost

$10.98 28% $7.43 $8.06 $13.34 30%

50

Chefs & Beef’s Value

Restaurant Operators plan to add more BEEF items to their menus

Source: Chefs & Beef’s Value Study 2016

Casual & Upper Casual

Fine Dining

+

51

The cuts that define quality in the minds of consumers

Source: Millennial Listening Panel Food Service Quality 2016

56%

33%

28%

27%

26%

26%

Filet Mignon

Sirloin

Ribeye

Tenderloin

Porterhouse

T-bone

Cuts and Types for High Quality

HOW DO WE TAKE ADVANTAGE OF THE

“SMOKED BEEF” TREND?Chef New Product Investigation

52

53

Have you ever…

Spent an entire day or night smoking beef?

Wishing you could enjoy smoked beef, but don’t have a smoker?

Wanted to order smoked brisket only to find out the restaurant has run out?

Thought about a smoked steak that was cooked to a perfect medium?

54

Low EndLiquid Smoke

MidPre-cooked smoked

Outsource to a smokehouse offsite

HighOn-site smoker

Best opportunity area in competitive landscape

Smoked Beef Landscape

Source: Cold Smoked Foodservice Qualitative 2016

Fresh Smoked Beef

Source: Cold Smoked Foodservice Qualitative 2016

Chef feedback:

No need for a smoking equipmentReal smoke – not artificialConsistency Creativity on the menuPotential for different cutsHigh volume potential at buffets

55

Fresh Smoked Beef

56

Chef thoughts:“Cold smoked gives you

the versatility where you could serve a piece of meat up anywhere from rare to medium rare to

well done..”

“It’s just unique. I’ve never even thought of it for a raw steak to be smoked. Whenever I think smoke, it’s fully cooked…

It’s interesting to think of a filet or a ribeye to be smoked and still be cooked to temp. It would be cool to play around with tartar and

a filet. It opens a lot of options.”

“It saves me $200,000 from going out and getting a smoker. We could have the same thing as having a smoked

product without using the liquid smoke marinade which tastes horrible and other products that do

the same.”

Source: Cold Smoked Foodservice Qualitative 2016

WHAT ABOUT SELLING BEEF ONLINE?

IRI Panel Data, Consumer Beef Index, Millennial Listening Panel

57

Anticipated Future Delivery of Online Meals, Meat, Groceries

58

Next few years’ deliveries of meals, meats or other groceries

Key: Significantly higher/lower than non-segment ( ) Base: Beef Eaters (N = 978), Millennials (N = 397), Parents 20-34 (N = 122)Q.40h/i: Over the next few years, do you anticipate that your use of services that deliver meals, meats and other groceries will ……?

20%

5%

15%

26%

7%

19%

28%

7%

21%

Increase (Net)

Increase a lot

Increase a little

Total

Millennials

Parents (20-34)

July 2014

Source: Consumer Beef Index, July, 2014

Steak Share Has Decreased

59

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

2012 2013 2014 2015

Perc

ent o

f Pou

nds

Internet Beef Sales Share of Retail Beef Sales

BEEF OTHER BEEF ROAST BEEF STEAKSGROUND BEEF TOTAL BEEF

Steak

Source: IRI Panel Data, 2012-2015

Less Repeat Business

60Source: IRI Panel Data, 2012-2015

0

20

40

60

80

100

2012 2013 2014 2015

Percent of Buyers Repeating - Total Beef

All Outlets Internet

Beef and Online Grocery

• Uncover barriers• What content

motivates purchase

• 323 participants• 150 Online Meat

Purchasers• 173 Potential

Online Meat Purchasers

• DMA’s with online shopping available.

Source: Millennial Listening Panel, E-Commerce Report, January, 2017 61

Beef and Online Grocery

Variety

Current e-meat shoppers

Product Detail

Potential e-meat shoppers

Prices/Delivery/Fat Content

Quality

Source: Millennial Listening Panel, E-Commerce Report, January, 2017 62

Beef and Online Grocery

Cut Recommendations Cooking Tips

Which e-commerce tools do they want to see launched?

Freshness Guarantee Recipe RecommendationsSource: Millennial Listening Panel, E-Commerce Report, January, 2017 63