Differentiated Meat in North America

Branding Beef as Natural or Organic:
A Look at the US Marketplace
Clinton Dobson
Livestock Market Analyst
Market and Consumer Analysis Unit
June 19, 2008
Niche or meat market of the future ?
All Natural, Branded (Painted Hills), Oregon
Raised, 100% Vegetarian and antibiotic-free
Source: http://www.marketofchoice.com.
2
Natural and organic beef sells at a premium
• In 2007, natural and organic beef retailed
at an average $5.50/lb, a $1.83/lb
premium.
• 58% of those that eat beef would pay an
extra 10% for beef raised without
hormones, and 55% said the same about
beef raised without antibiotics.
Source: Mintel, US Red Meat, 2007; FreshLook Marketing; NCBA, 2008
3
Natural / organic beef sales are on the rise
Share
Value
of Total
Beef
Quantity
Sales
Total
Sales
2006
2007
1.9%
2.5%
1.3%
1.7%
% Change
(06 vs 07)
US$
$290 million $388 million
33.9%
Lbs
54.2 million
30.2%
70.6 million
Source: NCBA, 2008; FreshLook Marketing;
4
Why consumers buy natural / organic meat
Reasons for Purchasing Natural or Organic Meat (2007)
Positive Long-Term Personal Health Eff ects
47.2%
Better Nutritional Value
47.2%
Better Health and Treatment of the Animal
40.4%
Better Taste
Animal Welfare
38.9%
Quality
Freshness
36.8%
Less of an Environmental Impact
30.6%
Prefer to Purchase Organics f or My Family
30.1%
Better Appearance
23.8%
Better Price / Value Question
Other
0.0%
Environment
14.5%
3.1%
5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0%
% of Buyers
Source: 2008 The Power of Meat
5
Need to target those with a higher income
% of Respondents by Income that have Purchased Natural or
Organic in the last 3 months
57.1%
60.0%
% of Respondents
50.0%
40.0%
33.8%
35.6%
30.0%
18.4%
20.0%
13.9%
10.0%
18.8%
15.8%
8.5%
0.0%
< $15,000
$15,000 to
$25,000
Source: 2008 Power of Meat
$25,001 to
$35,000
$35,001 to
$50,000
$50,001 to
$75,000
$75,001 to $100,001 to > $150,000
$100,000
$150,000
Income Bracket
6
The largest market is our nearest market
% of Respondents by Region that have Purchased Natural or
Organic in the last 3 months
30.0%
25.2%
% of Respondents
25.0%
20.0%
19.2%
18.1%
15.0%
13.4%
10.0%
5.0%
0.0%
Northeast
Source: 2008 Power of Meat
Midwest
South
West
Region
7
Asian buyers are more likely to purchase
natural / organic meat
% of Respondents by ethnicity that have Purchased Natural or
Organic in the last 3 months
35%
32%
30%
% of Respondents
25%
20%
19%
18%
19%
Caucasian
African-American
15%
10%
5%
0%
Source: 2008 Power of Meat
Asian
Hispanic
Ethnicity
8
Chicken leads the way
Frequency of Purchase for Natural/Organic Meat and Poultry in
Past 3 months
80.0%
72.5%
70.0%
Because natural/organic chicken is available and beef is not.
% of Packages
60.0%
48.6%
50.0%
40.0%
29.5%
30.0%
29.0%
25.4%
19.7%
20.0%
11.4%
10.0%
7.8%
0.0%
Chicken
Beef
Ground
Meat
Fish
Turkey
Pork
Lamb
Veal
Source: 2008 The Power of Meat
9
Beef lags the rest of the meat industry
% of Packages Labeled Natural in the Meat Case
80%
2004
2007
67%
70%
61%
% of Packages
60%
Wow!!!: 48.6% have
purchased natural/organic
beef while only 4% of beef is
natural/organic.
50%
Demand > Supply
40%
30%
29%
27%
25%
22%
22%
20%
15%
7%
10%
2%
17%16%
15%
9%
6%
4%
0%
Meat
Beef
Ground
Pork
Chicken
Turkey
Beef
Source: 2007 National Meat Case Study - (excludes value-added products)
Lamb
Veal
10
There is very little organic meat in the meat case
Natural beef represents 4% of products, organics < 1%. Natural is used on 67% of chicken packages vs 2% organic.
% of Packages with the USDA Organic Stamp in the Meat Case
2.0%
2004
2%
2007
1.8%
1.6%
% of Packages
1.4%
1.2%
1.0%
0.8%
1%
1%
0.6%
1%
0.4%
0%
0.2%
0%
0%
0%
0%
0%
0% 0%
0% 0%
0% 0%
Ground
Pork
Chicken
Turkey
Beef
Source: 2007 National Meat Case Study - (excludes value-added products)
Lamb
Veal
0.0%
Meat
Beef
11
Assuming all natural / organic meat is branded
% of Branded Packages that are labeled Natural or Organic in
the Meat Case
80%
2004
70%
% of Branded Products Packages
72%
2007
67%
64%
Assuming that all natural or organic
meat are national or store branded
products and not unbranded.
60%
50%
39%
40%
30%
28%
30%
20%
20%
10%
42%
19% 17%
13%
5%
12%
8%
0%
Beef
Ground Beef
Pork
Chicken
Turkey
Lamb
Veal
Source: 2007 National Meat Case Study - (excludes value-added products)
Note: Data presented is calculated on the assumption noted in the figure
12
In the US, natural dominates over organic
• 78% of respondents have used some form
of natural food or beverage vs 54% for
organics.
• Only 39% of respondents in the US think
that organics are healthier than natural
foods and beverages.
Source: The Natural Marketing Institute, 2007.
13
US consumers say Natural more important
40%
Somewhat important
Very Important
35%
30%
25%
20%
15%
10%
5%
0%
Certified Organic
Certified Natural
Source: Agriculture and Rural Development, 2008
14
Hormone free is the leading natural claim
2% of beef packages were labeled hormone free vs 53% of chicken packages.
Ve
ge
ta
ria
n
Fe
N
d
o
Ar
tif
ic
ia
lI
ng
St
re
er
di
oi
en
d
Fr
ts
ee
Fr
ee
R
an
ge
C
er
tif
ie
d
H
um
N
an
o
e
Pr
es
er
va
tiv
es
H
or
m
on
e
An
tib
io
tic
Chicken
Beef
Ground Beef
Pork
Turkey
Lamb
Veal
Other
Total
Fr
ee
Fr
ee
3% of beef packages were labeled antibiotic free vs 13% of chicken packages.
53%
2%
3%
2%
1%
0%
0%
0%
62%
13%
3%
3%
1%
0%
0%
0%
0%
20%
Source: 2007 National Meat Case Study
6%
2%
0%
0%
0%
0%
0%
0%
8%
1%
0%
1%
1%
0%
0%
0%
0%
3%
3%
0%
0%
0%
0%
0%
0%
0%
3%
1%
0%
0%
0%
<1%
0%
0%
0%
2%
0%
1%
0%
0%
0%
0%
0%
0%
<1%
0%
0%
0%
1%
0%
0%
0%
0%
1%
15
Natural is a complicated term !!!
• How natural? Last 90 days, 100 days or
‘never ever’ ?
• No Antibiotics, no hormones vs never
processed and no additives?
• Many firms are marketing ‘natural’ as
being minimally processed. For example,
product is being labeled ‘natural’ if it has
not additives and is just fresh beef.
16
NE3
• A shift to “naturally raised”
• On Nov 28, 2008 the AMS published the
definition of ‘naturally raised’ as the
proposed standard for USDA-verified
programs.
• The Never Ever 3 program – No
antibiotics, growth promotants and no
animal by-products - Ever.
17
There are numerous brands of natural beef
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Brandt Beef – The True Natural
Certified Angus Beef – Natural
Coleman Natural Beef
Creekstone Natural Angus Beef
High Sierra Beef
Laura’s Lean Beef
Maverick Ranch Natural Beef
Meyer Natural Angus Beef
Montana Legend Premium Angus Beef
NatureSource Natural Angus Beef
NatureWell Natural Beef
North Shore Cattle Company
Northeast Family Farms
Premium Gold Natural Angus Beef
Wolfe’s Neck Farm Naturally Raised Beef
There are
many more
local and
regional
brands
18
The industry is already consolidating
• What was once 3 natural companies is
now one.
• Meyer Natural Angus buys competition
December, 2007 – buys Laura’s Lean Beef
April, 2008 - buys Coleman Natural Foods beef operations.
• Meyer’s will likely have more than half of
the natural beef market in 2008 and be
well positioned to establish a national
brand (estimated sales of $US450 million).
Source: Cattle Buyers Weekly
19
Meyer Natural Angus
• No hormones or antibiotics ever
• Verified origin (born, raised, fed and
processed in the United States)
• Vegetarian diet
• Angus breed
• Certified humane (recent development)
• 200 ranchers in the US (pre-merger).
• Selling Natural Beef since 1979.
Source: www.meyernaturalangus.com/
20
Now JBS
National Beef® has 3 natural brands
Naturewell®
Natural Beef
No antibiotics or
added
hormones for
last 120 days
NatureSourceTM Vintage Natural
Natural Angus
Beef
Beef
No Antibiotics or
added
hormones –
ever
No antibiotics in
last 300 days,
no added
hormones - ever
Source: www.nationalbeef.com
21
Harris Ranch has 3 ‘Natural’ Brands
• Harris Ranch Premium Natural Angus Beef
• Harris Ranch Natural Black Angus Beef
• Harris Ranch Natural Beef
Only the Premium Natural brand claims no
antibiotics or hormones – ever. The other two
brands use ‘natural’ in reference to minimally
processed and no artificial ingredients.
Source: www.harrisranchbeef.com
22
Going from a commodity to branded product
Source: Natural Beef Advertisement
23
Niman Ranch – “Raised with Care”
All natural
No antibiotics – Ever
No hormones – Ever
All vegetarian feed
Humanely raised on sustainable U.S.
family farms and ranches.
• Angus
•
•
•
•
•
Sells the bulk of its steaks to over 1,200 foodservice operations across the US
Source: www.nimanranch.com
24
Nolan Ryan All-natural Guaranteed Tender
• No antibiotics or growth hormones during the
last 100 days prior to processing
• The Texas Rangers announced that all burgers
served at the general concessions stands and
casual dining locations in the stadium will be
Nolan Ryan's beef. (April 22, 2008)
• All products are raised and processed in the
U.S.A.
• Open to all breeds of beef cattle with a
preference for cattle with visible signs of Bos
Indicus influence.
Source: www.nolanryanbeef.com
25
Restaurants are leveraging natural beef…
Black Angus Steakhouse (75 locations)
• Switched to all natural (hormone and antibiotics)
and corn fed beef in March, 2007.
Chipotle Mexican Grill Inc (730 locations)
• 100% of restaurants use natural pork, 84% use
natural chicken and 59% use natural beef. Are
working at sourcing enough beef and pork to go
100%.
26
Conclusions
• Consumers are concerned about meat
safety.
• Natural beef is a proxy of food safety.
• Attributes serve as the basis to begin
branding beef products and creating brand
loyalty.
• Organic has tough competition when
consumers are satisfied with natural.
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