000151 Beef Demand Takes Upward Swing After 20-Year Slide

Phoenix, AZ - For the first time in 20 years, beef demand has stabilized. Preliminary fourth quarter 1999 data shows continued growth in demand when compared to 1998. For the year, beef demand shows a 3.5% gain compared to 1998.

The announcement was made during the 2000 Cattle Industry's Annual Convention and Trade Show in Phoenix, Ariz., and confirms industry projections for demand in 1999.

The increase in beef demand correlates with two major economic factors: increased consumer spending for beef and higher per capita consumption, said Randy Blach, market analyst for Cattle-Fax, a private market research firm in Denver, Colo. The beef demand index, which shows demand had been on the decline since 1980, is calculated by leading independent economics and industry experts using USDA per capita beef consumption data and USDA Choice retail beef prices adjusted for inflation.

As consumers continue to enjoy more beef at mealtime, the foodservice sector is one of the important factors in the rise in beef demand.

“Beef remains a dominant force in foodservice,” said Ronald N. Paul, president of Technomic, Inc., a Chicago-based marketing and management consulting firm specializing in the foodservice field. “We have seen growth in beef servings from steaks to roast beef sandwiches to the all-American burger.”

In 1998, total food expenditures favored foodservice. Consumers spent 51% of their food dollar on meals away from home and 49% in the retail marketplace, according to research done by Technomic, Inc. “More consumers turn to restaurants as a convenient meal solution. And beef offers both an option people like and can find,” Paul explained.

Beef appears on almost every restaurant menu across the nation with 7.1 billion beef servings in 1998 in commercial restaurants. That number represents a 13% increase in beef servings since 1990 (November 1999, NPD/Crest).

Total consumer spending on beef (retail and foodservice) totaled $49.22 billion in 1999, a $2.58 billion (or 5.5%) increase compared to one year ago. Per capita spending for beef also grew 4.5% to $180.37. This level of spending represents a $7.82 per capita gain and the largest increase in per capita spending since 1988.

A key factor in the spike for total beef spending is the fact that consumers are buying beef at steady to slightly higher prices despite record-high beef supplies. USDA average retail beef prices are up 7.2 cents per pound from one year ago, according to Cattle-Fax data. At the same time, the beef supply for the year reached 26.39 billion pounds, 2.8% above 1998 levels.

“Increased supply usually drives consumer prices lower, as demand becomes saturated. In 1999, the exact opposite happened,” Blach said.

In addition to increased consumer spending, per capita beef consumption for the year is up 1.1 pounds (or 1.6%) from 1998. Cattle-Fax estimates show year- end per capita consumption jumped to 69.2 pounds per person.

Data also shows beef's share of total meat expenditures is stable compared to last year, despite stiff competition from pork and poultry. Beef's share of consumer spending dollars in 1999 is 40%, which is slightly (0.2%) above last year's average. Pork, chicken and turkey market shares in 1999 were 28.4%, 27.4%, and 4.2% respectively. Blach expects beef's market share to hold steady throughout 2000.

Exports also contributed to the current improvement in beef demand, with exports of beef and beef variety meats through November 1999 showing an 8% increase in tonnage over 1998. Final beef export figures will not be available until late February. However, the value of U.S. beef exports in the first 11 months of 1999, when compared to 1998, increased by 13% to Korea and by 14% to Mexico. These countries, along with Japan, continue to increase imports of U.S. beef as their respective economies recover from recent financial crises.

Other factors that have helped beef demand include a strong U.S. economy, rising wages, low inflation and a low unemployment rate. While year-end preliminary demand figures give beef producers a lot to be hopeful for, the battle is far from over, said Chuck Schroeder, CEO of the National Cattlemen's Beef Association (NCBA).

“These preliminary year-end figures demonstrate the success of our efforts to stabilize beef demand. But to keep the demand momentum going for both consumers and America's beef producers, we'll continue to focus on and expand on the achievements we've seen within our industry,” Schroeder said.

As the major checkoff contractor to the Cattlemen's Beef Promotion and Research Board (CBB), NCBA embarked on the first leg of a long-term strategy in late 1998 to stabilize beef demand by focusing efforts on making beef more convenient for today's time-starved consumers. Schroeder said these initiatives contributed to the annual demand gains.

With checkoff funding, NCBA worked in both the foodservice and retail arenas to meet the demand for more convenient beef meals by introducing a new category of convenient, branded beef items that can be heated in the microwave and ready to serve in about 10 minutes. Several manufacturers of these products have seen double-digit sales and distribution increases since the beef industry launched its 1999 national marketing campaign to build consumer awareness and trial of these microwaveable beef products.

While primarily found in the supermarket fresh meat case, heat-and-serve beef products also are making their way into restaurants to ease operational issues and deliver a great beef meal for consumers. Foodservice operators are looking for convenient, laborsaving products. These value-added beef entrees can help operators reduce labor costs with a convenient, high-quality beef menu solution.

In addition, partnerships with casual dining operations helped promote new beef menu items using the “easy beef” theme.

“The fastest growing segment in foodservice continues to be casual dining,” explained Paul. “Variations on basic favorites, such as burgers and steaks, give chefs more variety on the menu and provide their customers with a new option at the restaurant.”

Beef's popularity in the casual dining restaurants saw steady growth in 1998 over 1997 with an 18.5% increase in hamburger/cheeseburger servings; a 12% increase in roast beef sandwich servings; and a 25% increase in steak servings, according to dining trend information from 1998 Technomic & NCBA Purchase Dynamics Study.

Today's time-starved consumers have more disposable income to pay for food preparation services. And this combination has definitely worked to the advantage of beef consumption in casual dining operations and traditional steakhouses, he added.

The beef industry's new product development initiative introduced more than 30 new products in 1999 using currently undervalued beef cuts from the chuck and round. And, the industry tackled one of the biggest barriers to increased beef purchase: consumer confusion at the retail meat case. Through a new marketing initiative called “Beef Made Easy,” the industry is helping retailers market beef products by cooking method, versus anatomy. Color-coded merchandising materials make the beef section easier to shop, and on-pack cooking instructions make beef dishes easier to prepare.

“The beef industry continues to build on this convenience strategy in 2000,” Schroeder said, “and has introduced an aggressive nutrition component to its marketing efforts -- one that focuses on the bundle of nutrients beef provides, such as zinc, iron, protein and several B vitamins.”

In past years, the industry has produced leaner products in response to consumer interest in lower-fat food choices. Today, consumers and health professionals also are recognizing the nutrient contributions beef makes to diet quality, he said.

“All of our marketing efforts target today's mom. As the primary shopper and keeper of the family meal, she is the critical link in helping build beef demand,” Schroeder explained. “With the introduction of the nutrition and convenience strategy, our marketing efforts will work in tandem to deliver convenient beef products she can feel good about eating and serving to her family.”

Beef industry marketing efforts are funded by beef producers through their $1-per-head checkoff program and are managed for the Cattlemen's Beef Board and state beef councils by the National Cattlemen's Beef Association. The national beef checkoff is administered by the Cattlemen's Beef Promotion and Research Board. This 111-member board is appointed by the Secretary of Agriculture to oversee the collection of the $1-per-head checkoff, certify state beef councils, implement the provisions of the Federal Order establishing the checkoff and evaluate the effectiveness of checkoff programs.

The National Cattlemen's Beef Association is the trade association of America's cattle farmers and ranchers, and the marketing organization for the largest segment of the nation's food and fiber industry. NCBA is producer- directed but consumer focused, with offices in Denver, Chicago and Washington, D.C.

RETURN TO HOME PAGE

E-mail: sflanagan@sprintmail.com