020226 Recession Not Affecting Appetite for Beef

Denver, CO - Year-end demand data indicate consumers' appetite for beef remains strong, with preliminary figures showing consumer demand in 2001 up 5.7 percent compared to 2000 levels, officials announced from the 2002 Cattle Industry Annual Convention and Trade Show.

Year-end gains were driven by a strong fourth quarter, despite the fact that the U.S. beef industry was facing record beef supplies, softened exports to key international markets, and a downturn in the nation's economy during the last few months of the year.

According to Chuck Lambert, chief economist for the National Cattlemen's Beef Association (NCBA) -- the trade organization representing America's cattle producers -- demand gains in the last few months of the year reflect the fact that the industry sold large beef supplies at strong retail prices.

“Fourth quarter beef production reached 6.7 billion pounds, which is nearly 3 percent larger than the same quarter one year ago. That combined with softer exports means total domestic beef supplies for the quarter were record large,” Lambert explained. “At the same time, average retail beef prices were slightly higher compared to the same time last year. When we sell more supply at steady prices or better, we will see increased demand.”

Beef demand, which is a measure accounting for both per capita consumption and consumer spending for beef, has trended upward since 1999. While the latest demand figures are encouraging, industry leaders admit they are faced with several challenges in the coming months, which will require great industry unity.

“It's inspiring to see that producers' efforts to build demand continued to pay off even when the economy was shaky at best,” said Dan Hammond, chairman of the Cattlemen's Beef Board (CBB) and a beef producer from American Falls, Idaho. “Demand is a measure of consumer behavior, not individual producer profitability. We aim to improve profitability as well as maintain consumer confidence and protect the overall marketing climate for beef.”

Hammond added that the industry has aggressive strategies in place to address these critical areas and strengthen the long-term health of the beef industry, which is the single largest segment of the United States agricultural economy.

Enhancing Profitability

Increasing the profit potential for all segments of the beef industry is a key priority for industry leaders. The CBB, NCBA, state beef councils, and state cattlemen's associations have a two-pronged approach to achieving greater and more consistent long-term profitability.

Growing consumer demand is one part of the equation, which will require the industry to maintain consumer confidence in beef, introduce more consumer- friendly products and grow the export market.

Protecting the business climate for America's beef producers is the second track of the industry's long-range plan. This entails increased cooperation and communication among industry segments, greater efficiencies in production, and working with government to ensure fair business practices for America's ranchers and farmers, among other things.

According to Lynn Cornwell, president of the NCBA and a beef producer from Glasgow, Mont., individual beef producers will see a greater share of the benefits as the industry continues to build its record of success in these areas.

“As demand increases, we can sell beef at slightly higher prices, and that equals greater returns for those of us in the beef business,” Cornwell explained. “The long- term outlook will only get better the more we can match demand signals with our production and supply levels.”

Alleviating Supply Surplus

Responding to supply issues will be of key importance in the coming months. Supply backlogs began in the fall of 2001 when the September 11 terrorist attacks hurt the travel, tourism and convention businesses -- all of which had a direct impact on restaurant beef business. Exports to Japan -- the top export market for U.S. beef in recent years -- also dropped following that country's discovery of BSE (bovine spongiform encephalopathy) in native cattle. As a result, total domestic beef supplies in the last few months of the year were record large.

With the use of checkoff dollars, the CBB, NCBA and state beef councils will continue to help move supply by encouraging consumers to take advantage of favorable beef prices, embarking on promotional efforts in major markets, urging retailers to continue featuring beef for their shoppers, and continuing partnerships with restaurant chains to bring great-tasting new beef items to their menus.

On the international front, the U.S. Meat Export Federation (USMEF) is implementing a $9 million education campaign in Japan to educate consumers about safety and wholesomeness of U.S. beef, position beef as an essential part of a balanced and healthful diet, and restore consumer confidence. NCBA, USMEF and the U.S. Department of Agriculture are working to expand the food safety education program to other Asian countries such as the Philippines, Taiwan and Korea. They also are educating local regulators about the regulatory framework that has kept BSE out of the U.S. for more than 15 years.

Finally, the industry will continue to work with the U.S. government to facilitate fair trade agreements that increase the access of U.S. beef in more foreign markets.

Introducing More Consumer-Friendly Products

The industry also plans to keep pace with consumers' busy lifestyles by helping manufacturers bring more consumer-friendly products to market. Just a few short years ago, the industry helped introduce an entirely new category of fully cooked beef products that could be heated in the microwave and ready to serve in minutes. Sales for these types of products have increased 100 percent since 1999, and annual sales for the category topped $116 million as of October 2001.(1)

This type of innovation helped spur an influx of new beef products to the supermarket channel. According to data from Marketing Intelligence Service, Ltd., roughly 1,100 new beef products were introduced at the retail level in the past three years.(2)

The industry also is using checkoff funds to help introduce new beef items on restaurant menus. Taco Bell® recently launched its new Steak Quesadilla and will be working with the beef industry and state beef council partners on a nationwide promotion of the product through March. The Taco Bell Steak Quesadilla is the third steak product the 6,300-unit chain has introduced in the past 12 months. Its previous two steak items -- the Grilled Steak Taco and the Steak Grilled Stuft Burrito -- helped move more than 27 million pounds of steak in 2001.

All of these consumer-friendly beef products deliver a bundle of essential nutrients, including zinc, iron, protein and many B-vitamins, thereby giving consumers more reasons to choose beef.

Maintaining Consumer Confidence

Protecting the safety of the U.S. cattle and beef supply is paramount for beef producers, and the industry will continue its leadership in preventing foreign animal disease, advancing technologies to reduce foodborne pathogens, and working with government to ensure adequate resources are devoted to food safety needs.

A recent survey found 89 percent of consumers felt confident the U.S. beef supply was safe from “mad cow disease” (bovine spongiform encephalopathy or BSE).(3) The findings followed the November 2001 release of a three-year risk analysis study conducted by Harvard University which found the U.S. was at low risk for exposure to BSE due to the various firewalls the industry and government have erected that have kept the disease out of America's cattle herds.

The beef industry will continue its support for food safety vigilance. In fact, it strongly supports additional funding and other initiatives to help expand the resources available to ensure the U.S. food supply remains the safest in the world.

Also related to overall consumer confidence is the number of consumers who feel good about the nutritional value of beef. A January 2002 consumer survey found the percent of consumers who consider beef as a healthful part of the diet is up slightly from December 1998. Consumers perceived beef steaks and roasts to be significantly more healthful than pork chops and roasts, and consumer perceptions about ground beef is improving. The percentage of people who rated ground beef as healthful is up three percentage points since 1998, with 90% lean ground beef being perceived as the most healthful of all beef segments.(4)

Producer-directed and consumer-focused, 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.

(1) ACNielsen, Fresh Look Marketing, October 2001

(2) Productscan Online, January 2002 -- an online database service of Marketing Intelligence Service, Ltd. New beef items considered as manufacturer- branded products for the retail setting only and included meat entrees for the fresh meat case, hot beef snacks, beef sandwiches and meals in which beef was used as an ingredient.

(3) NCBA/Ipsos Reid, December 2001

(4) NCBA/Wirthlin Worldwide, January 2002

SOURCE: National Cattlemen's Beef Association

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