Market Research TeamRick Husted, John Lundeen, Alison Krebs, Colleen Moore, Shawn Darcy

Consumer Insights

State of the Beef Industry

Agenda

• Herd expansion

• Growth in per capita consumption

Beef Supply & Demand

Economic Outlook

• Beef shares by channel

• Grocery dynamics

• Foodservice dynamics

Where Consumers Buy Beef

Why Consumers Buy Beef

• Product attributes

• Transparency regarding production

• Generational trends

• Media trends

• Single site logic

BIWFD.com Website Consolidation

54321

BEEF SUPPLY AND DEMAND

4

ECONOMIC OUTLOOK

Q1 growth was limited by weak consumer spending. While this followed the pattern of weak starts in recent years, the economy is projected to strengthen and remain growing at a fairly robust pace for the remainder of the 2017. The odds for a recession in the next 6-9 months remain below 20%.

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent Change in Real GDP

fcast

U.S. Bureau of Economic Analysis, Real Gross Domestic Product [A191RL1Q225SBEA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/A191RL1Q225SBEA, May 19, 2017. Forecast: Wall Street Journal Economic Forecasting Survey, May 2017.

WHERE CONSUMERS BUY BEEF

Research Sources:• Scanner data

from grocery stores (IRI)

• Foodservice Volumetric … annual study of purchases

12

51.4%

52.9%53.5%

54.6%54.1%

53.0%

48.6%

47.1%46.5%

45.4%45.9%

47.0%

40.0%

42.0%

44.0%

46.0%

48.0%

50.0%

52.0%

54.0%

56.0%

2011 2012 2013 2014 2015 2016*

Perc

ent o

f Tot

al B

eef V

olum

e

Share of Beef Volume by Channel

Foodservice Retail* Estimate

13

Grocery and Beef• Differentiated beef

offering• Bigger shopping carts• Total meat case revenues

Foodservice and Beef• #1 food by wholesale dollars• Gross profit dollars … dish and

meal• Add-on sales

The Business Case for Beef

Research Source:• Panel data (IRI)

Research Source:• Chef and Beef Value Study (Datassentials)

14

Meal –Center of Plate Proteins $17.33

$16.06 26%

30%

$14.48 27%

$11.97 26%

Beef meals profit

dollars are also

greater due to more

add-ons, which leads

to a larger check size.

ADD-ON REVENUE CHECK SIZE MEAL PROFIT

MEAL FOOD COST

$28.31

$23.28

$20.84

$45.42

$38.20

$31.92

$28.22

$31.77

Value Study 2016

WHY CONSUMERS BUY BEEF

Consumer Beef Index• Overall perceptions of beef (the

“buckets”)• Beef “performance”• Pricing perceptions• Comparison against chicken• Reasons for eating more or less beef

Steak Satisfaction Tracker

Consumer Image Index• Key production practices … consumer

mindset• Trust measure• Knowledge base• Transparency

A range of market research studies help track checkoff opportunities, successes and challenges.

“Product” Performance Trends Over Time At Home

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mar'17

Great tasting

Delivers goodresults consistently

Extremely safe toeat

Good value for themoney

Always tender

Beef’s quality, safety and value attributes are considered very important and have been climbing over time.

Source: Consumer Beef Index

(Web 1.0) (Web 2.0)

“Knowledge” Performance Trends Over Time At Home

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mar ' 17

Know how toprepare it well

Easy to pick theright cut

Knowledge of beef purchasing/preparation, while high, has been relatively static over time.

Source: Consumer Beef Index

(Web 1.0) (Web 2.0)

“Nutrition” Performance Trends Over Time At Home

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mar ' 17

Provides energy andfuel for the body

Excellent totalpackage of nutrients

An ideal balance ofgood taste and goodnutrition

Nutritional scores for beef are climbing.

Source: Consumer Beef Index

(Web 1.0) (Web 2.0)

Satisfaction Trends

Steak Satisfaction Tracker

Source: Toluna Quick Survey – May 2017 Steak Sat

80%90% 86% 86% 89% 90%

Q2. How satisfying was this beef steak eating experience? (1 – 5 stars)

4.23 4.43 4.35 4.39 4.39 4.53

Jul '16 Sep '16 Nov '16 Jan '17 Mar '17 May '17

4 – 5 Stars --------- Mean ----------

Base (204-272)

Significantly different than prior period

Ratings of steak satisfaction improved significantly in Sept 2016 and remain at that relatively high, and statistically stable, level through May 2017

Notably, the mean scores in May 2017 are up directionally vs. March 2017

Jul ’16 Sep ’16 Nov ’16 Jan ’17 Mar ’17 May ‘17

22

In addition to consumer studies, the product quality team uses shear force measurements to track beef tenderness.

Reasons Planning To Consume MORE Beef

42%

37%

33%

32%

41%

31%

31%

29%

27%

28%

43%

40%

43%

41%

32%

40%

34%

35%

36%

35%

Extremely important Very important

BETTER AVAILABILITY OF CUTS

PREFER THE TASTE OF BEEF

LESS WORRIED ABOUT THE SAFETY OF BEEF

MORE OF A FAMILY FAVORITE

FEELING COMFORTABLE WITH HOW BEEF IS RAISED

GREAT PRICES AT STORES

Base: Those planning to eat less beef (N = 157) 38f: As you noted earlier that you plan to eat less beef, how important or what impactdoes each of the following have on your decision to eat less beef?

Among consumers (14%) who say they are eating more beef, a mix of nutrition, taste, price and lifestyle reasons stand out

HEARING BETTER NEWS ABOUT IT BEING HEALTHY

ADDING PROTEIN TO YOUR DIET

LEARNED NEW WAYS TO PREPARE BEEF

LEAN BEEF FITS A HEALTHY DIET

Source: Consumer Beef Index

77%

44%

Importance Beef Agreement

Openly Share information with the public

High Familiarity with How Cattle are Raised

33%

Source: 2016 Consumer Image Index

25

Although unknowledgeable, around half verbalize concern for many topics impacting the industry

Antibiotic Use Sustainability

8% 8% 9%

53% 57%49%

2014 2015 2016

Conc

ern

2% 2% 3%

43% 50%40%

2014 2015 2016

10% 7% 10%

57% 59%51%

2014 2015 2016

Hormones

Source: 2016 Consumer Image Index

THE EVOLVING CONSUMER and BIWFD.COM WEBSITE

CONSOLIDATION

Aggregated by Ypulse Via US Census Demographics; Projections 2020

`232 Million `167 Million`237 Million

US Census Data 2015 – Laptop/DesktopStatista 2016 – Mobile/Tablet

30

BIWFD.COM WEBSITE CONSOLIDATION

Website Market Research Support

1X1 Interviews Hybrid Site Research

Website Consolidation

Intercept/ Simulation

FAB Added to Consolidation –

OC Approved

UX Expert and Stakeholder

Group Research

Tactical Market

Research Support

July 2016

Jan2016

May2016Mar

2016

FY 2017

Hybrid Site Gut CheckThere was overwhelming support for combining sites

99% 95%

Does All Info Fit Together?

100% 93%

Comfort w/Production Info on the website?

FAB Total

BIWFDTotal

FAB Total

BIWFDTotal

Value Of Additional Information?

Nutrition and Production

Recipes and Production

Recipes and Nutrition

Recipes,Nutrition,

Production

Sales

96%

Sales Sales Sales

98% 97% 100%

More Valuable/Does Not Matter

Create holistic and cohesive story throughout website –e.g., weaving in nutrition, cut, culinary and producer content where relevant

Website Goal

Main sections:• Recipes• Cooking• Cuts• Nutrition• Raising Beef• What’s New• Footer – Supply Chain-

specific

36

Raising Beef HubBeefitswhatsfordinner.com

• Goal: Provide a consumer-friendly, straightforward, easy-to-understand approach to communicating the complexities of the beef industry.

• Relatable• Deepened

Sense of Humanity/ Emotion

• Beautiful Imagery

Market Research TeamRick Husted, John Lundeen, Alison Krebs, Colleen Moore, Shawn Darcy

Consumer Insights