1. The Red Meat Market Today What is driving or hindering the red meat market? May 8, 2014

2. Agenda Market Drivers – Beef Sales and Forecast – Price – Health – Consumer Preference Beef Consumption Millennial Generation 2

3. Market drivers 3 Obesity Trends Among U.S. Adults

4. Beef Cow Inventory: Is a Larger Herd on the Way? Years Million Head 4

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6. Another 700 million people in the next decade Remember only 4 percent is in the U.S. World Population Growth 6

7. Market drivers – Cost of Food 7

8. In the News – Rising price of Food 8

9. Source: Red Meat Sales and Forecast Mintel/based on Information Resources, Inc. InfoScan Reviews; Bureau of Economic Analysis; FreshLook Marketing Group Total U.S. sales and fan chart forecast of red meat, at current prices, 2008-18 9

10. Source: Mintel/Based on Information Resources, Inc., InfoScan Reviews; Bureau of Economic Analysis; FreshLook Marketing Group Beef sits atop the red meat category Total U.S. retail sales of red meat, by segment, at current prices, 2011 and 2013 10

11. Total Meat Category Pound Share % in Total US Over Time 11

12. How Much Are Consumers Willing to Pay? 12

13. Reasons Reportedly Consuming Less Beef Limiting cholesterol or fat Health reasons Other meats seem healthier Eating more plant-based protein Concerned about “factory farming” More concerned about price Too expensive relative to other meat Prefer other meal options for taste Among consumers (17%) who feel they are eating less beef Source: Consumer Beef Index, July 2013 13

14. Obesity Trends* Among U.S. Adults BRFSS, 1990, 2000, 2010 (*BMI 30, or about 30 lbs. overweight for 5’4” person) 1990 No Data <10% 10%–14%15%–19% 20%–24% 25%–29% ≥30% 2010 2000 Market Drivers - Health 14

15. “Global obesity is a mega-investment for the next 25 years. Obesity may be the most pressing health challenge facing the world today and it will shape thinking by policy makers and boardrooms around the world” Industry Responding to Shifting Environment 15

16. Obesity Rates Obesity will drive the health discussion in America Obesity drives many other chronic health conditions … coronary heart disease, diabetes Average American youth watching 50 hours of electronics, including 25 hours of TV per week Fat and calories are in the cross- hairs What this Means for Red Meat: Nutrition debate will continue … labeling, “good and bad food” dialogue, search for solutions Americans will seek guidance, diets, strategies for eating Sources: (1)ISIPP Publishing (2)Virginia Tech Cooperative Extension (3)Center for Disease Control and Prevention, 2008 (4)UN Food and Agricultural Organization, 2004 U.S. Population Classified Overweight 34% U.S. Population Classified Obese 34% 16

17. Source: Mintel More consumers cutting back on red meat “You’ve indicated that you are eating less red meat this year compared to last year. Please tell us why. Please select all that apply?” 17

18. Reasons Reportedly Consuming Less Beef Limiting cholesterol or fat Health reasons Other meats seem healthier Eating more plant-based protein Concerned about “factory farming” More concerned about price Too expensive relative to other meat Prefer other meal options for taste Among consumers (17%) who feel they are eating less beef Source: Consumer Beef Index, July 2013 18

19. U.S. Consumer Interest in Protein Grows Protein is #1 nutrient that is growing in interest, among consumers who read labels. Aging consumers concerned about muscle mass expected to turn attention to protein foods. 19 Source: 2012 Food Marketing Institute Shopping for Health Survey Source: Institute of Food Technologists, 2012 “It is important for food and beverage marketers to highlight wherever possible that their products are a good source of lean protein.” NPD Food and Beverage Industry Analyst, IFT 2014.

20. Market drivers – Consumer Shifts 20

21. State of the Consumer Several other forces are shaping what the American household looks like 1-2 person households are now 62% of the total households Source: U.S. Census Bureau What this Means for Beef: Lots of merchandising options in the store are needed 21

22. From 2010 to 2050: Hispanics are anticipated to grow from 16% to 30% of households Asians from 5% to 9% African Americans from 14% to 15% The newest ethnic trend is “multi-racial” … only 2% of population in 2010, but it is a sign of the time for Millennials State of the Consumer – Ethnic Changes Source: Bureau of Labor Statistics What this Means for Red Meat: Beef must work to maintain and broaden its appeal to all ethnic groups Culinary tastes will shift 22

23. State of the Consumer – Busy Lifestyles 70% of women are working Average work night dinner expectations: What this Means for Red Meat: Convenience one of the drivers of growth How do we make all red meat more convenient? 40 minutes from start to table 60 minutes from start to table Too long for 31% of consumers Too long for 70% of consumers Sources: (1)Bureau of Labor Statistics (2)Convenience Framework, Dec. 2010 23

24. A study conducted by FMI – Food Marketing Institute found: – 72% of shoppers decide what to have for dinner that day – 1 in 4 shopper (24%) decide what to have for dinner within one hour before eating! Only about half of shoppers make most dinners at home with the ingredients they have on hand. – Half of shoppers buy frozen, fresh, prepared, or ‘fill in ingredients’ for a meal or get take-out from restaurants for dinner at least a few days a week. To most consumers it is acceptable to take 30-40 minutes to prepare and eat a red meat meal – other meals the expectation is 20 minutes! FMI, Shopping for Health 2011 Study 24 State of the Consumer – Lack of Planning

25. Source: Red meat consumed by 90% of consumers at least once a month Mintel “How often (if at all) do you personally eat each of the following items at home? Please select one per type.” Base: 2,000 internet users aged 18+ 25

26. Consumption Frequency – Servings Per Week Past Week Servings (mean) July 2013 Source: Consumer Beef Index, July 2013 26

27. Source: Hispanics are above average red meat consumers Mintel “Do you personally eat each of the following at least once a month at home?” 27

28. 28 the millennial Born 1980 through 2000 80 million strong The Net generation, Gen Y, Echo Boomers Optimistic Always connected Institutions are irrelevant Fast multi-taskers Connected with parents Feel entitled Educated, little experience Not loyal to brands or employers Millennials

29. The Millennial Generation: “Things aren’t perfect. I need you to be...” SOURCE: Millennial Generation and Beef, Conversion, December 2011 29

30. Millennials may pay more for food 30 Source: Jefferies AlixPartners

31. Base: Split sample (N = 505) Ranked by at-home importance Q.32a: How much do you agree or disagree with each of the following statements when eating each food type at home. Agree Completely/Somewhat  Key: Significantly lower than non-segment (  ) What Millennials ThinkWhat Millennials Want Millennials don’t know how to cook beef and have disappointing results with steaks & burgers. Consumer Beef Index – Feb. 2013 Millennials & Beef - 2011 Millennials: Beef’s Performance & Information Needs 31

32. Millennials: Beef’s Performance & Information Needs Agree Completely/Somewhat Base: Split sample (N = 505) Ranked by at-home importance Q.32a: How much do you agree or disagree with each of the following statements when eating each food type at home.   Key: Significantly lower than non-segment (  ) Consumer Beef Index – Feb. 2013 Millennial s & Beef - 2011 32

33. Source: Mintel Prepared products appeal to youngest consumers, men “Do you tend to buy red meat products that have been partially prepared for you?” 33 Beef and red meat consumers Pork consumers

34. Source: Improved packaging may appeal to consumers Mintel “Please indicate which of the following statements, if any, about beef and pork products you agree with. Please select all that apply.” 34

35. Market drivers 35 Obesity Trends Among U.S. Adults

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37. The Red Meat Market Today Thank You! 37