Transcript 1999 Analyst's Conference

Now and for Generations to Come
Anchorage 2003
AGENDA

Darden Restaurants

Growth of Aquaculture

Global Supply

Global Demand
– USA Focus

Buyer’s Perspectives

Guest Drivers (Romance Food)

Recommendation
FY’02
June ’01 – May ‘02
SKUs Suppliers Countries
Seafood
Purchases
Revenue
(May 26, 2002)
246
231
$4.4B
Up 19%
from May
‘00
35
$MM
Purchased
512.1
Population Trends Are Favorable
for Seafood in the USA
CONCEPT
RESTAURANTS
MARKET SHARE
46% of
Red Lobster
673
Casual Seafood Dining
35% of
Olive Garden
516
Bahama Breeze
31
Smokey Bones
33
Casual Italian Dining
Growth of Aquaculture
(A Model of Consistency)

Effects on Alaskan Fisheries
– Decreased demand, thus price for Wild Caught
Salmon
– Increased competition against Fresh Fish
(Halibut, Cod, Sole, etc.)
– Conversion of Japanese preference to Atlantic
Salmon alternatives
Why did this happen? What changed?
Global Wild Harvest Fish Supply
History & Forecast
Global Wild Harvest Fish Supply
History & Forecast
Millions of MT live Weight
100
90
SOURCE: FAO
2010 est
2009 est
2008 est
2007 est
2006 est
2005 est
2004 est
2003 est
2002 est
2001 est
2000 est
1999
1998
1997
1996
1995
1994
1993
1992
1991
70
1990
80
World Population Growth
1968 – 2020E
World Population Growth
Year
Annual Growth Rate
S ource: U.S . Census B ureau
2000-2020 are P rojections
SOURCE: U.S. Census Bureau
2000-2020 are Projections
Population
Growth Rate, %
0.0
2016
2018
2020
3.00
2010
2012
2014
0.5
2006
2008
4.00
2000
2002
2004
1.0
1996
1998
5.00
1990
1992
1994
1.5
1984
1986
1988
6.00
1980
1982
2.0
1976
1978
7.00
1974
2.5
1972
8.00
1968
1970
World Population, Billions
1968-2020E
Relative Consumption of Seafood
in the World: 1968 – 2000, Per Capita
Rel ati ve Consumpti on of Se afood in the W orl d
1968-2000, P er Capita
240
I ndexed t o 1968 = 1 00
220
200
180
160
140
120
100
80
1968
1972
1970
1976
1974
1980
1978
1984
1982
1988
1986
1992
1990
Year
U. S. A.
S ource: FA O
SOURCE: FAO
Europe
J apan
Developing Nat ions
1996
1994
2000
1998
World Supply of Beef, Pork, Poultry &
Seafood: 1968 – 1998, Per Capita
World Supply of Beef, Pork, Poultry, and Seafood
1968-1998, Per Capita
Index (1968=100)
275
225
175
125
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1968
75
Year
Beef
S ource: FA O
SOURCE: FAO
Pork
Poultry
Seafood
FY’02
June ’01 – May ‘02
SKUs Suppliers Countries
Seafood
Purchases
246
231
35
$MM
Purchased
512.1
Beef, Pork, Poultry & Seafood
Price Trends: 1968 -- 2000
Beef , Pork, Poultry , and Sea f ood Price Trends
1968-2002
800
750
700
P rice I ndex (1968= 1 00)
650
600
550
500
450
400
350
300
250
200
150
100
50
68
70
69
S ource: U.S .B ureau of Labor Statistic s
72
74
76
78
80
82
84
86
88
90
92
94
96
98
00
02
71
73
75
77
79
81
83
85
87
89
91
93
95
97
99
01
Beef
Pork
SOURCE: U.S. Bureau of Labor Statistics
Poult ry
Seaf ood
Wild vs. Aquaculture Species
Cod and Salmon Prices: 1990 -- 2000
Cod and Salmon Prices
1990-2000
$4.40
$4.00
$3.60
$/lb.
$3.20
$2.80
$2.40
$2.00
$1.60
Jan-90
Jan-92
Jan-91
Jan-94
Jan-93
Jan-96
Jan-95
Alaskan Cod, 8-16 oz., FAS
S ource: Urner B arry
SOURCE: Urner Barry
Jan-98
Jan-97
Jan-00
Jan-99
Atlantic Salmon, Farmed, 8-10#
U.S. Population
Historical
&
Projections
U.S. Population
Historical & Projections
(Estimate .9% average annual change from base of 1999 @ 272,690,813)
(Estimate .9% Average annual change from base of 1999 @ 272,690,813)
300,000,000
290,000,000
280,000,000
270,000,000
Population 260,000,000
250,000,000
240,000,000
230,000,000
220,000,000
E
06
20
E
04
20
E
02
20
E
00
20
98
19
96
19
94
19
92
19
90
19
Year
SOURCE: U.S. Census Bureau
Population Trends are Favorable
for Seafood
Index to
Age
1998
2008
% Change
Total
270.0
292.9
8%
< 10
39,141
38,922
-1%
46
10 – 19
38,797
42,226
9%
43
20 – 29
36,019
39,763
10%
119
30 – 39
42,768
37,193
-13%
118
40 -- 49
40,624
42,929
6%
127
50 – 59
28,108
39,124
39%
138
60 – 69
19,833
26,050
31%
129
70+
24,712
26,719
8%
95
SOURCE: CREST, 2001 Includes Sandwiches and Entrees
Casual Dining
Population Trends Are Favorable
for Seafood
Protein Consumption Indexed to Age
Seafood
Under 18
18 - 34
35 - 49
50 - 64
65+
52
83
105
135
153
SOURCE: U.S. Census Bureau
Beef
53
86
117
129
122
Poultry
124
112
93
83
78
U.S. Per Capita Consumption of
Seafood: 1980 – 2007E
U.S. P er Capita Consu mp tion of Seaf o od
1980-2007E
P ounds per P erson
16
15
14
13
12
75
77
76
79
78
81
80
83
82
85
84
87
86
89
88
91
90
93
92
Year
S ource: FA O
SOURCE: FAO, University of Southern Illinois
95
94
97
96
99
98
01
00
03
02
05
04
07
06
Future U.S. Seafood Supply
To maintain per capita status quo (15.6 lbs.) will require
approximately one billion additional pounds (edible wt.) by 2025
5500
Million Pounds Edible Weight
5000
4500
4000
3500
0
05
2000 Total
10
15
Additional Lbs Required
SOURCE: University of Southern Illinois
20
25
Total U.S. Seafood Supply –
Estimated Share of Supply (%)
Wild vs. Aquaculture
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2000
2005
2010
2020
2025
Domestic Wild
Imported Wild
Domestic Aquaculture
Imported Aquaculture
The Four Sources of Seafood
Supply and Outlook to the U.S.

Domestic Wild
– Stable to gradual decrease over time

Domestic Aquaculture
– Modest increase in production, but niche seafood
only

Imported Wild
– Stable to gradual decrease over time

Imported Aquaculture
– Will produce to fill any supply vacuum
From a U.S. Restaurant Buyer’s
Perspective

Seafood industry is supply driven.

Consumption of seafood in the USA
projected to increase in response to aging
population and consumer preferences.

A shortfall of seafood supply is anticipated
(one billion pounds {454 million kgs}
edible weight by 2025).

Wild harvest is expected to remain stable
to declining.
From a U.S. Restaurant Buyer’s
Perspective

Aquaculture Offers:
– Ability to partner with suppliers and contract prices
– Consistency in supply
– Price stability
– Uniform quality
Importance of Price and
Supply Stability

Food Service and Retailers benefit:
– Fixed menu prices with reasonable margins
– Base menu applications…eliminates the need to
re-print menus
– Product moves from seasonal to everyday
availability
– Ability to nationally promote products without fear
of supply disruptions or price escalation during a
promotion
The Cod Example

Demise of Cod at Red Lobster
– Prior to 1999, Red Lobster purchased 2.5 million
pounds of frozen Cod annually.
– In 1999, once frozen Cod prices soared to over
$3.50 per pound.
– Red Lobster promptly removed Cod from the
menu.
– To this day, Cod has not returned to the Red
Lobster menu.
The Cod Example
(Continued)

Important Lessons
– Consumers determine a product’s worth…not
restaurant’s, retailer’s, processor’s, or fishermen’s
expectations
– There are abundant seafood alternatives. Each
product competes for a “share of stomach”.
Drivers of Guest Traffic

Shrimp, Crab, and Lobster are considered guest
count drivers
– Red Lobster consistently nationally promotes Lobster, Crab,
and Shrimp.
– These shellfish are considered gourmet and guest relate
them to Red Lobster.
– With current health trends, Fresh Fish has increased in
popularity and preference.
– Frozen Fish, for the most part, is considered a commodity.
Most food service establishments offer frozen fish in some
form. What’s special about that?
Alaskan Snow Crab Quotas
350


Note the lack of
stability in quota
No stability = no
ability to maintain
the reputation of
Alaskan Snow
Crab
300
250
Live Wt.
Quota
200
MM 150
lbs.
100
50
0
1991 1993 1995 1997 1999 2001 2003
Alaska Fishing Industry
Weaknesses

Crab
– Very volatile quotas lead to erratic market
availability
– Regional equity / marketing allure is diminished.
Alaska Fishing Industry
Weaknesses (Continued)

Fresh Fish
– Limited market exposure for fresh Salmon products
– Underdevelopment of distribution system to the
United States
– Long-term dependence on Japanese buying
– Inability to offer market forms that meet current
consumer needs
Alaska Fishing Industry
Weaknesses (Continued)

Frozen Fish
– Lack of a customer-focused marketing program
– Higher cost of production than in other countries

Twice frozen fish processed in other countries are
arguably equal in quality to U.S. produced once-frozen
fish.
– Inability to offer market forms that meet consumer
needs
Recommendations
“Regaining Competitive Advantage”

Develop a better management program for
Snow and King Crab
– Decrease volatility of quotas
– The availability of Crab offers Alaska the strongest
marketing tool to increase guest awareness for all
Alaskan products.
Recommendations
(Continued)

Develop better Fresh Fish distribution
systems
– Comprehensive system that delivers product
throughout the United States

Process product to market forms
demanded by guests (i.e. pre-portioned
Sockeye Salmon)
Recommendations
(Continued)

Determine the viability of processing
frozen product in Alaska vs. other
countries. Is the perceived difference in
quality valued by the American consumer?
Recommendations
(Continued)

Explore the possibility of developing
Aquaculture fishing farming
– Sockeye Salmon
– Arctic Char
– Turbot
– Atlantic Salmon
Closing

We are in this together!
– Our guest is your guest

We will help champion your ideas.
We believe that Alaskan seafood products
should be…

Now and for generations to come!