Transcript Document

Supply Chain Evolution
Push 
National Cattlemen’s Beef Association
Pull
Jan. 27, 2004
Where is the Consumer Going?
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Family income, in real dollars, peaked in 1990.
Consumers are trying to shift time from food preparation to
wage-earning activities.
Looking for quick, easy and low-cost first.
Demographics will accelerate these trends.
More Family Members Working
= Less Meal Preparation Time
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More householders working:
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32% adult women in 1960 => 65% in 2000
4.4 million single households in 1960 =>15 million in 2000
Meal preparation time shrinking:
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1960, average dinner preparation time = 2 hours
2000, average dinner preparation time = 30-45 minutes
Baby Boomers & Echo Baby Boomers are Entering Age
Groups which Spend Less Time on Meal Preparation
Population Distribution, USA 1997
Male
90-94
Female
80-84
Age Group
70-74
60-64
50-54
40-44
30-34
20-24
10-14
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
00-04
Population (000's)
Population Distribution, USA 2005
90-94
Male
Female
80-84
Age Group
70-74
60-64
50-54
40-44
30-34
20-24
10-14
00-04
12,500
10,000
7,500
5,000
2,500
0
2,500
Population (000's)
5,000
7,500
10,000
12,500
Half of Growth Will Be in
Food Service and Deli
U.S. Meat Expenditures,
Wholesale Value by Distribution Channel
80 Foodservice
17
70 -
Retail Deli
16
13
60 10
50 40 -
5
6
3
4
2
6
6
6
40
46
48
60
1990
1996
2002
2007
Retail, Fresh/Frozen
Meat Dep’t.
30 20 -
Retail, Processed
Self Service
10 0-
Growth in the Retail Meat Department
Will Be Fueled by New Products
 Heat & Eat Foods
- Prepared meat & poultry
- Breaded & sauced entrees
- Finger foods (nuggets, wings, etc.)
- Meal kits
- Refrigerated/frozen entrees &
dinners
 Ingredient Meats:
- Case-ready meats
- Marinated or prepared entrees
- Ground Beef
- Chicken breast (IQF & fresh)
Summary - Consumer Wants to Spend
Less Time Cooking
• Products with lower preparation time will be the ones on
consumers’ radar screen
• Products must fit time (labor) criteria before other factors
will influence decision:
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Safety
Health
Taste
Cost
Where are Retailers &
Restaurant Operators Headed?
 Retailers are struggling to support
the demand for more prepared
foods:
- Labor availability tightening and
costs going up
- Experience with food preparation
limited
- Food safety issues loom on the
horizon
- Margin management is an issue,
especially w/HMR
 Food service operator facing
more competition
- Number of restaurants reaching
saturation point
- Consumer gravitating toward
niche concepts
- Labor tight and inexperienced
(harder to execute niche
concepts)
Where are Retailers &
Restaurant Operators Headed? (Cont’d)
 Retailers looking to suppliers for
solutions to:
- New convenient products
- Easier, idiot-proof preparation
- Lower cost
- Built-in safety
- Help with pre-pricing and margin
management
 Food service well ahead of
retail, but still looking to
suppliers for help with:
- New niche products
- Easier, idiot-proof preparation
- Lower cost
- Built-in safety
How Will Processors Meet These New
Demands from their Customers?
• The flow of information from the customer to the processor/producer
is more efficient in some operations than in others.
• This
is where most supplier/customer relations are working and the
most money is being recouped.
• Some
processors are more focused on the customers’ primary
requirement – ease of preparation. Others are having
trouble prioritizing product attributes.
Push to Pull
Commodity...
Follows a give’ em what you got strategy, product is what it is
Farmers
Commodity
Processors
Food
Manufacturers
Food
Distribution
Food
Retailers
Consumers
Branded...
Follows a give’ em what they want strategy, product has personality, the customer is
empowered to control this product experience
Procurement
Farmers
Commodity
Processors
Food
Manufacturers
Marketing
Food
Distribution
An integrated coordinator
and supplier.
Quality Control
Distribution
Food
Retailers
Consumers
Consumer Responses – the
Integrated Poultry Model
• Marketing and product development are focused on one thing How do we sell more chicken profitably?
- The company owns assets through all stages of production:
-- Feedmill, hatcheries & growout
-- Slaughter, cut & bone
-- Further-processing
-- Cooking & meal preparation
-- Marketing & distribution
-- The shared goal of maximizing returns to these assets, therefore, focuses on
pulling more product through the whole system.
-- Marketing & product development identify new products that consumers want.
-- The rest of the company figures out how to make & distribute new products.
• The company looks at what the consumer wants, and then looks within
its organization to figure out what needs to be done to get the customer
what he wants.
Consumer Responses – A NonIntegrated Meat Packer
• Marketing at a beef or pork packer is focused on -
“How do I get the highest price for the meat that I produce?”
- The company assets are all in one stage of the supply chain slaughter and boning.
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Goal number one is to produce products at the lowest cost.
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Efficiencies come from long runs of standardized products.
- The shared goal of maximizing returns to this asset, therefore,
focuses on pushing more of the standard set of products off to the
next stage of the supply chain.
- The whole idea of finding out what the consumer wants, and
reconfiguring the products that the processor makes to fit the
attributes that create consumer pull runs counter to the goal of
producing standardized products at the lowest possible cost.
Evolving Retailer Requirements
Large Corporate Chains (regional in scope)
1. Specification Driven
2. Consistency and Uniformity
A. Trim
B. Size of Primal
C. Packaging
D. Color
E. Apparent Freshness
3. Trace back capability
4. Service
5. Product origin
6. Brand name
Evolving Retailer Requirements
7. Health and Safety Issues
8. Price
A. Cost Plus Models
B. Formulas
9. Benchmarking
10. Low Cost Producer
11. Risk Management Strategies
12. Case Ready Product
13. Private label Driven
(Cont)
Medium Corporate Chains
(Regional in Scope – Independent
and Distributors)
1. Brand Driven
2. Quality at a Price
3. Consistency From a Commodity Point of View
4. Money or Promotional Driven From a Leverage Point of View.
5. Case Ready
6. Private Label
Regional Distributors and
Independent Grocery Stores
1. Commodity Driven
2. Price Driven
3. Do not Understand Cost at Store Level or at Distribution
Level.
Retail Issues in General
1. Nearly all of our customers are developing case-ready and prepackaged programs – both private label and branded.
2. Good meat cutters are hard to find.
3. Product liability is becoming an increasingly important factor.
4. Primal cuts are getting too large.
5. Risk management and pricing programs.
SYSTEM ANALYSIS
IDENTIFY OBJECTIVES
ESTABLISH COMMITMENT
IDENTIFY ACCOUNTABILITY
DEVELOP STRATEGIES
DEVELOP ACTIVITY LIST
ESTABLISH REVIEW TIMETABLE FOR
ACTIVITY LIST
REVIEW RESULTS