Transcript NBQA – 2005 Strategy Workshop

BIF – How to satisfy the
st
21 century beef
consumer!
Paul Heinrich
SYSCO Corporation
April 19, 2006
Agenda
• Background on SYSCO
• State of the Food Service Industry
• How to satisfy the 21st century beef consumer
–
–
–
–
Identify
Trends
Needs
How you can deliver
SYSCO Corporation
• Founded over 35 years ago
• Mission Statement: Helping our Customers
Succeed
• FY 05 Sales: $30.28 B, $4.0 B Meat
• 47,500 Employees
• 8000 Sales men & women
SYSCO Corporation
• 400,000 Customers
–
–
–
–
–
White Table Cloth
QSR
Health Care
Schools
Casual Dining
* We offer the widest variety of beef products in the
industry*
SYSCO Corporation
• 166 Distribution locations throughout North
America
• 18 dedicated meat processing facilities
throughout the USA and Canada
State of the Food Service Industry
$483 billion market
State of the Food Service Industry
-
-
Since SYSCO’s existence, we have seen
tremendous growth from families spending
more time and money eating away from their
home.
In 1970 less than half of women worked
outside the home. That number has changed
to 2 out of every 3.
Federal Reserve Bank of Kansas City
State of the Food Service Industry
-
More disposable income
Less time to prepare meals
State of the Food Service Industry
-
Last year was the first year on record that more
independent restaurants closed their doors
rather than opening them.
-
Alarming trend in the wrong direction.
State of the Food Service Industry
-
High fuel cost and more consumer debt has reduced
the amount of disposable income in our customers
pocket book.
-
Disposable income spent on food has declined from
14% in 1970 to 11% more recently.
Center for the Study of Rural America
State of the Food Service Industry
-
An article appearing in USA Today on March
1, 2006 claimed that on average families spent
$568 more than they earned in January 2006.
State of the Food Service Industry
-
High food cost have hurt as well. FY 05
SYSCO saw 7% inflation overall.
-
Over the past three years, our inflation for
beef has been closer to 15%
State of the Food Service Industry
-
Trend moving away from mid-level restaurants
and going towards the QSR’s (cheaper meal).
-
White table cloth continues to do well as more
and more entertainment is occurring.
SYSCO Goals For The Beef Industry
(Stated at NCBA Strategy Workshop)
1.
2.
3.
4.
5.
6.
Improve Eating Quality of Beef
Improve Consistency of Beef
Reduce Cost
Reduce Size
Reduce Fat
Reinforce Safety
Who is the 21st century
consumer?
• Matures >60 yrs (45.8 million)
– 72.2% know before 3 pm “what’s for dinner.”
– 67% say that they are making a sustained effort to
eat healthy
– 73.1% say they usually stick with familiar choices.
New American Diner Study
Who is the 21st century
consumer?
• Baby Boomers 40 – 59 yrs (73.6 million)
– Harshest judge of food quality
– Less likely to use the drive-thru
– 26.7% say they always tell management if they are
dissatisfied with a meal.
NADS
Who is the 21st century
consumer?
• Gen X 30 – 39 yrs (43.2 million)
– More value conscious.
– 56.1% described themselves as adventurous
– 40.4% describe leisure dining as “quality time”
NADS
Who is the 21st century
consumer?
• Gen Y < 29 yrs (118.8 million)
– 47.5% know before 3 pm “what’s for dinner.”
– Nearly 3 out of 10 prefer eating away from
restaurant.
– 39.5% use the internet to make eating choices
NADS
Comparing the Generations
“Amount spent on food”
– $75 (> 60 yrs)
– $102 ( 30 - 39 yrs)
– $123 ( 40 – 59 yrs)
NADS
CattleNetwork.com
- While the largest financial spot for new food
products is the aging baby boomers, the biggest
demographic change is the browning of
America. The fast growing population of
Latinos and Asians are bringing their own taste
of foods that will soon become standard
American fare.
CattleNetwork.com
- Consumption of food labeled as “Mexican” has
jumped 400% in the last 20 years.
- Sales of salsas surpasses ketchup!
- Tortillas will soon outsell white bread!
CattleNetwork.com
- Tyson Fresh Meats, Inc. introduced a new
premium thin sliced beef product (rebanado
delgado). This product is produced from the
chuck, round, sirloin, skirt and sirloin flap.
- Four, six and eight millimeter slices
The Land of the Clueless
Shopper
Andrew Zimmerman, a Minnesota based chef and TV personality
stated that “the meat counter at the supermarket confuses 99
percent of the people, in my estimation.”
Cargill took that statement to heart releasing their consumer
friendly labeling that informs whether or not the cut is right for
the grill, skillet or oven.
Yahoo.com
Trends
Why is the meat industry changing? Consumer
demand is shifting toward food products that
are easy to prepare while also promising safe
eating, improved nutrition and greater
consistency.
Center for the Study of Rural America
Trends
•
•
•
•
•
•
•
•
“Natural and/or Organic”
Convenience
Take-out, Catering
Pleasure
Cost
Diet
Menu Changes
Labor Force
Natural and/or Organic
• National Beef ’s research shows that close to
70% of American households are interested in
some kind of wholesome, healthy and natural
food products.
• Cattle Buyer’s Weekly estimates that the natural
beef segment is now worth over $1 billion.
Natural and/or Organic
- The Organic Trade Association says sales of
organic products will increase 18% annually
through 2008
- 2/3’s of American consumers have bought
organic products at least once and up to 20%
purchase them on a regular basis.
Who is buying Natural/Organic?
- Consumers between 45 to 54 are most likely to
purchase organic goods.
• 45% of teens who find “All-Natural”
motivating. (BuzzBack)
Convenience
• 52% of drivers who say they eat while in the car.
(Mason-Dixon polling and research)
• 73% note that it is easier to go to a restaurant
than to have a home cooked meal.
Convenience
• Don’t know what they are having for dinner!
- 89% at noon
- 62% at 4 pm
Technomic 05
Take-out
• Top 10 Casual Dining Takeout Sales
- $1.628 Billion (Up 17%) - - growing over
twice as fast as dine-in.
Takeout frequency – 2.6 times/month
Next 5 years – 27% surveyed will use takeout
more.
Take-out
• Most recent type of food ordered for takeout
- 2% steak
- 31% burgers
Take-out
• For some chain operators, curbside pickup now
accounts for as much as 9-11% of sales.
The Takeout Challenge
- To help items such as beef journey out of the
restaurant, chefs cook the product to only rare
or medium rare temperature.
- Reason - Juiciness, flavor, palatability
- Problem – Bacteria still present
Nation’s Restaurant News
The Takeout Challenge
- Some restaurants are starting to use better
ingredients for take-out orders.
- Improving packaging also helps.
Nation’s Restaurant News
Catering
• Most popular serving equipment last year was
chafers. Warmers was a close second.
Pleasure
• 3 out of every 4 consumers rank dining out
among their favorite activities.
North American Diner Study (NADS)
Restaurant Traffic
• Customer traffic will be flat or down in 2006
forcing many concepts to boost menu prices to
maintain growth. Menu prices are expected to
grow 3.2% this year.
Technomic
Cost
• What one change would increase the number
times you eat out? 55% of the respondents said
“If they had more money.”
NADS
Dieting
• Three studies in the Journal of the American Medical
Association showed that women who ate less fat and
more fruits and vegetables did not reduce their risk of
cancer or heart disease.
• High protein diets of 2004 have quickly vanished.
• Many big food companies that spent billions reconfiguring their products to be low-carb are now
doing the same thing to become low sugar.
R&I
Menu Changes
- 31% of women who say they often share a
restaurant entrée with a dining companion.
(R&I)
- 75% of consumers who say they would like
restaurants to provide information on safe
storage and reheating of leftovers. (American
Dietetic Association)
Menu Changes
- 32% of men who say they always finish their
restaurant entrée vs. 9% for women. (American
Institute for Cancer Research)
• 51% of Americans believe that portion sizes are
often too large. (NADS)
Menu Changes
• White table cloth downsizing beef entrées
Subprimals too large
Prevent increase menu cost
• QSR increasing portion sizes
Taking advantage of higher menu prices
• Most restaurants are featuring more pork, seafood and poultry
Not taking beef off of the menu, but redirecting focus
Labor Force
- 32% of hospitality-industry workers who say
they plan to pursue opportunities outside the
industry by year-end. (Careerbuilder.com)
Location, location, location
• Beef is more likely to be the entrée of choice in
rural areas,75 lbs per person/year vs. suburban
areas, 63 lbs pp/y (USDA Economic Research
Center)
• 14.8% of adults who say that if they were going
to a restaurant tonight, chicken most likely
would be their entrée of choice, versus 22% for
seafood and 20% for beef. (R&I)
SYSCO Goals For The Beef Industry
(Stated at NCBA Strategy Workshop)
1.
2.
3.
4.
5.
6.
Improve Eating Quality of Beef
Improve Consistency of Beef
Reduce Cost
Reduce Size
Reduce Fat
Reinforce Safety
Improve Eating Quality of Beef –
Why?
1. Continue to romance customers
(entertainment)
2. Eliminate cost aspect from consumers mind
(taste buds vs. pocket book)
3. Eliminate “doubt!”
4. Keep them coming back for more!
Improving Eating Quality of Beef
• Increase tenderness, juiciness and flavor (overall
palatability).
• Decrease dark cutters, poorly marbled cattle and
cattle that have higher amounts of connective
tissue.
Improving Eating Quality of Beef
• Hot Topics
–
–
–
–
Still seeing USDA Standard carcasses
Lack of USDA Prime beef
Lack of predictable tenderness score
New cuts of beef
• Warm Topics
– Bruising on subprimals
– Injection site blemishes
Improve Consistency of Beef
• Accurately predict eating experience
• Accurately determine the proper way to cook
Improve Consistency of Beef –
Why?
1. Customers don’t want to take chances.
2. Better educate consumers/chef ’s/cooks on
cooking mechanisms, quality and cut. (Make it
fail-proof)
Improve Consistency of Beef
• Hot Topics
– More accurately label “No Roll” beef
– Lack of uniformity in the box (size, yield, marbling,
tenderness, juiciness, flavor)
• Warm Topics
– “Guaranteed tender” claims
– Genetic markers for tenderness
Reduce Cost
• Keep profit margins intact for all parties and
focus on reducing the inefficiencies that is
costing our industry money.
• Businesses losing money generally cut corners!
– Product quality, service suffer
Reduce Cost – Why?
1. Beef cost considerably higher than either pork
or poultry.
2. Beef has more variability in eating quality
versus pork or poultry.
3. Imported Beef, considerably cheaper.
4. Other protein categories growing twice as fast
as beef in foodservice.
Reduce Cost
• Hot Topics
– Survivability of food service establishments
– Prevent an erosion of purchasing lower grade
products, thus reducing product quality and
dissatisfying customers.
– South America, Australia, New Zealand, Mexico &
Canadian imports. Lower quality but cheaper!
Reduce Size
• Reward for smaller weights
• Give the customer what they want
Reduce Size – Why?
1. Product too inconsistent in size.
2. Hard for food service establishment to gauge
portion sizes. Lowers profit. Labor force is an
issue in our industry.
Reduce Size
* For five years now, Sysco has been sending a
strong signal back through the packer that we
want smaller product. Our customers will only
pay a slight premium. If we aren’t giving the
customers what they want and they won’t pay
enough for that difference, let’s face the facts
and start doing something as an industry to cut
and market meat differently *
Reduce Size
• We are seeing a growing trend of restaurants,
particularly high end establishments reducing
portion sizes on steaks and roast.
• If the food service industry reduces portion
sizes of beef, we need customers eating beef
more often to maintain consumption.
• May be able to maintain menu price levels thus
increasing profitability.
Reduce Fat
• Reward For Less External/Seam Fat – Eliminate
the YG 4’s & 5’s
Reduce Fat
1. Restaurants are yielding considerably less than
they have in the past five-ten years meaning
lower profits.
2. Increasing external fat also increasing seam fat
thus making the product less desirable. Ex.
Kernel fat.
3. Lean trend, especially at Universities, Colleges
and upscale neighborhoods.
Reinforce Safety - Why?
• Customers need to consistently be aware that
beef is safe. Words like BSE, Foot & Mouth
should be used frequently to alleviate fears
within our population.
• Consumers 50 and over have 70% wealth in the
U.S. This trend is fueling the healthy, organic
and natural products.
New Kind of Producer Alliances
• New generation alliances
• Fixed membership
• Everyone agrees on exactly
- what product will be produced
- how it will be produced and marketed
- and in some cases how it will be processed and
sold.
In conclusion
•
What we need from you (beef industry)
1. Increase quality
2. Make the product more predictable
3. Position yourself ahead of the curve to capture
market share
4. Maintain positive margins for all parties
5. Reduce inefficiencies