Usage and Volumetric Assessment of Beef in Foodservice 2015 Edition

Transcription

1 Usage and Volumetric Assessment of Beef in Foodservice 2015 Edition PREPARED FOR: DECEMBER 31, 2015 MARCH 18, 2016 technomic.com

2 Background and objectives Every year since 2003, Technomic has conducted studies to investigate the usage of Beef and Chicken in the foodservice industry. In 2015, Technomic was again engaged to update the previous studies. The primary objectives of this 2015 study edition are to: Determine the penetration of Beef usage in various foodservice segments. Provide an updated volumetric situation of the foodservice Beef market by major product categories, including estimated volume in pounds and dollars. Assess the foodservice market for a variety of Chicken products, including both penetration and volumetric statistics. Understand Beef and Chicken category usage trends, including volume trends, menu position and rationale for offering. 2

3 Methodology summary Program Initiation Meeting Questionnaire Development Top 250 Chain Operator Headquarters Internet Survey Unit Level Data Gathering from Foodservice Operators Initial Analysis Market Size Validation/Finalization - Including interviews with 20 distributors (both broadliners and meat specialists) and 5 processors of proteins serving the foodservice industry 3

4 Methodology: Operator unit level quantitative respondent base (Step 4) Technomic used the following approach to gather information from non-chain restaurants and other segments. Prescreening: Non-chain and independent Operators were recruited to participate in the survey via telephone. Operator Internal Data Gathering: Operators reviewed their actual invoices to obtain typical monthly volumes of relevant products. Reporting: Operators reported data back to Technomic. A total of 950 operators responded from various segments. Adding in the chain level respondents, a total of 988 operators participated in this research. The segments of Bars & Taverns, Recreation, Military, Corrections, and Continuous Care Retirement Centers were surveyed for this 2015 research wave, unlike the 2014 wave. In 2014, 2013 data was used as a surrogate for 2013 numbers. Segment Restaurants & Bars # of Respondents Full Service Restaurants (small chains/independents) 182 Limited Service Restaurants (small chains/independents) 93 Bars/Taverns 50 Subtotal 325 Beyond Restaurants Healthcare (Hospital, Long Term Care) 105 Lodging 75 Retailers (convenience stores, supermarket foodservice) 75 Business & Industry 75 Colleges 75 Schools 75 Recreation 50 Continuous Care Retirement Center 35 Correctional Facilities 35 U.S. Military Bases 25 Subtotal 625 Total 950 4

5 Market size estimation approach To develop market size estimates using volumetric data, Technomic used a build-up approach. Each operator interviewed provided their average monthly volume of each of the relevant products. In addition, these operators also provide Technomic information on their total food and non-alcoholic beverage purchases on an annual basis. Once all interviews were completed, Technomic was able to conduct ratio analyses on sample to develop the initial market size estimates. An example of the methodology is provided for the Healthcare segment. The total monthly pounds of Sirloin Steak used in the sample of 75 Healthcare locations is 7,372. The total annual food & beverage purchases by the 75 locations in the sample is $94 million annually. Technomic tracking data on the foodservice industry shows that the total food and beverage purchases of the entire Healthcare segment of the industry is $8.35B. Therefore, our sample represents 1.1% of the total industry purchases. Applying the 1.1% number to our 7,372 pounds, this suggests that total Healthcare segment Sirloin Steak volume is 670,000 pounds monthly, or 8 million pounds annually. This same exercise was applied to all segments, formats and forms to develop the market size estimates. In addition, Operators were asked to indicate if their usage of each product increased, decreased or stayed the same versus last year. If increased or decreased, they were asked to indicate by what percentage and what was the rationale for the increase or decrease. This provided additional data points from which to conduct triangulation analysis. Once operator research is completed, Technomic conducts interviews with distributors and protein suppliers to obtain further insights and solidify market size estimates. The approach is charted on the next page. 5

6 Technomic sizing process Technomic employs the following steps in its market sizing process. It uses a triangulation approach to develop its numbers, obtaining feedback not just for operators, but from suppliers and distributors as well. Data Obtained Unit Level Operators National Accounts What is used? Formats? Usage change? Business size? Clean, tabulate, analyze data by segment Compare to previous report Develop rough market estimates Final sizing Confirm growth Obtain pricing data Obtain volume Supplier and Distributor Interviews 6

7 Category scope The following 38 categories are included in this study (34 Beef / 4 Chicken). Pre-cut Beef Steak Whole/Subprimals/Roasts Pre-Cooked Roast Beef All Other Beef Chicken Chuck Eye/Delmonico 1116D, PS01 Denver Steak/Cut (underblade) 116G, 1116G Flank/Skirt (Flank), 121C, 121D (Skirt) Flat Iron 114D, PS01 or 1114D, PS01 Hanger Steak 6 140, 1140D Petite Tender Medallions (teres major) 1114F Porterhouse/ T-Bone (porterhouse); 1174 (Tbone) Ranch Steak/Cut 114E, PS01 or 1114E, PS01 Ribeye/Rib/Ribeye Cap C (ribeye/rib); 112D-1112D (ribeye cap); Sirloin (top, butt, bottom, cap/coulotte) B Strip (top loin) Tenderloin/Filet (includes pre-cut for steaks) B Tri-Tip C, 1185D Other Steak (round, cubed, chuck, other steaks) Brisket C 3 Chuck Eye/ Underblade 116D 5 Chuck/Shoulder (excluding petite tender, chuck eye, underblade) 114, 114D, 114E, 116A, 116B, 116E Petite Tender 1 114F Rib or Rib Eye or Ribeye Cap (prime rib) D Sirloin B Strip Loin/Top Loin Round G Tenderloin Roast Tri-Tip 1 185D Pre-Cooked Roast Beef (whole muscle) Patties 6 Bulk 6 Ground Beef Preparations (meatloaf, meatballs, chili, lasagna, etc.) Back Ribs 124, 124A Ribs Boneless Country-Style Ribs 1 116D or 1116D, PS02 Short Ribs 123, 123B, 130, 130A All Beef Hot Dogs/Brats/Sausage Strips/Cubes/Shreds or Shaved/Philly Beef including Lifter Meat 4,7 Specialty Deli Meats (pastrami, corned beef, roast beef) Other Beef (Liver, offal, organ, and all other beef not accounted for previously. Excludes veal) 7 Bone-in (wings, whole fryers, and parts) 6 Boneless Chicken (all forms) 6 Further Processed Chicken (patties, nuggets, tenders, strips, breaded, formed and dices) 5 All Other 6 1 New category breakout in Porterhouse/T-Bone combined into 1 category in New category in Strips/Cubes combined with Philly/Shaved and Shreds in Category redefined in New breakout category in Category redefined in

8 Notes/clarifications The following notes and clarifications will assist in interpreting the results of this report. All volumetric pound estimates are subject to a range of ±10%. Volume data shown is for 12 months ending September of the respective year. Dollar volumes shown are based on reported pricing in September of each respective year. Pricing reflects price paid by the foodservice operator (operator purchase level). Price data are reported by distributors. In 2015, the beef market continued its inflationary trend until pricing started to fall in August/September. Since market value is based on pricing reported in September, the total dollar value of beef market in 2015 may be understated. MM = millions. Min = minimal or less than 500,000 in annual pound volume. Numbers may not add due to rounding. In 2012, Bars/Taverns, Retailers, Corrections, Military and Continuous Care Retirement Centers were not specifically researched data are used as surrogates in these segments. In 2014, Bars/Taverns, Recreation, Corrections, Military and Continuous Care Retirement Centers were not specifically researched data are used as surrogates in these segments. 8

9 II. KEY OBSERVATIONS, INTERPRETATIONS, IMPERATIVES AND RECOMMENDATIONS

10 Key observations and interpretations Observations Beef volume is down 183 million pounds in 2015, and 335 million pounds since Dollar value is down over $2B between this year and last. Insights Record high beef prices result in lower volume usage by operators. However, some deflation later in 2015 in some categories has caused dollar value on a per pound basis to drop in some cuts. Note however, that based on Technomic s methodology of using September pricing to develop market dollar value statistics, the foodservice beef operator purchase dollar number may be understated for In this year, the beef market continued its inflationary trend until August, at which time prices started to drop. Year Foodservice Beef Volume (MM Lbs.) Change vs. Previous Year (MM Lbs.) Foodservice Beef Operator Purchase Dollars ($ MM) Change vs. Previous Year ($ MM) , $26,997 +$2, , ,401 +3, , ,945 +2, , , , ,974 +2, , ,877-2,097 Dollar value calculations based on September pricing for each representative year 10

11 Key observations and interpretations Observations Although overall beef penetration has remained stable despite price proliferation, penetration in steaks, roasts and pre-cooked roasts is down. Insights Beef commodity costs may have hit a ceiling for some operators to the point where they can no longer afford to offer these cuts on the menu. % Operators Menuing/Using Beef Cut Ground Beef 75% 74% 72% 72% 75% 75% Steaks Roasts** Pre-Cooked Roast Beef* Ribs Overall Beef 96% 96% 97% 96% 97% 95% *Category added in 2011 **Category redefined in

12 Key observations and interpretations Observations Insights Roasts (subprimal) and other beef have increased in volume since 2014, but steak and ground beef are down. Only other beef has increased in value, while every other beef cut has declined, led by pre-cut steaks Annual Total = Billion Lbs. 1% 7% 10% 4% 13% 65% Ground Beef B Pre-cut Steak B Roasts (subprimal) B Other Beef B Pre-Cooked Roast Beef B Ribs B 2015 Annual Total = $ Billion Roasts volume increase may be slightly overstated due to the inclusion of strip/top loin roasts as a separate category in Some of this volume increase may be coming at the expense of strip steak, other steak or other beef. Both volume decreases and the beginning of some deflation at the end of the year contribute to overall decline in beef market value. Pounds Change 2015 vs = -183 Million Lbs Other Beef Roasts* Ribs Pre-Cooked Roast Beef -73 Ground Beef -133 Pre-cut steak Dollar Change 2015 vs = -2,097 Million 1% 6% 5% 18% 38% 32% Ground Beef $ B Pre-cut Steak $ B Roasts (subprimal) $5.761 B Other Beef $2.020 B Pre-Cooked Roast Beef $1.647 B Ribs $0.488 B 2015 addition of Strip/Top Loin Roasts may not make comparisons to 2014 directly comparable, as some volume may be coming from other cuts Dollar value calculations based on September 2015 pricing. Note: Numbers may not add due to rounding. $282 -$21 -$45 -$311 Other Beef Roasts* Ribs Pre-Cooked Roast Beef -$939 Ground Beef -$1,064 Pre-cut Steak 12

13 Overall conclusions Major conclusions from this 2015 Beef research are: Beef continues to decline, and is now second to chicken in terms of protein volume. Continuing rising beef prices and tight supplies are causing volume declines, but it appears that price softening has started to occur in the latter part of the year, which could firm up volume going forward. Steak has lost significant volume, but roasts have picked up some of that volume. Although chicken has surpassed beef in terms of volume, pork is growing at the fastest pace among the proteins driven by economical prices, new applications and positioning as a beef alternative. Of the total $145 billion wholesale value of all food sold into foodservice, Beef represents almost 23% of dollars and is undoubtedly the #1 product sold into the channel. 13

14 III. MARKET OVERVIEW

15 Total protein market in foodservice The total foodservice protein market represents billion pounds in Total protein volume is up 70 million pounds from 2014, and 581 million pounds since Beef has declined 183 million pounds in 2015, while chicken increased by 45 million pounds and pork is up 165 million pounds. Chicken is now the largest protein in foodservice by volume. Since 2010, beef is down 210 million pounds, but pork is up 425 million pounds. Chicken is up 231 million pounds over this period. Segment`` MM Lbs. MM MM MM MM MM MM 2010 Lbs. % Lbs. % Lbs. % Lbs. % Lbs. % Lbs. % 2015 Chicken 7, , , , , , Beef 7,737 30% 7,920 31% 8,072 32% 7,994 32% 7,855 32% 7,947 32% -210 Pork 5, , , , , , Seafood 2, , , , , , Turkey 1, , , , , , Veal 75 <1 80 <1 85 <1 89 <1 89 <1 90 <1-15 All Others* 70 <1 67 <1 65 <1 65 <1 64 <1 65 <1 +5 Total 25, % 25, % 25, % 24, % 24, % 24, % +581 *Game, Cornish hen, duck, buffalo, etc. Note: Numbers may not add due to rounding. Source: Technomic 2015 Technomic. Inc. 15

16 Beef volume by foodservice operator segment Beef volume in foodservice decreased by 183 million pounds in The majority of the decrease has come from LSRs, but FSRs, B&I and Military have also contributed significantly. Big increases, however, have been seen in the retail sector, primarily within supermarket foodservice. Since 2010, the beef category is down 3 percent or 211 MM lbs. with the largest drop-offs on a percentage basis in B&I, Recreation, and Military. Over a 5 year time frame, Beef volume has remained relatively stable in LSR, FSR, healthcare, schools, and CCRCs Change Change Segment MM Lbs. % MM Lbs. % MM Lbs. % MM Lbs. % MM Lbs. % MM Lbs. % MM Lbs. % MM Lbs. % LSR 3,492 45% 3,597 45% 3,591 44% 3,556 44% 3,470 44% 3,441 43% % % FSR 1, , , , , , Bars/Taverns 1, Total Restaurants & Bars 5,313 69% 5,484 69% 5,516 68% 5,488 69% 5,334 68% 5,337 67% % -24 <-1% Lodging 337 5% 360 4% 422 5% 372 5% 384 5% 392 5% % Retail Recreation Healthcare Colleges Schools Business & Industry Military 1, Corrections 1, CCRCs 1, Total Beyond Restaurants 2,424 31% 2,436 31% 2,556 32% 2,506 31% 2,521 32% 2,611 33% -12-1% % Total 7, % 7, % 8, % 7, % 7, % 7, % % % 1 Segment not researched in data used as surrogate for 2012 in this segment 2 Segment not researched in used as a surrogate for 2014 in this segment. Note: Numbers may not add due to rounding. Source: Technomic 16

17 Beef cut pound and market value trends Overall Beef is down 2.3% in volume and 6% in dollars. Biggest percentage declines are found in pre-cut steaks, ribs and precooked beef. Roasts (subprimal) and other beef are growing on a volume basis in Overall, there appears to be deflation occurring in ground beef, roasts (sub-primal), and pre-cooked roast beef, while downward pricing pressures is not yet evident in other categories. Category Lbs. MM $MM '15 vs '15 vs. 14 Ground Beef 5,020 5,093 5,123 5,102 5,056 5, % $12,596 $13,535 $11,826 $12,315 $11,414 $9, % Pre-cut Steaks 973 1,106 1,160 1,142 1,093 1, ,365 11,429 11,124 11,520 10,521 10, Roasts (subprimal)* ,761 5,782 5,159 5,244 4,771 4, Other Beef ,020 1,738 1,732 1,738 1,650 1, Pre-Cooked Roast Beef ,647 1,958 1,762 1,752 1, Ribs Total 7,737 7,920 8,072 7,994 7,855 7, % $32,877 $34,974 $32,061 $32,945 $30,401 $26, % Dollar value calculations based on September pricing for each representative year * Strip/Top Loin was added as a separate category in 2015, which may be artificially inflating volume in roasts, and deflating steak category volume. 17

18 Key observations and interpretations Observations Every pre-cut steak cut has experienced volume decline except for Denver Steak/Underblade and Other in Insights Traditional cuts represent the largest share of both pound and dollar declines. These represent the highest value cuts. In terms of dollar growth, only Sirloin and Other Steaks have shown any in Change vs Pre-cut Steak Cuts MM Lbs. $ MM MM Lbs. $ MM MM Lbs. $ MM Rib/Ribeye/Ribeye Cap 153 1, , Filets 144 $3, $3, $413 Flank/Skirt Strip/Top Loin , Porterhouse/T-Bone Total Traditional Cuts 578 $7, $8, $842 Sirloin 228 $1, $1, $100 Flat Iron Petite Tender Medallions Tri-Tip Chuck Eye/Delmonico Ranch Cut Denver Steak/Underblade Total Emerging Cuts 338 $2, $2, $214 Other Steaks 57 $ $ $7 Total 973 $10,365 1,106 $11, $1,063 Dollar value calculations based on September 2015 & 2014 pricing Numbers may not add due to rounding 18

19 Key observations and interpretations Observations Roasts (subprimal) poundage is up overall, driven by Brisket, Sirloin Roast and the addition of Strip Roast/Top Loin. Even in categories where there is decline, declines are not as dramatic as in pre-cut Steaks. Insights Overall increase in Roasts should be viewed in light of Strip/Top Loin being added as a separate category in 2015, which may be driving some volume upward. The better situation in Roasts versus Pre-Cut Steaks may be due to some operator shifting from Pre-cut Steaks to Roasts for cost savings and versatility reasons Change vs Roast (Subprimal) MM Lbs. $ MM MM Lbs. $ MM MM Lbs. $ MM Tenderloin 192 $2, $2, $343 Rib or Ribeye or Ribeye Cap (prime rib) 179 1, , Chuck/Shoulder Round Total Traditional Cuts 574 $4, $5, $412 Chuckeye or Underblade Tri- Tip Petite Tender Total Emerging Cuts 51 $ $ $66 Brisket Strip Loin/Top Loin Sirloin Roast Total new categories added in 2014 & $ $ $459 Total 790 $5, $5, $21 N/M = Not meaningful as new categories added in 2015 Dollar value calculations based on September 2015 & 2014 pricing Numbers may not add due to rounding 19

20 Key observations and interpretations Observations Some decline in roast beef and rib volume occurred, while most other beef cuts are growing. Insights Continued slow growth of major burger chains and high ground beef prices are driving decline of ground beef. Rib declines may be indicative of a shift toward more pork ribs due to pricing. Value-added beef (strips/cubes/shaved/shreds) is mostly driven by growth of fast casual Change vs Ground Beef MM Lbs. $ MM MM Lbs. $ MM MM Lbs. $ MM Patties & Bulk 4,835 $12,087 4,902 $12, $903 Preparations Total Ground Beef 5,020 $12,596 5,093 $13, $939 Total Pre-Cooked Roast Beef 311 $1, $1, $311 Ribs Boneless Country-style 12 $48 18 $65-6 -$17 Back Short Total Ribs 122 $ $ $45 Other All Beef Hot Dogs/Brats 228 $ $ $105 Strips/Cubes/Shaved/Shreds* Specialty Beef Deli Meats All Other Beef* Total Other 522 $2, $1, $282 *Definition changed in 2015 Numbers may not add due to rounding Dollar value calculations based on September 2015 & 2014 pricing. 20

21 Beef market volume In 2015, the beef industry lost 2.3% of volume in 2014, 6% of market value in dollars. This discrepancy suggests there has been some deflation in the beef market over the past year. Note, however, pricing data to determine market value of beef cuts were gathered in late September of 2015 during a deflationary beef market period. Therefore, the total market value may not be indicative of the entire year 2015 for this reason. In MM Lbs. In $MM * Change -1.2% -93 Change +1.8% +139 Change +1.0% +78 Change -1.9% -152 Change -2.3% -183 Change +12.6% +$3,404 Change +8.4% +$2,544 Change -2.7% -$884 Change +9.1% +$2,913 Change -6.0% -$2,097 8,072 7,948 7,855 7,994 7,920 $30,401 $32,945 $32,061 $34,974 $32,877 7,737 $26, *At the operator purchase, or distributor sales level. Dollar value calculations based on September pricing for each representative year. Source: Technomic, Inc. 21