New York Beef Culinary Tour: Industry Trends A l i s o n K r e b s, D i r e c t o r M a r k e t I n t e l l i g e n c e N a t i o n a l C a t t l e m e n s B e e f A s s o c i a t i o n A C o n t r a c t o r t o t h e B e e f C h e c k o f f
Industry Trends Macro Economy Foodservice Protein & Beef
MACRO ECONOMIC TRENDS
Economic Growth Remains Moderate
Unemployment falling, but what about wage growth? JOBS 20% 15% December 2015 Underemployment 9.8% 10% 5% Full employment? December 2015 0% Unemployment 5.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Technomic Inc. Source: Bureau of Labor Statistics 5
2016 Foodservice Industry Trends
1 Total restaurant sales performance reveals same-store sales growth Despite an ongoing influx in competition from other foodservice channels, restaurants continued to stay on a growth path in 2015. 2016 Technomic Inc. 1 0
2 Food with a story: transparency Not only does transparency sell a narrative around food quality, simplicity and freshness, but it connects with a human, emotional component that is centered on social responsibility, sustainability, food safety and animal welfare. 2016 Technomic Inc. 1 2
3 Better everything is in demand Better is a trend with traction, particularly for burger, pizza, snack, and sandwich chains. 2016 Technomic Inc. 1 3
4 Hot flavors spice up the menu The success of hot sauces like Sriracha is pushing chefs to scout the world for similar flavors to apply to accessible menu favorites like chicken, sandwiches and burgers. 2016 Technomic Inc. 1 5
5 Workers issues are reverberating throughout the industry Front- and back-of-house technology is emerging as a way for restaurants to manage labor and keep day-to-day operations running efficiently, even as staff sizes contract. 2016 Technomic Inc. 1 6
Fast Casual Continues to Drive Top 500 Sales Growth Fast Casual 11.5% 12.4% Fine Dining Polished Casual Quick Service Casual Dining Family Style/Midscale 5.9% 6.0% 4.8% 5.3% 4.5% 3.6% 3.1% 2.9% 3.2% 1.7% 1-Yr Sales Growth: 2015 5-Yr Sales CAGR: 2010-2015 Note: The results reported here are preliminary and subject to revision. Source: Technomic Top 500 Report(s)
FSR Menu Category Sales Growth U.S. Top 500 Chains 2015 FSR Sales Growth Sports Bar Steak Family Style Varied Menu 3.1% 2.9% 6.0% 8.0% 3.5% Top 500 FSR Sales Growth Rate Asian 2.5% Italian/Pizza Mexican Seafood All Other 2.4% 1.8% 0.4% 2.0% 0.7% Top 500 FSR Unit Growth Rate Note: The results reported here are preliminary and subject to revision. 21 Source: Technomic Top 500 Report. 249 Full-service chains. FSR All Other includes: Barbeque, Healthy, Other Ethnic, and Specialty.
LSR Menu Category Sales Growth U.S. Top 500 Chains 2015 LSR Sales Growth Asian/Noodle Coffee Cafe Chicken Mexican Frozen Desserts Bakery Café Pizza Burger Sandwich Family Casual -2.9% Specialty 10.3% 10.0% 8.6% 8.5% 6.8% 6.7% 5.8% 3.3% 2.7% 7.8% 2.3% Top 500 LSR Unit Growth Rate 5.5% Top 500 LSR Sales Growth Rate Note: The results reported here are preliminary and subject to revision. Source: Technomic Top 500 Report. 251 Limited-service chains. LSR All Other (1) includes: Barbeque, Chili, Donut, Healthy, Other Beverage, Other Ethnic, Salad, Seafood, 23 Snack, Soup and Specialty.
Industry growth forecast Total foodservice Restaurants Beyond restaurants 5.1% 4.7% 5.4% 4.7% 4.6% 4.5% 2.3% 2.4% 2.4% 2.4% 2.2% 2.5% 2015 nominal 2015 real 2016 nominal 2016 real Source: Technomic 26
Retail hosts growth forecast Supermarket FPF C-Store FS 8.6% 9.3% 3.9% 1.0% 3.3% 1.0% 5.5% 6.8% Other retailers 4.4% 3.8% 1.5% 1.5% 2015 nominal 2015 real 2016 nominal 2016 real 2015 CPI = 2.9% 2016 CPI = 2.3% Source: Technomic 27
Travel & leisure growth forecast Lodging 8.6% 7.9% 5.5% 5.5% Recreation 4.4% 4.3% 1.5% 2.0% Transportation 3.0% 1.5% 2.8% 1.5% 2015 nominal 2015 real 2016 nominal 2016 real Lodging, Recreation CPI; 2015=2.9%; 2016 = 2.3% Transportation CPI; 2015 = 1.5%; 2016 = 1.3% 28
Healthcare growth forecast Senior living Hospitals 6.4% 7.9% 4.1% 4.8% 4.8% 6.5% 2.5% 3.5% Long-term care 3.2% 3.1% 1.7% 1.8% 2015 nominal 2015 real 2016 nominal 2016 real 2015 CPI = 1.5% 2016 CPI = 1.3% Source: Technomic 29
Other segment growth forecasts College/university K 12 schools B&I Refreshment services * -3.0-3.5% 3.3% 2.0% 0.5% 1.8% 0.5% 4.0% 3.3% 2.0% 2.0% 2.5% 2.0% -0.2% 2.5% % -0.3% 2015 nominal 2015 real 2016 nominal 2016 real * Includes Vending, OCS, micromarkets; 2015 CPI = 1.5%; 2016 CPI = 1.3% Source: Technomic 30
Beef Trends
Beef is Worth it for Consumers 91% of U.S. adults eat beef once or more per week 53% eat beef 3+ times each week of foodservice patrons find 71% steak worth the price Source: Consumer Beef Index, July 2015
Beef Is a Top Protein in Foodservice of total foodservice protein market of overall foodservice purchases 96% of operators menu beef (on par with previous years)
Ground Beef Dominates Volume While Steak Drives Dollar Sales 2015 Annual Total: 7.737 Billion Lbs. 1% 4% 7% 10% 13% 65% Ground Beef 5.020 B Pre-cut Steak 0.973 B Roasts (subprimal) 0.790 B Other Beef 0.522 B Pre-Cooked Roast Beef 0.311 B Ribs 0.122 B 2015 Annual Total: $32.877 Billion 1% 38% Ground Beef $12.596 B 5% Pre-cut Steak $10.365 B 6% Roasts (subprimal) $5.761 B Other Beef $2.020 B 18% 32% Pre-Cooked Roast Beef $1.647 B Ribs $0.488 B
Top Selling Beef Cuts in Foodservice 5.0B lbs 228M lbs 192M lbs 179M lbs 153M lbs 144M lbs Ground Beef Sirloin Tenderloin Roast Prime Rib Ribeye Tenderloin Filet Source: Technomic Usage and Volumetric Assessment of Beef in Foodservice, 2015
Intent to return higher for steak 41
Menuing is strong +8.9% Despite menu simplification trend, Fast Casual continues to increase ingredient use of beef Beef cuts that increased on the menu at top 500 foodservice operators: Flank Steaks, Beef Medallions and Beef Tips Flavor Trends! (percentage increase 2015 vs. 2013) Parmesan Chili Bacon Barbecue 15% of all beef dishes include onion and garlic +73% +46% +34% +33% Source: Technomic Center of the Plate Report on Beef & Pork Consumer Trend Report, 2015; Technomic Beef Dashboard, 2016
Strategies for Maintaining Steak Margins Most common across all segments 64% Increase menu prices 51% Reduce waste of beef 45% 37% Look for cost savings on other food, labor Cut steaks in house vs. purchasing pre-cut steaks 35% Manage the cost of sides 33% More aggressive upselling of other menu items 28% Find ways to use trim 26% Reduce portion sizes About 10% said they d use a lower quality cut or USDA quality grade Source: Technomic, 2014
Strategies for Maintaining Ground Beef Margins Most common across all segments 57% Increase menu prices 38% Reduce waste of beef 37% Manage the costs of sides 31% 25% Look for cost savings on other food, labor More aggressive upselling of other menu items 16% Reduce Ground Beef portions 14% Use a different type of grind Source: Technomic, 2014
Thank you
Appendix
Per Capita Meat & Poultry Consumption is Expected to Continue Increasing
Per Capita Beef Supply
Productivity and Carcass Weights
Moderating Prices Have Given Retailers & Foodservice Operators Room to Breathe
Wholesale Beef Demand Index
Thank you