Post on 27-May-2018
transcript
Chevrolets, Cadillacs, Cows and Consumers
Todd A. Thrift
University of Florida
Department of Animal Science
There is no shortcut
to get where I
am going with this!
This is not going
to directly
make you more
money?
Americas love affair with the car
• 220 million cars on the road in US ( >1/3 of world total)
• 1800 + car manufactures in US from 1896-1930• Very few survived
• Almost no new ones since that time
Geronimo
Henry Ford
• Did not invent the car.• Did pioneer the use of the assembly line to manufacture cars – 1910
• 93 minutes to make a car• By 1919 ½ of all cars in the US were Model T’s• Eventually they made 9-10,000/DAY!!!!!!!!!!!!• 15 million built 1908-1927• “built for the multitudes”• No advertising from 1917-1923…..sold themselves
• Color- “ the customer can have any color they want as long as it is black”
WHY WAS HE SO SUCESSFUL???
Model T
Year # Manufactured Price
1909 10,666 $825
1914 202,667 $440
1925 1,911,705 $260
Make more of them…..and do
it for less money!
Does this remind you of anything?????
1992
8
The Annual U.S. Per Capita Consumption of Beef
and All Chicken over the 45 Years of 1970-2014
(Based on Retail Weight)
35
45
55
65
75
85
95
Po
un
ds
Pe
r C
ap
ita
Per Capita Chicken Consumption
Increased 101% from 1976 through
2014 (39 years) and increased by
42.5 pounds per person 2014 = 84.6
1970 = 84.6
1976 = 94.4
2014 = 54.2
1970 = 40.3
1976 = 42.1
1992
Per Capita Beef Consumption
Declined 43% from 1976 through
2014 (39 years) and decreased by
40.2 pounds per person
Source: USDA Economic Research Service; U.S. Department of Commerce; U.S. Census Bureau
Cars of the 1950s
• Outside• Fins
• Hood ornaments
• Fake vents
• Wings
• Chrome
• White sidewalls
• Inside• Metal dash
• Ashtray
• AM radio
• Vinyl bench seats
1970 Chevrolet
Custom Deluxe
AC AND a RADIO!
$4,000
1/3 of a years pay
Customer expectations1970 Chevrolet• Change oil
• Tighten 3 belts
• Change belts
• Check points
• Change plugs
• Rust holes in muffler
• Check brake fluid
• Set timing
• Tune carburetor
One year
10,000 mile warranty
Sold in 1983 with 54,000 miles!!
“Worn Out”
1997 Ford 7.3L
F250 Super Duty
All the Bells and Whistles for 1997
$32,000
I did not make $96,000 in 1997
Customer expectations1997 Ford 250 Super Duty• Change oil• Never tightened a belt• Change belt…..one belt• No Points• Never touched glow plugs• Original muffler• Never check brake fluid• Never touched motor• Never touched injectors• 3-4 clutches
3 year
100,000 mile warranty
390,000 miles!!
“Just getting broke in”
2016 Chevy Silverado Duramax
Too many options to list!!!
$56,000
5 years100,000 mile warranty
I damn sure don’t make $168,000 today
Hyundai Accent 10 years 100,000 miles
Consumer expectations
are much greater today!
Cars today
• Outside• Streamlined
• Simple
• Aerodynamic
• Inside• Bucket seats
• Sirus radio
• Heated Leather seats
• Computer
• TV
• Back up camera
• Plastic
• Steering wheel padded
• AC with dual climate control
Marketing-selling you, your service, or your product
American car slogans
• Built Ford tough-Ford
• Everything we do is driven by you-Ford
• Quality is job one-Ford
• The best never rest-Ford
• Like a rock-Chevy
• The heartbeat of America-Chevrolet
• Grab life by the horns- Dodge
• Ram tough- Dodge
Luxury car slogans
• The penalty of Leadership-Cadillac
• Standard of the World-Cadillac
• Life, Liberty and the Pursuit-Cadillac
• Creating a Higher Standard-Cadillac
• Travel well-Lincoln
• What a Luxury Car should be-Lincoln
Luxury cars
• Leather seat
• Heated and Ventilated
• Memory for 3 drivers
• 10 way adjustment
• Dual zone temp
• Rain sensing wipers
• Rear view camera
• Blind spot sensor
• Heated steering wheel
• Touch screen controls
• Automatic headlight dimmer
• Automatic parking system
• Power everything
• Remote starting
• Advanced safety features
• Premium audio
My Ford Touch
• Touch screen and voice commands that do away with dials and pointers
• Recognize 10,000 voice commands
I wish I could get my wife to recognize 3 voice commands!!!
Cadillac ELR-MSRP $67,305
Cadillac ELR
Ford 250 Pickup
Most of us would not
accept giving up the luxury, conveince and
technology that our
modern car offers
Consumers are willing to pay more for more options that are no longer options but
rather standard equipment!
1983 Chrysler Mini Van- “a box on wheels”
1983 Chrysler Mini Van
• Originally designed as a station wagon replacement
• Lee Iacocca (mustang)• Concept developed at Ford• Ford was afraid it would be an Edsel
• Saved Chrysler
• Funding by putting the Dodge Ram overhaul on hold till 1994
• 23 years since last one-more later…..
• Focused intently on the customer!
Two cup holders!!!!!
1983 Chrysler Mini Van
• Top selling car in the nation by 1994
• 10 years later both GM and Ford had failed to produce a vehicle that competed in the marketplace
• GM completely changed its development process because of this failureTODAY, Customers dictate product lines to GM and not vise-versa
Who would have thought cup holders
would make a difference
Cup Holders from the 1970’s
Chrysler listened to their customers
Try to find a car without cup holders
today
Consumers like Brands
“I Will Never Ever Own a Foreign Car!!!!!!!!!!!!!!!!!”
Consumer Loyalty
Japanese car slogans
• The power of dreams-Honda
• Technology you can enjoy-Honda
• I love what you do for me-Toyota
• You ask for it you got it-Toyota
• The best built cars in the world- Toyota
• Oh what a feeling-Toyota
• Think. Feel. Drive-Subaru
• Relentless pursuit of perfection- Lexus
We made it for you ….. How does
this car make you
feel?
Foreign cars made in the US• Acura (Honda) Indiana
• BMW X3 South Carolina
• Honda Accord Ohio
• Hyundai Sonata Alabama
• Infiniti JX Tennessee
• Nissan Altima Tennessee
• Mitsubishi Outlander Illinois
• Mercedes Benz GL Alabama
• Volkswagen Passat Tennessee
• Toyota Camry* Kentucky
*most popular car in US since 2001
Foreign car companies focused on
the consumer
long before the American manufactures
did.
European car slogans
• Never follow-Audi
• Drivers wanted-Volkswagen
• There is no substitute-Porsche
• Engineered to move the human spirt-Mercedes-Benz
• Sheer driving pleasure-BMW
• The ultimate driving machine-BMW
• Born to perform-Jaguar
• Don’t dream it. Drive it-Jaguar
• Cup holders considered a silly American accessory• Drive in restaurant
• Hot coffee to go
• Automatic transmission
• German automobile design culture
• engineer knows best
• studies of real people driving their vehicles irrelevant.
European cars
Make it and they will buy it….does this remind you of anything?
We spend a lot of time
arguing about which
breed is best while our ship is sinking…
Consumer Expectations- Wants vs Needs
Subaru………….will my dog like to ride in this car?
Subaru………….will my dog like to ride in this car?
What would Henry Ford say about what the consumer wants
today?
What does this have to do with BEEF consumers?
What do we know about our consumer?
Consumer Behavior-Millennials
• Born 1980-2000
• Fastest growing segment of population
• Married later in life
• More debt
• Mistrusting• Big Business
• Big religion
• Big government
• Information comes from internet and social media
Information from the Internet
Consumer behavior-Foodies
• Use food to show off their ethics and principles
• Entertain with food
• Quick to try new foods
• Food is their hobby
• They are influencers
• Vocal
Time Spent in Meal Preparation at Home
1960 100 mins1980 60 mins2016 34 mins
Consumer behavior-High income consumers
• Luxury items• Must be seen as high profile• Demand curve is the reverse
• Higher status products sell for more money• Value time savings more than cost savings
Consumer behavior-Health conscious consumers
• Nutrition based purchasing trends are driven by:• Older consumers• More disposable income • Mostly concerned with Fat, Cholesterol
Harsh and VanOverbecke, 2015
Consumer behavior-Social conscious consumers• Perceived better animal treatment
• Environmental protection
• Natural and Organic
• Perceived health benefits
• “free of substances I want to avoid”
• Higher income, More educated
• Often misinformed!
TeslaPresold 276,000 in 2 days
Consumer Behavior-Social conscious
I'm doing
the right thing
What does the Consumer
want?
What does the Activists
want?
Consumer beliefs-Organic
• Consumer beliefs are way ahead of the regulations• Higher Quality
• Safer
• Nutritionally superior
• Animals handled more humanely
• Environmentally more friendly
• Lower carbon footprint
Consumer Perceptions- Organic is Better….
•40% more likely to buy and pay for..• Steroid free• Hormone free • Antibiotic free
•14% of those say they would pay significantly more!
Technomic, 2013
How much more?
5%
But it cost 30-80% more to produce
Consumer Perceptions-Antibiotics
There are antibiotic residues in meat 71%
The FDA banned antibiotics in meat long ago 20%
Adapted from Rummo, 2016
Consumers and GMOs
Non GMO Whiskey
Non GMO Beer
No implantsNo added hormonesNo antibioticsNo GMOsGluten FreeFree rangeGrass fedSustainableOrganicNaturalLocal
What’s next?No TasteNo Flavor
Will replace modern fast growing chickens with slower growing chickens…………………..REALLY and give up 75 years of genetic progress
Maybe we have just found a new market for cracker cattle…………..
Whole Foods
Consumer behavior-Price conscious consumers
Price
Convenience
Eating satisfaction
Are more important than
Production history
Other information
Convenienceand Cost
Often at odds with each other
Consumer behavior-Price conscious consumers
Beef index $214.30Pork cutout $78.40Chicken index $65.60
When beef index is 3 X the chicken index, price resistance sets in
A large percentage of our consumers are price conscious
66
Competing Protein ItemsPrice Per Pound in
March of 2015
Percentage
Increase in Price
Per Pound in
March, 2015 VS.
March, 2014
1. Choice Sirloin Steak 8.37 19
2. Round Steak 6.21 17
3. Chuck Roast 5.87 13
4. Ground Beef 4.20 14
5. Boneless Chicken Breast 3.52 1
6. Whole Chicken 1.59 0
7. Boneless Hams 4.31 2
8. Pork Chops 3.81 1
Comparative Beef, Chicken and Pork Prices Per Pound and
the Percentage Increases for March of 2015, Compared to
March of 2014*
*Source: U.S. Department of Agriculture Economic Research Service
16%
1%
Helming 2015
Consumer behavior-critical thinkers?
• Product attributes • Price• Size• Nutritional value• Flavor
Often compared disproportionally in favor of a specific BRAND
“Which Brand is Best?”
Consumer Perceptions- Critical Thinkers….
•Salt-considered a “natural” ingredient
•Sodium chloride was NOT “natural”!!!
Lusk and Murry, 2013
Are we listening to the right consumers?
“…and to consumer groups everywhere, I leave my steers with the stipulation they gotta feed ‘em‘til they make up their mind if they want-leanness or marbling.”
Market Signals for Quality
Slight00 Small00 Modest00 Moderate00 Slightly Abundant00
Base +$$$$+$$+$$-$$$
Source CAB
Customer Satisfaction-degree of doneness
Degree of doneness FrequencyVery rare 0%Rare 2%Medium-rare 16%Medium 24%Medium-well 20%Well-done 27%Very well-done 11%
58% like beef medium-well or greater!!!82% like beef at least medium!!!
MARBLING IS INSURANCE AGAINST OVERCOOKING!!
Quality Grade Undesirable Eating Experience
Prime 1 in 26
Premium Choice (CAB) 1 in 19
Low Choice 1 in 7
Select 1 in 5
Standard 1 in 2
Does the consumer understand QG?
Does the consumer understand brand?
Brand loyalty- Most loyal
• High Income
• Men
• Shoppers with Children
FMI and AMI, 2014
Brand Loyalty?• Loyal Coca-Cola drinkers
• “Nothing else is as good”• During blind taste test some could not discern between
Coke and Root Beer
Brands
•96% of fresh meat products are branded
•National or store brand
882
0
100
200
300
400
500
600
700
800
900
1000
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
20
08
20
11
20
14
Mill
ion
Po
un
ds
Fiscal Year
Annual Sales of the CAB® Brand
Source CAB
Brand Success
If I like it my dog is sure to like it…
What does this have to do with cows?
“Its tough to bake a cake without a recipe, and a recipe isn’t much good if you don’t know anything
about the ingredients”
Jim McAdams, Spade Ranches
Product Specifications for Different Markets-1997
White Table Retail Target Lean Targetlive weight, lbs 1000-1200 1150-1250 1200-1350frame size 5-6 6 7ribeye area, sq in 11-12.5 12-14 13-16fat thickness, in .45-.50 .25-.45 .25-.30yield grade mix 2 and 3 mostly 2 1 and 2quality grade, min avg ch ch and sl low select
Ideal Mix 1997 data
Current mix Ideal mix1.3% prime 7% prime11.4% upper 2/3 choice 21% upper 2/3 choice35.6% low choice 34% low choice46.4% select 38% select5.3% standard 0% standard
12% increase in carcasses grading USDA Choice and Prime since
1995
Dykstra 2014
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
% C
ho
ice
& P
rim
e
Year
Quality Grade Trend by Region
Kansas
Texas
Nebraska
U.S.
Source CAB
CAB® Acceptance Rates and Certified Head Count
0
1
2
3
4
5
6
0%
5%
10%
15%
20%
25%
30%
He
ad C
ert
ifie
d (
mill
ion
s)
Acc
ep
tan
ce R
ate
Fiscal Year
Certified Hd
CAB %
*Projected
On average, 68,000 head/week are accepted into the CAB® brand.Source CAB
What About Tenderness?
National Beef Tenderness SurveyRibeye Steak WBS Shear Force, lbs
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
1991 1998 2006 2010
Guelker, 2014
“Tenderness may have reached a plateau”
Ribeye Steak WBS Shear Force, lbs (Retail Audit)
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Johnson 2016, personal communication
“Today 40-50% of calves result from mating commercial Angus
cows to a registered Angus bull.”
55-60% of all bulls turned out are Angus
Larry Corah, 2011
Prime
Year Prime-Choice Spread $/cwt
% Grading Prime
2011 $33.26 3.7%
2012 $52.20 3.3%
2013 $29.80 3.9%
2014 $37.80 4.1%
2015 $23.10 4.9%
2016 $17.50 5.7%Adapted from Dykstra, 2016
Trying to sell me that our customer wants more Prime is
like trying to sell heated seats to the devil.
Much of our marketing focus is on selling middle
meats to HIGH income consumers.
Much of the selection emphasis in the last 25 years has been
based on selection for middle meat palatability.
Clear Market Signals
• Food Service says• More Prime and CAB• Smaller portion size• More uniformity
• Retail says • Less fat but more marbling• More tenderness• Smaller portions
• Packer says• More uniformity• Less fat• Smaller portion size??
• Feedlot says• Grow faster• Stay healthier• Convert better
But we are
paid for lbs!!!
Pounds drives
the system
A pound of gold is worth more than a pound of lead!
Mark Gardiner Gardiner Angus Ranch
What is the average
consumers consumption
of gold?
True ….but….when you think about it…….Apparent consumption 2003GOLD
203 Metric tons
Jewelry
Industrial
Dental
Coins
LEAD
1,440,000 Metric tons
Ammunition
Brass and Bronze
Paint pigments
Sheet lead
Storage batteries
US Geological Survey 2005
Steer served up on the plate
Live 1300 lb steer
Carcass 806 lb
Edible beef 639 lb (½ of live)
chuck 29%
rib 9%
loin 16%
round 22%
thin 19%
misc 5%
Ribeye steak
Strip steak
Tenderloin
Sirloin
Ground Beef
91.5 lbs14%
258 lbs40%
Speer 2015
Ground Beef
57% of Americans eat a burger once
a week
55-60% of beef
consumed is ground
Burger Preferences at Restaurant
41%
33%
11%
12%3%
Angus
Ground Beef
Sirloin
No Preference
Kobe
Technomic Inc.
Trained sensory panel could not detect the difference in hamburger
made from cull cows as compared to upper 2/3 of choice cattle as long as the fat content was held constant.
Can the consumer tell a difference in burger?
Griffing et al., 2013
McDonalds has a line of Angus Burgers
107
Where Will The Very Large Supply of Ground
Beef (Hamburger) that is Consumed in the
U.S. Come From in the Years Ahead?
Cull beef and
dairy cows and
bulls25%
Imported beef
trimmings
15%
Grain and full
fed steer and
heifer marketings out
of U.S. Feedlots
20%
Source: Based on private beef industry data and the USDA, Economic Research Service.
Grass and forage fed steers and
heifers40%
Helming 2015
108
Where Does The Very Large Supply of
Ground Beef (Hamburger) that is Consumed
in the U.S. Presently Come From?
Cull beef and dairy cows and bulls
25%
Imported beef
trimmings15%
Grain and full fed steer
and heifermarketings out of U.S. Feedlots
60%
Source: Based on private beef industry data and the USDA, Economic Research Service.
Helming 2015
Grinding Steer
• Adapted cow mated to high growth terminal bull
• Wean 650 lb plus calf
• Stocker to 1000 lbs
• Feed for 60-75 days (white fat)
• .25 inch backfat
• Harvest at 1300lbs
• Fab middle meats and some whole muscles
• Grind the rest
$$$
Annual Per Capita Meat Spending
Beef $298Chicken $171Pork $161
2013
Beef is still the Cadillac
Cadillac ELR-MSRP $67,305 209 Days
Longstanding Brands that Went Away
•Mercury 1939-2011
•Plymouth 1928-2001
•Oldsmobile 1897-2004
•Pontiac 1926-2010
What is the Target?
•Red Meat Yield?•Quality Grade?•Niche?
• No implant• No antibiotics• Organic• Lean• Grass fed• Prime• Higher than Prime
70 % Choice70 % YG 1 and 2
Ideal Mix
70% choice 70% YG 1 and 2140 total
90% choice and CAB50% YG 1 and 2140 total
40% low choice100% YG 1 and 2140 total
Harlan Ritchie
Certified Angus Beef
• Has been a huge player in the demand for our product at food service, retail trade, and export trade.
• It is not the only target.
• There may be advantages to production to producing a middle of the road product with less cost in the southeast.
Cars and Quality Grade
Porsche, Lamborgini, Corvette=Kobe
Cadillac, Lincoln=Prime
Lexus, Buick=Upper 2/3 Choice
Chevy, Ford, Dodge, Honda, Toyota= Low Choice
Hyundai, Kia, Mitsubishi, Chevy, Ford, Dodge, Nissan=Select
Subaru, Volkswagen= No added hormones, free range, no antibiotics
Tesla (electric)=Organic, Grass fed
Geo Metro=Chicken
Henry Ford
“If I had asked the customer what they wanted, they would
have said faster horses”
Todd Thrift
Our consumer is a moving target. We must listen to their wants and
desires but we must be careful whom we listen to the most.
They consume a lot of ground beef and it must be at least
somewhat cost competitive with pork and chicken.
You wonder why I am questioning the consumers decisions?
We all know everything I have said today must be
true……..because…..
I found it all on the internet!!