Canadian BeefCanadian BeefDriving a Global Value PropositionPresented to Canadian Meat CouncilAnnual ConferenceMay 31, 2012y ,Quebec City, Quebec

Topics• Canada Beef Inc overview• Strategic direction & prioritiesg p• Canadian supply outlook & impact on global

strategygy• Canadian brand strategy• Domestic & export marketsp• Canadian consumer insights

2

Value Proposition Loyalty

Awareness

Understanding Audit &Measure

Value Proposition

Appreciation Commitment

Confidence(Trust) Preference

3

(Trust)

A Brand New Company

Export Federation

4

Canada Beef Inc. is Funded Through National Check Off & Leverages Various Government Funding Initiatives& Leverages Various Government Funding Initiatives

5

Canada Beef Inc. – Board of DirectorsChair – Brad Wildeman, SK

Vice Chair‐ Dane Guignion, MB  Canadian Association of Importers and Exporters Dwight Greer – Eastern Meat Solutions 

Grant Huffman, BC Chuck MacLean, ABJeff Warrack, AB P l Sh ON

Beef Processing and Distribution Brian Read – XL FoodsFrancis Labrecque – Levinoff Meat ProductsPaul Sharpe, ON 

Gib Drury, QC Jennifer MacDonald, NB 

Francis Labrecque – Levinoff Meat Products Mike Kennedy – CargillArthur Batista – EcolaitScott Ellerton – Sysco Canada

Members at largeJim Bremner, NSJohn MacDonald, PEI 

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3 Year Strategic PlanVision “A Dynamic Canadian Beef Advantage Delivering Recognized Value"

Brand & Reputation Risk & Reward People & Knowledge

Mission “Innovative, Collaborative & Sustainable Canadian Beef Solutions”'

Innovation & Collaboration(i) Seek (ii) Adopt (iii) Integrate (iv) Deploy

(v) Partner with passion & purpose

Stakeholder Connectivity(i) Continually define & openly share “the Canadian Beef story”

Operational Excellence(i) Risk management (ii) Program effectiveness & efficiency

(iii) Fiscal transparency (iv) Measured accountability

(i) Continually define & openly share the Canadian Beef story (ii) Strategically align internal/external messaging to showcase value

Culture & Leadership(i) Discover, enable & reinforce a mature & evolving culture of accountability, leadership & partnership

(ii) Talent development/succession

• Communicate the benefit of the CANADIAN BEEF ADVANTAGE to the Canadian industry.

• Identify, re-assess & confirm key markets and priority end-use customers.

• Achieve & maintain sustained commitment

• Messaging tailored to a diversity of stakeholders to expand their knowledge of the link between the Canadian Beef Brand and its attributes (food safety, on-farm food safety quality and animal health)

• Marketing efforts deliver a heightened consumer commitment to Canadian Beef.

• Marketing activity results in differentiation across a broad menu of Canadian beef offerings generating measureable value• Achieve & maintain sustained commitment

to Canadian beef in select priority markets & with identified priority end-use customers.

• Facilitate strategic and consistent growth & corresponding return on investment within priority markets & with priority end-use customers.

safety, quality, and animal health).• Management & staff receive ongoing

training and development• Management and staff receive ongoing

industry exposure.• Management has appropriate succession

plans in place for staff

offerings, generating measureable value.• Marketing efforts enhance demand/ROI for beef

products.• Leverage the benefits of Canadian cattle

genetics to strengthen the Canadian beef brand and reputation and vice versa.

Canfax Supply Outlook• Canfax projects decreased fed &

non fed production

• Fed marketings down 16% in ‘113,500

4,000

)

Canadian Beef ProductionFed Non-Fed

• Fed marketings down 16% in 11 at 2.85 million head• Domestic Slaughter down 12%• Exports down 33% 1,500

2,000

2,500

3,000

cass

wei

ght (

Mill

lbs)

p

• Fed production to decline further over next 2 yrs with smaller calf crops coming forward

0

500

1,000

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

Car

c

crops coming forward• Wildcard: fed production could be

smaller yet with heifers are retained vs. being fed

Source: Canfax Research

8

C di C ttl & C l

15.0

Canadian Cattle & Calves January 1

14.0

ad

12 0

13.0

Million Hea

11.0

12.0M

10.080 83 86 89 92 95 98 01 04 07 10 13p

9

80 83 86 89 92 95 98 01 04 07 10 13pSource:  Statistics  Canada

3,500

Canadian Fed Beef Production

3,000

unds

2,000

2,500

ons of Pou

1 000

1,500

Millio

500

1,000

80 83 86 89 92 95 98 01 04 07 10

10

80 83 86 89 92 95 98 01 04 07 10Source: Canfax  Research

Strategic Priorities

• Create a differentiated brand position for Canadian Beef/Veal

- Leverage the unique selling points of Canadian beef/VealLeverage the unique selling points of Canadian beef/Veal- Utilize a demand pull strategy- Targeted at both trade customers and consumers

• Identify targeted customers in priority markets- Determine customer value and ensure returns on marketing activities

- Collaborate with supply chain sales/marketing expertise

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Strategic Priorities

• Maximize the value of priority products in global markets

- Right products in highest value marketsRight products in highest value markets- Focus on export markets

• Provide timely and insightful market intelligence to i d t t k h ld t t dindustry stakeholders to support sound management decisions

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Communicating a Canadian Beef Advantage• The Canadian Beef Advantage (CBA) - composed of attributes which g ( ) p

support the value proposition. • The value proposition answers the question “why should I buy Canadian

Beef?”

• Broadly speaking there are two categories of CBA attributes which are “emotional” and “functional” attributes

• functional attributes are usually created through the efforts /investments of our stakeholders - tangible characteristics of our products and the supply chain from gate-to-plate

• emotional attributes - often related to perceptions of Canada and Canadians; less tangible but still vital to the value proposition

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Canadian has a very strong beef story to tell

Breeds/Genetics

High Quality

Feed Grains

AnimalCommitted Animal Health

Systems

Committed Global

Marketing

Consumer Preference

Food Safety Systems

Meat Quality

Systems

Cattle Identification

System

Quality Grading

Standards

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Key CBA Functional Attributes

Canadian Cattle Production System

Canadian Beef Processing System

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Canadian Cattle Production System B d S l ti d G ti I t P• Breed Selection and Genetic Improvement Programs- 30+ breeds and 10,000 breeding stock producers supporting

carcass yield advantage

C d ’ N ti l C ttl Id tifi ti S t• Canada’s National Cattle Identification System- created for animal health and supporting significant future potential in data based decision making (e.g. BIXS)

N i l A i l H l h P & V i• National Animal Health Program & Veterinary Infrastructure- control/ prevention of foreign animal disease critical to maintaining and expanding international markets g p g

• Grain Fed for Enhanced Eating Quality- HACCP based feed production and oversight bythe National Livestock Feed Program

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the National Livestock Feed Program- Enhanced Feed Ban for BSE prevention and control

Canadian Beef Processing System • Computer Vision Grading Systems• Computer Vision Grading Systems

- enhanced consistency and accuracy of grade application benefits the supply chain and end users

• HACCP Food Safety Systems for all Products• HACCP Food Safety Systems for all Products- audited by the CFIA and constructed in accordance with key trading partner requirements

Mi bi l I t ti d T ti• Microbial Interventions and Testing- carcass pasteurization and application of antimicrobial treatments on carcasses/cuts supporting food safety and product shelf-life

• Global Grain Fed Beef Exporter - Canadian exporters have proven track record for quality and customer satisfaction; experience in

th 100 k t ld id

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more than 100 markets world wide

Key CBA Emotional Attributes

S t f / ti t d ti• Support for/connection to domestic producers and industry

P iti ti f t l i t• Positive perception of natural environment

• Positive image of Canada & Canadians

• Nutritional benefits of beef

• Natural affinity for beef/tradition• Natural affinity for beef/tradition

• Confidence/higher awareness of domestic regulatory system

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regulatory system

Canadians care if the meat they buy is CanadianA t j it (78%) th t th d th t th t• A strong majority (78%) say that yes they do care that the meat they buy is Canadian– 35% care “a lot” about buying only Canadian meat

43% care but will buy other meat depending on where it is from– 43% care, but will buy other meat depending on where it is from

• The remaining 22% do not really care, as long as the meat passes Canadian standards and inspections

2235

I care a lot about buying only Canadianmeat

I care somewhat about buying Canadian

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meat, but I am willing to buy other meatdepending on what country it is from

I don't really care as long as the meatpasses all Canadian standards andinspections

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p

Source: ALMA Canadian Consumer Retail Meat Study – Dec. 2010

Prefer Canadian-Raised Beef, even if it costs more than imported beef

314

83

Yes No Don't ever buy

QWU8. Would you prefer to purchase beef that is produced on Canadian farms and ranches even if beef imported from other countries costs less?

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ranches even if beef imported from other countries costs less?Source: Beef Consumer Omnibus Research – May, 2008

74%

0%

47%

0%

58% 3%

Sirloin Ground Beef$4.49

Canadian Beef + Leaf (Front)

Sirloin Ground Beef$4.49

No origin mention

0.78

7 sec.

0.06

5 sec.

Agriculture Canada Study Grocery Simulation -

63%

0% yGround Beef

39%

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Sirloin Ground Beef$4.04

No origin mention

Average Time Spent on Category: 28 seconds

0.62

6 sec.

Market Development Program

• Designed to provide cost share investment to support activities that align with CBI objectives

• Provides objective measurement

• Available to all industry partners in all markets

• Focus on developing long term sustainable marketing programs/activities

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Brand Partners• Building brand equity through licensed partners• 120 signed licensees spanning all trade sectors with a focus on industry

leaders

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Canada Program Examples

LOBLAWS• Partnered with OCF to launch Ontario

Corn Fed Beef across Loblaw stores

• Part of national commitment to have Canadian beef across all LCL banners

• A significant partnership - represents long-term value for producers and packers alikep

• Program continues to grow in volume and assortment, further helping position thi h i l d i f h t

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this chain as a leader in fresh meat

Canada Program Examples

M&M MEATS• After years of offshore beef, M&M has

committed to launching five new ‘AAA’ gsteaks across the chain

• 465 stores in cities and town coast to coastcoast

• Mission to re-establish themselves as the premium steak destination; see Canadian beef as paramount in that questbeef as paramount in that quest

• Goal - sell 1 Million steaks in first year, supported by aggressive advertising and consumer education

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consumer education

Japan Program Example

NEW OTANI HOTELS• Group of high end hotels in Japan who are

featuring Canadian beef in their high volumefeaturing Canadian beef in their high volume restaurants

• In coordination with key importer partners on hi h l d d thigh-valued products

• Limited access to Japan but still strong interest in purchasing and promoting quality and safetypu c as g a d p o ot g qua ty a d sa ety

• This partnership leads up to the Japan BBQ festival where Canadian beef will play a leading

l ith f d i d t il t

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role with foodservice and retail sectors

Mexico Program ExamplesPALACIO DE HIERRO• 20 location located in the highest end retail

malls; has been in operation since 1891malls; has been in operation since 1891

• Associating highest quality ‘AAA’ beef with upscale retail to drive impressive volumes on hi h l d thigh-valued cuts

• A good example of finding the “diamond in the rough” and developing a strong partnership in g p g g p pa market that is plagued with a lot of negatives lately

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Market Outreach Initiative (MOI)*NEW* June 1, 2012.• New Canada Beef program available to

all exporters of Canadian beef and vealall exporters of Canadian beef and veal

• Designed to cost share expenses related to exploring new markets and business d l tdevelopment

• Compliments other Canada Beef market develop programsp p g

• Expect extensive uptake by exporters both large and small

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29Source: USDA

Top 10 Beef Cuts in Canada Represent 74% of Total Beef Volume at Retail (by kg volume)

kg (000) Total kg Share % Volume Change1. Lean Ground Beef 60,136 24.5% 5%2 Medium Ground Beef 24 401 9 9% 3%

++2. Medium Ground Beef 24,401 9.9% 3%

3. Extra Lean Ground Beef 20,050 8.2% 2%4. Round Beef Roast 13,930 5.7% 15%5. Sirloin Beef Steak 12,833 5.2% ‐7%6. Rib Beef Steak 11,910 4.9% 10%

++

+

7. Beef Cubes/Shanks 10,335 4.2% ‐5%8. Striploin Beef Steak 9,311 3.8% 16%9. T‐bone, Porterhouse, Wing Beef  Steak 9,170 3.7% 7%10. Regular Ground Beef 9,004 3.7% ‐14%T t l T 10 245 247 73 8%

+

+

++ +

Total Top 10 245,247 73.8%

Nielsen Market Track 52 we, July 3, 2010

Out of the 74% only 5 are sub primal cuts

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Out of the 74%, only 5 are sub primal cuts4 Grinds, 1 Stewing cuts4 Middle meats, 1 Round,

A Global Approach to Maximizing Value

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Global Representation• Canada

CalgaryMississauga

• Mexico• Japan• Japan• Korea• Hong Kongg g• China• Taiwan

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Canadian Beef Exports, 2011

Hong Kong &  Mexico

Russia2.4%

Other5.3%

Macau6.2%

9.1%

Japan 1%

Taiwan0.3%

U.S.73.5%

p %

33Source: Statistics Canada

The Importance of Market Access

Next Incremental Access Incremental Value Total Value1. Mainland China (U30M) $20 million $110 million2. Japan (U30M boneless) $47 million $125 millionp ( ) $ $3. Korea (U30M) $30 million $30 million4. Mexico (O30M) $15 million $200 million5. Russia (B-I/Offal O30M) $12.5 million $37.5 million( ) $ $6. Taiwan (B-I U30M) $8.4 million $15 million

Total for all Selected Export Markets: $132.9 million incremental increasep $

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Top 10 Beef Exporting Nations as a % of Production, 2011p

82.0%

67.2%

64.6%

New Zealand

Uruguay

Australia 64.6%

41.6%

24.8%

19.2%

Australia

Canada

India

Brazil 19.2%

11.8%

8.7%

2.0%

Argentina

United States

EU‐27

0.8%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

China

Source: USDA

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Top 10  Importing Nations as a % of Consumption, 2011p

95.2%58.2%

TaiwanJapan

p p g p , p

55.6%42.9%

40.2%

KoreaRussia

Philippines

38.9%24.6%

16.2%

EgyptCanadaMexico

9.8%6.0%

0% 20% 40% 60% 80% 100%

United StatesEU‐27

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Source: USDA

Strong Global Competition

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Consumer Insights

Imports 26% pup from 22% in 10

Domestic 74% down from 78% in 1078% in 10

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The Canadian Consumer: Common Facts• Aging Population• Smaller Families

D l I• Dual Income• Declining Cooking Skills• Diverse Ethnic Mix• Diverse Ethnic Mix• More Urban • More Informed “Educated”• Higher Demand for Quality• Variety Driven

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• More Health Conscious

Importance of Product Traits as Purchase Determinants

Q. Please check the five product traits of those listed below that you consider most important when you purchase a beef product.

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Beef Consumption Today vs. 5 Years Ago46% f d lt C di b f t th ti b t th• 46% of adult Canadian beef eaters say they are eating about the same beef today

• 43% say they are eating less beef

• 11% are eating more beef

43% 11%

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Q12. [If Beef eating frequency is > 0 at Q.11] How does your consumption of BEEF today compareto your consumption of beef five years ago? Eat a lot more beef today; Eat a little more beef today;About the same; Eat a little less beef today; Eat a lot less beef today