Beef Experts Say Beef Demand
Up Last Quarter By 4.5 Percent

NEW YORK — Several economic factors seem to indicate beef demand may be stabilizing for the first time in 20 years, say beef industry experts.

That was the message heard by those attending the Beef Summit 1999, a one-day seminar conducted here for beef marketers including retailers, food manufacturers and foodservice operators.

According to industry analysts, beef demand increased 4.59 percent during the third quarter of 1999, compared to demand during the same period last year. While seasonal demand slipped 1.65 percent between the second and third quarters of 1999, industry leaders remain optimistic that beef demand is improving.

The rate of decline of beef demand has been slowing since 1996, according to the Beef Demand Index, which is calculated by leading independent economists and industry experts using USDA per capita beef consumption data and USDA Choice retail beef prices adjusted for inflation.

Randy Blach, market analyst for Cattle-Fax, a private market research firm in Denver, told Beef Summit attendees that at least two of the key factors contributing to demand gains in 1999 to date include increased consumer spending for beef and gains in per capita consumption.

Consumer spending on beef from January through September 1999 totaled $36.7 billion — a $1.5 billion or four percent increase compared to one year ago. Consumer beef spending for the entire year is projected to reach $48.56 billion, which is nearly $2 billion above the 1998 level. And, per capita spending on beef is expected go grow to $178 by the end of 1999. This level of spending represents a $5 per capita gain and the largest increase in per capita spending since 1990.

A key factor in the spike for total beef spending is the fact that consumers are buying beef at steady to slightly higher prices despite record-high beef supplies. USDA average retail beef prices are up four cents per pound from one year ago, according to Cattle-Fax data. At the same time, the beef supply for the year is expected to reach nearly 27 billion pounds — 2.5 percent above 1998 levels.

"Increased supply usually drives consumer prices lower, as demand becomes saturated. So far this year, the exact opposite has happened," Blach said.

In addition to increased consumer spending, per capita beef consumption from January through September 1999 is up .9 pounds from one year ago. Cattle-Fax estimates year-end per capita consumption will jump to 69.2 pounds per person — a 1.6 percent increase from 1998 levels.

Data released today also shows beef's share of total meat expenditures is stable compared to last year, despite stiff competition from pork and poultry. Beef's share of consumer spending dollars from January through September of 1999 is 40 percent, which is slightly above last year's average. Pork, chicken and turkey market shares January through September were 28.4 percent, 27.4 percent and 4.2 percent, respectively.

Blach anticipates beef's market share will hold steady through the end of 1999.

Improved exports during the first half of 1999 have contributed to the current state of beef demand. Japan and Korea have begun to increase imports of U.S. beef as their respective economies begin to recover from recent financial crises, and Mexico is expected to remain a strong import customer.

Other factors that have helped beef demand include a strong U.S. economy, rising wages, low inflation and a low unemployment rate. Yet Chuck Schroeder, CEO of the National Cattlemen's Beef Association, said while preliminary demand figures give beef producers a lot to be hopeful for, the battle is far from over.

"We have made great strides toward improving consumer demand for beef, and we need to continue building on those successes if we are to keep demand on the upswing for America's beef producers," Schroeder said.

As the major checkoff contractor to the Beef Board, NCBA embarked on the first leg of a long-term strategy in late 1998 to stabilize beef demand by focusing efforts on making beef more convenient for today's time-starved consumers. Schroeder says these initiatives also have contributed to first and second-quarter demand gains.

With checkoff funding, NCBA helped introduce a new category of convenient, branded beef items that can be heated in the microwave and ready to serve in about 10 minutes. Several manufacturers of these products have seen double-digit sales and distribution increases since the beef industry launched its 1999 national marketing campaign to build consumer awareness and trial of these microwaveable beef products.

While primarily found in the supermarket fresh meat case, heat-and-serve beef products also are making their way into restaurants to ease operational issues and deliver a great beef meal for consumers. Foodservice operators are looking for convenient, consistent and versatile, high-quality beef menu solutions that help address their labor problems.

The beef industry's new product development initiative introduced more than 30 new products in 1999 using currently undervalued beef cuts from the chuck and round. New products such as a rotisserie beef roast for the deli, beef appetizers for restaurants and pre-marinated steaks are making chuck and round products more convenient and appealing for consumers — and more profitable for the beef industry.

And, the industry tackled one of the biggest barriers to increased beef purchase: consumer confusion at the retail meat case. Through a new marketing initiative called "Beef Made Easy," the industry is helping retailers market beef products by cooking method, versus anatomy. Color-coded merchandising materials make the beef section easier to shop, and on-pack cooking instructions make beef dishes easier to prepare.

The beef industry will continue building on this convenience strategy in the year ahead, Schroeder said, and it will add an aggressive nutrition component to its marketing efforts — one that focuses on the bundle of nutrients beef provides, such as zinc, iron, protein and several B vitamins. In past years, the industry has produced leaner products in response to consumer interest in lower fat food choices. Today, consumers and health professionals also are recognizing the nutrient contributions beef makes to diet quality, said Schroeder.

"All of our marketing efforts target today's mom. As the primary shopper and keeper of the family meal, she is the critical link in helping build beef demand," Schroeder explained. "The next phase of our long-term marketing strategy will ensure convenience and nutrition work together to deliver easier products she can feel good about eating and serving to her family."