16_3_t.txt Technical Challenges for Processed and Meal Solutions Tom Rourke

[1]Alright, next let me introduce Tom Rourke from Meat Solutions. And, he will discuss technical challenges for process meat and meal solutions. Tom is the director of R & D for national accounts at Cargill Meal Solution in Wichita, Kansas. He is a professional member of the American Meat Institute, the American Meat Science Association, the Institute of Food Technologists, and the Research Chefs Association. Previously, Tom worked at USDA as a meat grader and was an instructor of meat science at the University of Missouri. And, he was recently vice president of research and development at Impact Foods. Please let’s welcome Tom Rourke. Good morning. It’s very nice to be in central Illinois. I’m a native of central Illinois, grew up just outside of Springfield, and still have a bunch of family in Havana and Kilburn areas so it’s nice to be here, nice to be surrounded by corn, lots, and lots of corn. I like it. You know corns not everywhere. Just kind of being from here you think it’s just everybody grows it but they don’t. It’s amazing. Today is June 21, the first day of summer, the longest day of the year, and to keep this from being the longest presentation of the conference I’m going to have to skip a few slides so I hope you don’t mind. And, I already forgot which way is forward and reverse but we’ll see here. So, Phyllis Shan called me. Is this the right distance? Phyllis Shan called me about two months ago and asked if I would say a few words about meal solutions and I said yes. I’m not really involved in meal solution on a daily basis anymore but I have some history. Then, she started talking about challenges in meat processing. We talked about that a little bit. About a month went by and I did an official thing that says here’s your title for the presentation, Challenges in Meat Processing and Meal Solutions. Boy, that’s a big one; a lot of topics there. So how do we attack that?

[2]So, I did an outline or a table of contents and decided we’d just try and maybe list the challenges in processed or meat processing and concentrate our efforts on meal solutions. I figured the reason she called me is I had a little history in meal solutions so we’ll talk a little bit about that. It’s a law that you have to talk about trends if you’re going to talk about meal solution and I wish I didn’t have one trend slide in here right now because you’ve heard so much about it. So we’ll fly through those. And, then we’ll talk a little about some of the solutions that Cargill is providing currently for its customers, touch a little bit on packaging, and then try to sum the whole thing up.

[3]So, meat processing challenges; I went to the AMI website because Randy Huffman and his group deal with that everyday and here’s kind of a list of what they’re dealing with under animal health and welfare labeling. You know, they’ve got the cool and environmental factors, worker safety, inspection; things like that are important to them as far as their issues.

[4]Then, I decided to have a little fun with the computer and I just started to search challenges and issues in meat processing and what pops up is anti•meat industry and anti•corporate farming websites. These people are aggressive. And, I kept; I didn’t want to open them. Like we all do, you know, I don’t want to read that. Then after awhile you think you know we better start reading this stuff. Just like the presentation earlier this morning; maybe we should have read that book. I read it; how many people read that book, Nation? Not very many, so I always like to kind of know what people are saying about us so maybe we should read and look at those. So I started looking at these.

[5]And, here’s their list; much more green in nature, much more environmental in nature, feed additives, antibiotics, genetics engineering, hormones, organic, BSE, loss of family farms. They’re worried about the family farm and consolidation of meat companies.

[6]So, a big list; 20 minutes and I’ve already used ten just introducing myself so where do we begin? Let’s concentrate on meal solutions.

[7]And, here’s a shot of a few products that our company has rolled out the years Page 1 16_3_t.txt in one facet or another.

[8]Some of the history; here’s some of the lines that I’ve been involved in over the years and I think for people that are interested in meal solution and developing new lines, going to market, checking out what’s out there before is a good place to start.

[9]In 1995 we rolled in a line of items called Tonight’s Choice and that was really an exciting period of time in meal solutions because nobody knew a darn thing and everybody’s opinion was just as good as anybody else’s ‘cause nobody had any facts to prove anybody wrong. So, and, we decided what we were going to roll out, five white guys at a table, then we said this is what they’re going to buy, and so what we decided is, you know, they’re going to buy stuff that they can’t make at home. They’re going to buy fancy items, chef prepared items, and so

[10]these are the products we rolled out. And, what we found out they bought were meatloaf, rib•eye steak, and chicken breast. So they didn’t go for the Florentine pork loin that had cranberries and asiago cheese in it. They went for the chicken breast. So this line did pretty well for awhile. We got a lot of testing. There were only three or four people trying to do it back then and so you could get a lot of tests in retail, but continued sales were a little tougher.

[11]So, then we said, you know, it’s comfort food and feeding two is not right, it’s four and so we’re going to increase the size. We’re going to make all these fancy, little comfort food roasts and we’re going to put them in a microwavable tray that, by the way, nobody used, and we are going to put a fancy lid over it so you can see the product and we’re going to sell those for $8.99 retail.

[12]You know, it, here’s a list of the items. It did pretty well. $8.99 retail’s pretty high. That’s probably its biggest problem. Some of these products still exist in some facet or another and the line supported itself for about two years. So not too bad in that day and age.

[13]Then, we decided, well shucks, we’re going to go back to two because four’s not the answer, two’s the answer. We were right to begin with and we’re going to reduce the store ring. We’re going to get that price down. We’re going to go down to 16 ounces but that includes a four ounce pack of sauce so 12 ounces of meat. We’re going to get rid of that expensive, microwavable tray since everybody’s throwing it away anyway. We’re going to increase the convenience by pre•slicing the product. We’re going to put a unique, chef prepared sauce pack in so comfort food with a twist which you hear a lot about now. And, then we’re going to give all the pertinent information over to the right. You see the recipe cards. There’s three recipes, there’s redeemable coupons. You know, we tried to hook them into buying this regularly. It worked pretty good for

[14]awhile. Here’s the list of items all kind of comfort food with a little bit of twist like chicken strips with sweet pepper sauce.

[15]Then, we also in that arena there was or that time period around ’95 there was a thought that the customer wanted to cook it themselves. They didn’t want it pre•cooked, they didn’t want to just microwave so they wanted it marinated and ready to go but they wanted to cook it. So we rolled this line out, Our Own Kitchen, of raw marinated and here’s

[16]several of the items here, probably too many items actually.

[17]And, in that ILK in 2002 we said, yeah the customer wants to be involved and they want to do the cooking and the Hispanic community’s growing so we’re going to provide this El Carnicero Moderno, the modern butcher. And, we rolled that out.

[18]And, here are some of the very, at least we used original names, but, and we rolled them out in Hispanic communities where like 40% of the community was Hispanic; modest packaging. And, we weren’t just that packaging as intentional, Page 2 16_3_t.txt intentionally modest, and authentic flavors. What we found out at our first big test was in Sam’s and so we get demographic data. We found out that Caucasians were buying the product and five white guys. So, and, then it died and we didn’t get many sales. And,

[19]if you ask around the company why it died, this is 2002 remember, and they thought that our modern butcher looked a lot like Saddam Hussein. I think that is Saddam Hussein.

[20]This is just another line in 2002, a marinated, ready to cook, and this was actually in one of the club stores also for quite a period of time, marinated roast with a variety, pork chops with a honey barbecue sauce, rib•eye, sirloin with different nice, fancy glazes on them. In

[21]2000, this was fun. We tried to get into the sandwich business and the breakfast business. I love this product. We did really horribly at getting into the sandwich business, by the way, but we gave it a shot. The, this was a great product though, an egg and sausage in a pancake sandwich and actually one of the national accounts now after this, but has a product much like this and they’re doing quite well.

[22]And, then this is just a product of short ribs from a chuck that the marketing department, I put it to the side here so you could see the fancy things that the marketing department did to stimulate the interest in this product and this product still sells much more in a food service style, packaged though. And, but, you know, that marketing initiative probably helped to open many doors for that product.

[23]Trends; when they start to, five after. Trends,

[24]we’re now in the valuable life arena and it’s kind of neat. I’m kind of proud of where we are as American’s now. It’s getting low carb, organic, natural, health initiatives, but another thing is social causes. I buy this food product; what impact does that have on the earth which is just kind of neat, I think, and has a lot of opportunity for product development.

[25]The mega trends, number one, is flavor. Flavor’s king, the over•riding factor in everything we choose; health, which is the natural and organic which you’ve heard a lot about going that category; ethnicity, Hispanics number one and then convenience.

[26]On the flavor side, the use of anything fresh, crisp, fruit flavor, mango pepper sauce, is very important now. The health emphasizes on fresh and pure, authentic ingredients. Ethnic flavors; smoked, wood roasted are all popular and comfort foods still remain popular but comfort with a twist.

[27]Here’s a just, this is on the X axis is just the year 2005, the four quarters, the number of menu items, and you see that the usage of fresh is increased by 14%.

[28]I thought long and hard about whether to include this or not. Right now, I definitely wish I wouldn’t of, but this is the food flavor pyramid and, you know, the most important factors are down below where you’re pyramid starts to build and then up at the top maybe not quite so important, but let’s just run through them real quick. Lightly foreign; not crazy where we’re we’ve never heard of it before, but lightly foreign, very important.

[29]Fruit and nut infusion; if you can put that into your recipe ideas or your product development is very helpful.

[30]This one’s real important for meat; flavorful prep; wood roasted, smoked, toasted, grilled, marinated. I touched this, I put some love into it type of a thing. Contradictory;

[31]oh here’s some of the smoked, we’ve always enjoyed smoked; applewood, hickory, Page 3 16_3_t.txt but look at some of these new ones; tequila smoked, green tea leaf smoked, cherrywood smoked, that hamper smoked. I didn’t even say it because it sounds horrible. So who would eat that?

[32]But, then the contradictory flavors, the hot with sweet and things like that.

[33]Add a fancy cheese and it’ll help your products; asiago and gouda and gorgonzola.

[34]Regional ethnics; you can’t say just Chinese anymore where in Chinese is Mongolian; what is it? Is it Tai food? It, you

[35]know, one of the, and one of the big ones now is the island cuisines. You see a lot of food service restaurants popping up with island themes now.

[36]And, then, of course, are comforts we’ve always enjoyed but comfort with a twist.

[37]So, and I have this slide in here ‘cause it’s good news. We need some good news first day of summer, is we’re as fat as we’re going to get. Okay? We’ve leveled out as Americans so you can eat. You know, I’m just going to, I ‘m going to pig out today ‘cause we’ve leveled out. We’re not going to get any fatter. So, but we’re still concerned, right, because I don’t think we’ve gotten thinner. We just, I just take it, you can’t get any fatter than what we are.

[38]So, 42% of the menu items are showing low carb. These are health related, of the total health related items; 42% low carb, vegetarian’s big, and the, you have several other, gluten free I thought was kind of interesting at 9% of the health claims. So that’s growing rapidly.

[39]Here, all I want you to look at is the baby blue line and you see these health claims; low carb, vegetarian, light, low fat, and it’s the mid scale and family restaurants that are really going after these.

[40]Here you see the green line of growth in organic number of menu items and it was mentioned before, and rightfully so, that that’s not a huge number of increase, a 150 to 250, but you think about everything that goes into getting something on the menu, you know, a 100 that’s a, that’s a lot of work being done with organic items. I’ll skip that bottom. I’ve seen it four times since I’ve been here.

[41]And, Jim Batis presented this the other day, organic meat, poultry and seafood growth 139% from ’03 to ’04. And, then natural meats increased by 30%. He also was bold enough to present the growth of organic which said 15, that consumers would pay 30% more for natural meats and then the other piece of data there was, for organic, they pay 15 to 200% more. I thought that’s a big range, 15 to 200! I think what that means, I’m not sure, but I think what it means if you go to the trouble to get it organic you can charge whatever you want. So the annual growth rate in organic products is about 20 to 24%. And, you can see that the current market for natural organic ’s about $350 million annually, anticipated to grow within the next three to five years to $1 billion.

[42]These are our cause related menu item claims and their growth. Quarter one is, in 2005, is the green bar and the yellow bar is quarter four. And, you can see from natural, authentic, local, range free, these items are growing and they’re growing in the casual family and upscale dining sectors.

[43]Ethnicity; the Hispanic population will grow in 2000 from 12.6% to 2010, 15.5%.

[44]And, this graph just shows over to the right the Hispanic household. Historically these, the Hispanic people have not spent a lot of money in restaurants but they’re starting to. A 34.3% increase from ’97 to ’02.

[45]And, just to say Mexican food is not enough, we need to keep in mind that Page 4 16_3_t.txt there’s regional flavors within the Hispanic community.

[46]One last thing about the Hispanics, I thought this was a neat graph, chile peppers. A number of menu items in 2005 doubled from 30 to a little over 60.

[47]And, the convenience factor of trends is hot foods in retail markets. That’s what we’re seeing a lot of, not so much the conventional meal solution that we picked up package and put it in our basket and went out with but more so a restaurant operating within the grocery store itself, drive thru's in limited serve restaurants. And, when we do go to a conventional area of the grocery store to pick up a meal solution that packaging used to be simple to the consumer. In other words, you need to be able to pop it right it into the microwave and then for convenience restaurants are designing their menu items for take•out so you can drive up, pick it up, and take it home. Hopefully, I can get my voice back here.

[48]Retail meal solutions; one of the

[49]things that I did is we have a person on our staff and her name is, what’s her name; Karen Stewart, Karen Stewart, very nice lady and she spent a lot of time with me to prepare this presentation. And, so I asked her what’s currently successful in retail meal solutions? And, her answer to me was food service solutions.

[50]So in Safeway she’s got to cook prime rib, she’s got some raw marinated products, a cooked tri tip and a cook brisquet we are selling those very much like you’d sell to any food service establishment but they’re using them in their hot deli.

[51]Some other successful programs that she has with Central Markets, Whole Foods, and Wegman’s and are all utilizing hot food service approach to meal solutions.

[52]Here’s some of the things that they’re looking at. Instead of a tap off top round they’re looking at, we stuff this into a casing therefore they can still slice it and count slices for their sandwiches so that they don’t have to be weighing out the portion size. This is just a new item here, beef short ribs, just a fanciful item that they can heat up quickly and use in their restaurant.

[53]And, then kits, they’re always interested in kits; prime rib with mashed potatoes and gravy all in the box or an Italian beef with the au jois in the box.

[54]Here’s some whole turkeys in a bag that car dealers used to come out with that you can just pop right into the oven.

[55]Our next greatest challenge in retail meal solution is providing an entire solution. In other words, providing the food just isn’t enough anymore.

[56]I shamelessly spilled and that’s five slides from one of her presentations and this just shows the kind of things that she’s providing for her customers that historically we never came close to.

[57]So, she’ll sit down with them and say what are your problems? What are your barriers? Is your deli tired, poor salesmanship, high shrink, no menu planning, all the common things that are problems in the retail deli?

[58]Then she’ll tell them that together they can collaborate and create and succeed by providing innovative, hot food programs, comprehensive training programs, easy to handle products, world class consumer updates and trend analysis, full menu planning; the gamut.

[59]She’ll bring her, a variety of different protein solutions and menus, menu categories,

[60]within those categories specific menus that they can prepare.

Page 5 16_3_t.txt [61]And, here’s a carving station and some of the things that you can provide on the carving station.

[62]So, she’s going to come in and she’ll provide custom proprietary branding, design of the hot foods, all the supporting literature, and health claims, weekly menu development.

[63]Also, she can provide a total solution for that retail.

[64]So what are your further challenges and that is food service, restaurant, aggressive fight for market share? These restaurants are going to get this market share. They’re going to go after people looking for meal solutions.

[65]I deal a lot of with these two customers, but quick serve restaurants, 28% of the total food service sales narrowly growing about three to four percent a year though.

[66]Fast casual, the biggest one Panera, growing at 15 to 20%, but only about four percent of the total quick serve restaurant segment.

[67]Casual dining, Applebee’s, the largest of this arena; 16% of the total restaurant industry and still growing. These are perceived to have a little higher quality, fresher, more choices, more substitutions.

[68]And, here’s where we’re eating. Take just a second to look at that. There’s a lot of fast food there. It’s probably why we’re as fat as we’re going to get. And, two donut shops, I thought that was kind of interesting and a gas station. Two donut shops, a gas station, and fast food; so, this is where we’re going. This is where we’re spending our money.

[69]So the sales grew 7.12% from ’03 to ’04,

[70]but the units only grew .4% during the same time period.

[71]Our restaurant usage peaked about 2000. We’re now at about 200 visits per person annually and it’s stabilized.

[72]The annual meals consumed at restaurants has stabilized at about, what is that, 80, yeah, 80.

[73]The annual restaurant meals eaten at home per person has stabilized at about 57 and our weights stabilized, everything’s stabilized.

[74]What’s growing? Well, a little bit is the restaurant meals eaten in our cars

[75]and then the percent of meals order from our cars.

[76]And, restaurants are aware of this, when you see an Applebee’s with a curbside ten percent of their total restaurant sales, Romano’s Macaroni Grill’s seven percent of their restaurant sales, Ruby Tuesdays’ six percent.

[77]You have things like this popping up; Papa Murphy’s Pizza where you can order it and take it out.

[78]Create and take; I don’t know a whole lot about these but I think you have a little bit of an involvement in the, in what goes on it and you stop by and, or they deliver it to you.

[79]But a big one is a lot of the restaurants are designing their menu so that you can easily pick this product up and take it home and order for your family.

[80]And, then you’re always going to be fighting the value meals and the cheap prices. Page 6 16_3_t.txt

[81]I want to talk just a little bit about packaging. When we go into the retail market with a food service style solution our packaging really is relatively simple. We kind of went back to where it always had been with cook and ship in or frozen. And, with those methods you’re somewhat exempt from the USDA alternative one, two, and three and they do like kits when we go into, into retail markets with food service solutions.

[82]The conventional packaging for meal solution is still complexed, requires food safety and consumer ease, simple directions, simple handling, simple cooking, got to be microwavable.

[83]I put this up because when we think of meal solutions probably a lot of you think of the, that Harris Ranch products have been around a long time, pot roast. Our Emmber heat and serve pot roast has been in Sam’s for forever and they’re actually going to dress that up a little bit and go from black to white and they were redesigning it. So I thought that was interesting just to keep it fresh.

[84]If anybody’s in here from Cryovac I apologize, sorry. This slide’s like ten years old. This was when Sean Brady was like, I think I got something here, but I called it Jiffy Pop technology. It’s simple steps, right, simple steps. Like I said, it’s an old slide, but this is great packaging. It’s great because for a meal solution because you can, one, it looks great and you can cook in it, but probably the biggest setting is the consumer can take it home, read some very simple, you don’t even have to read them you can do pictures and then pop it in the microwave and it’s done. You don’t have to cover it or anything else. You don’t have to vent it.

[85]One of the problems with new retail packaging for home meal solutions is that it’s expensive. A retailer will give you a test and you have to spend a large capital expenditure to get into it and then if the test doesn’t work out often times the packaging doesn’t really have applicability to the rest of our business. So it keeps us, you know, it’s kind of the chicken or the egg thing. Do we buy the packaging or do we take the test and that’s one of the problems associated with the new packaging.

[86]I thought this packaging was neat. I don’t really have a whole lot to say about it because I know absolutely nothing about it. But, I was in Wal•mart and I saw it and it’s a cool product, shelf stable. In one moment… I thought maybe we’ll go on ahead into the future, then I said, well, wait a second. It’s a shelf stable, retorted, product so maybe we’re just going back. I don’t know. So maybe we’re going back with fanciful packaging but a very interesting product line.

[87]In summary, a review of the history and real solution can protect against maybe future roll out errors. The most important food trends are flavor, health, ethnicity, and convenience for meal solutions. One meal solution from restaurants will remain the major competitor of the retail meal solutions. Retail hot meals solution programs are the most successful for a car deal right now.

[88]Retailers want total meal solutions provided so they want training and they want menu development, private labeling, food safety guarantees, literature. Retail hot service meal solutions have simplified packaging requirements. In other words, if you got a hot deli I can give you my normal packaging for food service and the packaging requirements for the conventional retail meal solution remain somewhat complexed.

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