2012
BCCA Value Chain Market Analysis and Strategy Development
(Amended May 2, 2013)
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Funding for this project has been provided by Agriculture and Agri-Food Canada and the BC Ministry of Agriculture through the Canada-BC Ranching Task Force Funding Initiative. The initiative is delivered by the Investment Agriculture Foundation of BC.
Agriculture and Agri-Food Canada (AAFC) and the Ministry of Agriculture are committed to working with industry partners. Opinions expressed in this document are those of [the authors] and not necessarily those of AAFC or the Ministry of Agriculture.
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Acknowledgements
We would like to acknowledge and thank all interview respondents and the following industry representatives, organizations and companies for their support, expertise, insights and guidance:
BCCA – Kevin Boon and Alana Palmer BC Association of Cattle Feeders – Bill Freding, Dimity Hammon BC Food Processors Association – Christine Koch Verified Beef Production Program (VBP) – Terry Grajczyk People Talking Market Research Services – Theresa Dietrich Susan Evans Communications – Susan Evans MNP – Andrew Raphael Canada Beef Inc. – John Baker, Ron Glaser National Cattlemen’s Beef Association – Rick McCarty, Trevor Amen Agriculture and Agri-Food Canada – John Ross Pfizer Animal Health – Gord Collier Thompson River University – Gillian Watt Canadian Food Inspection Agency United States Department of Agriculture
Legal Disclaimer
The report is provided for information purposes and is intended for general guidance only. It should not be regarded as comprehensive or as a substitute for personalized, professional advice. We have relied upon the completeness, accuracy and fair presentation of all information and data obtained from industry associations, telephone interviews and public sources. The accuracy and reliability of the findings and opinions expressed in the presentation are conditional upon the completeness, accuracy and fair presentation of the information underlying them. We assume no liability for errors or omission.
The information contained in this report is confidential and for the sole use and benefit of the BC Cattlemen’s Association. It must not be distributed or reproduced without their express permission.
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Table of Contents Executive Summary ...... 6 Introduction ...... 7 Background ...... 8 Overview of Project ...... 9 Market Research ...... 10 Consumer Research ...... 18 Key Research Findings...... 21 Supply Chain Research ...... 28 Marketing and Merchandising Audit ...... 33 Market Analysis ...... 45 Beef Value Chain Marketing Strategy ...... 48 Beef Value Chain Detailed Project Plan ...... 52 Appendix A – Merchandising Audit ...... 62 Appendix B – Organics ...... 83 Appendix C – About Brand Marketing ...... 88
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Table of Tables Table 1 Comparison of Demographics ...... 11 Table 2 NCBA Consumer Beef Index – Beef Performance Index ...... 17 Table 3 Consumer Beef Purchasing ...... 19 Table 4 Beef Consumption ...... 20 Table 5 Attitude to Beef ...... 20 Table 6 Cost Saving Behaviour ...... 21 Table 7 Concern over Origin ...... 22 Table 8 Premium Purchasing ...... 23 Table 9 Cattle Numbers in BC (thousands of head) ...... 28 Table 10 Cattle Numbers in BC on Feeding Operations* (thousands of head) ...... 29 Table 11 Cattle Slaughter in Provincially Inspected Establishments ...... 29 Table 12 Cattle Inspected and Shipped to US ...... 30 Table 13 Cattle Shipped East 2011 ...... 30 Table 14 Retail Grocery Format Breakdown ...... 34 Table 15 Total West Grocery Market Share Breakdown ...... 36 Table 16 BC Grocery Market Share Breakdown ...... 36 Table 17 Washington’s Top Retail Grocers ...... 41 Table 18 Oregon’s Top Retail Grocers ...... 41 Table 19 Budget ...... 51
Table of Figures Figure 1 Consumer Purchasing Decisions ...... 15 Figure 2 Natural/Organic Share of Total Beef (Dollar), Total US, 1st Quarter 2012 ...... 16 Figure 3 Natural/Organic Category Growth, Total US, 1st Quarter 2012 vs. Year Ago ...... 16 Figure 4 Organic Logos ...... 86
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Executive Summary
BCCA’s Beef Value Chain Market Analysis and Strategy Development project is a comprehensive consumer-driven marketing strategy to revitalize British Columbia’s beef and cattle industry.
To achieve this, an innovative consumer focused approach is required to maintain and strengthen the beef cattle industry in BC. Value chain participants will gain a competitive advantage from the ability to understand consumer preferences and align the supply chain to deliver on those expectations. This report presents the market analysis and research along with recommendations on a marketing strategy to achieve this.
Together, the BC and Pacific Northwest region represent a sizable market with over 15 million people. BC has 13.2% of Canada’s population, yet represents only 8% of beef consumed in Canada. Historically, the Pacific Northwest consumes 2% less beef than the national average1, suggesting that both markets are underdeveloped for beef consumption. With the explosive growth of the Chinese population in BC (almost 20% of people in Metro Vancouver are of Chinese origin), there may be an opportunity to increase beef demand with this important market segment.
The consumer research clearly demonstrated that a significant segment of these markets were willing to pay premiums for beef products with identifiable attributes. Seventy four per cent (74%) of those surveyed in BC and 59% in the Pacific Northwest were willing to pay more for beef with any of the value-added claim. Thirty per cent (30%) of consumers in this region (on average) were willing to pay 25% more for antibiotic and hormone free beef.
The review of the supply chain and in discussions with industry, it appears the majority of ranchers and feeders surveyed would welcome more collaboration and communication. They are very open to producing products with specific attributes, if it could be demonstrated to them that “it was going to pay- off” in the long-run.
According to the merchandising audit, the retail market in B.C. is underdeveloped in terms of availability of products with identifiable attributes. Out of the ten chains surveyed (which represent about 90% of market), only about one-third offered value-added beef programs that featured the most desired attributes – antibiotic and hormone-free beef.
The goal is to improve the profitability and sustainability of BC’s cattle industry by aligning the supply chain to produce a product with the specific attributes that consumers’ demand. Developing beef programs with these specific attributes and ensuring they are widely available at retail will increase beef demand.
The recommended strategy calls for supply chain alignment, development of branded programs with major retailers, a consumer education strategy and communication to industry. Proposed to be funded by the Canada-BC Ranching Task Force, this program would start September 2012 and run until March 2014 at which time it would be sustainable in the hands of the supply chain partners.
1 USDA Economic Survey, 2005
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Introduction
BC Cattlemen’s Beef Value Chain Market Analysis and Strategy Development
BCCA’s Beef Value Chain Market Analysis and Strategy Development project is a comprehensive consumer-driven strategy to revitalize the BC beef and cattle industry.
Over the last five years, the size of the cow herd and, consequently, production has declined in BC. BC’s beef producers believe there is capacity to develop the industry in an environmentally sustainable way.
To achieve this goal, a more innovative, consumer-focused approach is required to maintain and strengthen the beef cattle industry in BC. The value chain gains a competitive advantage from its ability to understand consumer preferences and align the supply chain to deliver on those expectations.
This voluntary market initiative is aimed at providing better returns to the ranching industry by adding value to management practices that the majority of ranchers already execute. By adding value to information already collected, like age and health programs, management practices or physical locations (traceability), producers can be rewarded in the price for their cattle. The backbone of this initiative is the Beef InfoXchange System (BIXS), an innovative, cost-effective, information-driven beef marketing program with a central database that allows producers, feedlots, retailers and processors to remain coordinated within the production chain.
2The goal is to create a beef marketing program that builds consumer demand by providing consumers with the information they need to select beef that meets their personal preferences. This report presents the market analysis and research along with recommendations.
In addition to developing the industry by increasing consumer demand, the project identifies new opportunities and makes recommendations to increase the size of the market geographically by analyzing beef marketing in the Pacific Northwest, defined as the states of Washington, Oregon and the province of BC. The project also analyzes the opportunity presented by marketing to the Chinese consumer, who now makes up 25% of the ethnic population of BC.
2 Image courtesy of Canadian Beef Advantage image library, http://www.cbamarketing.info/images/scenics/cattle/837. Page 7 of 88
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Background
British Columbia’s beef industry is important to the province's economy and supports many family and community businesses. The total economic contribution of the industry is estimated at $500 million annually, with an estimated 8,700 persons employed in BC’s beef sector.
BC’s beef cattle industry is made up primarily of cow-calf operations. Approximately 4,086 cattle ranches operate in BC, making up 4.5% of Canada's national cow herd. The industry is diverse, ranging from small hobby farms to diversified operations and large cattle ranches. The majority of calves raised in BC are marketed in the fall at live auctions, then sent to feedlots in Alberta and the US where they are fed a grain diet and brought up to slaughter weight. A small number of calves remain in BC for “backgrounding” or finishing. There are approximately 40 feedlots in BC and 34 provincially inspected red meat plants.
When it comes to beef consumption, the BC market is underdeveloped and represents an opportunity to increase demand. The population of BC is just over 4.5 million people, representing 13.2% of the population of Canada.3 It is estimated that BC only accounts for about 8% of total Canadian beef consumption. If the BC beef and cattle industry is better able to meet the needs of the population base, it can potentially develop its share of the national cow herd to more than the current 4.5%.
Niches within this large population base also provide an opportunity to increase demand. Recent Statistics Canada data shows that over 17% of the approximately 2.5 million people living in the metropolitan Vancouver area are ethnic Chinese.4 Vancouver has one of the most diverse Chinese- speaking communities in Canada. Examining and better meeting the needs of this large and growing segment represents a growth opportunity.
The Pacific Northwest is a broader market with great opportunity. A common definition of the Pacific Northwest includes the US states of Oregon and Washington, and the province of BC. The region's largest metropolitan areas are Seattle/Tacoma with almost 4 million people; Vancouver with 2.4 million people; and the Portland metropolitan area with 2.2 million people.5 The combined populations of the Greater Vancouver/Lower Mainland area, the Seattle metropolitan area and the Portland metropolitan area total almost 9 million people.6 The total combined population of Washington, Oregon and BC is over 15 million people!7
3 Source: Statistics Canada 2011.
4 Source: Statistics Canada 2006, Wikipedia.
5 Source: US Census Bureau, 2010.
6 Source: US Census Bureau, 2010.
7 Source: US Census Bureau, Statistics Canada.
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Overview of Project
A key component of this project was research and analysis, starting with a review of the demographics of the potential market in BC, Washington and Oregon. Market research on consumer attitudes and purchase behaviour of meat products from publicly available sources like the Alberta Meat and Livestock Association, the National Cattlemen’s Beef Association (NCBA) and the American Meat Institute is also included.
Consumer research was undertaken to evaluate the importance of specific product attributes, purchase motivators and consumers’ willingness to pay for specific attributes. Methodology included qualitative analysis utilizing focus groups in the Vancouver area and an online consumer survey with participants from BC, Washington and Oregon. The sample size of 812 participants is considered significant enough to identify key differences between the BC and US markets.
In order to develop a better understanding of Chinese consumer attitudes and behaviour related to beef, Chinese consumer respondents were identified in the survey research.
In addition to market and consumer research, primary production research of the supply chain was conducted, looking at cow-calf operators, backgrounders, feedlots, packers and processors. Information gathered included size, capacity and capabilities. This report also reviews the research conducted by Meyers Norris Penny (MNP), providing insight into barriers to success and willingness to collaborate in a value chain marketing strategy.
A merchandising audit was conducted on 20 grocery retailers in the Pacific Northwest. Stores were visited and intelligence gathered on their beef programs to identify branded programs, product attributes, product mixes and pricing strategies. Available market share data was also collected. This information was used to highlight potential gaps in the marketplace by comparing the current offerings with the consumer preferences identified in the consumer and market research analysis.
The extensive research was analyzed and the opportunities and barriers were identified. From this the marketing strategy was developed with objectives, the strategy and key success factors, a proposed budget, funding and timelines.
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Market Research
Market Research – Demographics of the Pacific Northwest
The Pacific Northwest is a broader market with great opportunity. A common definition of the Pacific Northwest includes the US states of Oregon and Washington, and the province of BC. The region's largest metropolitan areas are Seattle/Tacoma with almost 4 million people; Vancouver with 2.4 million people; and the Portland metropolitan area with 2.2 million people.8 The combined populations of the Greater Vancouver/Lower Mainland area, the Seattle metropolitan area and the Portland metropolitan area total almost 9 million people.9 The total combined population of Washington, Oregon and BC is over 15 million people, which represents an enormous opportunity for BC beef.
Following is an overview of the demographics of BC, Washington and Oregon to provide background and context for the recommendations in this report.
Province of British Columbia
BC has a total population of 4.6 million; over half the population (2.4 million) is located in Metro Vancouver.
. The median age in BC is 40.8 years, slightly older than the Canadian median age of 39.9. Children under 18 comprise 18.5% of the population, and 15% of the population is over 65, leaving 66.5% between the ages of 18 and 65. . The median household income in BC is $66,700 and 28% of people hold a college degree or higher. . Forestry, mining, agriculture and fishing continue to be important to the economy; there is strong growth in the eco-tourism, agri-tourism, technology and film industries.
BC is an ethnically diverse province with about 1 million people who are members of a visible minority group (about 25% of the population). Chinese is the single largest ethnic group in BC at 400,000 people or about 10% of the population, mostly located in the Metro Vancouver region.
The Chinese population represents about 40% of all visible minorities, followed by South and Southeast Asian at 30%. The remainder includes Japanese, Korean, Filipino, Black and Hispanic.
Washington State
The state of Washington has a total population of 6.8 million. The largest population centre is Seattle/Tacoma with almost 4 million people.
8 Source: US Census Bureau, 2010.
9 Source: US Census Bureau, 2010.
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The population’s median age is 37.1 years, just slightly above the national average of 36.6 years. Children under 18 comprise 30% of the population, and 12.3% of the population is over 65, leaving 57.7% between the ages of 18 and 65.
Washington is home to a wide variety of industries including aerospace, high-technology, forest products and agriculture. It houses head offices for world-renowned organizations like Microsoft, Boeing and Starbucks.
The median household income in Washington is $57,244 USD. It is a highly educated workforce, with 31% of people holding a college degree or higher.
Washington State has 1.3 million people of ethnic origin (18.4% of the population) that includes Hispanic (representing about 40% of the ethnic population), African American, American Indian, Alaska Native and Asian American people. While Hispanics and African Americans are underrepresented compared to the rest of the US, Asian Americans (representing about 25% of the ethnic population), American Indians and Alaska natives represent a larger portion of the population compared to the national average.
Oregon State
The state of Oregon has a total population of 3.87 million. The largest metropolitan area is in and around Portland with 2.2 million people.
The median age in Oregon is 37.7 years, just above the national average of 36.6 years. Children under 18 comprise 28.8% of the population, and 13.9% of the population is over 65, leaving 57.3% between the ages of 18 and 65.
Oregon has a strong agricultural industry that includes winegrowing, ranking third in the number of wineries per state in the US. In addition to manufacturing and forest products, Oregon is also home to a number of outdoor gear and active wear companies including Nike and Columbia Sportswear.
The median household income in Oregon is $49,260 USD and over 28% or people hold college degrees or higher.
Like Washington, Oregon has an ethnically diverse population. Its 720,000 residents of ethnic origin (18.6% of the population) include Hispanic (representing about 50% of the ethnic population), African American, American Indian, Alaska Native and Asian American peoples.
Table 1 Comparison of Demographics Population % of Population Region in Millions Median Age Median Income That Is Ethnic
Washington 6.8 37.1 $57,244 (USD) 18.4%
Oregon 3.87 37.7 $49,260 (USD) 18.6%
BC 4.6 40.8 $66,700 (CAD) 25%
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The Chinese Consumer in Canada and the US
In Canada
The Chinese population in Canada is projected to double, growing from 1.3 million in 2006 to between 2.4 million and 3 million by 2031.
The Chinese population is the single largest ethnic group in BC at 400,000 people, or about 10% of the population, mostly located in Metro Vancouver. While the median household income of Chinese Canadians is slightly lower than the average Canadian household income, Chinese Canadian shoppers in Greater Vancouver report spending $136 per week on groceries, 9% higher than the average for other residents.
Asian American Consumers
The expanding Asian population in the US and Canada represents an opportunity for the beef industry. Currently estimated at 14.9 million consumers in the US, or nearly 4.8% of the population, this consumer segment is projected to become the fastest-growing ethnic group in the United States. Population growth is forecasted to increase by 200% from 2000 to 2050. Asian Americans possess the highest median household income of $69,047 USD, compared to the national median household income of $52,175 USD.10
After the Hispanic population, the Pacific Northwest's Asian American consumers represent the second-largest ethnic population in the region, totaling approximately 650,000 consumers in 2011. Asian Americans accounted for 6.4% of the total Pacific Northwest population, significantly higher than the national percentage of Asian Americans (4.8%).
11 12 13
10 GoldSea, 2010.
11 Pike Place Market, photo by M. Monterrubio, http://www.flickr.com/photos/broken_chord/4537301656/sizes/n/in/photostream/.
12 Granville Island Market, photo by Taz, http://www.flickr.com/people/sporkist/.
13 Portland Market, photo by Michelle Kinsey Bruns, http://www.flickr.com/photos/sapphir3blu3/3373167249/sizes/z/in/photostream/.
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Market Research – Consumer Purchase Behaviour of Meat Products
A review of publicly available consumer purchase behaviour research for meat products was conducted and relevant findings from recent studies are summarized. Canada Beef was also consulted about its consumer research findings; it reported that it has not conducted any research on consumer attitudes and behaviour since 2010.
Canadian Consumer Retail Meat Study
The Alberta Livestock and Meat Agency Ltd. (ALMA) requested a comprehensive Canadian consumer retail meat study in 2010.14 The online survey of 1,372 pre-qualified respondents was analyzed and the key findings were made available to interested parties in the meat industry.
The findings from this research highlight a number of relevant consumer purchase behaviours:
. Half of Canadian shoppers have been negatively affected by the recession; shopping behaviour is now more value-conscious and less wasteful. . Consumers pre-plan their shopping using store flyers, and the meat specials in flyers have the potential to impact consumers’ store choices. . Consumers have consistent expectations of what they want from an ideal retail meat section including: A wide variety of meats, cuts, pack sizes and choices; Freshness and quality; Featured meat specials in stock; Competitive/good prices. . There is potential in providing on-pack information like recipes, cooking instructions and cues (e.g. marinating steak). Meat shoppers were more likely to pick up an unfamiliar cut of meat if they had a recipe to try.
The key drivers for meat purchases, in general, are convenience and family acceptance. In other words, these are the “price of admission”—consumers need to have these first.
. Chicken, beef and pork compete closely in the minds of consumers. They are all thought to be “everyday,” versatile, easy-to-prepare products that the whole family enjoys. . Beef and pork are more “juicy and tender” while chicken is more “lean and a bit healthier.” . Meat quality and safety are largely assumed as givens.
Once a consumer has decided on a particular protein and is choosing which product to buy:
. The most important factor for all proteins is price. . The next most important factor is origin (the country the product is from).
14 Canadian Consumer Retail Meat Study – commissioned by ALMA 2010. Page 13 of 88
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A key finding of this research is the importance of Canadian origin to consumers. Nine out of ten respondents said buying Canadian is important, with more than half saying it is very important.
. Canadian meat buyers cite their desire to support the Canadian economy and Canadian farmers as their primary reason for caring about buying Canadian. . Their secondary reason for buying Canadian is because of a belief that Canadian standards are higher. . Meat raised in Canada is linked to a number of positive perceptions, including being raised with higher/stricter standards and being more safe/trustworthy. . Canadian meat buyers place a premium on Canadian origin and, in fact, would expect to pay less per pound for non-Canadian meat.
15 16 17
“The Power of Meat” 2011 Annual Report
The American Meat Institute publishes an annual report, “The Power of Meat,” that takes an in-depth look at consumer meat purchasing habits with a survey of 1,300 shoppers. The following is sourced directly from that report.
In 2011, grocery and meat shopping continued to be dominated by finding ways to save. It appears these past few years have created very savvy grocery shoppers who master the implementation of a variety of money-saving measures ranging from sales specials and coupons to cooking different types of meals. For the first time, we saw the share of shoppers simply opting to buy less (and thus spend less) equalled the share using lists, coupons and other saving measures.
15 Image courtesy of Canadian Beef Advantage image library, http://www.cbamarketing.info/images/scenics/cattle/1288.
16 Ibid, http://www.cbamarketing.info/images/scenics/mountains/1517.
17 Ibid, http://www.cbamarketing.info/images/scenics/cattle/1307.
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The 2012 report found a significant increase in the role of price, total package cost and sales promotions on the amount and kind of meat/poultry purchased. While pre-trip research remains important, the emphasis continues to shift to an in-store purchasing decision—making clear signage and effective operations all the more important.
Price dominates the purchasing decision among virtually all shoppers—those who are trying to save and those who go about meat purchasing their normal way. Rising to a study-high average of 4.6 on the six-point scale, price per pound is the dominant
Figure 1 Consumer Purchasing Decisions18 decision factor, followed closely by total package cost.
Organic and Natural Market Trends
The American organic sector has seen dramatic growth in recent years and is now one of the fastest- growing segments of American agriculture. Consumer awareness and demand for organic food and beverages have also greatly increased since the USDA organic standards logo and certification program was introduced in 2002.
Grocery retailers have responded by expanding their organic product offerings, especially by developing store brand organic product lines. In fact, 85% of retail grocers now offer natural or organic options and 62% sell private label organic products (FMI). In 2010, the organic industry in the US grew to over $28.6 billion USD. With 7.7% growth during 2010, organic food outpaced the growth of total food sales, which stagnated at only 0.6%. Organic continues to make gains in total market share, climbing to 4% of the $673 billion USD food industry in 2010.
Organic fruits and vegetables, which represent 39.7% of total organic food value and nearly 12% of all US fruit and vegetable sales, experienced the most growth, reaching nearly $10.6 billion USD in 2010, up 11.8% from 2009 performance. Organic dairy, the second largest category, experienced 9% growth to achieve a value of $3.9 billion USD, capturing nearly 6% of the total US market for dairy products. No data was reported in the survey for meat products.
US retailers see a bright future ahead for the natural and organic beef category. Sales have grown steadily even through the worst of the recession. The latest National Meat Case Study, a report compiled once every three years by Sealed Air's Cryovac brand, the Beef Checkoff program and the National Pork Board, underscores those comments. The study showed that 32% of packages in meat cases in 2010 carried “natural” claims, up 3% from 2007. This figure, however, lumped together
18 The Power of Meat 2012: An In-Depth Look at Meat Through the Shoppers’ Eyes, Presentation, Slide 13. Page 15 of 88
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products that only met the USDA's minimally processed “all natural” definition with products that were raised without added hormones or antibiotics. The same study showed that only 0.9% of packages in the meat case carried the USDA Certified Organic seal. The study summary, however, indicated that the percentage had increased slightly from previous years.
Current figures gathered by the National Cattlemen's Beef Association (NCBA), via the Beef Checkoff program, throw light on a broader picture of consumers' demand for naturally and organically raised beef and other fresh meat. According to FreshLook Marketing Data sourced by NCBA, retail sales of natural and organic beef represented just 2.5% of total beef volume, and 3.9% of total dollar sales of beef, sold in the US in 2011. The first quarter of 2012 reflected slightly higher dollar sales with natural/organic representing 4.1% of dollar volume.
Figure 3 Natural/Organic Category Growth, Total US, 1st Quarter 2012 vs. Year Ago 20
Figure 2 Natural/Organic Share of Total Beef (Dollar), Total Beef Natural/Organic Beef Total US, 1st Quarter 201219 Average Price $4.15/lb (Total Beef) $6.38 (Natural/Organic Beef) According to FreshLook, natural/organic pricing for the fourth quarter of 2011 was $6.38, versus $4.15 for total beef. NCBA research shows that consumers maintain an interest in beef raised naturally even if that interest is not currently reflected in sales growth with volume sales down 13.3% 1st Quarter 2012. The percentage of consumers showing concern over the use of artificial hormones and antibiotics in beef has increased by at least single digits every year from 2007 until July 2011. A slight decline is measured in March 2012 according to a Beef Checkoff study.
19 FreshLook Marketing Data for Total US Total Beef & Natural/Organic Dollar Sales for 13 weeks ending 3/25/12, http://www.beefretail.org/natural-organicshareoftotalbeefdollarandpound.aspx.
20 FreshLook Marketing Data for Total US Total Beef & Natural/Organic Dollar and Pound Sales for 4th Quarter 2011 ending 12/25/11 vs. 4th Quarter 2010. http://www.beefretail.org/Natural-OrganicCategoryGrowth.aspx.
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Table 2 NCBA Consumer Beef Index – Beef Performance Index Mar Jan ‘07 Feb ‘08 Mar ‘09 Feb ‘10 Feb ‘11 Jul ‘11 ‘12 BSE (Mad Cow Disease) 33% 39% 32% 31% 30% 34% 28%
E. coli in beef N/A N/A 30% 32% 29% 36% 27%
Hormones in beef 20% 26% 26% 27% 26% 30% 26%
Saturated fat in beef 23% 29% 27% 28% 24% 31% 24%
Beef and heart disease N/A 27% 26% 26% 23% 27% 24%
Antibiotics in beef 21% 26% 24% 25% 25% 27% 24%
Naturally raised beef availability 19% 21% 20% 20% 21% 25% 21%
Grass-fed beef availability 16% 19% 18% 20% 19% 24% 20%
Vitamins and minerals beef contains 16% 20% 18% 20% 18% 23% 20%
Beef and cancer N/A 24% 22% 21% 21% 24% 19%
Organically raised beef availability 16% 20% 19% 19% 19% 23% 18%
Locally raised beef availability N/A 18% 17% 17% 19% 23% 18%
Base: Total 1200 1000 1008 1000 1000 1000 1346
21 22 23 24
21 http://www.amazon.ca/The-Brisket-Book-Story-Recipes/dp/1449406971/ref=zg_mg_940844_16
22 http://www.amazon.com/The-Healthy-Beef-Cookbook-Stir-fry/dp/0471738816
23 http://www.amazon.ca/The-Butchers-Guide-Well-Raised-Meat-Poultry/dp/0307716627/ref=zg_bs_940844_25
24 Reading about Meat, photo by P. Gradwell, http://www.flickr.com/photos/philandpam/2227435026/sizes/l/in/photostream/. Page 17 of 88
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Consumer Research
A key component of the BCCA Value Chain Market Analysis and Strategy Development was to survey consumers from BC and Pacific Northwestern USA to evaluate the importance of specific product attributes, purchase motivators and consumers’ willingness to pay for specific attributes. The findings from this research provide industry direction on product differentiation, branding and certification.
Following is a summary of these findings. The complete report, along with research tables, copies of the survey, detailed information about methodology and statistical analysis is available from BCCA. Specific Research Objectives
. To understand the impact of origin, feeding claims, organic claims, “raised without” claims, environmental claims, tenderness and flavour guarantees, animal welfare guarantees, “traceable to farm of origin” claims, and price on how a product is selected for purchase; . Specifically, to understand how much more (if anything) consumers are willing to pay for each of these claims; . To measure the “size” of the groups who are seriously interested in buying beef with these claims (i.e. willing to pay more for it); . To obtain measures of beef purchase and consumption frequency; . To measure attitudes toward beef in terms of healthfulness, nutrition, taste and enjoyment, convenience, ease of preparation, family preferences, etc.; . To explore origin cues, and whether consumers look for these when buying beef; . To explore purchase interest in beef from British Columbia, and open-ended perceived advantages and disadvantages of BC beef; . To understand attitudes related to shopping behaviour and changes in feelings of financial security in the past two years (impact of economy) in order to better understand differences between the US and Canada.
Methodology
To meet the needs outlined in the research objectives, an online survey was conducted among 812 respondents in January 2012. A total of 408 of these respondents were Canadian from the Metro Vancouver, Victoria, Kelowna, Kamloops and Prince George areas. Included in the Metro Vancouver respondents was a sample of 101 ethnic Chinese respondents. A total of 404 surveys were completed by American respondents in Seattle and Portland markets. To qualify, all respondents had to be:
. Adults 18+ years of age; . Not working in disqualifying industries such as food retail, meat production or marketing research; . Buying and eating beef, and acting as the primary or shared grocery shopper and meal preparer in their homes.
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On conclusion of the quantitative survey, two focus groups were conducted in Vancouver. Respondents confirmed their interest in buying value-added beef (organic, hormone- and antibiotic-free) at a premium price versus “regular” beef to further explore their motivation and attitudes towards these value-added claims. Research Results
Purchase and Consumption Behaviour
Respondents were surveyed about their beef purchasing behaviour. Of the total grocery shoppers who bought beef in each region, 45% purchased beef once per week or more.
Table 3 Consumer Beef Purchasing Base: Grocery Shoppers Who Ever Total NW US BC 65+ Light Med Heavy Buy Beef (812) (404) (408) (82) (476) (238) (72)
Net: Once/week or more 45% 45% 45% 40% 40% 59%K 51%k
2 or more times/week 14% 16% 11% 11% 7% 23%K 31%k
About once per week 32% 29% 34% 29% 33%M 36%M 21%
2 or 3 times per month 27% 25% 29% 28% 29% 26% 25%
About once per month 18% 23% 13% 23%g 20%L 12% 17% Less often than once/month 10% 7% 13% 9% 11%L 3% 7% Never buy beef ------
Consumption
Separate from purchase frequency, respondents were asked how many beef, chicken, pork and fish meals they eat per week. This would include meals away from home, such as restaurant meals.
The “beef meals” question has been asked in other studies and is used to categorize consumers into light (1-2 meals), medium (3-4 meals) and heavy (5+ meals) users. The largest group of beef eaters (59%) was “light,” meaning they ate beef for 1-2 meals per week.
Across the combined sample, chicken was consumed most frequently, averaging 2.8 meals per week, compared to 2.4 beef meals, 1.5 pork meals and 1.4 fish meals.
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Table 4 Beef Consumption Of the shoppers who buy beef (N=812), how often do they consume it? Beef Chicken Pork Fish
None 3% 2% 17% 22% Light Users (1-2 times/week) 59% 46% 67% 61%
Medium Users (3-4 times/week) 29% 39% 11% 12%
Heavy Users (5+ times/week) 9% 13% 4% 4%
Average/week (#) 2.4 2.8 1.5 1.4
Attitude towards Beef
Beef buyers in both regions expressed strong agreement with positive statements about beef being versatile, easy to prepare, flavourful and full of essential nutrients.
Pacific Northwestern US respondents agreed more strongly than BC consumers that their whole family likes beef, that there is nothing to match the flavour of beef, and that beef is a safe food choice.
Table 5 Attitude to Beef Base: Grocery Shoppers Who Ever Buy Beef - Top 2 box agreement (agree Total NW US BC 50-64 65+ completely/somewhat) (812) (404) (408) (335) (82)
There are many easy-to-prepare beef meals 92% 93% 91% 93%f 95%
Beef is very flavourful/flavourful 90% 92% 89% 90% 96% Beef contains a wide range of essential nutrients 83% 85% 81% 85%F 84%
My whole family likes beef 79% 84% 75% 78% 76%
There’s nothing to match the taste of beef 76% 81% 71% 75% 82%
Overall, beef is a safe food choice 75% 78% 73% 74% 82% Beef is an important part of a healthy eating plan 74% 75% 73% 74% 78%
Beef is a product I trust 73% 75% 71% 70% 77%
Beef offers a good value 68% 71% 65% 65% 73%
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Key Research Findings
25Price has the biggest impact on purchase interest.
Many US and BC consumers indicated that their shopping behaviours have changed over the past 2-3 years, particularly with regard to cost-saving measures such as looking for sales and specials, doing price comparisons and reading grocery store flyers.
The recent economic slowdown has had an impact on a significant portion of Pacific Northwestern households, more so in the US (Seattle/Portland) than in Canada. A total of 61% of Pacific Northwestern US consumers said they were financially worse off than they were 2-3 years ago compared to 47% of consumers in BC. A total of 25% of consumers in Pacific Northwest US said their household income was “a lot” lower, with 36% feeling less financially secure.
All things being equal, consumers would always prefer to buy beef at a lower price, and price has the biggest impact on purchase interest, more than all other factors combined.
Cost-Saving Behaviours Related to the Economic Slowdown
Table 6 Cost Saving Behaviour Base: Grocery Shoppers Who Ever Buy Beef Total NW US BC High agreement top 3 box (rated 8, 9 or 10) (812) (404) (408)
Buying meat on sale/special deal 72% 73% 71%
In the store, comparing prices of different meat brands and cuts 67% 69% 66%
Reading grocery flyers for meat specials 60% 61% 59%
Stocking up/buying and freezing larger package sizes of meat 54% 58% 51%
Purchasing larger economy/value/family package sizes of meat 53% 54% 52%
Stretching meat dollar by cooking casseroles and pasta dishes 48% 53% 42%
Buying less expensive cuts of meat 44% 50% 38%
Shopping at discount grocery stores 43% 45% 41%
The widespread agreement with these statements confirms these behaviours are not limited to those who have been negatively impacted by the economic downturn. Even among those who have
25 Image courtesy of Canadian Beef Advantage image library, http://www.cbamarketing.info/images/industry/concepts/1167. Page 21 of 88
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experienced no impact, there is a clear sense that they have become more value-focused and cost- conscious in their shopping behaviour. Key Findings – Origin
26Origin is also an important cue for consumers.
BC beef buyers most prefer to buy beef labelled “Produced locally in BC” and secondarily prefer “Product of Canada.” Pacific Northwestern US beef buyers most prefer “Product of the Pacific Northwest” (which sounds local even though it does not specify country), followed by “Product of USA.”
Beef buyers in both regions indicated that country of origin is an important consideration when they buy beef. Three-quarters of consumers in BC and about 60% in Pacific Northwest US at least sometimes look for an indication on the package that the meat they are buying is from their country. However, meat retailers are not consistently and prominently providing this information on the package.
More than 80% of beef buyers in each region care at least somewhat that the meat they buy is from their country. More than 40% care “a lot” about buying only Canadian or only American meat.
Table 7 Concern over Origin Base: Grocery Shoppers Who Ever Buy Beef Total NW US BC (812) (404) (408)
I care a lot about buying only American/Canadian beef. 43% 39% 46% I care somewhat, but I am willing to buy imported meat depending on where it’s from. 41% 42% 40%
I don’t really care, as long as the meat passes all standards. 17% 19% 14%
In general, beef buyers in BC are highly interested in buying BC beef. When asked why, responses tended to focus on supporting the economy and choosing meat that is fresher and has travelled less far. However, 34% mentioned as a disadvantage that beef from British Columbia costs more. As a rule of thumb, any negative volunteered by 10% or more represents an issue that may need to be addressed.
Beef buyers in the Pacific Northwest US are only moderately interested in buying BC beef. Just under half perceived any advantage or benefit to buying beef from BC, with some characterizing it as close or local with less distance to travel, and some believing it may cost less. The main barriers to interest in
26 Image courtesy of Canadian Beef Advantage image library, http://www.cbamarketing.info/images/industry/restaurant/1111.
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BC beef relate to wanting to support American farmers/jobs; concern that BC is not close/local; concern that BC beef is not regulated to American standards; and concerns about freshness and price.
Subsequent questions reveal that nearly half of Pacific Northwestern US beef buyers and one-third of BC beef buyers have not noticed origin on the beef they buy, but more than eight in ten do care about buying beef from their own country. So it is quite important when noticed, but is not a factor when it is not noticed.
While a handful of consumers (6% in each region) prefer the designation “Product of Australia,” this preference is very weak as none would be willing to pay more for Australian beef.
Key Finding – Value-Added Claims
27Overall, 74% in BC and 59% in Pacific Northwest US expressed willingness to pay the required premium for at least one of the value-added features or benefits.
Apart from price, origin and type of feed, the other test factors (raised without hormones, antibiotics, or hormones & antibiotics, tenderness and flavour guarantee, organic, environmental sustainability claim, animal welfare claim or traceable to farm of origin claim) were each of interest to about two-thirds of consumers.
Even when told the specific premium cost of each value-added feature, interest remained high. For example, 38% of those surveyed in BC and 20% of those in Pacific Northwest US were willing to pay a 25% premium for beef raised without antibiotics.
Percent of Consumers Who Would Pay the Stated Premium for Value-Added Beef
Table 8 Premium Purchasing NW US BC Proportion of Consumers Who Would Pay Required Premium (404) (408)
Net: Willing to pay more for ANY of these value additions 59% 74%
25% Premium for w/o added hormones 22% 37%
25% Premium for w/o antibiotics 20% 38%
25% Premium for w/o hormones or antibiotics 24% 32%
20% Premium for grass-fed 32% 38%
20% Premium for grain-fed 24% 46%
27 Image courtesy of Canadian Beef Advantage image library, http://www.cbamarketing.info/images/industry/concepts/1032. Page 23 of 88
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NW US BC Proportion of Consumers Who Would Pay Required Premium (404) (408)
35% Premium for organic 20% 31%
10% Premium for environmental sustainability 32% 46%
15% Premium for tenderness & flavour guarantee 31% 42%
10% Premium for animal welfare 39% 42%
25% Premium for traceable 21% 26%
There are no significant socioeconomic or demographic differences that delineate the groups who are willing to pay more for each claim, indicating that the differences are more attitudinal or psychographic.
Analysis also reveals that there is a clustering of cross-membership among the premium-paying groups. In other words, someone willing to pay more for the organic label is also more likely to be willing to pay more for animal welfare claims, environmental claims or “raised without” claims.
Further analysis reveals that there is a very small subgroup—9% in the Northwest US and 21% in BC— for whom their predominant beef purchase pattern is driven by a strong preference for the value- added claims or benefits. These claim-driven consumers tend to represent a smaller proportion of the market compared to those primarily driven by (low) price or origin.
What Focus Group Participants Said about Value-Added Claims
Those consumers surveyed who made the significant commitment to purchase organic meats at a 30- 50% price premium seemed to have satisfied their vague unease about eating beef. They claimed they were eating the same amount of beef, or more than they were 2-3 years previously.
While most would be considered “light beef eaters,” eating only about 1 or 2 beef meals per week, they were committed and knowledgeable beef consumers who preferred to eat less—but what they perceived to be better quality—meat.
The “organic” claim is a catch-all phrase that carries with it myriad benefits, both functional and emotional, for those who are buying organic beef. Most expect it to be hormone- and antibiotic-free (“free of medicine”), local in origin and fed organically, with a general feeling that the animals are being raised in a humane way. However, beef buyers are unsure for the most part exactly what “organic” means. They seemed to be significantly less focused on environmental practices.
The emotional benefits were equally, if not even more, important: peace of mind that they were eating healthier, with some consumers claiming they actually felt the difference in their own health levels when they were eating organically versus non-organically.
It is interesting to note that given the rather vague list of criteria used to determine if a product is organic, most of those buying organic agreed that they had to “trust” that the product was in fact organic. This trust stemmed from where they purchased their meat, such as a trusted butcher or meat
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market with a good full-service counter. There was no awareness of specific brands of organic beef or other organic proteins.
28The claim of being “free of hormones and antibiotics” is the most important value-added claim relative to all claims tested.
For those not currently buying organic meats, this claim is more important than the organic claim because it can actually be validated while the organic claim is considered to be vague and less regulated.
For those paying the premium for organic meats, it is often the most important benefit they believe they are getting with their organic meat.
Being free of hormones and antibiotics was felt to be the most important value- added claim that meat could carry relative to all the claims that were tested.
“Raised with environmentally sustainable methods” was the claim that generated the least interest with the focus groups. As such, there was less interest in paying a premium for meat that could carry this claim. It is interesting to note that among the survey respondents, 46% of consumers in BC and 32% of those in the US were willing to pay a premium for this feature.
While good animal welfare practices were a strong value-added claim relative to good environmental practices, the focus group participants felt they were not an important stand-alone claim, while more respondents in the survey group were willing to pay a premium.
Carrying a claim of being “traceable to farm of origin” is one of those value-added benefits that initially seemed very positive, but raised thoughts of food safety issues. The concept of knowing where a food product comes from was very appealing, as it projected authenticity. However, it was more important to know how an animal was raised and fed.
The tenderness claim (“tenderness guaranteed or 2x your money back”) was significantly disliked qualitatively. While tenderness is a very important criterion for how consumers judge beef, most believed that it wasn’t something that could be guaranteed and few would return meat to the store if they were dissatisfied.
Chinese Sub-Group Beef Consumption Patterns
Within the BC sample, Chinese consumers reveal some differences compared to the rest of the population. With regard to demographics, they skew younger, with greater proportions in both the 18- 34 and 35-49 age groups, live in slightly larger households, and are more likely to have kids younger than 18 at home. They are more highly educated, with a higher proportion having university degrees and further post-graduate education.
In terms of their beef purchasing and consumption, they appear to purchase beef less frequently (19% buy beef less often than once per month). But they report eating beef meals slightly more often per
28 Image courtesy of Natural Pastures Beef, http://naturalpasturesbeef.ca/images/splash/label-large.png. Page 25 of 88
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week, on average 2.4 meals versus the 2.2 beef meals consumed among non-Chinese respondents in the rest of BC. This is driven by having 11% in the heavy consumption group, eating 5+ beef meals per week, versus 7% heavy beef consumers among the rest of BC beef buyers.
When reviewing research findings, note that the Chinese group is underrepresented among the subgroups willing to pay more for features such as “raised without,” feeding claims and animal welfare subgroups, but it is represented at parity in the organic subgroup and is slightly overrepresented in the environmental sustainability and traceability groups.
The Chinese consumer shops and cooks differently than the average Canadian. First, freshness is the most important factor. They tend to be more willing to shop daily to get the freshest items, as demonstrated by the proliferation of fresh fish tanks in local grocery retailers in the Lower Mainland. Note that this desire for freshness does not lend itself well to the practice of aging beef. Chinese consumers may have issues with purchasing beef that might be 7-10 days old.
29 30 31
How and what they cook also differentiates the Chinese consumer. While burgers and pot roasts may not be part of their cooking repertoire, beef does play a role as an ingredient in many of the dishes prepared by Asians. The most well-known, of course, is stir-fry. Beef is a popular component of this Asian mainstay.
The Hot Pot is also typical of Asian cooking and is rapidly finding its way into mainstream dining. Called many names, from Korean or Mongolian hot pot to Japanese Shabu Shabu, and like North America’s fondue of the 70s, the hot pot consists of a central pot filled with hot stock, in which meats and other ingredients are then put to cook. This method of cooking is popular both in homes and when dining out.
Other cooking methods include “tataki,” where beef is quickly seared on all sides leaving the inside uncooked. For this preparation method, the beef may be marinated for flavour. Another popular cooking method is “yakiniku” barbecue, where marinated beef and vegetables are cooked quickly on a grill or
29 Szechuan Hot Pot, photo by Matt Ryall, http://www.flickr.com/photos/mjryall/3631964718/.
30 Roast, photo by Steve Johnson, http://www.flickr.com/photos/artbystevejohnson/4667971394/sizes/m/in/photostream/.
31 Taipei Beef Noodles, photo by Matthew Hine, http://www.flickr.com/photos/hine/6804214144/.
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griddle over a communal charcoal or gas burner. Sukiyaki uses thinly sliced beef, vegetables and noodles, all simmered in a shallow pot or skillet in hot broth or sweetened soy sauce.
Short ribs continue to be popular with the Asian demographic, but not the thickly cut short ribs with which North Americans are familiar. Asian culture uses thinly sliced short ribs, traditionally marinated in a sweet and savoury sauce. This style of cooking short ribs has also crossed over to the mainstream and many North American shoppers look for marinated Korean-style short ribs at the meat case.
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Supply Chain Research
This section includes primary production statistical research on the segments of the supply chain including cow-calf operators, backgrounders, feedlots, packers and processors. Following is information on the size, capacity, and make-up of the cattle industry along with an overview of recent research on their willingness to collaborate in a value chain marketing strategy. Industry Overview
The beef cattle industry in BC has evolved to reflect market conditions and the changing economics of beef production in the province. Current cattle prices have resulted in industry growth in the province after a decline in cattle numbers in BC over the past several years. Beef cattle numbers in BC have declined by 25% since 2006.More specifically, beef cow numbers have dropped by a third from 285,000 in 2006 to 193,000 in July 2011 (see following chart for more detail).
Table 9 Cattle Numbers in BC (thousands of head)32 2006 2011 2006 2011 (Jan 1) (Jan 1) (July 1) (July 1)
Beef cows 285 192 280 193
Beef heifers (replacement) 35 28 43.5 33
Beef heifers (sltr) 15 8.5 26 25.3
Dairy cows 75 70.5 73 72
Dairy heifers (replacement) 30 35 35.5 35
Bulls (1 yr & over) 16 12 17 13
Steers (1 yr & over) 30 21 55 50
Calves (under 1 yr) 174 153 290 228.7
Total 660 520 820 650
Beef Total (dairy cows & heifers not included) 555 414.5 711.5 543
The numbers in the following chart are accounted for in the previous chart. They are just broken out to identify the numbers in BC feedlots.
32 Statistics Canada Table 1-13 - Cattle on Farms - British Columbia.
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Table 10 Cattle Numbers in BC on Feeding Operations* (thousands of head)33 2006 2011 2006 2011 (Jan 1) (Jan 1) (July 1) (July 1)
Heifers (sltr) 2.5 2.5 4.5 13
Steers (1 yr & older) 13 4.8 19 15
Calves (under 1 yr) 6 1.7 4 2
Total 21.5 9 27.5 30 *Farms where cattle are fed a high-energy ration such as grain as they are fattened for market
The number of farms in the province has also declined since 2006. In 2006 there were 6,996 farms that reported having cattle and calves and in 2011 that number had dropped to 5,975. Furthermore, when dairy operations are removed from the total, the actual number of cattle farms in BC in 2011 was 4,086.
Cattle continue to move from BC to the east (primarily Alberta) to be fed (69% of the 74,000 head sent east in 2011 went into feedlots) and to the south (primarily Washington) to be finished and processed (see the following chart for more detail). According to the BC Livestock Co-op, a large percentage of the cattle sent south are backgrounded in southern BC prior to export to the US for finishing and processing.
Table 11 Cattle Slaughter in Provincially Inspected Establishments34
Year British Columbia Canada
2011 22915 164380
2010 19283 191520
2009 17390 214380
2008 15888 214388
2007 14291 248122
33 Statistics Canada Table 7-9 - Cattle by Farm Type - British Columbia.
34 Agriculture and Agri-Food Canada - Source: CFIA and Provincial Governments. Page 29 of 88
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Table 12 Cattle Inspected and Shipped to US Table 13 Cattle Shipped East 2011
Month 2010 2011 Month Sale Yard Slaughter Feedlot Total
January 5454 2852 January 717 812 2338 3867
February 6153 4652 February 539 148 3545 4232
March 4252 3061 March 1111 75 5281 6467
April 5233 3460 April 891 250 1863 3004
May 3610 2871 May 806 282 2553 3641
June 2406 1289 June 334 157 3640 4131
July 1188 242 July 20 70 1629 1719
August 2710 284 August 0 0 2381 2381
September 4362 1392 September 0 0 2475 2475
October 3533 2158 October 5904 797 11419 18120
November 2032 1662 November 6132 1146 7942 15220
December 2441 816 December 1852 976 6044 8872
Total 43374 24739 Total 18306 4713 51110 74129
Beef producers in the province have programs available, such as Verified Beef Production (VBP) and Beef InfoXchange System (BIXS), that allow for the incorporation of a tracking and auditing process into standard management and production practices. There are currently 89 active VBP registrants in BC (mainly cow-calf producers) and approximately 700 producers in the province are trained in VBP. To become an active registrant, the only remaining step is to complete the audit.
Conversely, the processing sector which processes beef in BC has grown by 40% in the last five years while the rest of Canada has declined by 30%. According to Agriculture and Agri-Food Canada, there are 28 provincially inspected plants operating BC that process beef cattle. There are no federally inspected processing facilities in BC that process beef.
Canadian federally inspected beef packing plants are highly competitive and consolidated. XL Foods operating in Brooks, Alberta is the largest beef processing plant in Canada. Cargill Foods operates processing plants in High River, Alberta and Guelph, Ontario and is the largest processor in Canada. These are large world-class plants that operate extremely efficiently, producing high volumes. They also have company specific marketing and brand strategies. The scale of these plants, along with their need for efficiency and corporate brand strategies, does not lend itself well to start-up marketing programs targeting niche segments of the market.
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35Canadian Premium Meats Inc. (CPM) identified the need for a federally registered custom slaughter and processing plant in Western Canada. CPM has addressed that need with a plant in Lacombe, Alberta. The plant was designed to meet the needs of producers who recognize the opportunity existing in niche markets such as organic, natural and hormone- free beef, bison, elk and venison. CPM concentrates solely on custom processing livestock and is not involved in the processing and marketing of their own branded meat products.
South of the border, Boise, Idaho-based Agri Beef Company functions as a vertically integrated beef producer, operating a ranch, cattle feedlots, and beef processing and packaging facilities located primarily in the Pacific Northwest. Agri Beef's subsidiary, Washington Beef, processes and packages beef products for the company and its customers. The company also manages the National Beef feedlot and processing and packaging operations in southwestern Kansas.
Agri Beef sells its own beef products under the Washington Beef brand in the United States and the St. Helens brand for export. In 2005, Agri Beef introduced a new brand of beef products designed to meet consumer demand for locally produced foods. The Double R Ranch brand, named for company founder Robert Rebholtz, promotes grain-fed beef from the Pacific Northwest as comparable or better in taste and quality as midwestern corn-fed beef. To meet mandatory country-of-origin labeling requirements, this product is marketed as a product of the United States and Canada.
Tyson Fresh Meats owns and operates a large plant in nearby Pasco, Washington. Like the large federally inspected plants, the scale of these plants, need for efficiency and corporate brand strategies do not lend themselves well to start-up marketing programs targeting niche segments of the market. Producer Survey
The BC Cattlemen’s Association engaged Meyers Norris Penny (MNP) to conduct an economic impact study of the cattle industry. The study examines the impact of economic activity and the environmental and social contributions of the industry through charitable giving, volunteerism, stewardship of the land and other community activities. As part of this study, we had the opportunity to survey producers to gain insight into the willingness of ranchers and feeders to collaborate in a value chain marketing strategy.
Overall, there is a positive feeling towards the industry. The majority of ranchers and feeders agreed that the industry facilitates opportunities for their businesses and believes there is an opportunity for greater collaboration and communication between industry and their businesses. They also agreed that the industry is doing enough to support herd health and protect the industry as a whole. Those
35 Image courtesy of Canadian Beef Advantage image library, http://www.cbamarketing.info/images/industry/packing-plant/1155. Page 31 of 88
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surveyed were aware of the need to be responsive to consumer concerns around issues like antibiotics and hormones, and they saw the value in cattle identification programs.
The majority of ranchers and feeders surveyed said they would be interested if consumer research identified opportunities to capture potential premiums by developing products with specific attributes. Interest declined slightly if the premiums were not immediately identifiable, but the majority of ranchers and feeders still said they would be interested in developing such a product. Many expressed concern about increased costs and noted that they would need to see a plan that demonstrated they would make money over the long term and that it was worth the investment.
Ranchers and feeders surveyed were unanimously in favour of participating in Verified Beef Production or Beef InfoXchange (BIXS)36 if it made it more profitable to deliver products delivering specific market requirements. Those surveyed did note that while they agree with the programs and agree the programs promote “best practices,” they would like the benefits clearly spelled out for them. There was concern about the amount of paperwork and they want a process in place that provides information/feedback back to them about their participation. They definitely recognize this is the direction the industry needs to move in order to meet consumer needs.
The BIXS program is new to ranchers in BC. The cow-calf portion of the program was launched recently and is available for all beef producers in the province. Preliminary work to foster interest and understanding in the program was done in the winter of 2011 with workshops held in key areas throughout the province.
37In summary, the majority of ranchers and feeders surveyed believe the industry is doing a good job for them and would welcome more collaboration and communication. They are very open to producing products with specific attributes, if it could be demonstrated to them that there was going to be a “pay-off” in the long-run. They all agreed they would be in favour of participating in a VBP or BIXS but again, they need to understand “what’s in it for them” in terms of return on investment.
36 The Beef Info Exchange system is the exchange of information between all sectors of the value chain. Calves are age and source verified at birth through the CCIA database, linked to RFID numbers and tracked through the value chain for performance, animal health and carcass data including yield and grade information.
37 Photo courtesy of http://www.beefinfo.org.
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Marketing and Merchandising Audit
Grocery retailing is big business—a business that impacts every consumer, Canadian and American alike. Retailers at the end of the food distribution channel greatly influence what food manufacturers at the beginning of the channel produce. In fact, grocery retailers are often the only face that consumers see in the food distribution channel, making them powerful gatekeepers between food manufacturers and consumers. Retail Grocery Formats
Grocery retailing exists in many formats and can typically be categorized into conventional supermarkets, mass merchandisers, warehouse clubs, drug stores and convenience stores.
Supermarkets are the largest segment at 67% of the retail grocery market in Canada. This segment is dominated by chains. Consumers prefer these outlets because of the wide selection, convenient locations and longer hours of operation. Faced with increased competition from mass merchandisers and warehouse clubs, supermarkets continue to remodel stores and enhance product offerings to improve the consumer shopping experience.
Mass merchandisers are the second largest segment at 13.5% of the retail grocery market. Mass merchandise outlets are popular with consumers as they offer one-stop shopping solutions including everything from grocery and drugstore items to goods you would find in a department store, like clothing, furniture and small goods. Mass merchandisers continue to challenge supermarkets by expanding their fresh food selections and offering competitive everyday low prices while opening new outlets. In fact, retailers like Walmart are increasingly converting stores into supercentres that offer a wide assortment of grocery items along with perishable products including fresh meat. Their key competitive advantages are aggressive pricing and convenience as consumers increasingly aim to complete all their shopping in one location.
Warehouse clubs are an important player at 10.8% of the retail grocery market. They offer high-quality food products and regular merchandise in large package formats at low prices. Although warehouses have a more limited selection of products, they offer competitive pricing for multipacks which appeal to high-volume buyers. Many warehouse clubs have expanded their product offerings, particularly in fresh food and store brand product lines. Costco, the segment leader, offers a wide range of high-quality merchandise, fresh food and deli items and an extensive line of private label products branded under Kirkland Signature. Costco’s pricing strategy is to mark up products at a rate lower than typical supermarkets, providing a competitive advantage.
Drug stores account for 5.4% of the retail grocery market. Their primary traffic builder and source of revenue is the pharmacy. Many also focus on heavily on cosmetics, health and beauty items, greeting cards and seasonal merchandise to build traffic. Some also include added services like postal outlets to generate traffic which drives impulse purchases. In Canada, most drugstores merchandise a range of grocery products as well with limited fresh food offerings and virtually no meat products.
Convenience stores have traditionally relied on tobacco and gasoline sales as primary traffic-builders. With supermarkets, mass merchandisers and warehouse clubs increasingly selling gasoline, and the Page 33 of 88
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consumer turning to lower-priced competitors for tobacco products, the convenience store segment faces considerable competition. An additional factor affecting convenience stores is the increasing availability of pay-at-the-pump options for purchasing gasoline. This means consumers don’t need to enter the store, reducing sales of impulse items. Convenience store operators are countering with fresh food offerings including meat products.
Table 14 Retail Grocery Format Breakdown
Tl West-RETAIL TRADE % Share
Tl West-GROCERY 64.1
Tl West-REM GROCERY 2.8
Tl West-CONVENIENCE+GAS 0.3
Tl West-DRUG STORES 5.4
Tl West-MASS MERCH w/SUPERS 13.5
Tl West-WAREHOUSE CLUBS 10.8
Tl West-GENERAL MERCHANDISE 1.3 Tl West-Giant Tiger 0.4 Tl West-Canadian Tire 0.5 Tl West-REM GENERAL MERCHANDIS 1.8
Total 100
How Retailers Work
Retailers, like brokers, distributors and manufacturers, are running a business. They want to purchase successful products that sell well, stocking the products their customers demand. They want a good deal on the products they purchase and they want to make a decent, if not sizable, margin. Most retailers are looking for the same thing: a unique product.
When it comes to perishable programs, particularly fresh beef, retailers are looking for programs that differentiate their stores from competition. Beef shoppers are the primary shoppers who drive total store sales. When beef is part of a customer’s shopping trip, their average grocery bill is much higher than when beef isn’t purchased. A strong marketing and merchandising program for beef can build customer satisfaction and loyalty. Both are critical in the never-ending battle for market share and profitability in the highly competitive grocery industry.
Purchasing is done by either buyers or category managers, depending on the size of the retailer. Larger retailers have category managers who purchase and maintain products in their category for many stores.
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Buyers and category managers deal with many people and have a good understanding of what their customers want. They decide which products will be placed on store shelves, purchase products from distributors and manufacturers and work with brokers. Almost all chains have centralized purchasing for all stores.
Retailers in Western Canada
38In Western Canada, the retail supermarket market share is dominated by five retail chains that represent over 90% market share. (see tables following). Loblaws Companies Limited holds the largest market share at 34%, operating stores under the Real Canadian Superstore, Extra Foods and No Frills banners. Canada Safeway follows at 24.7%. The Overwaitea Food Group is third at 12.6%, operating under Overwaitea, Save-On-Foods, PriceSmart Foods, Buy Low Foods and Cooper’s banners. Sobeys Canada is fourth with 11.6% market share, operating under Sobeys, IGA and Thrifty Foods banners. Co-op is next at 10.5%.
39 40 41
38Image courtesy of Canadian Beef Advantage image library, http://www.cbamarketing.info/images/industry/grocery-store/739.
39 Ibid, http://www.cbamarketing.info/images/raw-meat-cuts/retail/hip/eye-round/526.
40Ibid, http://www.cbamarketing.info/images/raw-meat-cuts/mexican/specialty/beef/ox-tail/397.
41Ibid, http://www.cbamarketing.info/images/raw-meat-cuts/asian/loin/sirloin-tri-tip/56. Page 35 of 88
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Table 15 Total West Grocery Market Share Breakdown Table 16 BC Grocery Market Share Breakdown % TL West – Grocery Share BC – Grocery Supermarkets % Share
TL West-LCL NATIONAL 34.4 BC-CANADA SAFEWAY 24.4 TL West-RCSS WEST 27.3 BC-LCL NATIONAL 33.2 TL West-Extra Foods 4.8 BC-RCSS WEST 26.0 Tl West-No Frills 1.7 BC-Extra Foods 5.1 TL West-REM LCL 0.6 BC-REM LCL 0.9
TL West-CANADA SAFEWAY 24.7 BC-OVERWAITEA FOOD GRP 24.9 TL West-OVERWAITEA FOOD GRP 12.6 BC-Save-On-Foods 17.3 TL West-Overwaitea 0.8 BC-Overwaitea 1.9 TL West-Save-On-Foods 9.6 BC-Cooper's 1.2 Tl West-PriceSmart Foods 1.8 BC-PriceSmart Foods 4.5 TL West-Buy Low Foods/A.G. BC-Buy Low/A.G. Foods 0.9 Foods 0.8 BC-TOTAL CO-OP 0.6 TL West-Cooper's 0.5 BC-SOBEYS CANADA INC. 6.3 TL West-TOTAL CO-OP 10.5 BC-Sobeys 0.6 TL West-Federated Co-op 8.2 BC-Thrifty Foods 5.7 TL West-Calgary Co-op 2.3 BC-HY Louie/IGA 3.7 TL West-SOBEYS CANADA INC. 11.6 BC-REM GROCERY 6.9 TL West-Sobeys 7.9 TL West-IGA/IGA Extra 1.2 Total 100
TL West-Thrifty Foods 2.3
TL West-HY Louie/IGA 1.5 Tl West-T&T Supermarkets 0.3
TL West-REM GROCERY 4.4
Total 100
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Beef Marketing and Merchandising
A retail audit of grocery supermarkets, mass merchandisers and wholesale clubs in BC and the Pacific Northwest was conducted from November 2011 to March 2012. In addition to compiling corporate information, marketing and merchandising information specific to the beef category was gathered. The result includes details on market positioning/branding, product mixes, display formats, point-of-production, packaging formats, pricing strategies, point of sale materials and, if available, key prices and suppliers. Information was gathered through observation and, where possible, discussion with store-level staff.
Overall, 20 banners were audited, 10 in British Columbia and 10 in the Pacific Northwest. In BC, these 10 chains would account for more than 90% of grocery market share. Likewise, in Washington and Oregon, these 10 chains would account for about 90% of grocery market share. Detailed information from these audits can be found in Appendix A.
Market Positioning
The availability of branded beef programs has increased dramatically over the past decade. These are loosely defined as programs that “make a promise” to the consumer to deliver a specific attribute or attributes under a brand name. Virtually all supermarkets in Western Canada now feature a branded program that is marketed by a retailer, producer or supplier. Retailers like Country Grocer and T&T Supermarkets feature Certified Angus Beef which originates with beef producers. Thrifty Foods features Sterling Silver and Marketplace IGA features Northridge Farms, both of which are packer brands from Cargill. Overwaitea Food Group features Western Family Beef and Co-op features Guaranteed Gold, both of which are retail private label brands. Others, like Costco and Safeway, prefer to market by grade designation featuring Canadian AAA beef. Some, like Superstore and Sobeys, use a combination of marketing by grade designation and private label brand.
Most of these brands promote the country of origin (Canada) to leverage the strong consumer preference for Canadian beef that was demonstrated post-BSE. The majority of branded beef programs in Western Canada are based on a promise of exceptional eating quality with attributes that include being tender, juicy and flavourful. Many also include product specifications such as grade, number of days of age, etc.
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Among the top five chains in Western Canada (which account for 90% of supermarket market share), only one retailer features a branded program with a “method of production” claim. Superstore features a President’s Choice “Free From” Angus Beef product line. The beef used for this program is “raised without the use of antibiotics and hormones, vegetable grain-fed containing no animal by-products.” The packaging features ranch managers from Montana as dedicated suppliers. This product is merchandised in select stores in urban centres and appears to be selling well. Price premiums are significant. As an example, lean ground beef is sold for $7.68/kg while President’s Choice “Free From” lean ground beef is sold at $12.48/kg.
Market penetration and availability of organic and antibiotic-, hormone-free beef is higher in the Lower Mainland and on Vancouver Island. Thrifty Foods (which operates in both markets) features Diamond Willow Organic Beef. This certified organic product is Canadian origin and is raised without antibiotics or added hormones. Choices Markets feature Spring Creek Angus Beef which is raised in Alberta without antibiotics or added hormones. They go a step further and claim their ranch and community are powered by their own bio-fuel. Country Grocer’s Island Pastures Beef is a local product raised without growth hormones or antibiotics. They also claim their cattle are grass-fed and support a sustainable production system.
Product Mix
Supermarkets generally feature a full mix of fresh steaks, roasts, thin meats, value-added products and ground meats. Warehouse clubs feature a narrow mix of selected steaks, roasts and value-added products. Branded or grade-designated programs are offered in both a single tier format, representing the retailer’s entire beef product offering, or as just a small portion of the retailer’s product mix. In some cases, the retailer features a grade-designated program (e.g. AA or higher) and also offers branded programs as a smaller product category. In most cases, consumers looking for a specific product or cut would likely only have one or two options (e.g. AA or higher or branded).
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Display Formats
A wide range of display formats was observed. Self-service meat counters were the most common, typically either a multi-deck or coffin-style meat case. Some banners also feature service counters with displays of higher quality or specialty meat products. Combining a wide selection of self-service products along with a well-stocked service counter provides differentiation in the marketplace.
Point of Production and Packaging Formats
Stores in Western Canada feature either fresh beef produced in- store or packaged, case-ready beef processed at a central facility. In Western Canada, chains like Superstore, Save-On-Foods and Safeway are supplied with case-ready products for all or most of their fresh beef. Chains or warehouse clubs like Sobeys, Thrifty Foods and Costco are cutting fresh beef on site and packaging it in conventional polystyrene trays with overwrap. Save-On-Foods is the only chain utilizing vacuum skin-packed (VSP) packaging for fresh beef. The primary benefit of this technology is increased shelf life (often as much 30 days on beef cuts). Food safety and product liability concerns have driven increased availability of case-ready ground beef either in modified atmosphere or vacuum skin-pack packaging. The latter is the most common for organic ground beef, likely due to the extended shelf life.
Pricing Strategies
Most supermarkets surveyed in Western Canada feature a high- low advertising strategy. Under this type of pricing strategy, retailers put a high mark-up (35-40%) on most items and a low mark-up (-5-5%) on a select few items. These select few items or “loss leaders” are featured in flyer advertising or promotional programs, leveraging attractive pricing to build traffic. The products featured typically vary weekly or for a short, specified period of time. These retailers try to achieve a gross margin target (20-22%) using the loss leaders to get the customer into the store in anticipation that sales of higher margin items will achieve the targets. Volume of feature items will typically increase from 6 to 20 times the regular volumes. This type of system can be extremely challenging for fresh meat suppliers who have to utilize the entire carcass and balance inventories.
Alternatively, an everyday-low-price (EDLP) strategy is used by operators like Costco. Under this strategy, mark-ups are more consistent (14%) and prices do not fluctuate significantly from week to week. This makes for more consistent volumes that are easier for suppliers to manage inventories. It is common for some frequently used perishable products like ground beef and muffins to be priced at lower margins to build traffic. This is leveraged by placing these items around the perimeter to generate exposure for other general merchandise and seasonal items.
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Point of Sale Materials
In order to obtain a premium price for beef programs, creating brand awareness and understanding of the key points of differentiation is critical. Point of Sale (POS) materials are an extremely effective way to communicate this information to consumers right where they are making the decision. These materials include overhead signs, banners, rail cards, shelf dividers, on-pack labels and consumer brochures. They can communicate anything from a brand name and product attributes to cooking instructions and websites for additional information.
Asian Markets
The audit also looked at retail marketing of beef products to Asian consumers. As outlined earlier, they tend to shop at traditional Asian-style markets, Asian supermarkets or conventional supermarkets.
The Crystal Mall in Burnaby is an example of a traditional Asian- style market. It features independently owned and operated retail outlets marketing a broad range of products and services. The meat retailers feature fresh, frozen and barbecued meat options including pork, beef and poultry with the majority of the space dedicated to pork and poultry items. The beef product mix is very limited. There do not appear to be any brands promoted and almost all signs are in Chinese. A relationship appears to exist between the retailer and the customer. A high level of service is provided and appears to be valued by the customer.
T&T Supermarkets is a chain of stores that caters specifically to Asian consumers. The locations are in areas with a higher density of Asian consumers. These high-volume stores also have an elaborate beef merchandising program featuring both Certified Angus Beef and Canadian AA beef. Service counters merchandise fresh beef cuts popular with Asian consumers like short ribs, plates, flanks and shanks. Self-serve counters feature products like thinly sliced blade meat and a small assortment of steaks. Both fresh and frozen options are available for thinly sliced meats popular for hot pot application. These include items like thin sliced chuck roll, short rib or rib eye used for Shabu Shabu, Yakiniku or hot pots.
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Some conventional supermarkets appear to be making efforts to meet the needs of Asian customers in the meat department. Thrifty Foods features a limited line of meat products in select locations designed specifically to appeal to Asian consumers. Some Save- on-Food locations also have a selection of products for Asian consumers merchandised together in the meat case. These include chicken feet, chicken hearts, pork belly, pork hocks, beef tongue, beef tripe, etc. Overall, efforts to market specifically to the Asian market (a large and growing segment) within traditional grocery chains appear to be quite limited.
Pacific Northwest Retailers
Market share data for Washington and Oregon are presented separately. In both states, supermarket share is dominated by large chains like Safeway, Fred Meyer, Walmart, Albertsons and Winco
Regional banners like Quality Food Centers have established reasonable market share.
Table 17 Washington’s Top Retail Grocers Table 18 Oregon’s Top Retail Grocers Washington’s Top Retail # of % Oregon’s Top Retail # of % Grocers Stores Share Grocers Stores Share
Safeway 168 28.2 Safeway 102 25.3
Fred Meyer 57 15.2 Fred Meyer 50 23.0
Walmart Supercenter 28 10.9 Walmart Supercenter 16 11.3
Albertsons/Supervalu 75 9.5 Albertsons/Supervalu 48 10.0
Quality Food Centers 70 7.0 WinCo Foods 16 6.0
Haggen 29 4.3 C&K Markets 38 3.3
WinCo Foods 10 2.0 Trader Joe’s 9 2.3
Brown & Cole 20 1.9 Grocery Outlet 30 1.7
Military 7 1.8 Grocery Outlet 6 1.3
Trader Joe’s 13 1.4 Roth’s Market 11 1.1
All Others 351 17.8 All Others 180 14.7
Total 506 100 Total 506 100
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Many of the marketing and merchandising practices of retailers in the Pacific Northwest are similar to those found in BC, but can also be distinctly different. This following analysis will try to highlight some of the key differences.
Market Positioning
The guidelines for making natural product claims are different in the US than Canada. The United States Department of Agriculture (USDA) defines natural as “a product containing no artificial ingredient or added color and [that] is only minimally processed.” This is much broader than the Canadian Food Inspection Agency (CFIA) definition which states “natural and naturally raised claims are considered acceptable only on products that were raised with minimal human intervention, for example, wild turkey or wild fish.”
While most retailers in BC featured one branded program, those in the Pacific Northwest often featured two or three. Quality Food Centers featured Certified Angus Beef as the main product line and also offered CAB Prime and CAB Natural. Haggens featured Double R Ranch Northwest Branded Beef, NatureSource Natural Beef and Verde Certified Organic Beef. Fred Meyer featured Fred Meyer Select Beef along with Private Selection Natural Beef and Northwest Finest Natural Ground Beef. Safeway offered Rancher’s Reserve and Open Nature Natural Angus beef. Most of the natural programs were further supported with claims of no added hormones or no antibiotics.
Albertsons featured Stockman and Dakota Angus Beef. Costco featured USDA Choice and USDA Prime beef while Walmart featured only USDA Choice beef. None of these large retailers featured natural, organic whole-muscle beef products at the time of the audit. Albertsons carried Northwest Finest Natural Ground beef while Costco carried organic ground beef and Walmart carried natural ground beef. This interesting strategy of carrying only natural or organic ground beef needs further exploration to determine if it is due to supply constraints.
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Whole Foods Market features a natural program, offers organic beef in some locations, and also features animal welfare rating standards for all meat products.
Product Mix
Availability of natural and organic ground beef products is much higher in this market area than in BC. Natural and organic processed products are also arriving. Safeway features “Open Nature,” a line of private label, 100% natural ham, bacon and sausages. The availability of value-added products like ready-to-heat and ready-to-eat entrees is considerably higher.
Display Formats
Meat case design is similar but has a much higher ratio of value-added products that are often displayed using peg board displays rather than shelving.
Point of Production and Packaging Formats
Thin meat items like skirt, flank and flat irons are centrally prepared using vacuum skin packaging, thus significantly increasing availability and shelf life. Due to food safety and product liability concerns, ground beef is case-ready either in modified atmosphere or vacuum skin-pack packaging. These formats also provide the extended shelf life required by retailers to increase sales of natural and organic products.
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Pricing Strategies
Similar to BC, pricing strategies are typically either high-low or everyday-low-price. Price premiums for natural and organic products are difficult to compare accurately in a survey like this, but they appear to be significant. Natural products would appear to command a 15-25% premium and organic products would appear to command a 25-40% premium over USDA select beef.
Point of Sale Materials
Products making claims such as ‘no antibiotics’ are aggressively creating consumer awareness using effective point of sale materials.
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Market Analysis
Analysis of the extensive research findings identified the following opportunities and barriers: Opportunities
1. Market size opportunity Together, the BC and Pacific Northwest regions represent a sizable market with over 15 million people. BC has 13.2% of Canada’s population, yet represents only 8% of beef consumed in Canada. Historically, the Pacific Northwest consumes 2% less beef than the national average, suggesting that both markets are underdeveloped for beef consumption.42
2. Willingness to pay The consumer research clearly demonstrated that a significant segment of these markets was willing to pay premiums for beef products with identifiable attributes. In fact, 74% of those surveyed in BC and 59% in the Pacific Northwest were willing to pay more for beef with any of the value-added claims.
3. Retail market opportunity – lack of value-added beef programs According to the merchandising audit, the retail market in BC is underdeveloped in terms of availability of products with identifiable attributes. Out of the ten stores surveyed (which represent about 90% of the marketplace), only about one-third offered value-added beef programs that featured the most desired attributes—antibiotic- and hormone-free beef.
4. Retail market opportunity – major retailers in BC The merchandising audit identified opportunities with major retailers in BC to establish beef programs with specific attributes including: . A retailer with an existing branded program that is currently sourced from the U.S. . A retailer currently having success with a natural program in the Pacific Northwest, but does not have a program in BC, where consumer research suggests demand is actually higher. . A leading BC-based retailer already promoting local products; this existing relationship could be leveraged to develop a supply chain for BC products.
5. Retail market and supply chain opportunity – Pacific Northwest Supply chain research identified opportunities in the Pacific Northwest to establish a program with specific attributes: . Agri Beef has successful brands that utilize BC cattle; these could be expanded to include products with additional identifiable attributes. . Some Pacific Northwest retailers are currently sourcing products from South America with specific attributes while research has shown that consumers would prefer to buy products of Canada.
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6. Premiums that can sustain the value chain The consumer research demonstrated that consumers are willing to pay significant premiums for the specific attributes they most desire. This willingness to pay a premium would sustain profitability for the value-chain and support their efforts to supply this product for the long term.
7. Production practices already in place could be exploited The supply chain research identified a number of production practices already in place with many BC producers (such as hormone- and antibiotic-free, grain-fed, environmentally sustainable) have the potential to meet the branded program requirements to achieve a premium that is not currently being captured by the producer.
8. Verified Beef Production and Beef Information Exchange provide competitive advantage The Verified Beef Production (VBP) and Beef Information Exchange (BIXS) program may provide a competitive advantage for BC producers to meet the branded program verification and audit requirements that would be needed for an attribute-specific program.
9. Meeting consumer needs will increase overall demand Consumer research demonstrates that if you meet the needs of consumers by providing the specific attributes they want, they will purchase more of the product, increasing overall beef demand.
10. Chinese consumer opportunity With the explosive growth of the Chinese population in BC (almost 20% of people in Metro Vancouver are of Chinese origin), there may be an opportunity to increase beef demand with this important market segment. Marketing and merchandising programs targeting the Chinese consumer should be explored, working with Thompson River University when their study on Chinese consumers is complete. Barriers
Analysis of the research also identified the following barriers:
1. Sufficient resources Securing sufficient resources to fund the value-chain marketing strategy will be necessary, along with assembling the necessary team to successfully implement the strategy.
2. Changes to CFIA guidelines regarding production claims Currently there is uncertainty about the proposed update to CFIA guidelines (scheduled for spring 2012) regarding production claims. This is important information to provide clarity on what will be allowable in the future. Improvement in CFIA’s ability to monitor and enforce non-compliance would also increase confidence and willingness to participate.
3. Willingness of primary producers to participate Producer participation may be complicated by the lack of desire to change or take on risk, current high beef prices and the difficulty in easily identifying the premium for the producer.
4. Economically viable production costs for primary producers In order for this program to be attractive for producers, cost of production must not exceed the potential premium in order to make participation economically viable.
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5. Willingness of federally inspected beef packer(s) to participate in value-chain strategy Federally inspected packer(s) will be essential to ship inter-provincially to meet the needs of potential retail customers. The initial low volumes and inefficiencies of servicing a niche market may be potential issues.
6. Economically viable production costs for packer(s) Production costs for packers should not exceed the potential premium. The potentially high cost of custom killing may also be an issue.
7. Willingness of retailers to participate in a value-chain strategy Retail executives are extremely busy with limited time to devote to start-up marketing initiatives. They are often seeking immediately available programs and may have little interest in waiting a year or more to establish supply.
8. Ability to match suitable partners at all levels of the supply chain to meet supply and demand requirements Cow-calf, feedlot, packer and retail partners’ supplies and the potential demand must align to optimize cut-out values and provide sufficient returns for all.
9. Ability to establish brand awareness and comprehension, and induce product trials upon launch Reaching consumers in the overcrowded retail marketplace and encouraging trials for new products can be challenging. Conclusions
An immediate market opportunity exists to meet sizable consumer demand for beef products with identifiable attributes at premium prices. Many barriers will need to be overcome. Willing partners may be aligned to meet consumer needs for specific attributes, increasing demand for cattle and improving the profitability and sustainability of the cattle industry in BC. Next Steps
Results of this study should be shared with supply chain partners at the cow-calf, backgrounding, feedlot, packing and retail levels. A submission should be made to the Canada – BC Ranching Task Force to secure funding for a supply chain strategy.
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Beef Value Chain Marketing Strategy
Overview
The research and analysis establishes that there is a real opportunity to improve the profitability and sustainability of the BC cattle industry. This can be accomplished by creating programs that meet consumer demand for products with specific identifiable attributes.
The consumer research highlighted a market segment of more than 30% willing to pay a premium for products with specific identifiable attributes. With a population of 15 million in the Pacific Northwest, this is a significant market opportunity.
The current retail marketplace is underdeveloped. Only about one-third of grocery retailers offer beef brands with consumers’ desired attributes, meaning there are immediate opportunities with leading retailers.
A number of production practices already in place with beef producers (such as raising beef without hormones or antibiotics) creates the potential for producers to capture a premium for something they are already doing. Audit programs like Verified Beef Production and BIXS provide a competitive advantage to meet verification requirements for an attribute-specific program.
These opportunities inform the development of the marketing strategy presented in this report. In the event the Canada-BC Ranching Task Force funds this project, a high-calibre team can be quickly assembled. Marketing Strategy
Objectives
1. Improve the profitability and sustainability of BC’s cattle industry by aligning the supply chain to produce products with the specific attributes that consumers demand.
2. Increase beef demand in BC by developing beef programs with the specific attributes consumers are looking for and ensuring they are widely available at retail. Strategy
1. Research Dissemination To lay the ground work for further development, share results of this study should with industry and supply chain partners including producers, packers, retailers, relevant associations and government.
2. Establishment of Steering Committee Establish an industry steering committee to guide the project with representation from relevant associations and government.
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3. Branded Program Development Develop branded programs. The first step is market segmentation and prioritizing key targets for programs with identifiable attributes. . Potential project partners identified and engaged; . Key attributes established; . Program protocols and specifications developed; . Volume and value target established. Depending on retail partner commitment, four to five programs would be pursued with the expectation of the development and implementation of two programs.
4. Supply Chain Alignment Develop and align the supply chain to establish supply for programs. A facilitator would be utilized to work with cow-calf and feedlot operators, packers and retailers to help coordinate the supply of product to meet protocols and specifications.
5. Marketing and Merchandising Develop marketing and merchandising programs to support premium branded programs with key targets. This would include developing brand(s), positioning statements, product mixes, pricing strategy, packaging, case layouts, ad strategies, etc.
6. Consumer Education Establish consumer education programs to build brand awareness and comprehension, and to induce product trials. This would include development of point of sale material(s), website(s), in-store demonstrations, etc.
7. Industry Communications Develop communication programs targeting industry stakeholders to communicate opportunities, progress updates, results, etc. This includes reporting requirements to the steering committee, BCCA and Canada-BC Ranching Task Force.
Key Success Factors
1. CFIA are expected to have posted the update to the guidelines regarding production claims by September 2012 (scheduled for spring 2012). Lobbying efforts can be undertaken by BCCA and CCA to enhance CFIA enforcement of the regulations to improve producer confidence and willingness to participate.
2. The willingness of producers to participate will be directly influenced by the size of the market opportunity and potential premiums available.
3. Producers will need to be able to evaluate cost of production implications based on protocols and specifications to determine if participation is economically viable.
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4. Both federally and provincially inspected packers can be utilized to supply potential customers. This would include federally inspected packers like Canadian Premium Meats (CPM) also specialize in processing for producer-driven value chains to service niche markets.
5. Given the significant segments of the market interested in products with specific identifiable attributes, as well as the size of the retail targets, it is anticipated that packer volumes would be sufficient to make costs reasonable.
6. Securing retailer commitment will require a highly skilled and experienced project leader along with assurance that the supply chain can be aligned and that supply can be established relatively quickly.
7. Considerable work will need to be done to match supply and demand, including optimizing cut-out values by creating demand for all parts of the carcass.
8. Establishing brand awareness and product trial can be achieved by a highly skilled team backed with sufficient resources that can be leveraged with retail partners.
Performance Measures
Measures and targets should be established by the steering committee. Measures for consideration include:
1. Number of programs 2. Size of market affected 3. Number of cattle marketed 4. Value derived by partners 5. Profitability of partners 6. Investment leveraged 7. Sustainability of programs 8. Changes in industry capability (i.e. participation in VBP, BIXS, etc.)
Key market indicators that measure impacts on industry should be established, such as:
1. Impact on overall market prices 2. Changes in industry capacity 3. Impact on beef demand
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Budget
Table 19 Budget Strategy Total $ Research Dissemination 17,000 Steering Committee 18,000 Branded Program Development 285,000 Supply Chain Alignment 175,000 Marketing and Merchandising 100,000 Consumer Education 70,000 Industry Communication 16,000 Administration 68,100 Total 749,100
Funding
Under the direction of the BCCA Board of Directors, an application and funding request totalling $749,100 would be prepared for the consideration of the Canada-BC Ranching Task Force.
Timeline
The project’s start date would be September 1, 2012 and its completion date would be March 31, 2014.
Project Completion
It is anticipated that the programs developed will be sustainable in the hands of the cow-calf, feedlot, packer and retailer partners at the conclusion of the project and that the premiums paid by the consumer will be sufficient to supply products profitably for the long term. It is recognized that consumer education will need to be ongoing. This can be incorporated into the product pricing structure to ensure it can be sustained in the hands of the supply chain partners.
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Beef Value Chain Detailed Project Plan
(Added to Report May 2013)
Project Background
BCCA presented the report BCCA Value Chain Market Analysis and Strategy Development at the British Columbia Cattlemen’s Annual General Meeting in June of 2012. Since that presentation, BCCA has evaluated the opportunities identified in the report, consulted with producers and targeted retailers to determine their interest in participating in a value chain project.
Initial discussions with a leading retailer indicate there is a willingness to consider participation in developing and marketing a branded program featuring beef with specific, consumer-desired attributes. This application outlines the requirements to make this opportunity a reality.
Project Overview
The research and analysis undertaken establishes that there is a real opportunity to improve the profitability and sustainability of the BC cattle industry. The consumer research clearly demonstrated that a significant segment of these markets were willing to pay premiums for beef products with identifiable attributes. Seventy four per cent (74%) of those surveyed in BC were willing to pay more for beef with any of the value-added claims. Thirty per cent (30%) of consumers in this region (on average) were willing to pay 25% more for antibiotic and hormone free beef.
In discussions with industry along with a review of the supply chain, it appears the majority of ranchers and feeders surveyed would welcome more collaboration and communication. They are very open to producing products with specific attributes, if it could be demonstrated to them that it was going to “pay- off” in the long-run. Production practices already in place with beef producers (such as raising beef without added hormones or antibiotics) create the potential for producers to capture a premium for something they are already doing. Audit programs like Verified Beef Production (VBP) and BIXS (Beef Info Exchange System) provide a competitive advantage to meet verification requirements for an attribute-specific program.
According to the merchandising audit, the retail market in B.C. is underdeveloped in terms of availability of products with identifiable attributes. Out of the ten retail grocery chains surveyed (which represent about 90% of market), only about one-third offered value-added beef programs featuring the most desired attributes – antibiotic and hormone-free beef.
The primary objective of this project is to improve the profitability and sustainability of BC’s cattle industry by aligning the supply chain to produce a product with the specific attributes that consumers’ demand. Developing beef programs with these specific attributes and ensuring they are widely available at retail will increase beef demand.
The recommended strategy calls for supply chain alignment, development and implementation of branded program with a major retailer, a consumer education strategy and communication out to industry. This program is proposed to start June 1, 2013 (or sooner if possible) with an expected completion date of March 31, 2014. It is proposed that costs would be shared with funding from the Canada-BC Ranching Task Force.
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Objectives of Project
1. Improve the profitability and sustainability of BC’s cattle industry by aligning the supply chain to produce products with the desired attributes for one leading retailer. 2. Increase demand for BC calves produced with specific attributes, as required by one of BC’s leading retailers. 3. Enhance the capability of the BC cattle industry to meet branded program requirements by leveraging production practices and programs like VBP and BIXS. 4. Increase beef demand in BC by developing a beef program with the specific attributes consumers are looking for and ensuring it is widely available at one of BC’s leading retail chains.
Strategy
1. Research Dissemination and Retailer Engagement After reviewing the research and analysis, BCCA was able to determine the greatest opportunity for market segmentation and prioritize the key targets. One of BC’s leading retailers has been targeted and expressed interest however due to project partner confidentiality requirements they can’t be identified in this proposal at this time. They are a recognized market leader with a strong preference for domestic and local products and are committed to supporting the communities they operate in. Once the program is launched at retail, the partner will be identified. The retail partner will also be required to support consumer education and industry communication initiatives. A memorandum of understanding outlining project responsibilities and cost-sharing parameters between partners will be established from the outset. The detailed research results will be shared with their senior meat merchandising and marketing personnel to review the opportunities identified in the research. We will work to secure their commitment to develop a branded beef program that can exploit those opportunities.
2. Branded Program Development
The goal is to develop one branded program with identifiable attributes. The proposed consumer positioning or key attribute (i.e. antibiotic and hormone-free, organic, natural, environmentally sustainable, etc.) will be determined in consultation with the project partner. Ultimately, the retail partner knows their customer and has a relationship with them – they have to be able to command the premium price and will need to take on the financial risk in development of the brand and accompanying product.
The brand name will be determined and value proposition defined. Based on the consumer positioning and key attribute, supporting attributes will be defined. Program protocols will be established to define production system requirements for the program to address areas such as:
. Identification and traceability . Animal health
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. Animal welfare . Animal nutrition . Environmental sustainability . Handling and transportation . Processing procedures . Stock rotation and retail display
Product specifications will be established to define product quality requirements for the program such as:
. Carcass weight ranges . Yield grades . Quality grades (i.e. age, colour, texture, intramuscular fat, etc.) . Trim specifications . Visible defects (i.e. bone fragments, bruising, lesions, etc.)
Volume forecasts will also be required to match customer requirements with supply chain capabilities. Matching weekly fresh meat requirements with plant capacity and available cattle supply can be extremely challenging.
3. Supply Chain Alignment
Develop and align the supply chain to establish supply for programs. Once protocols and specifications are established, they will be communicated through BCCA to cow-calf and feedlot operators. A BCCA program coordinator will be responsible for outlining the program to interested producers and establishing a commitment to supply to the program on the schedules developed for the entire supply chain.
Verified Beef Producers (VBP) - All participants in the cattle supply chain must be trained and audited under the VBP program. The program will increase the credibility of the producer and build confidence in the practices they adhere to. Spot audits will be conducted to ensure compliance.
Beef Information Exchange System (BIXS) - All participants in the supply chain must be enrolled on the BIXS program and only cattle that are entered into the system will qualify for the program. The system will be the tool for tracking the information and attributes required and will identify the cattle that do qualify.
BC Calves: In the alignment of the production chain this is perhaps the most critical sector to get established but also the easiest. The primary calf producer must start the process by identifying that their cattle currently have the specified attributes and the correct required protocol has been followed to qualify for the program. They will also be able to raise cattle in accordance with the production protocols and criteria outlined for the program. They will be required to register the cattle as qualified for the program. Benefits and potential rewards for raising these cattle will need to be established in order to get the producers to adjust their programs if required to create the supply.
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Feedlots: Feedlots willing to participate in the program need to be identified from the onset. Feedlots will be also be required to raise cattle in accordance with the production protocols and criteria outlined for the program. This would include the segregation and identification of program cattle in the feedlot.
Business arrangements between cattle supply chain partners will need to be established directly between partners. This would include options and rates for producers wanting to retain ownership and custom feed their cattle along with terms and conditions for feedlots to own a portion of the cattle.
Feedlots not identified will be able to join if they are willing to coordinate with the other feedlots in coordinating cattle on feed numbers and creating a consistent supply to the processors to be able to meet the demands of the retailer. Coordination between cow-calf and feedlots will be required to ensure the supply to the processor is consistent throughout the year. The programs will also need to be scaled based on initial cattle supply.
Packers: Securing the commitment to implement a program meeting the retailer’s requirements is a major component of aligning the supply chain. Potentially both federally and provincially inspected packers can be utilized to supply the retail partner. This could be federally inspected packers like either a large multi-national packer or a smaller operator like Canadian Premium Meats (CPM) who specialize in processing for producer-driven value chains to service niche markets. Other federal plants like SunGold Specialty Meats Ltd will also be considered. The retailer has also indicated a willingness to utilize product from other federal or provincial plants.
4. Marketing and Merchandising
Marketing and merchandising programs that support the premium branded program will be required. This is often left to the discretion of the retailer based on their organizational objectives. This plan proposes a more comprehensive approach that balances the objectives and requirements of the cow calf, feedlot and packer partner in the value chain. This includes defining product mixes, pricing, case layouts, ad strategies, etc.
The merchandising strategy will consider the balancing of carcass utilization and cut-out value optimization. Most retail programs more heavily utilize middle meats (strip loin, rib eye, tenderloin, top sirloin) then chuck (blade, cross rib) and round (inside, outside, eye, sirloin tip). These volumes also fluctuate seasonally adding to the challenge. This can be further complicated by the retailer’s advertising strategy and selection of products for feature activity.
5. Consumer Education
Consumer education programs to build brand awareness, comprehension and to induce product trial will be established. This includes development of a brand logo which will be prominently displayed in retail feature activity. Point of sale material (POS) will also be developed. Depending on retailer requirements, materials such in-store signage, a consumer brochure and website may be developed. The use of a QR (quick response) code will be explored for those with smart phones - scanning the code takes users directly to the website. Social media options will also be explored with the retailer.
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In order to build trust with consumers, BC cattle producers and their families will be utilized in the marketing materials if possible. Messages will focus on communicating key product attributes. Existing photography will be utilized where possible to minimize licensing requirements and project costs. Consumer education efforts will be cost-shared with the retail partner. It is proposed BCCA would pay for design and photography which allows for control of content. The retailer would pay for production and distribution cost for materials like signage and brochures. For the website, BCCA would pay for design and the retailer would be responsible for hosting and maintenance.
6. Evaluation and Communication
Information and feedback from value chain partners will be gathered throughout the process for evaluation back against the performance measures.
A communications program will be developed targeting industry stakeholders to communicate program results. Upon program launch, a media release will be issued to agriculture media to generate media coverage. A feature article will also be developed and placed in Beef in BC magazine and BCCA newsletters. Ongoing updates will be provided to BC beef producers through available BCCA communication materials such as Beef in BC, email and website updates along with regularly scheduled newsletters – this might include information on flyer events, promotional launches and sampling events so that producers can maximize the opportunities in their local communities.
In addition to providing updates to BC producers, there will be a focused communications effort to provide updates and articles to other key stakeholder groups like Verified Beef Production (to generate awareness for the need to identify animals), Canadian Meat Council and national trade meat magazines like Canadian Meat Business in order to broaden the reach.
A final report will be prepared to meet the requirements of BCCA and Canada-BC Ranching Task Force. Twenty-five colour copies will be provided along with electronic files.
The final report will be accompanied by a PowerPoint presentation highlighting the program objectives, strategy, performance measures and results. The final report and presentation can be presented at the BCCA Annual General Meeting as well as other associated industry meetings such as BC Cattle Feeders.
Performance Measures
Performance measures correlate back to the program strategy and typically measure the effectiveness of implementation. Some of the targets will need to be confirmed once the retailer is committed, shares volume requirements and attributes and protocols are established. They type of targets to be established are as follows:
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Performance Measure Target 1. Number of programs One program with leading retailer (25% market share) 2. Size of market affected Establish distribution in 80 stores 3. Number of cattle enrolled TBC based on brand attributes and program protocols 4. Number of producer participants Cow calf operators and feedlots TBC as above 5. Changes in industry capability Increase use of VBP and BIXS to TBC as above 5. Packer participation At least one packer participate TBC as above 6. Investment leveraged 1:1 match ratio (RTF: BCCA/Retailer)
Key Market Indicators
Key market indicators correlate back to the program objectives and measure impacts on industry. It’s important to note these indicators are affected by a broad range of market factors that may positively or negatively affect the indicator.
Key Market Indicators Indicators (source) 1. Profitability of BC cattle industry Market prices (producer feedback) 2. Increase in demand for BC calves Producer feedback (CANFAX/Producer feedback) 3. Capability of BC cattle industry BIXS and VBP participation (CCA) 4. Increase beef demand in BC Retail sale data (retail partner)
Project Timeline
The project’s proposed start date is June 1, 2013 with a completion date proposed for March 31, 2014. This is an extremely aggressive timeline for implementation of a project of this scope and scale. Successful implementation will be subject to timely participation and decision making of value chain partners. Proposed timing of implementation is outlined as follows.
Activity Start Date Finish Specific Deliverables Date Research Communication and June 1, 2012 June 30, 1) Research communicated to key meat Retailer Engagement 2013 merchandising personnel 2) Retailer commitment to pursue development of program Branded Program Development June 15, 2013 September 3) Brand name determined 30, 2013 4) Value proposition defined 5) Attributes defined 6) Production system requirements and protocols established 7) Product specifications defined Supply Chain Alignment August 1, February 8) Cow-calf producers engaged
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2013 28, 2014 9) Feedlots engaged 10) Packer(s) engaged Marketing and Merchandising September February 11) Product mix defined 15, 2013 28, 2014 12) Cut-out developed (if required) 13) Advertising and pricing strategy developed
Consumer Education January 1, March 31, 14) Brand logo developed 2014 2014 15) POS developed 16) Website developed Evaluation and Industry March 1, 2014 March 31, 17) Performance measure and indicator Communication 2014 data gathered 18) Press release and feature article 19) Final report and presentation
Implementation will have a phased approach. The first step is to secure the retail partner commitment to a program. Depending on requirements, it may be necessary to develop components of the branded program to secure their commitment to participate.
If commitment is secured, then supply chain alignment will proceed. Cow-calf, feedlot and packer partners will be pursued simultaneously during supply chain alignment. Commitment of one, or potentially more, packers will be required depending on retail volume requirements.
Only when those commitments are secure will the next phase of developing marketing and merchandising materials and consumer education proceed. Evaluation and stakeholder communications components will proceed to meet the requirements of the BCCA and the Canada-BC Ranching Task Force.
This program is intended to be sustainable in the hands of the cow-calf, feedlot, packer and retailer partners over the long-term and that the premiums paid by the consumer will be sufficient to supply products profitably for the long-term. It is recognized that consumer education will need to be ongoing. This can be incorporated into the product pricing structure to ensure it can be sustained in the hands of the supply chain partners.
Given the extremely tight timeframe for implementation, it is possible that additional facilitation and/or resources may be required in the projects infancy to ensure sustainability in the hands of the project partners.
Key Success Factors
The overall strategy outlined in the Value Chain Report identified the following key success factors; they are listed below with a brief overview of how each factor will be addressed.
1. CFIA is expected to have posted the update to the production claim guidelines by September 2012. (Originally scheduled for spring 2012).
CFIA is expected to release these guidelines in May of 2013. This timing allows for the program to be developed in full compliance of the new regulations and it may also create new opportunities.
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2. The willingness of producers to participate will be directly influenced by the size of the market opportunity and potential premiums available. Given the size of the retailer and their recognition as an industry leader, their volume will be significant and should capture the interest of producers. Potential premiums will be dependent on the program protocols and specifications.
3. Producers will need to be able to evaluate cost of production implications based on protocols and specifications to determine if participation is economically viable.
With the tight timeline established, we expect to have the protocols and specifications defined in September. We also anticipate that, depending on the program specifications, many cattle may qualify without any additional cost to the producer.
4. Both federally and provincially inspected packers can be utilized to supply potential customers. This would include federally inspected packers like Canadian Premium Meats (CPM) who specialize in processing for producer-driven value chains to service niche markets.
This retailer has a very well established supply relationship with a major multi-national Canadian packer. Their volumes provide a significant amount of leverage in negotiations with the packer to source and process cattle to the specifications required. The retailer has also indicated a willingness to utilize product from other federal and provincial plants.
5. Given the significant segments of the market interested in products with specific identifiable attributes, as well as the size of the retail targets, it is anticipated that packer volumes would be sufficient to make costs reasonable.
This retailer has significant volume requirements; it is estimated that packer volumes would be sufficient to make costs reasonable.
6. Securing retailer commitment will require a highly skilled and experienced project leader along with assurance that the supply chain can be aligned and that supply can be established relatively quickly.
The preliminary discussions with the retailer indicate a willingness to consider a program for immediate development. A highly experienced project leader is also available to initiate the project on June 1st.
7. Considerable work will need to be done to match supply and demand, including optimizing cut- out values by creating demand for all parts of the carcass.
Once the protocols and specifications are defined this work can begin immediately. It is most likely the protocols and specifications required will already be present in many calves in BC. Supply for next spring will become a challenge if attributes are required that are not readily available in the current cattle supply. The retailer has extensive experience balancing carcass utilization to make a program with carcass specific attributes work. Their preferred packer also has multiple lines of business that can be utilized to optimize cut-out values.
8. Establishing brand awareness and product trial can be achieved by a highly skilled team backed with sufficient resources that can be leveraged with retail partners.
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The funding requested in this application will allow for a highly skilled team to be put in place to design the program material. As a market leader, the retailer has enormous reach along with the tools to generate program awareness. Preliminary discussions indicate a willingness to invest heavily in a program that meets the needs of a larger segment of the consumer market and provides a point of differentiation in the marketplace.
Project Budget
It is proposed that this project be cost shared between the BCCA and the retailer with funding from the Canada-BC Ranching Task Force. The total project budget of $640,490 is comprised of both cash and in-kind contributions and is inclusive of PST/GST.
Project Budget Expense Funding Source In-Kind Expenditure Item Total RTFFI Retailer BCCA $ $ $ (In-Kind) Research Communication & Retailer Engagement 13,000 13,000 0 7,000 Branded Program Development 82,200 82,200 0 21,800 Supply Chain Alignment 75,375 75,375 0 65,200 Marketing and Merchandising 30,800 30,800 0 16,400 Consumer Education 179, 600 29,600 150,000 15,600 Evaluation & Industry Communication 17,400 17,400 0 29,750 Sub Total 398,375 248,375 150,000 155,750 Administration (8%) 19,870 19,870 0 PST/GST (12%) 47,805 29,805 18,000 18,690 Total 466,050 298,050 168,000 174,440
A detailed budget including unit rates is as follows:
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Detailed Project Budget Expense Funding Source In-Kind Expenditure Item Rate Quantity Total RTFFI Retailer BCCA $ $ $ $ (In-Kind) Research Communication & Retailer Engagement Contractor 150 80 12,000 12,000 Travel 1,000 1 1,000 1,000 1,000 BCCA staff participation 150 40 6,000 Branded Program Development Contractor 150 528 79,200 79,200 Travel and expenses 1,000 3 3,000 3,000 2,000 BCCA staff participation 150 132 19,800 Supply Chain Alignment Contractor 150 480 72,000 72,000 Travel and expenses 1,000 2 2,000 2,000 2,000 Mileage 1 2,500 1,375 1,375 BCCA staff participation 150 288 43,200 BCCA Communication 20,000 Marketing and Merchandising Contractor 150 192 28,800 28,800 Travel and expenses 1,000 2 2,000 2,000 2,000 BCCA staff participation 150 96 14,400 Consumer Education Contractor 150 64 9,600 9,600 POS Design 1 20,000 20,000 20,000 POS Production and Distribution 75 2,000 150,000 150,000 BCCA staff participation 150 104 15,600 Evaluation & Industry Communication Contractor 2 50 140 7,000 7,000 Contractor 1 150 44 6,600 6,600 Final report presentation - travel 2 1,000 2,000 2,000 800 Press release 1 600 600 600 Feature article 1 600 600 600 2,950 Final report 25 24 600 600 BCCA/Beef in BC Communications 20,000 BCCA staff participation 150 40 6,000
Subtotal 398,375 248,375 150,000 155,750 Administration 8% 19,800 19,800 0 PST 12% 47,805 29,805 18,000 18,690 Total 466,050 298,050 168,000 174,440 Page 61 of 88
Appendix A – Merchandising Audit
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“Safeway Inc. is one of the largest food and drug retailers in North America. As of September 10, 2011, the company operated 1,681 stores in the Western, Southwestern, Rocky Mountain, Midwestern and Mid-Atlantic regions of the United States and in Western Canada. In support of its stores, Safeway has an extensive network of distribution, manufacturing and food processing facilities. Safeway also holds a 49% interest in Casa Ley, S.A. de C.V., which operates 169 food and general merchandise stores in Western Mexico.”
General Organization Information Beef Marketing and Merchandising 1020 64th Avenue, Canadian AAA Beef Corporate Office: Beef Brand(s): Calgary, Alberta
Website: http://www.safeway.ca Grade(s): AA, AAA Full mix of steaks, roasts, 171 stores in BC/Alberta Total Stores: Product Mix: thin meats, value-added 75 stores in BC products and ground meats Store Types: Conventional Supermarkets Display Format(s): Self-serve and full-serve Store Operating Point of Safeway Case ready and store cut Names: Production: British Columbia, Alberta, Area of Packaging Saskatchewan, Manitoba, Polystyrene overwrap Operations: Format(s): Ontario 24.7% Western Canada Market Share: Pricing Strategy: High-low advertising 24.4% BC Point-of-Sale Banners, signs, labels, etc. Comments: Materials: Supplier(s): Various
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Real Canadian Superstore is a chain of “hyper-markets” owned by Canadian food retailer Loblaws. The stores carry a variety of goods, with the majority of space devoted to groceries and about one-third of each store set aside for electronics, housewares and clothing. They are known for their in-store brand “President’s Choice” (PC).
General Organization Information Beef Marketing and Merchandising Loblaw Companies Limited Canadian Beef and “PC Corporate Office: Beef Brand(s): Brampton, Ontario Free From”
Website: www.superstore.ca Grade(s): AA, AAA 110 locations in Western Full mix of steaks, roasts, Total Stores: Canada and Ontario (24 Product Mix: thin meats, value-added locations in BC) products and ground meats Grocery and general Store Types: Display Format(s): Self-serve merchandise Store Operating Superstore, Real Canadian Point of Case ready and store cut Names: Superstore. Extra Foods Production: Area of BC, Alberta, Saskatchewan, Packaging Polystyrene overwrapped Operations: Manitoba and Ontario Format(s): 34.4% Western Canada Market Share: Pricing Strategy: High-low advertising 33.2% BC Point-of-Sale Banners, signs, labels, etc. Features a line of “PC Free Materials: From” beef and pork Comments: products: “raised without “PC Free From” beef antibiotics and hormones”. Supplier(s): products are sourced from Montana
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BCCA Value Chain Market Analysis and Strategy Development
Thrifty Foods is a chain of supermarkets located on Vancouver Island and BC’s Lower Mainland. In 2007 it became a division of Sobeys Inc., but operates independently from the larger company. It has a reputation for quality value-added prepared foods, full-service meat and seafood counters, and customer service.
General Organization Information Beef Marketing and Merchandising “Sterling Silver” and Corporate Office: Victoria, BC Beef Brand(s): “Diamond Willow Certified Organic Canadian Beef”
Website: www.thriftyfoods.ca Grade(s): Marketed by brands above Full mix of steaks, roasts, Total Stores: 29 Product Mix: thin meats, value-added products and ground meats Store Types: Conventional supermarkets Display Format(s): Self-serve and full-serve Store Operating Point of Thrifty Foods Store cut Names: Production: Area of Vancouver Island and Packaging Polystyrene overwrapped Operations: Lower Mainland of BC Format(s): Market Share: 5.7% BC Pricing Strategy: High-low advertising Excellent merchandisers Point-of-Sale Banners, signs, labels, etc. who utilize the beef Materials: category to build customer Comments: loyalty and differentiate in Cargill Foods, Diamond the marketplace, capturing Supplier(s): significant premiums for Willow both brands.
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General Organization Information Beef Marketing and Merchandising Overwaitea Food Group “Western Family” private Corporate Office: Beef Brand(s): Langley, BC label beef
www.overwaitea.ca www.saveonfoods.ca Website: www.coopers.ca Grade(s): AA www.pricesmart.ca www.urbanfare.ca Full mix of steaks, roasts, 125 stores across five Total Stores: Product Mix: thin meats, value-added banners products and ground meats Store Types: Conventional supermarkets Display Format(s): Self-serve and full-serve Save-on-Foods, Overwaitea, Store Operating Point of Price Smart Foods, Coopers, Self-serve is all case ready Names: Production: Urban Fare Area of BC, Alberta (excluding Packaging Vacuum packaged Operations: Calgary) Format(s): 24.9% BC (Save-On-Foods Market Share: Pricing Strategy: High-low advertising makes up 17.3%) First in Western Canada to Point-of-Sale Banners, signs, labels, etc. go entirely to vacuum- Materials: packaged case ready Comments: products. Leverage BC ranchers in ads and point of Supplier(s): Vantage Foods sale materials.
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Costco Wholesale operates an international chain of membership warehouses carrying brand name merchandise at substantially lower prices. These goods are usually bulk-packaged and marketed primarily to large families and businesses. The Costco house brand is Kirkland Signature Products.
General Organization Information Beef Marketing and Merchandising Corporate Office: Ottawa, Ontario Beef Brand(s): “Canadian AAA Beef”” AAA beef with select Website: www.costco.ca Grade(s): warehouses featuring Prime Limited mix of steaks, roasts, stew, value-added Total Stores: 82 Product Mix: products and ground meats, all in large pack sizes Store Types: Warehouse format Display Format(s): Self-serve Store Operating Point of Costco Wholesale Cut in each warehouse Names: Production: Canada and United States Area of Packaging plus numerous international Polystyrene overwrapped Operations: Format(s): locations Market Share: 10% Western Canada Pricing Strategy: Everyday-low-price Heavily promote Canadian Point-of-Sale Overhead signs, labels, etc. AAA beef in signage and Materials: Comments: product labels. Recognized by consumers for high quality Supplier(s): XL Foods and exceptional value.
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Sobeys is the second largest food retailer in Canada, with over 1,300 supermarkets operating under a variety of banners including Thrifty Foods and Sobeys in British Columbia.
General Organization Information Beef Marketing and Merchandising Corporate Office: Stellerton, NS Beef Brand(s): “Sterling Silver”
Website: www.sobeys.com Grade(s): Sterling Silver and AA Full mix of steaks, roasts, Total Stores: 3 Sobeys stores in BC Product Mix: thin meats, value-added products and ground meats Store Types: Conventional supermarket Display Format(s): Self-serve and full-serve Store Operating Point of Sobeys Store cut Names: Production: Area of Three locations – Golden, Packaging Polystyrene overwrapped Operations: Invermere and Fort St. John Format(s): 7.9% Western Canada Market Share: Pricing Strategy: High-low advertising 0.6% BC Point-of-Sale Exclusive marketers of Banners, signs, labels, etc. Comments: Sterling Silver at retail in Materials: Alberta. Also feature AA. Supplier(s): Cargill Foods
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BCCA Value Chain Market Analysis and Strategy Development
A member of Federated Co-op
General Organization Information Beef Marketing and Merchandising Federated Co-op 401-22nd Street East, Corporate Office: Beef Brand(s): AA beef/14 day aged Saskatoon, SK
Website: www.coopconnection.ca Grade(s): Marketed by brands above Full mix of steaks, roasts, Total Stores: N/A Product Mix: thin meats, value-added products and ground meats Store Types: Conventional grocery stores Display Format(s): Self-serve and full-serve Store Operating Grocery People, Co-op Point of Store cut Names: various Production: Area of Packaging Western Canada Polystyrene overwrapped Operations: Format(s): Market Share: N/A Pricing Strategy: High-low advertising Point-of-Sale Banners, signs, labels, etc. Comments: Materials: Supplier(s): N/A
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IGA Marketplace is owned by HY Louie Company and has been locally owned and operated since 1955. They are neighbourhood stores located mostly in the Lower Mainland and the Okanagan.
General Organization Information Beef Marketing and Merchandising HY Louie “Northridge Farms” Corporate Office: Beef Brand(s): Burnaby, BC Premium Beef
www.marketplaceiga.com Website: Grade(s): AA, Australian
Full mix of steaks, roasts, Total Stores: 32 Product Mix: thin meats, value-added products and ground meats Store Types: Conventional supermarket Display Format(s): Self-serve and full-serve Store Operating Point of Marketplace IGA Store cut Names: Production: Area of Primarily Lower Mainland Packaging Polystyrene overwrapped Operations: and Okanagan area Format(s): Market Share: 3.7% in BC Pricing Strategy: High-low advertising Point-of-Sale While they carry Northridge Banners, signs, labels, etc. Farms and Canadian AA, Materials: Comments: they also frequently feature Cargill Foods, Newton High Supplier(s): Australian beef. Quality Meats
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BCCA Value Chain Market Analysis and Strategy Development
T&T is a Canadian supermarket chain which sells primarily Chinese and Asian foods. The supermarket chain is headquartered in Richmond, British Columbia and with recent expansion, T&T is now Canada's largest Asian supermarket chain. It has eight stores in Metro Vancouver, four in Alberta (two in Calgary and two in Edmonton), and seven stores in Ontario—six in the Greater Toronto Area, including downtown Toronto, and one in Ottawa. T&T was purchased by Loblaws in 2009.
General Organization Information Beef Marketing and Merchandising Corporate Office: Richmond, BC Beef Brand(s): Certified Angus Beef
Website: www.tnt-supermaket.com Grade(s): AA Mix of Asian cuts (typical 12 in Western Canada (8 in thin meats) and some North Total Stores: Product Mix: BC) and 7 in Ontario American cuts including ground meats Large Asian-style Store Types: Display Format(s): Self-serve and full-serve supermarkets Store Operating Point of T&T Supermarkets Store cut Names: Production: Area of Lower Mainland, Edmonton Packaging Polystyrene overwrapped Operations: and Calgary, Ontario Format(s): Market Share: N/A Pricing Strategy: High-low advertising Point-of-Sale Targets Asian consumers Banners, signs, labels, etc. Comments: with product mix tailored to Materials: meet unique needs. Supplier(s): N/A
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Country Grocer is a Vancouver Island family-owned and -operated grocery chain with seven local locations. It specializes in customer service and carrying local goods.
General Organization Information Beef Marketing and Merchandising Certified Angus Beef Corporate Office: Victoria, BC Beef Brand(s): Island Pastures Beef
Website: www.countrygrocer.com Grade(s): AAA, N/A Full mix of steaks, roasts, Total Stores: 6 Product Mix: thin meats, value-added products and ground meats Store Types: Conventional supermarket Display Format(s): Self-serve and full-serve Store Operating Point of Country Grocer Store cut Names: Production: Area of Packaging Vancouver Island Polystyrene overwrapped Operations: Format(s): Market Share: N/A Pricing Strategy: High-low advertising Point-of-Sale Recently launched Island Banners, signs, labels, etc. Comments: Pastures Beef raised without Materials: hormones and antibiotics Supplier(s): N/A
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BCCA Value Chain Market Analysis and Strategy Development
Pacific Northwest Region
Safeway Inc. is one of the largest food and drug retailers in North America. As of September 10, 2011, the company operated 1,681 stores in the Western, Southwestern, Rocky Mountain, Midwestern and Mid-Atlantic regions of the United States and in Western Canada. In support of its stores, Safeway has an extensive network of distribution, manufacturing and food processing facilities.
General Organization Information Beef Marketing and Merchandising “Ranchers Reserve” private Corporate Office: Pleasanton, California Beef Brand(s): label beef and “Open Nature Natural Angus Beef” Website: www.safeway.com Grade(s): Marketed by brands above 168 stores in Washington Full mix of steaks, roasts, Total Stores: state Product Mix: thin meats, value-added 102 stores in Oregon products and ground meats Store Types: Conventional supermarkets Display Format(s): Self-serve and full-serve Store Operating Safeway, Vons, Randalls, Point of Store cut Names: Genuardi’s, Carr’s Production: Pacific Northwest in addition Area of Packaging to other areas of the US and Polystyrene overwrapped Operations: Format(s): Canada 28.2% Washington Market Share: Pricing Strategy: High-low advertising 25.3% Oregon Point-of-Sale Extensive mix of natural Banners, signs, labels, etc. Comments: beef, ground beef and Materials: processed meat products Supplier(s): N/A
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Fred Meyer, Inc. is a chain of supercentres founded in 1922 in Portland, Oregon, by Fred G. Meyer. The company was one of the pioneers of one-stop shopping, eventually combining a complete grocery supermarket with a drugstore, clothing store, shoe store, fine jewellers, home decor store, home improvement centre, garden centre, electronics store, toy store, sporting goods store and more under one roof.
General Organization Information Beef Marketing and Merchandising Fred Meyer Select Private Selection Natural Beef Corporate Office: Portland, Oregon Beef Brand(s): Northwest Finest Ground Beef – Organic
Website: www.fredmeyer.com Grade(s): 131 stores total Full mix of steaks, roasts, Total Stores: 57 in Washington Product Mix: thin meats, value-added 50 in Oregon products and ground meats Supercentres that include Store Types: grocery plus everything from Display Format(s): Self-serve and full-serve pharmacy to home decor Store Operating Fred Meyer Marketplace, Point of Centrally produced Names: Fred Meyer Production: Area of Washington, Oregon, Idaho, Packaging Polystyrene overwrapped Operations: Alaska Format(s): 15.2% Washington Market Share: Pricing Strategy: High-low advertising 23% Oregon Its natural beef line makes Point-of-Sale Banners, signs, labels, etc. claim of no antibiotics or Materials: Comments: added hormones and only vegetable feed Supplier(s): N/A
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BCCA Value Chain Market Analysis and Strategy Development
Albertsons is a supermarket chain with 463 grocery stores in Arkansas, Arizona, California, Colorado, Florida, Idaho, Louisiana, Montana, North Dakota, New Mexico, Nevada, Oregon, Texas, Utah, Washington and Wyoming. It is a subsidiary of Super Valu.
General Organization Information Beef Marketing and Merchandising Stockman & Dakota Corporate Office: Boise, Idaho Beef Brand(s): Premium Angus Beef
Website: www.albertsons.com Grade(s): USDA Choice Full mix of steaks, 453 in total roasts, thin meats, Total Stores: 75 in Washington Product Mix: value-added products 48 in Oregon and ground meats Store Types: Conventional supermarkets Display Format(s): Self-serve and full-serve Store Operating Albertsons Point of Production: Store cut Names: Washington, Oregon, Northern California, Colorado, Utah, Nebraska, South Packaging Polystyrene Area of Operations: Dakota, Arizona, New Mexico, Format(s): overwrapped Texas, Louisiana, Arkansas, Oklahoma and Florida 9.5% Washington Market Share: Pricing Strategy: High-low advertising 10% Oregon Point-of-Sale Banners, signs, labels, Extensive mix of heat-and-eat Comments: entrees from multinational Materials: etc. manufacturers. Supplier(s): N/A
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TOP Food & Drug was founded (as Haggens) in 1933 in Bellingham, Washington. The company currently operates supermarkets throughout Washington and Oregon, with continued planned growth. The company operates two retail formats: TOP Food & Drug focuses on low prices while Haggen Food & Pharmacy provides stores for shoppers seeking value and a shopping experience that combines personal service with the highest quality products.
General Organization Information Beef Marketing and Merchandising Double R Ranch, Northwest Brand Beef, Corporate Office: Bellingham, Washington Beef Brand(s): Verde Farm Organic Grass-fed Beef Double R Ranch - product of US and Website: www.top-foods.com/ Grade(s): Canada – choice Verde Farm - Uruguay Full mix of steaks, 32 stores roasts, thin meats, Total Stores: Product Mix: 18 TOP Food & Drug value-added products and ground meats Store Types: Conventional grocery Display Format(s): Self-serve and full-serve Store Operating Haggens Point of Production: Store cut Names: TOP Food & Drug Packaging Polystyrene Area of Operations: Washington and Oregon Format(s): overwrapped Market Share: N/A Pricing Strategy: High-low advertising Point-of-Sale Banners, signs, labels,
Comments: Materials: etc. Supplier(s): Agri Beef
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BCCA Value Chain Market Analysis and Strategy Development
Haggens was founded in 1933 in Bellingham, Washington. The company currently operates supermarkets throughout Washington and Oregon, with continued planned growth. The company operates two retail formats: TOP Food & Drug (opened in 1982) focuses on low prices while Haggen Food & Pharmacy provides stores for shoppers seeking value and a shopping experience that combines personal service with the highest quality products.
General Organization Information Beef Marketing and Merchandising Double R Ranch, Northwest Brand Beef Corporate Office: Bellingham, Washington Beef Brand(s): Nature Source, Natural Angus Beef
Website: www.haggens.com Grade(s): USDA Choice Full mix of steaks, 32 total roasts, thin meats, Total Stores: Product Mix: 16 Haggens value-added products and ground meats Store Types: Conventional supermarket Display Format(s): Self-serve and full-serve Store Operating Haggens Store cut Point of Production: Names: TOP Food & Drug Packaging Polystyrene Area of Operations: Washington Format(s): overwrapped Market Share: 4.3% Pricing Strategy: High-low advertising Double R Ranch Northwest Point-of-Sale Banners, signs, labels,
program is tender, local, US Materials: etc. Comments: choice beef and utilizes BC cattle. Supplier(s): Agri Beef
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Whole Foods Market is the world’s leader in natural and organic food. Their goal is to offer the finest natural and organic foods available while they maintain the strictest quality standards in the industry with an “unshakeable commitment to sustainable agriculture.” Each division is managed independently and makes decisions for its own stores. They maintain very strict requirements from the manufacturer.
General Organization Information Beef Marketing and Merchandising Bel River Organic grass-fed Corporate Office: Austin, Texas Beef Brand(s): natural beef, no antibiotics, no added hormones
Website: www.wholefoodsmarket.com Grade(s): Limited mix of steaks, 309 locations with 6 stores in roasts, thin meats, value- Total Stores: the US and 7 stores in Product Mix: added products and ground Canada (4 in Vancouver) meats Supermarket with Store Types: local/organic focus plus Display Format(s): Self-serve and full-serve health food store Store Operating Point of Whole Foods Market Store cut Names: Production: Packaging Area of Operations: US (38 states) and Canada Polystyrene overwrapped Format(s): Market Share: N/A Pricing Strategy: High-low advertising Also features Whole Foods Point-of-Sale Banners, signs, labels, etc. “5-Step Animal Welfare Materials: Comments: Rating” that rates how pigs, chickens and cattle are Supplier(s): N/A raised for meat
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BCCA Value Chain Market Analysis and Strategy Development
Quality Food Centers is a supermarket chain founded in 1955 and based in Bellevue, Washington with stores in the Puget Sound region of Washington State and in the Portland, Oregon metropolitan area.
General Organization Information Beef Marketing and Merchandising Certified Angus Beef, Certified Angus Natural Corporate Office: Bellevue, Washington Beef Brand(s): Beef, Certified Angus Prime Beef
Website: www.qfc.com Grade(s): USDA Choice, Prime Full mix of steaks, roasts, Total Stores: 75 Product Mix: thin meats, value-added products and ground meats Self-serve and full-serve Store Types: Conventional supermarket Display Format(s):
Store Operating Point of Store cut QFC Names: Production: Packaging Area of Operations: Pacific Northwest Polystyrene overwrapped Format(s): Market Share: 7% Washington Pricing Strategy: High-low advertising Point-of-Sale Operates a three-tier Banners, signs, labels, etc. Comments: program under the same Materials: brand – Certified Angus Beef Supplier(s): N/A
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Costco is the third-ranking chain in Supermarket News’ Top 75 Retailers and Wholesalers for 2012. It is the largest membership warehouse club in the United States and the seventh largest retailer in the world, with locations in the United Kingdom, Canada, Australia, Mexico, South Korea, Japan, Taiwan and the United States. Costco is headquartered in Issaquah, Washington. It has 592 warehouses worldwide and $77.9 billion in sales.
General Organization Information Beef Marketing and Merchandising Corporate Office: Issaquah, Washington Beef Brand(s): Kirkland Signature Beef
Website: www.costco.com Grade(s): USDA Choice Limited mix of steaks, Total Stores: 592 Product Mix: roasts, value-added products and ground meats Self-serve and full-serve Store Types: Warehouse clubs Display Format(s):
Store Operating Point of Store cut Costco Wholesale Names: Production: US, UK, Canada, Australia, Area of Packaging Mexico, South Korea, Japan, Polystyrene overwrapped Operations: Format(s): Taiwan Market Share: N/A Pricing Strategy: Everyday-low-price Point-of-Sale Features organic ground Banners, signs, labels, etc. Comments: beef at significant premiums Materials: ($17.99 for 4x1 lb packages) Supplier(s): N/A
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Walmart Stores Inc. (Walmart Supercenters and Neighbourhood markets) is the first-ranked retailer in Supermarket News’ Top 75 Food Retailers and Wholesalers for 2012. This American retail giant runs chains of large discount department stores and warehouse stores, and has $311 billion in sales.
General Organization Information Beef Marketing and Merchandising Corporate Office: Bentonville, Arkansas Beef Brand(s):
Website: www.walmart.com Grade(s): USDA Choice Full mix of steaks, roasts, Total Stores: 8,970 stores in 15 countries Product Mix: thin meats, value-added products and ground meats Supercentres, department Store Types: Display Format(s): Self-serve stores, warehouse stores Walmart Store Operating Point of Walmart Supercenter Case ready Names: Production: Sam’s Club Area of Packaging US and internationally Polystyrene overwrapped Operations: Format(s): 10.9% Washington Market Share: Pricing Strategy: High-low advertising 16.3% Oregon Walmart has recently Point-of-Sale Banners, signs, labels, etc. launched a USDA Choice Materials: Comments: program. They also carry natural ground beef. Supplier(s): N/A
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WinCo Foods is an employee-owned supermarket business headquartered in Boise, Idaho. WinCo previously operated stores as Waremart Food Centers and Cub Foods before a decision by employees to change the name to WinCo Foods in 1999.
General Organization Information Beef Marketing and Merchandising Corporate Office: Boise, Idaho Beef Brand(s): None
Website: www.wincofoods.com Grade(s): None Full mix of steaks, roasts, Total Stores: 113 Product Mix: thin meats, value-added products and ground meats Conventional supermarkets Store Types: Display Format(s): Self-serve with a focus on low pricing Store Operating Point of WinCo Foods Store cut Names: Production: Area of Packaging Western US Polystyrene overwrapped Operations: Format(s): 2% Washington Market Share: Pricing Strategy: High-low advertising 6% Oregon Point-of-Sale Origin declared as product of Banners, signs, labels, etc. Comments: Materials: USA and Canada. Supplier(s): Establishment 354
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Appendix B – Organics
Organic and Natural Definitions in Canada and the US
For more than a decade, use of specific “method of production” claims has been increasing. In the United States and Canada, growth of organic and natural retail programs has flourished in recent years. But what are “organic” and “natural” products?
Canadian Food Inspection Agency Guidelines
Claims are considered acceptable provided they are accurate, truthful and not misleading, as required by Section 5.(1) of the Food and Drugs Act and Section 7 of the Consumer Packaging and Labelling Act. These regulations provide guidance so industry members can ensure their claims meet the requirements of these Acts.
The existing guidance on terms like “natural,” as outlined in The Guide to Food Labelling and Advertising, states that “foods or ingredients of foods submitted to processes that have significantly altered their original physical, chemical or biological state should not be described as ‘natural’. ... A natural food or ingredient of a food is not expected to contain, or to ever have contained, an added vitamin, mineral nutrient, artificial flavouring agent or food additive. A natural food or ingredient of a food does not have any constituent or fraction thereof removed or significantly changed, except the removal of water.”
In the absence of specific guidelines for food labels and advertising regarding how animals were raised or what they were fed, the CFIA has developed interpretive guidance to support Subsection 5.(1) of the Food and Drugs Act and Section 7 of the Consumer Packaging and Labelling Act to promote clear and truthful labelling.
In 2005, CFIA held a broad stakeholder consultation on the use of specific claims. At the same time, a telephone survey of over 1,000 Canadians collected information related to consumer understanding of specific claims including natural claims and feed claims. The guidelines were developed, taking into consideration results of the broad stakeholder consultation, consumer survey and a review of policies from other countries.
The proposed guidelines were posted on the CFIA website on September 28, 2011, with a 60-day comment period. This comment period closed on November 27, 2011. As several years had passed since the initial consultation, the guidelines were posted with an invitation to comment.
A key point for consideration is that the use of claims on how meat, poultry or fish are raised or fed is voluntary, but when claims are made, they should adhere to specific criteria. The guidelines do not affect organic claims, which fall under the Organic Product Regulations. Guidelines are applicable to a product’s brand name.
Key elements of the guidelines are as follows:
1. Section I: “Natural” and “Naturally raised” These claims are considered acceptable on products that were raised with minimal human intervention (e.g. wild fish, wild turkey). Animals raised on a farm would not meet the criteria for a “natural” or Page 83 of 88
“naturally raised” claim. When a “natural” or “naturally raised” claim cannot be made, the guidelines provide criteria for other, more specific claims.
2. Section II: Feed Claims
a. “Fed no” or “Raised without” animal products/by-products/fat/meal or bone meal: . This claim could be used for products raised on feed free of ingredients or components of animal origin. . Components of animal origin would include minerals, vitamins and non-nutritive feed additives.
b. “Grain-fed” or “Vegetable grain-fed”: . This claim could be used where the macro feed ingredients are made up solely of grains and grain by-products, but micro-nutrients may be added regardless of origin. . This claim could be used in conjunction with a), but in that case the product cannot contain ingredients or components of animal origin.
c. “Raised on feed that includes grains”: . This claim could be used for animals raised on feed which includes grain and grain by-products, but is not exclusively limited to grain. . This claim could be used in conjunction with a), but in this case the product cannot contain ingredients or components of animal origin.
d. “X% grain-fed”: . This claim is similar to c), but it indicates the proportion of the feed made up of grains and grain by-products in the diet. . This claim could be used in conjunction with a), but in this case the product cannot contain ingredients or components of animal origin.
3. Section III: “Raised without the use of antibiotics” This claim could be used for meat, poultry or fish products that have not received antibiotics from birth to harvest/slaughter. Vitamins and minerals may be given, but not above the level for antimicrobial effect. In addition, no antibiotics can be administered to the mother of the animal in any manner that would result in antibiotic residue in the animal.
4. Section IV: “Raised without the use of hormones” If no hormones were administered in any way, and if the regulations permit the use of hormones, this claim could be made. In cases where regulations do not permit the use of hormones, a claim “like other (naming the product or source animal) these (naming the product or source animal) were raised without the use of hormones” could be made. Claims such as “hormone free” should not be used as meat, poultry and fish products contain naturally occurring hormones.
From an enforcement perspective, claims are considered acceptable provided they are accurate, truthful, and not misleading, deceptive or likely to create an erroneous impression. The CFIA addresses issues on a risk-based, priority basis and will verify the compliance of these types of claims based on the established criteria. When non-compliance is identified during inspections and when responding to complaints, appropriate action will be taken to promote compliance.
In terms of next steps, these guidelines are already in effect and claims are currently assessed based on the criteria established by the CFIA. If it is determined that changes will be made to the guidelines, a
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transition period will likely be applied. It is anticipated that the finalized guidelines will be posted in spring 2012. Any transition period, if applied, would follow.
Organic
The Organic Products Regulations (OPR) require mandatory certification, by a CFIA accredited Certification Body, to the Canadian Organic Standards (Canadian Organic Production Systems Standards: General Principles and Management Standards and the Permitted Substances Lists) for agricultural products represented as organic in import, export and inter-provincial trade, or that bear the federal organic agricultural product legend (or logo). Imported organic products may also meet the requirements of the Organic Products Regulations by being certified to a standard deemed to be equivalent under an equivalency determination agreement with a foreign country by a Certification Body accredited by that foreign country.
As in the case of all products sold in Canada, organic inputs, such as, but not limited to, fertilizers, feed supplements, pesticides, soil amendments, veterinary treatments, processing additives or aids, sanitizing and cleaning material; and products derived from organic agriculture, such as, but not limited to, feed and food should comply with all applicable regulatory requirements.
When producing or handling organic products, it is forbidden to use any of the following substances or techniques: all material or products from genetic engineering, synthetic pesticides, fertilizer or compost and animal material that contains a prohibited substance, sewage sludge, synthetic growth regulators, synthetic allopathic veterinary drugs including antibiotics, synthetic processing substances, ionizing radiation, synthetic fungicide, cloned animals, intentionally manufactured nano-technology products or any other substances that are not included on the permitted list.
Under a system of organic production, livestock are provided with living conditions and space allowances appropriate to their behavioural requirements, and organically produced feed. These practices strive to minimize stress, promote good health and prevent disease.
Specific to livestock, the standards also states: “Herbivores shall have access to pasture during the grazing season and access to the open air at other times whenever weather conditions permit. Calculated on the basis of dry matter intake, the consumption of grazed forage during the grazing season of the region shall represent a minimum of 30% of the total forage intake during this period for ruminants that have reached sexual maturity. On all farms a minimum of 0.13 ha (1/3 acre) per animal unit must be devoted to grazing. (One animal unit = one cow or one bull or two calves (each 225 to 500 kg) or five calves (each less than 225 kg) or four ewes and their lambs or six does and their kids). Livestock stocking rates shall recognize the differences between Canada's agro-climatic regions and take into consideration feed production capacity, stock health, nutrient balance and environmental impact. Organic livestock management shall aim to utilize natural breeding methods, minimize stress, prevent disease, progressively eliminate the use of chemical allopathic veterinary drugs (including antibiotics), and maintain animal health and welfare.”
The CFIA regulates the use of the logo below. The use of the organic logo will only be permitted on products certified according to Canadian requirements for organic products, and that have an organic content that is greater than 95%. The use of the organic logo is voluntary.
Imported products must meet the requirements of the Canada Organic Regime. Should imported products bear the logo, the statement "Product of", immediately preceding the name of the country of Page 85 of 88
origin, or the statement "Imported", must appear in close proximity to the logo or the designations, and these statements must appear on the label in both French and English.43
Figure 4 Organic Logos
United States Department of Agriculture (USDA) Guidelines
The USDA provides definitions for organic and natural production claims.
Organic
According to the USDA, “organic is a labeling term that indicates that the food or other agricultural product has been produced through approved methods that integrate cultural, biological, and mechanical practices that foster cycling of resources, promote ecological balance, and conserve biodiversity. Synthetic fertilizers, sewage sludge, irradiation, and genetic engineering may not be used.”
The USDA Consumer Brochure on Organic Food Standards and Labels: The Facts defines organic “as food that is produced by farmers who emphasize the use of renewable resources and the conservation of soil and water to enhance environmental quality for future generations. Organic meat, poultry, eggs, and dairy products come from animals that are given no antibiotics or growth hormones. Organic food is produced without using most conventional pesticides; fertilizers made with synthetic ingredients or sewage sludge; bioengineering; or ionizing radiation. Before a product can be labeled ‘organic,’ a Government-approved certifier inspects the farm where the food is grown to make sure the farmer is following all the rules necessary to meet USDA organic standards. Companies that handle or process organic food before it gets to your local supermarket or restaurant must be certified, too.”
Natural
The USDA defines natural as “a product containing no artificial ingredient or added color and is only minimally processed.” Minimal processing means that the product was processed in a manner that does not fundamentally alter the product. The label must include a statement explaining the meaning of the term natural (such as "no artificial ingredients; minimally processed").
It is worth noting that the natural label does not include any standards regarding farm practices and only applies to processing of meat and egg products. There are no standards or regulations for the labelling of natural food products if they do not contain meat or eggs. This definition is currently under review by the USDA. Many products labelled "natural" today go beyond the requirements and include additional claims relative to the use of hormones, antibiotics, vegetarian feed or free range.
43 Logos can be found at http://www.inspection.gc.ca/food/organic-products/labelling-and-general-information/certified- choice/eng/1328082717777/1328082783032
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No Hormones
The term "no hormones administered" may be approved for use on the label of beef products if sufficient documentation is provided to the Agency by the producer showing no hormones have been used in raising the animals. Hormones are not allowed in raising hogs or poultry. Therefore, the claim "no hormones added" cannot be used on the labels of pork or poultry unless it is followed by a statement that says "Federal regulations prohibit the use of hormones."
No Antibiotics
The terms "no antibiotics added" may be used on labels for meat or poultry products if sufficient documentation is provided by the producer to the Agency demonstrating that the animals were raised without antibiotics.
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Appendix C – About Brand Marketing
Glenn Brand is President of Brand Marketing & Management. His background includes over 22 years of experience in meat marketing and merchandising for both beef and pork. He has retail experience with Canada Safeway and Costco Wholesale and marketing experience with the Alberta Pork Producers and the Beef Information Centre (BIC). For the last six years, he was the Chief Executive Officer of BIC, the organization responsible for the market development of Canadian beef in both Canada and the United States. During his sixteen years of service with BIC, Glenn led development of many successful consumer-driven marketing programs including branded beef initiatives, commercial beef utilization programs and strategies to mitigate the impact of country-of-origin labelling in the United States.
Glenn Brand President P: 403.275.7713 C: 403.615.2526 [email protected]
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