USAGE AND VOLUMETRIC ASSESSMENT OF BEEF …...• Assess the foodservice market for a variety of Chicken products, including both penetration and volumetric statistics. • Understand

Prepared for:

USAGE AND VOLUMETRIC

ASSESSMENT OF BEEF IN FOODSERVICE

2016 Edition

December 2016 | Project #17237

© 2016 Technomic Inc. Source: 2016 Usage and Volumetric Assessment of Beef in Foodservice Study © 2016 Technomic Inc. Source: 2016 Usage and Volumetric Assessment of Beef in Foodservice Study 2

Background andobjectives

Every year since 2003, Technomic has conducted studies to investigate the usage of Beef and Chicken in the foodservice industry. In 2016, Technomic was again engaged to update the previous studies.

The primary objectives of this 2016 study edition were to:• Determine the penetration of Beef usage in various

foodservice segments.• Provide an updated volumetric situation of the

foodservice Beef market by major product categories, including estimated volume in pounds and dollars.

• Assess the foodservice market for a variety of Chicken products, including both penetration and volumetric statistics.

• Understand Beef and Chicken category usage trends, including volume trends, menu position and rationale for offering.


Program initiation meeting

Questionnaire development

Top 250 chain operator headquarters internet survey

Unit level data gathering from foodservice operators

Initial analysis

Market size validation/finalization — including interviews with 20 distributors (both broadliners and meat specialists) and 4 processors of proteins serving the foodservice industry

Methodology summary

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Technomic used the following approach to gather information from non-chain restaurants and other segments.

• Prescreening: Non-chain and independent operators were recruited to participate in the survey via telephone.

• Operator Internal Data Gathering: Operators reviewed their actual invoices to obtain typical monthly volumes of relevant products.

• Reporting: Operators reported data back to Technomic. A total of 725 operators responded from various segments. Adding in the chain level respondents, a total of 760 operators participated in this research.

• The segments of Bars & Taverns, Recreation, Military, Corrections, and Continuous Care Retirement Centers were not surveyed for this 2016 research wave. 2015 data was used as a surrogate for 2016 numbers.

Methodology: Operator unit level quantitative respondent base (Step 4)

Segment# Of

respondents

Restaurants & bars

Full service restaurants (small chains/independents) 145

Limited service restaurants (small chains/independents) 130

Subtotal 275

Beyond restaurants

Healthcare (hospital, long term care) 75

Lodging 75

Retailers (convenience stores, supermarket foodservice) 75

Business & industry 75

Colleges 75

Schools 75

Subtotal 450

Total 725


To develop market size estimates using volumetric data, Technomic used a build-up approach. Each operator interviewed provided their average monthly volume of each of the relevant products. In addition, these operators also provide Technomic information on their total food and non-alcoholic beverage purchases on an annual basis.Once all interviews were completed, Technomic was able to conduct ratio analyses on the sample to develop the initial market size estimates. An example of the methodology is provided for the Healthcare segment.

• The total monthly pounds of Sirloin Steak used in the sample of 75 Healthcare locations is 7,372. The total annual food & beverage purchases by the 75 locations in the sample is $94 million annually.

• Technomic tracking data on the foodservice industry shows that the total food and beverage purchases of the entire Healthcare segment of the industry is $8.35B. Therefore, our sample represents 1.1% of the total industry purchases.

• Applying the 1.1% number to our 7,372 pounds, this suggests that total Healthcare segment Sirloin Steak volume is 670,000 pounds monthly, or 8 million pounds annually.

This same exercise was applied to all segments, formats and forms to develop the market size estimates.In addition, operators were asked to indicate if their usage of each product increased, decreased or stayed the same versus last year. If increased or decreased, they were asked to indicate by what percentage and what was the rationale for the increase or decrease. This provided additional data points from which to conduct triangulation analysis.Once operator research is completed, Technomic conducts interviews with distributors and protein suppliers to obtain further insights and solidify market size estimates. The approach is charted on the next page.

Market size estimation approach

© 2016 Technomic Inc. Source: 2016 Usage and Volumetric Assessment of Beef in Foodservice Study

• Clean, tabulate, analyze data by segment

• Compare to previous report

Develop rough market estimates

Supplier and distributor interviews

National accounts

Unit level operators • What is used?

• Formats?• Usage change?• Business size?

• Confirm growth• Obtain pricing data• Obtain volume

Final sizing

Data obtained…

6

Technomic employs the following steps in its market sizing process. It uses a “triangulation” approach to develop its numbers, obtaining feedback not just for operators, but from suppliers and distributors as well.

Technomic sizing process

© 2016 Technomic Inc. Source: 2016 Usage and Volumetric Assessment of Beef in Foodservice Study 7

The following 38 categories are included in this study (34 Beef/4 Chicken).

Category scope

Pre-cut Beef steak Whole/subprimals/roasts Pre-cooked roast Beef All other Beef Chicken

• Chuck eye/delmonico1116D, PS01

• Denver steak/cut (underblade)1116G

• Flank/skirt1193 (flank),121C, 121D (skirt)

• Flat iron114D, PS01 or 1114D, PS01

• Hanger steak6

140, 1140D

• Petite tender medallions/portioned (teres major)1114F

• Porterhouse/t-bone2

1173 (porterhouse); 1174 (tbone)

• Ranch steak/cut1114E, PS01

• Ribeye/rib/ribeye cap1103–1112C(ribeye/rib);112D–1112D(ribeye cap);

• Sirloin(top, butt, bottom, cap/coulotte)1184–1185B

• Strip(top loin)1179–1180B

• Tenderloin/filet(includes pre-cut for steaks) 1188–1190C

• Tri-tip1

1185C, 1185D

• Other steak(round, cubed, chuck, other steaks)

• Brisket120–120C3

• Chuck eye/underblade5

116D 116E, 116G

• Chuck/shoulder (excluding petite tender, chuck eye, underblade)113, 114C-E, 115, 116A, 116B, 116K

• Petite tender (teresmajor)1

114F

• Rib, ribeye, prime rib or ribeye cap 107–112D excluding 109B

• Sirloin184–185B

• Strip loin/top loin6

175–180

• Round166A–171G

• Tenderloin roast188–192

• Tri-tip1

185D

• Pre-cooked roast Beef (whole muscle)

• All Beef hot dogs/brats/sausage

• Strips/cubes/shreds or shaved/philly Beef including lifter meat, blade meat or pectoral meal4,7

109B (Blade meat); 115D (Pectoral meat)

• Specialty deli meats (pastrami, corned Beef, roast Beef)

• Other Beef (liver, offal, organ, and all other Beef not accounted for previously. Excludes veal) 7

• Bone-in (wings, whole fryers, and parts)6

• Boneless Chicken (all forms)6

• Further processed Chicken (patties, nuggets, tenders, strips, breaded, formed and dices)5

• All other6

Ground Beef

• Patties6

• Bulk6

• Preparations (meatloaf, meatballs, chili, lasagna, etc.)

Ribs

• Back ribs124

• Boneless country-style ribs1

1116D, PS02

• Short ribs123, 123B, 130, 130A

1 — New category breakout in 2011 2 — Porterhouse/T-Bone combined into 1 category in 20113 — New category in 2014 4 — Strips/Cubes combined with Philly/Shaved and Shreds in 20145 — Category redefined in 2014 6 — New breakout category in 20157 — Category redefined in 2015


The following notes and clarifications will assist in interpreting the results of this report.• All volumetric pound estimates are subject to a range of +10%.

• Volume data shown is for 12 months ending September of the respective year.

• Dollar volumes shown are based on reported pricing in September of each respective year. Pricing reflects price paid by the foodservice operator (operator purchase level). Price data are reported by distributors.

‒ In 2015, the Beef market continued its inflationary trend until pricing started to fall in August/September. Since market value is based on pricing reported in September, the total dollar value of Beef market in 2015 may be understated.

• MM = millions.

• Min = minimal or less than 500,000 in annual pound volume.

• Numbers may not add due to rounding.

• In 2012, bars/taverns, retailers, corrections, military and continuous care retirement centers were not specifically researched. 2011 data are used as surrogates in these segments.

• In 2014 and 2016, bars/taverns, recreation, corrections, military and continuous care retirement centers were not specifically researched. 2013 and 2015 data are used as surrogates in these segments for these years respectively.

Notes/clarifications


II. KEY OBSERVATIONS, INTERPRETATIONS,IMPERATIVES AND RECOMMENDATIONS

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Key observations and interpretations

YearFoodservice Beef volume (MM lbs.)

Change vs. previous year (MM lbs.)

Foodservice Beefoperator purchase

dollars ($ MM)Change vs. previous

year ($ MM)

2012 7,994 +139 32,945 +2,544

2013 8,072 +79 32,061 -884

2014 7,920 -152 34,974 +2,919

2015 7,737 -183 32,877 -2,097

2016 7,816 +79 28,598 -4,279

Observations Insights

• Beef volume increased by 79 millions in 2016 to 7.816 billion pounds.

• Despite this increase, there was a substantial decline in dollar value of over $4.2 billion dollars.

• Significant drops in commodity prices for Beef have driven down the overall Beef purchase value in foodservice.

• On average, Beef prices dropped 14% at the operator purchase level compared to last year.

Dollar value calculations based on September pricing for each representative year



*Category redefined in 2014

Beef cut 2016 2015 2014 2013 2012Ground Beef 77% 75% 74% 72% 72%

Steaks 41 42 48 47 47

Roasts (subprimal)* 38 36 40 45 45

Pre-cooked Roast Beef 21 20 29 25 25

Ribs 14 14 15 13 11

Overall Beef 94% 96% 96% 97% 96%

% Operators menuing/using

Observations Insights

• Beef usage penetration is down slightly from 96% in 2015 to 94% in 2016.

• There is a slight increase in Roast (subprimal) and Ground Beef penetration in 2016 compared to 2015

• Despite this slight decline overall, Beef volume increased in 2016.


35%

32%19%

7%

6%

1% Ground Beef—$10.094 B

Pre-cut Steak—$9.078 B

Roasts (subprimal)—$5.359 B

Other Beef—$1.961 B

Pre-Cooked Roast Beef—$1.639 BRibs—$0.466 B

64%

13%

11%

7%4%

1% Ground Beef—5.023 B

Pre-cut Steak—1.012 B

Roasts (subprimal)—0.838 B

Other Beef—0.505 B

Pre-Cooked Roast Beef—0.321 BRibs—0.117 B

-$8 -$22 -$59-$402

-$1,287

-$2,502

Pre-CookedRoast Beef

Ribs Other Beef Roasts* Pre-cutSteak

GroundBeef

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Dollar change 2016 vs. 2015 = $-4,297 million

Pounds change 2016 vs. 2015 = 79 million lbs.

2016Annual total7.816 B lbs.

48 3910 2

-5 -17

Roasts* Pre-cutsteak

Pre-CookedRoast Beef

GroundBeef

Ribs Other Beef

Observations Insights• Ground Beef remains the largest share of Beef volume and dollars.• Roasts and Pre-cut Steaks have increased in volume most

substantially.• All Beef cuts have decreased in value with ground Beef taking the

largest hit.

• Operators/consumers appear to be slowly returning to steaks and roasts as prices drop.

Dollar value calculations based on September pricing. *Sub-primalNote: Numbers may not add due to rounding.

2016Annual total

$28.598 B


Overall conclusions

• The volume decline of the foodservice Beef category which started in 2013, began to reverse itself in 2016.

• Despite increases in Beef volume, it appears that operators have not yet returned to offering higher end cuts as of yet. Rather, value-cut products have gained share in both Steaks and Roasts.

• Market deflation has certainly helped firm up volume, but has had a negative impact on total market value.

• Despite Beef’s gains, Chicken continues to gain volume share based on popularity of Wings and deflation in this market as well.


III. MARKET OVERVIEW

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The total foodservice protein market represents 25.744 billion pounds in 2016. Foodservice protein volume is up 335 million pounds over the past year and 855 million pounds since 2012.

• Beef increased by 79 million pounds (1% in 2016), but has declined over that past four year period by 178 million pounds total.

• Chicken and Pork both have gained significantly over the past 4 years (433 and 478 million pounds respectively). Chicken volume has been driven by the wing trend and pork has been driven by breakfast growth (bacon and breakfast sausage). Additionally, both have also benefitted from high Beef prices over the past few years.

Total protein market in foodservice

*Game, Cornish hen, duck, buffalo, etc.Note: Numbers may not add due to rounding.Source: Technomic

.

Segment

2016 2015 2014 2013 2012 MM Lbs.

2012—2016

MM Lbs. %

MM Lbs. %

MM Lbs. %

MM Lbs. %

MM Lbs. %

Chicken 7,924 31 7,757 30 7,712 30 7,630 30 7,491 30 +433

Beef 7,816 30% 7,737 30% 7,920 31% 8,072 32% 7,994 32% -178

Pork 5,378 21 5,315 21 5,150 20 5,010 20 4,900 20 +478

Seafood 2,860 11 2,855 11 2,750 11 2,760 11 2,750 11 +110

Turkey 1,625 6 1,600 6 1,660 7 1,610 6 1,600 6 +25

Veal 73 <1 75 <1 80 <1 85 <1 89 <1 -16

All Others* 68 <1 70 <1 67 <1 65 <1 65 <1 +3

Total 25,744 100% 25,409 100% 25,339 100% 25,232 100% 24,889 100% +855


Beef volume continues to be highest in LSRs, where Ground Beef usage is very high. Looking at individual segments, Retailers experienced very strong growth in 2016 with an additional 48 million pounds while FSRs added 30 million pounds of Beef. The biggest decliner was the Business & Industry segment which lost 25 million pounds.

• Since 2012, however, Beef is down 178 million pounds total or 2% total.

Beef volume by foodservice operator segment

1Segment not researched in 2012. 2011 data used as surrogate for 2012 in this segment2Segment not researched in 2014 and 2016. 2013 and 2015 data used as surrogates respectively for this segmentNumbers may not add due to rounding.

Segment2016 2015 2014 2013 2012 ‘15-’16 Change ‘12-’16 Change

MM Lbs. % MM Lbs. % MM Lbs. % MM Lbs. % MM Lbs. % MM Lbs. % MM Lbs. %LSR 3,487 45% 3,492 45% 3,597 45% 3,591 44% 3,556 44% -5 0% -69 -2%FSR 1,743 22% 1,713 22 1,761 22 1,799 22 1,807 23 30 2 -64 -4Bars/Taverns1,2 108 2% 108 2 126 2 126 2 125 2 0 0 -17 -14

Total Restaurants & Bars 5,338 69% 5,313 69% 5,484 69% 5,516 68% 5,488 69% 25 <1% -150 -3%

Lodging 363 5% 337 5% 360 4% 422 5% 372 5% 26 8% -9 -2Retail1 256 2% 208 2 154 2 173 2 170 2 48 23 +86 51Recreation2 188 3% 188 3 199 3 199 2 228 3 0 0 -40 -18

Healthcare 249 3% 236 3 226 3 233 3 233 3 13 6 +16 7

Colleges 335 4% 343 4 327 4 344 4 340 4 -8 2 -5 -1Schools 466 6% 467 6 462 6 504 6 490 6 -1 0 -24 -5Business & Industry 263 4% 288 4 324 4 295 4 310 4 -25 -9 -47 -15Military1,2 152 2% 152 2 186 2 186 2 164 2 0 0 -12 -7Corrections1,2 46 1% 46 1 63 1 63 1 57 1 0 0 -11 -19CCRCs1,2 159 2% 159 2 137 2 137 2 142 1 0 0 +17 12

Total Beyond Restaurants 2,478 31% 2,424 31% 2,436 31% 2,556 32% 2,506 31% 54 2% -28 -1%

Total 7,816 100% 7,737 100% 7,920 100% 8,072 100% 7,994 100% 79 1% -178 -2%


2016 vs. 2015 change in Beef poundage (in lbs. millions)

*Steaks $8.30-10.45: Porterhouse/T-Bone, Ribeye/Rib/Ribeye Cap, Strip$6.15-7.70: Denver Steak, Flat Iron, Petite Tender, Sirloin, Chuckeye/Delmonico,$4.55-6.25 Flank/Skirt, Ranch Cut, Tri-Tip, Hanger, Other Steak

**Roast Premium: Prime Rib, Tenderloin, Strip/Top LoinMid-Tier: Chuckeye/Underblade, Chuck/Shoulder, Round, Tri-Tip, Petite Tender, Brisket, Sirloin Roast***All Other Beef, Hot Dogs/Brats/Sausage, Strips/Cubes/Shreds/Shaved, Specialty Deli Meats, All Other Beef

SegmentPre-cut Steaks* Roasts (subprimal)** Pre-Cooked

Roast BeefGround

Beef RibsAll Other Beef***Filets $8.30-10.45 $6.15-7.70 $4.00-$5.32 Premium Mid-Tier

LSR 0 -1 +3 +5 +13 +10 +5 -42 -3 +4

FSR +17 -12 +2 0 +14 0 +3 +13 +3 -10

Bars/Taverns1 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

Total Restaurants & Bars +17 -13 +5 +5 +28 +10 +8 -29 0 -6

Lodging +2 +1 -1 +10 +3 -1 +2 +8 +1 +3

Retailers -2 -3 -4 +10 +4 -1 +9 +34 -2 0

Recreation1 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

Healthcare -1 -1 -1 +8 +2 +3 -2 +4 -1 +1

Colleges -1 0 -3 +9 -3 -6 0 +4 -3 -5

Schools 0 0 0 +2 +7 +2 -2 -3 -1 -7

Business & Industry -2 0 -1 +5 -1 -5 -2 -11 -3 -3

Military1 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

Corrections1 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

CCRCs1 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

Total Beyond Restaurants -4 -3 -11 +43 +12 -1 +2 +31 -5 -10

Total +13 -17 -6 +49 +39 +9 +10 +2 +5 -17

1Segment not researched 2016. 2015 data used as surrogates for this segment

Numbers may not add due to rounding.


Overall Beef is up 1% in volume but down 13% in value. Deflation in the Beef market overall drives down market value of all Beef products.

On a volume basis, Roasts, Pre-cut Steaks and Pre-Cooked Roast all have grown in 2016.

Beef cut pound and market value trends

Dollar value calculations based on September pricing for each representative year*Strip/Top Loin was added as a separate category in 2015, which may be artificially inflating volume in roasts, and deflating steak category volume in that year.

Category

Lbs. MM $MM2016 2015 2014 2013 2012 '16 vs. ’15 2016 2015 2014 2013 2012 '16 vs. ‘15

Ground Beef 5,022 5,020 5,093 5,123 5,102 0% $10,094 $12,596 $13,535 $11,826 $12,315 -20.0%

Pre-cut Steaks 1,012 973 1,106 1,160 1,142 4.0 9,078 10,365 11,429 11,124 11,520 -2.6

Roasts (subprimal)* 838 790 745 742 725 6.1 5,359 5,761 5,782 5,159 5,244 -7.0

Other Beef 505 522 472 534 539 -3.2 1,961 2,020 1,738 1,732 1,738 -2.9

Pre-Cooked Roast Beef 321 311 356 367 358 3.2 1,639 1,647 1,958 1,762 1,752 -0.5

Ribs 117 122 148 146 128 -4.0 466 488 533 467 376 -4.5

Total 7,816 7,737 7,920 8,072 7,994 1.0% $28,598 $32,877 $34,974 $32,061 $32,945 -13.0%


2016 Pre-Cut Steak Summary

Pre-cut Steak Cuts2016 2015 2016 Change vs. 2015

MM Lbs. $ MM MM Lbs. $ MM MM Lbs. $ MMRib/Ribeye/Ribeye Cap 155 $1,621 153 $1,836 2 -$215Filets 157 2,575 144 3,132 13 -557Flank/Skirt 117 622 128 800 -11 -178Strip/Top Loin 89 740 99 988 -10 -248Porterhouse/T-Bone 54 540 54 556 0 -16Total Traditional Cuts 572 $6,095 578 $7,312 -6 -$1,214Sirloin 214 $1,657 228 $1,882 -14 -$225Flat Iron 53 366 59 440 -6 -74

Petite Tender Medallions 26 187 23 199 3 -12Hanger 19 76 24 109 -5 -33Tri-Tip 10 48 10 62 -0 -14Chuck Eye/Delmonico 11 88 9 99 2 -11Ranch Cut 6 30 7 39 -1 -9Denver Steak/Underblade 2 12 2 16 0 -4Total Emerging Cuts 341 $2,457 362 $2,846 -21 -$389Other Steaks 99 $524 34 $208 65 $316Total 1,012 $9,078 973 $10,365 39 -$1,287

Dollar value calculations based on September pricing of respective yearNumbers may not add due to rounding

Other Steaks gained 65 million pounds and $316 million in value in 2016. All of the other Pre-cut Steak cuts lost value in 2016, and only 4 others gained in poundage.

Total traditional cuts held up well volume wise, while emerging cuts showed evidence of erosion in pounds.


2016 Roast (Subprimal) Summary

Roast (Subprimal)2016 2015 2016 Change vs. 2015

MM Lbs. $ MM MM Lbs. $ MM MM Lbs. $ MMTenderloin 198 $2,081 192 $2,242 6 -$163Rib, Ribeye, Prime Rib or Ribeye Cap 183 1,611 179 1,765 4 -154

Chuck/Shoulder 94 292 105 408 -11 -116Round 97 290 98 381 -1 -91Total Traditional Cuts 572 $4,274 574 $4,796 -2 -$524Chuckeye/Underblade 22 $93 28 $145 -6 -$52Tri-Tip 15 57 13 63 2 -6Petite Tender (teres major) 10 37 10 44 0 -7Total Emerging Cuts 47 $185 51 $249 -4 -$64Brisket 73 $292 63 $222 10 $70Strip Loin/Top Loin 94 400 65 293 29 107Sirloin Roast 51 206 37 204 14 2Other Roasts 218 $898 165 $719 53 $179Total 838 $5,359 790 $5,759 +48 -$402

Dollar value calculations based on September of respective yearsNumbers may not add due to rounding

Looking at Roasts specifically, Strip/Top Loin has gained the most volume and dollars in 2016, at 29 million pounds and $107 million respectively. Brisket and Sirloin Roast are the other Roast cuts that gained volume and value in 2016.


2016 Ground Beef, Pre-Cooked Roast Beef, Ribs, and Other Beef Summary

Ground Beef2016 2015 2016 Change vs. 2015

MM Lbs. $ MM MM Lbs. $ MM MM Lbs. $ MMPatties & Bulk 4,825 $9,649 4,835 $12,087 -10 -$2,437Preparations 198 445 185 509 13 -65Total Ground Beef 5,023 $10,094 5,020 $12,596 2 -$2,502Total Pre-Cooked Roast Beef 321 $1,639 311 $1,647 10 $11

RibsBoneless Country-style 9 $36 12 $48 -3 -$12Back 15 60 15 60 0 0Short 93 370 95 380 -2 -10Total Ribs 117 $466 122 $488 -5 -$22OtherAll Beef Hot Dogs/Brats 214 $615 228 $651 -14 $-36Strips/Cubes/Shaved/Shreds* 188 877 192 894 -4 -17Specialty Beef Deli Meats 79 393 78 388 0 5All Other Beef 23 77 24 87 -1 -10Total Other 505 $1,961 522 $2,020 -17 $-59

*Including pectoral, lifter and blade meatNumbers may not add due to roundingDollar value calculations based on September pricing in respective years.

Ground Beef Preparations gained 13 million pounds, and Pre-cooked Roast Beef volume rose by 10 million pounds. Ground Beef Patties & Bulk, the largest pound volume category tracked, was down by only 0.2%


In 2016, the Beef industry gained 1.0% of volume, but lost 13% of total market value. This discrepancy suggests overall deflation in the Beef market has averaged around 14% in 2016.

Beef market volume and value

In MM Lbs. In $MM*Change-2.7%-$884

Change+9.1%

+$2,913

Change-6.0%

-$2,097

Change-2.3%-183

Change-1.9%-152

Change+1.0%

+78

*At the operator purchase, or distributor sales level.Dollar value calculations based on September pricing for each representative year.Source: Technomic, Inc.

7,994

8,072

7,920

7,737

7,816

2012 2013 2014 2015 2016

Change+1.0%

+79

$32,945 $32,061

$34,974

$32,877

$28,598

2012 2013 2014 2015 2016

Change-13.0%-$4,279


312-876-0004 | [email protected] | technomic.com

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USAGE AND VOLUMETRIC ASSESSMENT OF BEEF …...• Assess the foodservice market for a variety of Chicken products, including both penetration and volumetric statistics. • Understand