Chevrolets, Cadillacs, Cows and Consumers

Todd A. Thrift

University of Florida

Department of Animal Science

There is no shortcut

to get where I

am going with this!

This is not going

to directly

make you more

money?

Americas love affair with the car

• 220 million cars on the road in US ( >1/3 of world total)

• 1800 + car manufactures in US from 1896-1930• Very few survived

• Almost no new ones since that time

Geronimo

Henry Ford

• Did not invent the car.• Did pioneer the use of the assembly line to manufacture cars – 1910

• 93 minutes to make a car• By 1919 ½ of all cars in the US were Model T’s• Eventually they made 9-10,000/DAY!!!!!!!!!!!!• 15 million built 1908-1927• “built for the multitudes”• No advertising from 1917-1923…..sold themselves

• Color- “ the customer can have any color they want as long as it is black”

WHY WAS HE SO SUCESSFUL???

Model T

Year # Manufactured Price

1909 10,666 $825

1914 202,667 $440

1925 1,911,705 $260

Make more of them…..and do

it for less money!

Does this remind you of anything?????

1992

8

The Annual U.S. Per Capita Consumption of Beef

and All Chicken over the 45 Years of 1970-2014

(Based on Retail Weight)

35

45

55

65

75

85

95

Po

un

ds

Pe

r C

ap

ita

Per Capita Chicken Consumption

Increased 101% from 1976 through

2014 (39 years) and increased by

42.5 pounds per person 2014 = 84.6

1970 = 84.6

1976 = 94.4

2014 = 54.2

1970 = 40.3

1976 = 42.1

1992

Per Capita Beef Consumption

Declined 43% from 1976 through

2014 (39 years) and decreased by

40.2 pounds per person

Source: USDA Economic Research Service; U.S. Department of Commerce; U.S. Census Bureau

Cars of the 1950s

• Outside• Fins

• Hood ornaments

• Fake vents

• Wings

• Chrome

• White sidewalls

• Inside• Metal dash

• Ashtray

• AM radio

• Vinyl bench seats

1970 Chevrolet

Custom Deluxe

AC AND a RADIO!

$4,000

1/3 of a years pay

Customer expectations1970 Chevrolet• Change oil

• Tighten 3 belts

• Change belts

• Check points

• Change plugs

• Rust holes in muffler

• Check brake fluid

• Set timing

• Tune carburetor

One year

10,000 mile warranty

Sold in 1983 with 54,000 miles!!

“Worn Out”

1997 Ford 7.3L

F250 Super Duty

All the Bells and Whistles for 1997

$32,000

I did not make $96,000 in 1997

Customer expectations1997 Ford 250 Super Duty• Change oil• Never tightened a belt• Change belt…..one belt• No Points• Never touched glow plugs• Original muffler• Never check brake fluid• Never touched motor• Never touched injectors• 3-4 clutches

3 year

100,000 mile warranty

390,000 miles!!

“Just getting broke in”

2016 Chevy Silverado Duramax

Too many options to list!!!

$56,000

5 years100,000 mile warranty

I damn sure don’t make $168,000 today

Hyundai Accent 10 years 100,000 miles

Consumer expectations

are much greater today!

Cars today

• Outside• Streamlined

• Simple

• Aerodynamic

• Inside• Bucket seats

• Sirus radio

• Heated Leather seats

• Computer

• TV

• Back up camera

• Plastic

• Steering wheel padded

• AC with dual climate control

Marketing-selling you, your service, or your product

American car slogans

• Built Ford tough-Ford

• Everything we do is driven by you-Ford

• Quality is job one-Ford

• The best never rest-Ford

• Like a rock-Chevy

• The heartbeat of America-Chevrolet

• Grab life by the horns- Dodge

• Ram tough- Dodge

Luxury car slogans

• The penalty of Leadership-Cadillac

• Standard of the World-Cadillac

• Life, Liberty and the Pursuit-Cadillac

• Creating a Higher Standard-Cadillac

• Travel well-Lincoln

• What a Luxury Car should be-Lincoln

Luxury cars

• Leather seat

• Heated and Ventilated

• Memory for 3 drivers

• 10 way adjustment

• Dual zone temp

• Rain sensing wipers

• Rear view camera

• Blind spot sensor

• Heated steering wheel

• Touch screen controls

• Automatic headlight dimmer

• Automatic parking system

• Power everything

• Remote starting

• Advanced safety features

• Premium audio

My Ford Touch

• Touch screen and voice commands that do away with dials and pointers

• Recognize 10,000 voice commands

I wish I could get my wife to recognize 3 voice commands!!!

Cadillac ELR-MSRP $67,305

Cadillac ELR

Ford 250 Pickup

Most of us would not

accept giving up the luxury, conveince and

technology that our

modern car offers

Consumers are willing to pay more for more options that are no longer options but

rather standard equipment!

1983 Chrysler Mini Van- “a box on wheels”

1983 Chrysler Mini Van

• Originally designed as a station wagon replacement

• Lee Iacocca (mustang)• Concept developed at Ford• Ford was afraid it would be an Edsel

• Saved Chrysler

• Funding by putting the Dodge Ram overhaul on hold till 1994

• 23 years since last one-more later…..

• Focused intently on the customer!

Two cup holders!!!!!

1983 Chrysler Mini Van

• Top selling car in the nation by 1994

• 10 years later both GM and Ford had failed to produce a vehicle that competed in the marketplace

• GM completely changed its development process because of this failureTODAY, Customers dictate product lines to GM and not vise-versa

Who would have thought cup holders

would make a difference

Cup Holders from the 1970’s

Chrysler listened to their customers

Try to find a car without cup holders

today

Consumers like Brands

“I Will Never Ever Own a Foreign Car!!!!!!!!!!!!!!!!!”

Consumer Loyalty

Japanese car slogans

• The power of dreams-Honda

• Technology you can enjoy-Honda

• I love what you do for me-Toyota

• You ask for it you got it-Toyota

• The best built cars in the world- Toyota

• Oh what a feeling-Toyota

• Think. Feel. Drive-Subaru

• Relentless pursuit of perfection- Lexus

We made it for you ….. How does

this car make you

feel?

Foreign cars made in the US• Acura (Honda) Indiana

• BMW X3 South Carolina

• Honda Accord Ohio

• Hyundai Sonata Alabama

• Infiniti JX Tennessee

• Nissan Altima Tennessee

• Mitsubishi Outlander Illinois

• Mercedes Benz GL Alabama

• Volkswagen Passat Tennessee

• Toyota Camry* Kentucky

*most popular car in US since 2001

Foreign car companies focused on

the consumer

long before the American manufactures

did.

European car slogans

• Never follow-Audi

• Drivers wanted-Volkswagen

• There is no substitute-Porsche

• Engineered to move the human spirt-Mercedes-Benz

• Sheer driving pleasure-BMW

• The ultimate driving machine-BMW

• Born to perform-Jaguar

• Don’t dream it. Drive it-Jaguar

• Cup holders considered a silly American accessory• Drive in restaurant

• Hot coffee to go

• Automatic transmission

• German automobile design culture

• engineer knows best

• studies of real people driving their vehicles irrelevant.

European cars

Make it and they will buy it….does this remind you of anything?

We spend a lot of time

arguing about which

breed is best while our ship is sinking…

Consumer Expectations- Wants vs Needs

Subaru………….will my dog like to ride in this car?

Subaru………….will my dog like to ride in this car?

What would Henry Ford say about what the consumer wants

today?

What does this have to do with BEEF consumers?

What do we know about our consumer?

Consumer Behavior-Millennials

• Born 1980-2000

• Fastest growing segment of population

• Married later in life

• More debt

• Mistrusting• Big Business

• Big religion

• Big government

• Information comes from internet and social media

Information from the Internet

Consumer behavior-Foodies

• Use food to show off their ethics and principles

• Entertain with food

• Quick to try new foods

• Food is their hobby

• They are influencers

• Vocal

Time Spent in Meal Preparation at Home

1960 100 mins1980 60 mins2016 34 mins

Consumer behavior-High income consumers

• Luxury items• Must be seen as high profile• Demand curve is the reverse

• Higher status products sell for more money• Value time savings more than cost savings

Consumer behavior-Health conscious consumers

• Nutrition based purchasing trends are driven by:• Older consumers• More disposable income • Mostly concerned with Fat, Cholesterol

Harsh and VanOverbecke, 2015

Consumer behavior-Social conscious consumers• Perceived better animal treatment

• Environmental protection

• Natural and Organic

• Perceived health benefits

• “free of substances I want to avoid”

• Higher income, More educated

• Often misinformed!

TeslaPresold 276,000 in 2 days

Consumer Behavior-Social conscious

I'm doing

the right thing

What does the Consumer

want?

What does the Activists

want?

Consumer beliefs-Organic

• Consumer beliefs are way ahead of the regulations• Higher Quality

• Safer

• Nutritionally superior

• Animals handled more humanely

• Environmentally more friendly

• Lower carbon footprint

Consumer Perceptions- Organic is Better….

•40% more likely to buy and pay for..• Steroid free• Hormone free • Antibiotic free

•14% of those say they would pay significantly more!

Technomic, 2013

How much more?

5%

But it cost 30-80% more to produce

Consumer Perceptions-Antibiotics

There are antibiotic residues in meat 71%

The FDA banned antibiotics in meat long ago 20%

Adapted from Rummo, 2016

Consumers and GMOs

Non GMO Whiskey

Non GMO Beer

No implantsNo added hormonesNo antibioticsNo GMOsGluten FreeFree rangeGrass fedSustainableOrganicNaturalLocal

What’s next?No TasteNo Flavor

Will replace modern fast growing chickens with slower growing chickens…………………..REALLY and give up 75 years of genetic progress

Maybe we have just found a new market for cracker cattle…………..

Whole Foods

Consumer behavior-Price conscious consumers

Price

Convenience

Eating satisfaction

Are more important than

Production history

Other information

Convenienceand Cost

Often at odds with each other

Consumer behavior-Price conscious consumers

Beef index $214.30Pork cutout $78.40Chicken index $65.60

When beef index is 3 X the chicken index, price resistance sets in

A large percentage of our consumers are price conscious

66

Competing Protein ItemsPrice Per Pound in

March of 2015

Percentage

Increase in Price

Per Pound in

March, 2015 VS.

March, 2014

1. Choice Sirloin Steak 8.37 19

2. Round Steak 6.21 17

3. Chuck Roast 5.87 13

4. Ground Beef 4.20 14

5. Boneless Chicken Breast 3.52 1

6. Whole Chicken 1.59 0

7. Boneless Hams 4.31 2

8. Pork Chops 3.81 1

Comparative Beef, Chicken and Pork Prices Per Pound and

the Percentage Increases for March of 2015, Compared to

March of 2014*

*Source: U.S. Department of Agriculture Economic Research Service

16%

1%

Helming 2015

Consumer behavior-critical thinkers?

• Product attributes • Price• Size• Nutritional value• Flavor

Often compared disproportionally in favor of a specific BRAND

“Which Brand is Best?”

Consumer Perceptions- Critical Thinkers….

•Salt-considered a “natural” ingredient

•Sodium chloride was NOT “natural”!!!

Lusk and Murry, 2013

Are we listening to the right consumers?

“…and to consumer groups everywhere, I leave my steers with the stipulation they gotta feed ‘em‘til they make up their mind if they want-leanness or marbling.”

Market Signals for Quality

Slight00 Small00 Modest00 Moderate00 Slightly Abundant00

Base +$$$$+$$+$$-$$$

Source CAB

Customer Satisfaction-degree of doneness

Degree of doneness FrequencyVery rare 0%Rare 2%Medium-rare 16%Medium 24%Medium-well 20%Well-done 27%Very well-done 11%

58% like beef medium-well or greater!!!82% like beef at least medium!!!

MARBLING IS INSURANCE AGAINST OVERCOOKING!!

Quality Grade Undesirable Eating Experience

Prime 1 in 26

Premium Choice (CAB) 1 in 19

Low Choice 1 in 7

Select 1 in 5

Standard 1 in 2

Does the consumer understand QG?

Does the consumer understand brand?

Brand loyalty- Most loyal

• High Income

• Men

• Shoppers with Children

FMI and AMI, 2014

Brand Loyalty?• Loyal Coca-Cola drinkers

• “Nothing else is as good”• During blind taste test some could not discern between

Coke and Root Beer

Brands

•96% of fresh meat products are branded

•National or store brand

882

0

100

200

300

400

500

600

700

800

900

1000

19

78

19

81

19

84

19

87

19

90

19

93

19

96

19

99

20

02

20

05

20

08

20

11

20

14

Mill

ion

Po

un

ds

Fiscal Year

Annual Sales of the CAB® Brand

Source CAB

Brand Success

If I like it my dog is sure to like it…

What does this have to do with cows?

“Its tough to bake a cake without a recipe, and a recipe isn’t much good if you don’t know anything

about the ingredients”

Jim McAdams, Spade Ranches

Product Specifications for Different Markets-1997

White Table Retail Target Lean Targetlive weight, lbs 1000-1200 1150-1250 1200-1350frame size 5-6 6 7ribeye area, sq in 11-12.5 12-14 13-16fat thickness, in .45-.50 .25-.45 .25-.30yield grade mix 2 and 3 mostly 2 1 and 2quality grade, min avg ch ch and sl low select

Ideal Mix 1997 data

Current mix Ideal mix1.3% prime 7% prime11.4% upper 2/3 choice 21% upper 2/3 choice35.6% low choice 34% low choice46.4% select 38% select5.3% standard 0% standard

12% increase in carcasses grading USDA Choice and Prime since

1995

Dykstra 2014

35%

40%

45%

50%

55%

60%

65%

70%

75%

80%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

% C

ho

ice

& P

rim

e

Year

Quality Grade Trend by Region

Kansas

Texas

Nebraska

U.S.

Source CAB

CAB® Acceptance Rates and Certified Head Count

0

1

2

3

4

5

6

0%

5%

10%

15%

20%

25%

30%

He

ad C

ert

ifie

d (

mill

ion

s)

Acc

ep

tan

ce R

ate

Fiscal Year

Certified Hd

CAB %

*Projected

On average, 68,000 head/week are accepted into the CAB® brand.Source CAB

What About Tenderness?

National Beef Tenderness SurveyRibeye Steak WBS Shear Force, lbs

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

1991 1998 2006 2010

Guelker, 2014

“Tenderness may have reached a plateau”

Ribeye Steak WBS Shear Force, lbs (Retail Audit)

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Johnson 2016, personal communication

“Today 40-50% of calves result from mating commercial Angus

cows to a registered Angus bull.”

55-60% of all bulls turned out are Angus

Larry Corah, 2011

Prime

Year Prime-Choice Spread $/cwt

% Grading Prime

2011 $33.26 3.7%

2012 $52.20 3.3%

2013 $29.80 3.9%

2014 $37.80 4.1%

2015 $23.10 4.9%

2016 $17.50 5.7%Adapted from Dykstra, 2016

Trying to sell me that our customer wants more Prime is

like trying to sell heated seats to the devil.

Much of our marketing focus is on selling middle

meats to HIGH income consumers.

Much of the selection emphasis in the last 25 years has been

based on selection for middle meat palatability.

Clear Market Signals

• Food Service says• More Prime and CAB• Smaller portion size• More uniformity

• Retail says • Less fat but more marbling• More tenderness• Smaller portions

• Packer says• More uniformity• Less fat• Smaller portion size??

• Feedlot says• Grow faster• Stay healthier• Convert better

But we are

paid for lbs!!!

Pounds drives

the system

A pound of gold is worth more than a pound of lead!

Mark Gardiner Gardiner Angus Ranch

What is the average

consumers consumption

of gold?

True ….but….when you think about it…….Apparent consumption 2003GOLD

203 Metric tons

Jewelry

Industrial

Dental

Coins

LEAD

1,440,000 Metric tons

Ammunition

Brass and Bronze

Paint pigments

Sheet lead

Storage batteries

US Geological Survey 2005

Steer served up on the plate

Live 1300 lb steer

Carcass 806 lb

Edible beef 639 lb (½ of live)

chuck 29%

rib 9%

loin 16%

round 22%

thin 19%

misc 5%

Ribeye steak

Strip steak

Tenderloin

Sirloin

Ground Beef

91.5 lbs14%

258 lbs40%

Speer 2015

Ground Beef

57% of Americans eat a burger once

a week

55-60% of beef

consumed is ground

Burger Preferences at Restaurant

41%

33%

11%

12%3%

Angus

Ground Beef

Sirloin

No Preference

Kobe

Technomic Inc.

Trained sensory panel could not detect the difference in hamburger

made from cull cows as compared to upper 2/3 of choice cattle as long as the fat content was held constant.

Can the consumer tell a difference in burger?

Griffing et al., 2013

McDonalds has a line of Angus Burgers

107

Where Will The Very Large Supply of Ground

Beef (Hamburger) that is Consumed in the

U.S. Come From in the Years Ahead?

Cull beef and

dairy cows and

bulls25%

Imported beef

trimmings

15%

Grain and full

fed steer and

heifer marketings out

of U.S. Feedlots

20%

Source: Based on private beef industry data and the USDA, Economic Research Service.

Grass and forage fed steers and

heifers40%

Helming 2015

108

Where Does The Very Large Supply of

Ground Beef (Hamburger) that is Consumed

in the U.S. Presently Come From?

Cull beef and dairy cows and bulls

25%

Imported beef

trimmings15%

Grain and full fed steer

and heifermarketings out of U.S. Feedlots

60%

Source: Based on private beef industry data and the USDA, Economic Research Service.

Helming 2015

Grinding Steer

• Adapted cow mated to high growth terminal bull

• Wean 650 lb plus calf

• Stocker to 1000 lbs

• Feed for 60-75 days (white fat)

• .25 inch backfat

• Harvest at 1300lbs

• Fab middle meats and some whole muscles

• Grind the rest

$$$

Annual Per Capita Meat Spending

Beef $298Chicken $171Pork $161

2013

Beef is still the Cadillac

Cadillac ELR-MSRP $67,305 209 Days

Longstanding Brands that Went Away

•Mercury 1939-2011

•Plymouth 1928-2001

•Oldsmobile 1897-2004

•Pontiac 1926-2010

What is the Target?

•Red Meat Yield?•Quality Grade?•Niche?

• No implant• No antibiotics• Organic• Lean• Grass fed• Prime• Higher than Prime

70 % Choice70 % YG 1 and 2

Ideal Mix

70% choice 70% YG 1 and 2140 total

90% choice and CAB50% YG 1 and 2140 total

40% low choice100% YG 1 and 2140 total

Harlan Ritchie

Certified Angus Beef

• Has been a huge player in the demand for our product at food service, retail trade, and export trade.

• It is not the only target.

• There may be advantages to production to producing a middle of the road product with less cost in the southeast.

Cars and Quality Grade

Porsche, Lamborgini, Corvette=Kobe

Cadillac, Lincoln=Prime

Lexus, Buick=Upper 2/3 Choice

Chevy, Ford, Dodge, Honda, Toyota= Low Choice

Hyundai, Kia, Mitsubishi, Chevy, Ford, Dodge, Nissan=Select

Subaru, Volkswagen= No added hormones, free range, no antibiotics

Tesla (electric)=Organic, Grass fed

Geo Metro=Chicken

Henry Ford

“If I had asked the customer what they wanted, they would

have said faster horses”

Todd Thrift

Our consumer is a moving target. We must listen to their wants and

desires but we must be careful whom we listen to the most.

They consume a lot of ground beef and it must be at least

somewhat cost competitive with pork and chicken.

You wonder why I am questioning the consumers decisions?

We all know everything I have said today must be

true……..because…..

I found it all on the internet!!