1417-FM

AUTHORIZATION REQUEST FOR FY 2014

CBB Budget Category(s): Foreign marketing

Name of Contractor: NCBA

Name of Organizations Subcontracting: USMEF

I.OVERVIEW
  1. AR Description: In support of the Beef Industry Long Range Plan, USMEF organizes its programs in the international markets around the following strategic priorities:
  • Market Development – Introduce U.S. beef to new buyers in untapped sectors in each market while expanding the volume and range of cuts purchased by current buyers.
  • Market Access – Minimize the impact of government requirements and emerging consumer issues on U.S. beef exports.

As USMEF develops tactics to achieve its strategic objectives, it breaks each market into four unique sectors roughly corresponding to the distribution flow of product as follows: Trade (importers, distributors, processors), HRI (Hotel, Restaurant, Institution), Retail, and Consumer. The more developed the market, the further down this distribution chain USMEF’s activities will reach. To create further opportunities for U.S. beef, USMEF divides each of these sectors into smaller segments. For example, the HRI sector may be divided into family style eateries, BBQ chains, white tablecloth restaurants, local cuisine, and catering. The opportunities presented in these submarkets provide new areas for growth.

The activities that USMEF conducts in support of its objectives are similar in all markets, though their implementation and the specific messages delivered through these activities are tailored to fit target audiences in each market and sector. A brief description of the types of activities conducted is provided below:

Trade Servicing – trade servicing encompasses the ongoing activities that are conducted in a market to stay current on intelligence, connect buyers and sellers, communicate the commitment of the U.S. industry, stay in touch with target accounts, and build and maintain relationships.

Trade Shows – trade shows bring buyers and sellers together to discuss business needs, reinforce personal relationships, become informed about trends, and demonstrate current and new products. Trade shows often feature a U.S. or meat pavilion in which USMEF and U.S. beef suppliers have booths for displaying product samples and meeting buyers. Trade shows range from large-scale events, to smaller shows focused on specific sectors or regions, as well as very targeted importer-hosted shows.

Trade Teams – trade teams give participants (typically importers/distributors and decision-makers from targeted hotel, restaurant, and retail companies) a thorough overview of U.S. beef production techniques and the industry so they are better informed about topics such as quality attributes, the range of products available from the U.S., safety and inspection procedures, and trends in food service and retail industries. In many cases, trade teams are an important means to facilitate business relationships between buyers and sellers.

Seminars/Training – seminars are used to deliver relevant information about U.S. beef to target audiences. As buyer education is one of the cornerstones of market development, seminars allow USMEF to reach buyers in a very direct manner. Seminars range from large-scale presentations to hands-on training and company-specific visits.

Communications – a variety of communications activities may be utilized to create a positive image for U.S. beef among targeted buyers and to stimulate purchases. The activities can help introduce new products, provide information about where to purchase U.S. beef, generate goodwill, and promote the quality and safety of the product. Specific activities may include advertising, article placements, and public relations events to keep U.S. beef top-of-mind among the target audience.

Promotions – promotions are used in conjunction with a full range of activities to encourage retailers and foodservice operators to become first-time/regular buyers of U.S. beef and then to expand the range of products they include in their menus and meat cases. Promotions also provide a means for delivering messages about the quality, taste, safety and versatility of U.S. beef directly to targeted consumers. USMEF participates jointly with HRI and retail partners in promotions that take many different forms, including new menu features, in-store tastings, and events/contests designed to increase purchases.

Issue Monitoring, Analysis and Reporting – USMEF updates U.S. exporters, industry trade associations and government agencies with information and analysis on import policies and requirements that could restrict U.S. beef exports. Specific activities include structured conferences, formal communications with relevant parties, and informal meetings.

Government and External Relations – USMEF communicates information about U.S. meat safety systems, U.S. government export requirements, U.S. production practices, and science-based assurances about the U.S. meat industry to foreign government authorities, opinion leaders, the media, the trade, and the general public in international markets. Specific activities include seminars, teams, educational materials, relationship-building, public relations and research.

Technical Support – USMEF provides details to the trade and local authorities on U.S. export specifications, certification procedures, safety inspection measures and quality assurance programs. Specific activities include seminars, educational materials and teams.

B.Costs Requested from this AR:

Source of Funding / Total / Direct Costs / Implementation
Beef Board/BPOC / $7,634,898 / $5,483,026 / $2,151,872
Federation of SBCs (FSBCs) / $1,741,402 / $1,259,274 / $482,128
Other Sources (describe)
Total Funds Requested / $9,376,300 / $6,742,300 / $2,634,000

C.Start date: 10/1/13Completion date: 9/30/14

II.PLANNING INFORMATION FOR THIS AR
  1. Long Range Plan Core Strategies/Demand Drivers Addressed by This AR:
  • Capitalize on global growth opportunities
  1. Committee(s) recommendations for work plan funded by this AR: The Global Growth Committee recommends this AR for funding by the Beef Promotion Operating Committee.
III.PROGRAM INFORMATION FOR THIS AR

A.Long Range Plan Core Strategy1: Capitalize on global growth opportunities

Strategy 4 Proposed Cost: $9,376,300

Specific Tactic Information:

Tactic 4A: Market Development – ASEAN

ASEAN Background

In 2012, exports of U.S. beef plus variety meat to the ASEAN region decreased 30 percent in volume to 55,280 mt and 16 percent in value to $231 million. This decline was driven by a steep drop in exports to Indonesia where U.S. beef faces significant import barriers. Exports to Vietnam performed well through the first eight months of 2012 but then slowed, finishing down 10 percent to 40,305 mt. Export volume to the Philippines was down 9 percent, but value increased 18 percent to $45 million.

Export forecasts for 2013 and 2014 are 50,844 mt valued at $212.9 million and 61,549 mt valued at $249.5 million, respectively.

ASEAN Market Trends & USMEF Tactical Response

Several markets in the region show solid potential for U.S. beef exports, as the rapidly growing middle class can now afford to spend more on imported food including beef. Beef consumption continues to increase in the region, particularly as more international restaurant and retail franchise outlets open.

Tactical Response:USMEF’s top priority will be the foodservice sector, including large volume users such as catering establishments. USMEF will work with key accounts to explore the use of secondary cuts that only require simple preparation but present a higher perceived value of the finished product.The skill level of chefs in some countries is limited, so basic preparation instruction would provide immediate benefits.

Retail opportunities are growing in the Philippines, Indonesia, Singapore and Vietnam as the developing retail sector transitions to modern shopping centers and large supermarkets.

Tactical Response:USMEF will work to increase U.S. beef’s presence in modern supermarkets, providing merchandising assistance and developing strategies with distributors to help retailers effectively promote U.S. beef products. Many ASEAN countries are also showing growth in Internet shopping, and USMEF will assist importers/distributors and their retail customers with tools to strengthen promotions and use new technologies to increase sales.

As the cost of local manufacturing material continues to increase, processors in the Philippines, Vietnam and Indonesia are looking for a consistent supply of quality input materials.

Tactical Response:USMEF will maintain close contact with processors to influence and educate them on using U.S. beef variety meat such as hearts and livers as standard input material.

Recent changes to Japan’s U.S. beef under-twenty-month age restriction have significantly increased the amount of U.S. beef eligible for Japan, especially variety meats, and the ASEAN region may face price increases or supply challenges as more product flows to the higher margin market.

Tactical Response:USMEF will further explore expanded use of sirloin and round cuts in the ASEAN region, as well as work to increase the market for over-thirty-month and no-roll items for the Philippines and Indonesia.

ASEAN Continuing Tactical Objectives

Educate key accounts about the quality and value of a wide range of U.S. beef products to a) mitigate the perception that U.S. beef is not price competitive, b) encourage expanded purchases among trade, HRI and retail accounts, and c) maintain strong relationships with existing buyers.

  • Develop the image of U.S. beef as the premier beef available in the market, from five-star establishments to family-style outlets.
  • Educate HRI end-users about the profitability of underutilized U.S. beef cuts and teach them how to incorporate these cuts into their restaurant concepts.
  • Work with targeted food distributors, chefs, purchasing managers and restaurant owners to identify and address company-specific opportunities and challenges.
  • Continue to focus on new opportunities, including expanding the marketing reach to new HRI and retail subsectors in targeted markets.

Measurable Objectives: (Target Audiences for Evaluation adjusted for 2014)

  • 83% of targeted trade accounts will understand the profit potential of and have a favorable attitude towards U.S. beef based on information provided by USMEF.
  • 73% of targeted HRI accounts will regularly feature/promote U.S. beef.
  • 86% of targeted retailers will regularly stock U.S. beef.

Proposed Cost: $323,777 (Direct + Estimated Implementation)

Tactic 4B: Market Access – ASEAN

USMEF will contribute to and support initiatives to eliminate trade-restrictive policies and requirements in the ASEAN region and keep the U.S. industry informed on critical changes in government regulations and emerging consumer issues.

ASEAN Noteworthy Market Access Issues include a) BSE-related restrictions on imports of U.S. beef in Singapore, Thailand and Vietnam; b) Vietnam’s “white offal” ban and revised acceptable residue levels for selected chemical compounds in meat; c) Indonesia’s introduction of WTO-inconsistent quantitative restrictions on beef imports and lack of a transparent and consistent system for approving plants; and d) other non-science based barriers throughout the region.

Measurable Objectives:

  • USMEF will contribute to and support initiatives to eliminate trade restrictive policies.
  • 80% of USMEF members will report that they receive the information they need from USMEF related to market access.

Proposed Cost: $18,753 (Direct + Estimated Implementation)

Tactic 4C: Market Development – Caribbean

Caribbean Background

In 2012, exports of U.S. beef plus beef variety meat to the Caribbean region were 17,624 mt valued at $94.4 million—down 20 percent in volume, but 7 percent higher in value than 2011. Exports to Jamaica, the Caribbean’s leading volume destination, were consistent with the pattern as volume (5,559 mt) was down 26 percent, but value ($17.9 million) was up 6 percent. The Bahamas was the region’s leading value destination, up 8 percent to $22 million, despite a drop in volume (down 18 percent to 3,557 mt).

Export forecasts for 2013 and 2014 are 17,147 mt valued at $97.4 million and 18,004 mt valued at $103.8 million, respectively.

Caribbean Market Trends & USMEF Tactical Response

The sluggish global economy has impacted tourism and employment rates in the Caribbean, leading to increased importance placed on price/value by restaurateurs. Buyers and chefs are looking at methods to provide quality offerings to their customers while keeping price points low.

Tactical Response:USMEF will work with chefs to introduce and highlight the profit potential of cost-effective U.S. beef cuts and showcase how quality and culinary integrity can be maintained when using alternative cuts, especially compared to that of the competition.

The U.S. is the only significant exporter of fresh beef to the Caribbean market, so there is room to expand import volumes of fresh U.S. beef products. Target islands for development and expansion of fresh U.S. beef offerings are beginning to understand the quality and taste benefits of fresh product.

Tactical Response:USMEF will work with retail chains to educate employees on the value/quality benefits of U.S. chilled beef as well as to train them on the proper handling and marketing of the product.

Jamaica recently implemented a consumption tax on some raw food items, including beef. This tax is applied to each transaction in the distribution/production process, and is estimated to increase the final tax/duties for imported beef up to 120%. This has severely limited the market for all beef imports outside the manufacturing sector, which was granted duty-free status.

Tactical Response:USMEF will educate local processors on using U.S. beef for manufacturing to capitalize on the duty-free status, while also promoting more value-added, economical cuts by focusing on their profit potential for HRI and retail buyers.

Caribbean Continuing Tactical Objectives

Keep U.S. beef top-of-mind among purchasers in terms of quality, consistency and eating experience in order to: a) distinguish it from the competition and other alternative protein sources; and b) further develop demand for a wide range of items.

  • Expand the range and volume of U.S. beef cuts sold by educating importers and their downstream customers about the value and profitability of featuring U.S. beef for its versatility, safety and taste.
  • Present the maximum SKUs (individual items) from each cut and identify ways distributors can work with their customers to broaden their menu or retail offerings.
  • Demonstrate how to profitably handle an expanded range of U.S. beef cuts to foodservice distributors, dining establishments and lodging properties.
  • Work with all sectors, especially foodservice, on basic principles of meat science and handling practices.
  • Showcase the versatility of U.S. beef products by demonstrating to targeted HRI accounts how certain cuts like brisket can be used as both a beef roast and barbeque menu item, as well as for staff meals.
  • Continue to focus on new opportunities, including hotel chain growth, especially with some of the higher-end chains, and the consolidation of retail chains across the islands which allows for more targeted programs.

Measurable Objectives:

  • 100% of targeted importers/distributors will understand the supply/quality/value relationships of U.S. beef based on information provided by USMEF.
  • 88% of targeted HRI accounts will promote new ways to use popular cuts or an alternative cut of U.S. beef to their customers.
  • 90% of targeted retailers will understand how to properly merchandise U.S. beef.

Proposed Cost: $128,411 (Direct + Estimated Implementation)

Tactic 4D: Market Access – Caribbean

USMEF will contribute to and support initiatives to eliminate trade-restrictive policies and requirements in the Caribbean region and keep the U.S. industry informed on critical changes in government regulations and emerging consumer issues.

Caribbean Noteworthy Market Access Issues include BSE-related restrictions on imports of U.S. beef in St. Lucia.

Measurable Objectives:

  • USMEF will contribute to and support initiatives to eliminate trade restrictive policies.
  • 80% of USMEF members will report that they receive the information they need from USMEF related to market access.

Proposed Cost: $2,679 (Direct + Estimated Implementation)

Tactic 4E: Market Development – Central America + Dominican Republic

Central America+DR Background

In 2012, exports of U.S. beef plus variety meat to the Central America + DR region were about even with 2011 at 10,691 mt, though value was up 19 percent to $69 million. Guatemala was the largest volume market in the region at 3,781 mt (up 8 percent) valued at $19 million (up 18 percent). Although the DR was a close second in terms of volume at 3,707 mt, it was by far the largest value market at $33 million (up 13 percent).

Export forecasts for 2013 and 2014 are 11,447 mt valued at $73.8 million and 12,428 mt valued at $81.2 million, respectively.

Central America+DR Market Trends & USMEF Tactical Response

Most countries in the region continue to increase imports of beef, though in many markets, the U.S. is not the leading supplier. This is creating opportunities for U.S. beef to fill the resultant supply shortfall. However, high U.S. beef prices and restricted supplies remain constraints to tapping these opportunities.

Tactical Response:USMEF is working to increase buyer knowledge through the promotion of beef value cuts in the HRI and retail sectors (e.g. top blade “California cut,” sliced shoulder clod “Texas steak,” arm roast, and petite tender), while also educating importers and distributors on the range of U.S. beef products available.

The U.S.-Panama free trade agreement, entered into force in October 2012, immediately eliminated duties on Choice and Prime graded U.S. beef as well as variety meats. Other duty reductions will begin in year 6 and will reach zero by year 15. Panama has the highest per capita income in the region, and the U.S.-Panama FTA represents new export opportunities for the U.S. beef industry.

Tactical Response:USMEF will leverage the benefits of the FTA by identifying niche HRI and retail segments for high grade U.S. beef as well as additional areas for variety meats.

Growth is expected to continue in Guatemala with the CAFTA-DR free trade agreement, which provides duty-free access for a limited quantity (1,480 mt in 2013) of U.S. beef exports to Guatemala, and an 8 percent out-of-quota duty. There is no duty for Choice and Prime beef cuts. Despite favorable market conditions, U.S. beef is still challenged by high prices and limited availability of many cuts.

Tactical Response:USMEF will continue to work with the leading buyers to encourage them to source alternative U.S. beef products such as inside round. There will also be an increased emphasis on the retail sector as more consumers will likely purchase beef through this channel rather than the restaurant and hotel sector due to high U.S. beef prices.

The tourism sector in the Dominican Republic, where 60 percent of all U.S. beef is consumed, continues to represent growth opportunities. Additionally, the modern supermarket sector is expanding not only in Santo Domingo, but also in other population centers.