Consumer Research Highlights

1. Consumer Research Highlights Retail Advisory Committee April 27, 2011

2. To review today • Current Research Highlights • Pricing and Promotion • Meat to Meals, Part 1 • Who is the Pork Champion? (consumer segmentation) • Planned Research Overviews • Pork Champion Consumer Survey • Meat to Meals, Part 2

3. Pricing and Promotion Research • The goal: Utilizing available resources and data, provide “best practices” for key facets of pricing and promotion to optimize fresh meat performance

4. Findings: Timing • Some cuts currently considered “seasonal” can be effectively merchandised year round • “Off season” has been defined by retailers and can be significantly altered to build added sales opportunities • While regional differences exist, there are opportunities to close the “seasonal” gap in every region Timing $ Results Depth Vehicle Mix Frequency

5. Significant opportunity : Close gap between holiday sales and remaining time periods Total U.S. 40% gap Source: VM Meat/FreshLook, 52 weeks2009/2010 data arranged by week to begin 1/1

6. Pork example • Chops are consistent year round, similar to ground beef and chicken, and merit additional focus • Roasts exhibit seasonality, but have consistent “off season” sales as well • Ribs show the greatest seasonality, but have solid “off season” sales potential Chops Roasts Ribs • Total U.S. Pork ribs – even in the off season – are a strong item outselling other promoted species/segments (whole chickens, beef roasts) Source: VM Meat/FreshLook, 52 weeks2009/2010data arranged by week to begin 1/1

7. Findings: Depth of Discount • Optimum range of discount – for all species and segments – is about 10% (+) • Deep discounts (30%+) do not consistently build baseline sales/shopper loyalty and do erode profits Timing $ Results Depth Vehicle Mix Frequency

8. Depth Similar Patterns exist between Species for Volume, Sales and Profitability Beef Chicken Pork Pounds Sales Profit % Change vs. Baseline % Change vs. Baseline % Change vs. Baseline 10% 20% 30% 40% 10% 10% 20% 20% 30% 30% 40% 40% Depth of Discount Depth of Discount Depth of Discount Source: Composite database, retailer analysis

9. Depth And within pork category Chops Roasts Ribs Pounds Sales Profit % Change vs. Baseline % Change vs. Baseline % Change vs. Baseline 10% 20% 30% 40% 10% 10% 20% 20% 30% 30% 40% 40% Depth of Discount Depth of Discount Depth of Discount Source: Composite database, retailer analysis

10. …Thru to the Sub-Category Level Pounds Sales Profit % Change vs. Baseline % Change vs. Baseline % Change vs. Baseline Depth of Discount Depth of Discount Depth of Discount % Change Vs. Baseline At Different Discount Levels Chops Roasts Ribs 10% 20% 30% 40% 10% 10% 20% 20% 30% 30% 40% 40% Source: Composite database, retailer analysis

11. Findings: Product Mix • Too much emphasis on single segment/species misses the consumer’s inherent need for variety • Too much emphasis encouraging trade down sacrifices profit margin and risks dissatisfying shoppers • Opportunity for increased promotion on Premium Beef segments and across all Pork segments Timing $ Results Depth Vehicle Mix Frequency

12. Findings: Frequency of Featuring • Points out need to increase frequency across species/ segments versus focus on only conventional items (ground beef/boneless skinless chicken breasts) • “Broader” promotion can produce incremental (versus cannibalistic) results • Broadening promotion to, for example, both bone-in and boneless pork chops can grow both segments Timing $ Results Depth Vehicle Mix Frequency

13. Findings: Vehicle • Ads typically act as a “reminder to purchase” trigger – not exclusively about pricing • Shoppers want new meal ideas but meat department not delivering in-store or, oftentimes, online Timing $ Results Depth Vehicle Mix Frequency

14. Next Steps: Pricing and Promotion Research • We will review this dataset in depth and identify other key findings to share with retailers

15. How America Shops for Meat and Meals

16. Research background • Objectives: • To better understand meal planning and the role of fresh meat • Identify opportunities to gain a larger share of meals • Methodology: • Web-based survey • 2,000+ respondents • Geographically and demographically dispersed; representative of U.S. • Primary shopper of food • Meat consumers • Ages 25 - 64

17. Key Learnings There are distinct types of shoppers based on meal planning; each represents meat case opportunities The meat department is truly a centerpiece in shoppers’ lives, serving as a core department for family meals There is great opportunity in the meat case to improve “shopability” and become a source for new meal ideas

18. Research Showed that Shoppers can be Grouped according to their level of Planning prior to Shopping Heavy Planners 35% 35% Medium Planners 30% Non Planners

19. Heavy Planners had Higher Household Income and Education Levels Some High School/ Degree (or equivalent) Some College Heavy Planners College Degree 66% 48% Post Graduate Degree Some High School/ Degree (or equivalent) Some College Medium Planners College Degree 65% 45% Post Graduate Degree Some High School/ Degree (or equivalent) Some College Non Planners College Degree 56% 40% Post Graduate Degree

20. Attitudes Toward Home Cooking Vary Across The Three Shopper Groups • Heavy Planners enjoy cooking and believe home cooking is healthier

21. Meat Department Is Important In Choosing Their Store Importance In Choosing Store – % Very/Somewhat Important Top 3 Departments

22. Only about One in Four Shoppers is Loyal to one Meat Department Heavy Planners Medium Planners Non Planners

23. Why are Shoppers Buying Meat Elsewhere?

24. The Meat Department is not a Key Source for Meal Info Sources For New Meal Ideas % Very/Somewhat Important

25. Summary: Conclusions/Action Steps • There are different shopper types, each with different needs • Each shopper type believes the fresh meat case is critical in driving store choice • Over one-third of all shoppers purchase up to 75% of their meat at a different store from where they do the majority of their shopping - - indicating a lack of loyalty • Shoppers are seeking a more “shoppable” meat department that: • Is “attractive, clean” • Offers “variety” • Is “interesting/fun to shop” • Makes shopping for fresh meat easier • Shoppers want meal ideas - - communication goes beyond just pricing

26. Next Steps: Meat to Meals Research • We will use portions of this research as a benchmark and utilize additional research methods such as shop-alongs, online survey, and in-store observation • The ultimate goals are to identify key opportunities to influence fresh meat decisions within the shopper’s planning process and pinpoint effective methods of reaching consumers during their shopping experience in order to increase fresh meat purchases at retail

27. NPB’s Consumer Segmentation Research – Identifying Our Target

28. Goals of this research • Understand all U.S. pork consumption • Determine the right consumer Target – our Pork Champion • Develop the right consumer Message • Create an on-going consumer insights resource for use with retail partners

29. What are the characteristics of the Pork Champion? • Our core consumer loves pork, meat, and the whole meal • Enjoy trying different types of meat or poultry, and different ways of preparing them • Believe meat is an important part of the meal, and side dishes are just as important • Enjoys cooking & food • Take pride in their cooking skills; are confident cooking pork • Like to try new things at restaurants, and make restaurant dishes at home • Loves life • Confident and optimistic, social and altruistic • Feel good about their lifestyle • Want to try new things

30. The Pork Champion28% of the population accounts for 78% of fresh pork consumed at home 28% 78% 51% 38% 35% FRESH At Home FRESH Away PROCESSED Away U.S. HHs PROCESSED At Home Source: NPB Consumer Segmentation Study, 2010

31. Who are these Champions? • Women and men both included in target • Married, in a smaller household • Both working full-time outside the home • 35-64 years old • College grad, making $50K-$99K per HH • Any ethnicity, living anywhere • Medium/heavy pork user • Medium/heavy meat & poultry user • A confident cook, but not a foodie

32. How We Reach our 2014 Goal Annual Fresh Pork Eatings Baseline Goal 2011 2012 2013 2014 Heaviest 88 76 +3 +6 +9 +12 Our Pork Champions 77 68 +1 +3 +6 +9 48 42 +0 +1 +3 +6 Lightest 10% Growth

33. Next Steps: Reaching the Pork Champion Pork Champion Consumer Survey

34. Goal of this research • Solicit feedback regularly from Pork Champion target consumers on marketing programs, communication elements and other topics of interest to the Retail Marketing Team, Domestic Marketing and other NPB program areas, as well as retail partners • Ultimate goal: Better understand and more effectively communicate with Pork Champion target

35. Pork Champion Consumer Survey Quick Overview • Survey 1000 randomly selected Pork Champions on a quarterly basis • Maximum of 10-12 questions per survey, with two being open-ended • Survey questions submitted by: • Retail Marketing Team • Domestic Marketing and other NPB program areas • Retail partners • Conduct three surveys in FY2011 (quarterly in subsequent years): • 1st: Family Gathering concept, ingredients, cut, photography • 2nd: Holiday roast promotion possibilities, in-store execution ideas • 3rd: First quarter 2012 elements