How the Beef Checkoff Uses Market Data to Understand and Drive Demand

 

 by Rick Husted, MBA, Vice President-Strategic Planning and Market Research – National Cattlemen’s Beef Association, a contractor to the Beef Checkoff and Courtney Kalous, Director-Planning and Evaluation, Cattlemen’s Beef Board
 
Summary
 
The beef checkoff has long used market data and sound analysis to understand beef demand, set industry priorities and measure progress and performance over time. Building on this rich history of ongoing insight into key demand drivers and their corresponding values, the beef checkoff’s Evaluation Advisory Committee recently commissioned two of the country’s top agricultural economists, from Kansas State University, to create a new and actionable beef demand index. This index will focus on specific cuts, with special attention to ground beef to inform checkoff programs and the beef industry how best to increase overall beef demand in foodservice and retail channels.
 
Background
 
Considering past demand-driving efforts, this particular project is a logical evolution in the beef checkoff’s continued effort to understand and capitalize on specific areas of opportunity. Simply put, this rigorous approach is intended to help identify how cut-specific beef demand can fluctuate, given changes in beef prices, thus informing channel partners how to maximize the value to consumers of their respective beef offerings. Key criteria for this and prior work is to ensure consistent and focused support of the goals and objectives of the Beef Industry Long Range Plan
 
While this newly commissioned study is just getting underway - with expected completion in early 2017 – past efforts have included:
 
 
Discussion
 
Following is a summary of past demand-driving analytical efforts and how these outcomes helped shape priorities across checkoff-funded programs.
 
Beef Demand: Recent Determinants and Future Drivers (2013) – The principal objectives of this project were to provide an assessment of major domestic beef-demand determinants and identify key demand drivers that would shape future demand for beef. Emphasis was placed on assessing factors that affect beef demand and that the beef industry could actually influence, thus providing a clearer path to prioritization and efficient allocation of checkoff resources.
 
It is important to note the outcomes directly influenced the advent of new checkoff committees and working groups, formed to focus on these areas of opportunity. It also is important to note that the analytical approach was rigorous and required a variety of data inputs, including a number of preference studies, as well as consumer and industry expert surveys. A summary of these beef demand drivers is as follows:
 
  • Food Safety – This can be viewed as a table stake for beef.  If our products aren’t safe, consumers will look elsewhere for their protein.
  • Price – Beef price is directly tied to consumption and speaks to the importance of making sure consumers understand the relative value they receive for the price they pay.
  • Health and Nutrition – Consumers consistently identify health and nutrition concerns as reasons they consider eating less beef.
  • Product Quality – Product quality encompasses a variety of factors, including taste, color, consistency, juiciness, and ease of preparation; all factors that consumers consider when choosing beef.
  • Social and Sustainability Aspects – Though found to be slightly lower in importance, these aspects of demand cannot be ignored, and the authors of this study strongly urge the industry to remain vigilant in this area as well. This advice has proven somewhat prophetic over the last several years, as the millennial generation increasingly pays attention to these attributes.
 
An Economic Analysis of the Cattlemen’s Beef Promotion and Research Board Demand-Enhancing Program (2014) – Following the outcome and application of the demand determinant study outlined above, the beef checkoff’s Evaluation Advisory Committee embarked on an effort to more fully understand the ultimate value that checkoff programs contribute to the beef industry. In other words, what is the dollar value of the return that beef producers are getting for their checkoff investments? Again, employing the expertise of top industry analysts, the study reviewed historical investments in the checkoff and a variety of checkoff-program outcomes to achieve this objective.
 
The analysis required the development of an equilibrium displacement model, which essentially measured the return on beef-checkoff investments for a number of checkoff programs and, ultimately, an overall estimated return on investment for the years 2006 – 2013. The nine checkoff programs evaluated in the study included:
 
  • Beef advertising
  • Public relations
  • Beef safety research
  • Channel marketing
  • Industry information
  • New product development
  • Nutritional research
  • Product enhancement research
  • Foreign market development
 
This independent evaluation of the economic effectiveness of beef checkoff programs was clear and quantifiable. The beef checkoff, on average, has returned a total of just over $11 for each $1 invested for the period 2006 – 2013. The statistical results indicated that all eight demand-enhancing domestic activities funded by the beef checkoff have a positive and statistically significant impact on increasing per capita beef demand. Put another way, had there been no checkoff funded domestic marketing or research activities over this eight year period, domestic beef demand would have been considerably lower than it actually was.
 
Results for the checkoff’s foreign-marketing efforts were similar. The statistical outcomes clearly indicate that U.S. foreign-market development programs had the effect of increasing market share of U.S. beef exports globally. The study calculated the return on investment for seven key markets:
 
  • Japan
  • Russia
  • Taiwan
  • European Union
  • South Korea
  • Mexico
  • China/Hong Kong
 
While some markets have performed better than others, all markets performed well.
 
Conclusion
 
Producers’ ongoing investments in the Beef Checkoff Program highlight the need to monitor the performance and value of programs continually and to communicate the outcomes effectively. The anticipated outcome of the current study and past studies ensure that checkoff dollars are being allocated efficiently and continue to provide focused direction for a positive return on checkoff investments.
 
Additional Resources

 
 

Tags: Beef Issues Quarterly, Research Findings, Summer 2016

June 26, 2016