Market Analysis

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Market Analysis ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?
Points to cover are:
In this section discuss the
marketing mix, product or
Identify customers and potential customers. Discuss demographic information about
customers such as age, gender, income, type of work and where they are located.
service, distribution
channels, price and
2. Market Size and Trends
promotion. Discuss these
Discuss market in current unit and dollar size. Include future industry growth and
items in comparison to the
trends. Support with documentation.
industry in general and
3. Competition
against your competition.
Identify the competition and where it is located. Discuss competitors’ annual sales
Focus on your target
volume, market share, strengths and weaknesses. Discuss key differences of your
company and product compared to the competition and your product price
markets. Explain how your
compared to the competitors’ price.
market has people willing
to buy or who may buy the
4. Estimated Market Share and Sales
Include projected unit and dollar sales and area of the sales territory.
product. Show that you
have enough potential
5. Product Distribution and Sales
buyers for the company to
Discuss how this type of product is sold in the market place. Discuss distribution and
your plans compared to customary practices.
survive and grow. Discuss
the demographic
6. Competitive Advantages
characteristics of
Discuss the competitive advantages of your company and product compared to
potential customers and
industry and competition.
why they may want to buy
7. Analysis
your product.
Analyze strengths and weaknesses of your product line and company versus
competitors’ product line and company.
Market Analysis - 206

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Sample Market Analysis
Market Analysis
Cattle Producers Marketing Coop has developed a database of present
customers who buy on a regular basis and customers who have bought only
occasionally as the opportunity presents itself, such as at farmers markets.
Customer demographics show the current customers are in an income range of
$45,000 or more, two income families, professional occupations, concerned
about the environment and located primarily in urban areas. Research also
shows these customers are Internet users and willing to order product from our
business via the Internet.
Research conducted by the company has verified that there is a market
segment large enough to justify the investment in the processing facility.
Further, the premium these consumers are willing to pay will allow the shipment
of products to nearly all geographic locations in the country. Focus groups,
market surveys and product demonstrations at several locations were used to
develop demographic profiles of each promising location so that zip codes
could be used to easily identify future markets when expansion is deemed
appropriate. (Note: Results of the surveys can be provided if additional
information is desired.)
A significant number of consumers are concerned about where their meat
products are coming from and how these products are processed. The
company will market directly to that group. Since they are highly informed
consumers, however, a major task will be to establish credibility.
In the farmers markets targeted for sales there are an estimated 100,000
potential customers (based on census estimates). At present, Marketing Coop
has reached only a fraction of that customer base.
Based on data in the U.S. Census Bureau databases, estimated customer
potential is as follows:
Big Town Farmers Market
Cool Springs
Market Size and Trends
The following beef consumption trends have emerged from a variety of national

U.S. consumers purchase more than 67 pounds (retail weight) of beef per
capita annually.

Moving beef from producer’s gate to the consumer’s plate will facilitate
more than one million nonfarm jobs in addition to the 186,000 jobs supported
on the farms and ranches where it was grown.

Beef’s share of consumer expenditures has changed little in the past 30
Market Analysis - 207

General Trends in Meat Consumption
There are a number of new and emerging trends in meat marketing which are
relevant to the interest of this feasibility study. In general there are three con-
sumer preferences today which are driving major changes in the meat industry.

Consumers are demanding meats that require little preparation time.
Population and labor trends are driving this preference. An unprecedented
number of women are in the workforce today. There is an increasing
number of single adult households in the U.S.; of those, the number of
single parent, female-headed households is increasing, resulting in more
than ever limited time for meal preparation within U.S. households. A
Yankelovich poll (reported by the American Meat Institute) claims that half
of all Americans spend less than 45 minutes cooking an evening meal
compared to the two-hour meal preparation typical in American
households 30 years ago. People have a limited amount of time and don’t
want to spend it cooking. Add to this the fact that at 4 p.m., 60 percent of
Americans do not know what they will eat for dinner. The implications are
that the meat marketing industry has a whole new challenge for capturing
palates and dollars.

Consumers have little knowledge of and skills for cooking. Studies report
that many consumers feel that their knowledge of cooking and skills for
meal preparation are more limited than those of their parents and
grandparents. Furthermore, the American Meat Institute reports that many
American consumers find meat preparation to be challenging. Implications
for meat marketing are that meats are becoming increasingly available as
meal-ready or with minimal preparation.

Consumers are concerned about health and nutrition when buying meat.
The Food Marketing Institute claims that nearly 80 percent of Americans
want to eat food they perceive to be extremely healthy and that 42 percent
are willing to pay more for low-fat versions of commonly consumed
products. In the lunch meat and hot dog markets, a record 50 percent of the
products offered are items with reduced or low fat.
Consumers are demanding changes from the meat industry and the industry is
responding. Numerous options and innovations can be observed at all levels in
production, processing and packaging. The retail point of sale is taking on a
new look.
Emerging Trends in Meat Marketing
Case-Ready Meat: These are value added fresh meat products that the
supermarket purchases in precut packages. Due to new packaging
technologies, precut, tray-ready packages tend to offer a longer shelf life than
conventional products. Often hermetically sealed, they offer customers
trimmed, individually wrapped, consistent portions. Case-ready meats eliminate
extra steps in handling for retailers and consumers alike.
Consumer-Ready Products: These products go a step beyond the case-ready
meat products by including preparation tips, cooking instructions, spices, or
seasoning packets. Portions are indicated on the package. Consumer-ready
products include items such as marinated meats, stuffed chops, kabobs and
Market Analysis - 208

seasoned steaks and roast which are ready to take home and pop into the oven,
microwave or place on the grill.
Home Meal Replacement: These are fully prepared products which free the
consumer from all responsibility of meal preparation. They often come packed
and portioned as entrees with options to purchase complementary side dishes or
extras. Also known as TOTE (Take Out To Eat), these dinners in a bag are the way
in which supermarkets and grocery stores are competing with restaurants to
gain business from Americans who choose not to prepare their own meals.
The market analysis shows a broad range of prospective clients. The green
labeled, eco-labeled, naturally labeled food industry is in a boom period. While
there are a growing number of items from a growing number of vendors
becoming available, Cattle Producers Marketing Coop is approaching the
market as a multi-choice provider of products with a face.
The owner/members of Marketing Coop have spent 10 years carefully laying the
groundwork and learning the methods for success. The value-added
cooperative is now poised to make the most of established connections with
consumers and other marketers of natural items handcrafted on family farms.
Cattle Producers Marketing Coop is set to offer food, fiber and manufactured
products that either nourish, provide comfort or address a desired taste or
want. The members of the cooperative have proven an ability to adjust their
product lines while also displaying a tenacious desire to provide whatever level
of sweat equity is required to preserve their independent ways of life as family
farmers. The owners/members have also provided 50 percent of the equity
requirements per early feasibility estimates.
The food-with-a-face concept of marketing is still relatively new and enjoys
some sense of novelty in the marketplace. The genuine authenticity that can be
verified by Cattle Producers Marketing Coop is not yet common in the
commercial consumer marketplace, which gives the Marketing Coop group a
leg up on the competition.
The industry of specialized foods and handmade, one-of-a-kind products is on a
steady upward growth curve; and Marketing Coop is poised to capitalize on the
consumer’s desire for these items.
While a bouncing economy can affect many areas, specialty food items and
unique crafted goods are generally less affected than the main, with unique
items typically finding favor in the marketplace. The following article, reprinted,
provides a degree of verification.
Market Analysis - 209

Farmers Rated Best in Ensuring Food Safety
Survey Identifies Consumer and Editor Opinions about Food Issues
DES MOINES, Iowa— Tuesday, September 29, 1998— Food safety has
surpassed issues such as crime prevention, health and nutrition,
environmental protection, water quality and recycling as the most
important public issue facing consumers. However, consumers give
farmers high marks for their efforts to assure a safe food supply,
a survey
by the International Food Safety Council, a restaurant and foodservice
industry coalition, shows.
Fifty-nine percent of consumers surveyed said farmers are doing an
excellent job to ensure a safe food supply.
Supermarkets came in a close
second at 57 percent, followed by food processors (44 percent),
restaurants (42 percent), consumers (38 percent), government agencies
(34 percent), and meat/poultry packers (29 percent).
“The survey clearly shows that consumers hold farmers in high regard
for their efforts to produce safe and wholesome products
,” said Bill
Brewer, public relations counsel for the Food Practice Group. “This offers
an opportunity for the agricultural community…

1998 Food Issues Survey News Release
Presented in association with the International Food Safety Council, a
restaurant and foodservice industry coalition.
Cattle Producers Marketing Coop Products
Ground Chuck
Select Chuck
Beef for Stew,
Ground Beef
The following tables show the pricing strategy that the coop will use for its
Price Calculated per Pound
Ribeye Steak
Chuck Roast, US Choice, Boneless
Market Analysis - 210

Potential Markets
Customer Categories
Distributors (includes restaurants)
$85,000 $100,000 $125,000
Direct (includes farmers markets)
$80,000 $100,000
$85,000 $130,000 $190,000 $225,000
TOTAL $100,000 $200,000 $300,000 $400,000 $500,000
Product Distribution and Sales
Meat products are sold in a variety of ways somewhat dependent on fresh or
frozen and size of package. At present, ethnic markets and specialty food
markets are underserved. A survey of the phone company’s yellow pages,
showed only two markets selling to ethnic groups in our proposed trade area.
Regardless of whether the market is a niche or traditional market, the meat
sales are still handled in the same manner.
Types of sales include:

Over the counter in locker plants or meat shops

By mail order

Via Internet

Door-to-door sales and delivery

Grocery stores

Institutional food vendors

Specialty marketing

Prepared food sales
Marketing Coop will not have any unique food sales methods. Rather, the
company will sell via specialty markets, such as farmers markets, as frozen
foods, shipping product sold via Internet or phone orders and over the counter
at the processing facility. For a small company, Marketing Coop will cover as
many marketing avenues as time and resources permit.
Market Analysis - 211

Estimated Market Share and Sales
The potential sales volume for the projected sales area is $10 million. This is
based on USDA estimates, as obtained from the USDA Web sites and Iowa
State University Extension estimates, which combine population numbers and
consumption numbers. With a projected sales volume of $500,000, Marketing
Coop will not have a large market share.
Competition is formidable. The competitors have more buying power, more clout
in the marketplace and more financial resources to cut deals with suppliers.
Marketing Coop has no illusions of coming into the market place and easily
capturing sales. It will need to work hard to gain and keep sales. Customers
have well established buying habits for meat products coupled with established
preferences for products, packing and freshness.
Competition is in the form of three main categories:
Large chain grocery stores for retail customers.
Small independent locker plants with retail counters.
Meat brokers and institutional food sales groups selling to restaurants.
The main competition will be beef products marketed in the traditional manner,
i.e., as a commodity. Typically, the consumer does not know where the product
comes from and where and how it was processed. Marketing Coop plans to
differentiate its products from commodity meats in the following manner:

Preserve the identity of products from the cattle raiser to the consumer,
whether the product is sold in meat markets, grocery stores, restaurants or

Cattle will be raised in open pastures on a rotation basis, as opposed to
highly dense confinement buildings, thus minimizing the investment
required and eliminating waste disposal and related environmental
problems. Studies have shown that cattle raised in this manner have fewer
health problems, thus reducing the need for medicines of various types,
further reducing production costs.

Establish that the brand “Cattle Producers Marketing Coop” offers products
that are safe and are of consistent high quality, thereby deserving of a
premium price.
Who are our competitors? We do not know the annual meat sales volume of our
competitors or their market shares. Such figures, if published, were not
available for this study.
Marketing Coop prices will be competitive and, in some cases, higher than
competing beef products found through other distribution channels. The higher
cost, about 5 cents per pound higher on average, will result from the key
differences of Marketing Coop product versus competitors’ products. Again, the
sales history indicates consumers are willing to pay a very slight premium to get
product that meets their criteria.
Market Analysis - 212

Some key differences of our product include:

It is a natural product, free of hormones.

It is provided by farmers known to the consumer, as in “food with a face.”

Quality is assured as all cattle are raised to an audited quality system.

No quality problems will come from processing due to our small facility and
worker responsibility for quality.

Doorstep delivery is available where possible.

Customers can visit the factory where the food is made.
Competitive Advantage and Analysis
The following table outlines how Cattle Producers Marketing Coop compares to
the competition in terms of product and other factors, including strengths and
weaknesses. The analysis is of the company against the competition by major
groups. While there may be key differences against individual stores or
businesses, these do not exist in large enough quantity to affect sales or
strategy of Marketing Coop.
Points of Comparison
Locker Plants
Natural Product
Yes 0
No +
No +
Market Share
Financial Resources
Total Product Line
Customer Service
Custom Processing
Yes 0
No +
No +
Rating scale:
0 means Marketing Coop is no better;
+ means Marketing Coop is better; and
- means Marketing Coop is in a worse competitive position.
Market Analysis - 213

Following is an analysis of Cattle Producers Marketing Coop strengths and
weaknesses, opportunities and threats:
SWOT Analysis
(Strengths Weaknesses Opportunities Threats)
Members invested a lot of
Members personal finances
cash in coop
are weakened
Coop has many charter members
Size and needs of member
operations vary
Quality is trademark of cooperative
Consumers may not recognize quality
Market hungry for coop’s fresh meats
Fresh meats provide thin net
profit margins
Many area farmers markets to attend
Farmers markets rely on great
volunteer effort
New ethnic markets are expanding
Major companies also pursuing
ethnic markets
Market Analysis - 214

What Does the Coop Have to Sell?
Beef Carcass Yields 1,150 lb. Live Weight Choice Steer
Retail Beef Lbs.
Other Lbs.
Carcass Total
Chuck (209.5 lbs.) 29%
Blade roasts and steaks
Stew or ground beef
Arm pot roasts and steaks
Cross rib pot roast
Fat and bone
Miscellaneous (32.7 lbs.) 4.5%
Kidney, hanging tender
Fat, suet, cutting losses
Thin Cuts (134.6 lbs.) 18.9%
Flank steak
Pastrami squares
Outside skirt
Inside skirt
Boneless brisket
Ground beef, stewing, etc.
Fat and bone
Rib (66.6 lbs.) 9%
Rib roast
Rib steak
Short ribs
Ground beef, stewing, etc.
Fat and bone
Loin (115.7 lbs.) 16%
Porterhouse steak
T-bone steak
Strip steak
Sirloin steak
Tenderloin steak
Ground beef, stewing, etc.
Fat and bone
Market Analysis - 215