2012/13 Business Plan

Introduction:

Canada Beef Inc. is the organization created by the consolidation between the Canadian Beef Cattle Research, Market Development and Promotion Agency, the Beef Information Centre and the Canada Beef Export Federation.

Canada Beef Inc.'s 2012/13 inaugural annual business plan (15 months) establishes a clear direction for the new organization. The plan is designed to deliver programs and activities that will achieve measurable and impactful results with clear alignment to the 3 year strategic plan developed by Canada Beef's Planning and Priorities Committee, as well as the long term strategic goals of the Canadian Cattle Market Development Council.

The Canadian beef and cattle supply outlook (Canfax Outlook) for the next 24 months suggest that volume growth opportunities are limited due to industry consolidation and that maintaining domestic market share and optimizing value in export markets is a more realistic goal. The projected reduction in cattle marketings also creates a new fiscal reality the organization must face moving forward. The inaugural Canada Beef plan will require program rationalization and difficult decisions to be made as they relate to defining priority and emerging markets.

Strategic Focus:

The strategic focus of the plan is to continue the foundation of defining, communicating and leveraging the unique points of differentiation for Canadian beef and veal. As a high cost producer of high quality grain fed beef, it is imperative that Canada Beef marketing programs are targeted at a very specific customer base that represents the best opportunity to provide a return on investment. Those targeted customers must be in markets and segments that can receive highest values for high quality grain fed beef and veal, and must value the quality and safety systems that Canadian producers/industry/government invest in.

Market Prioritization:

In developing the plan and resources required to deliver on the outcomes, many factors have been considered. Where possible, programming that offers longer term benefits have been developed and will be implemented in markets where viable access is solidified. In markets where full or viable access is not yet solidified, programming has been scaled to offer the highest short term returns possible in limited access conditions, but with an eye to the future when more favourable long term access conditions are realized.

In order to maximize values of the current level of production, direct input from industry was utilized to determine markets that represent the highest value in the current access conditions and can be enhanced through a marketing strategy of developing value propositions based on clear and meaningful product differentiation compared to competing alternatives in global markets. Value propositions will be based on leveraging the relevant and meaningful attributes defined by the Canadian Beef Advantage and the commitment the Canadian industry has in delivering those attributes.

The plan includes a comprehensive analysis provided by Canfax Research Services (attached) of projected supplies of both fed and non fed production which serves as the basis for market prioritization. In order to prioritize markets an analysis was performed with industry partners of various factors including, market access, as well as the product mix that historically makes up the export volumes and the ability to significantly differentiate those products based on value delivered through the points of differentiation. In markets where the points of differentiation offered by the CBA are less impactful, less importance was placed on them as opposed to markets where Canada clearly differentiates its products versus competing alternatives, specifically U.S. and Australian. The rationale is to identify markets which represent the most efficient return on investment and support increased value. For the 2013/14 fiscal year business plan, Canfax Research Services will provide a more comprehensive approach to market/product analysis and export market volume targets.

Desired Outcomes by Priority Market:

Considering the beef supply outlook over the term of the plan and available funding to implement the plan, desired outcomes by priority market have been identified and are reflective of the abilities of Canada Beef to effectively impact results based on those factors.

Canada

Encourage increase in market share
Optimize product values for priority products
Positively influence domestic consumer perceptions
Empower industry stakeholders on the Canadian Beef Advantage

Priority Export Markets: USA, Mexico, Japan, China/HK/Macau

Increased brand awareness
Optimize product values for priority products
Utilize market intelligence to develop relationships and align supply chain

Secondary Export Markets: Korea, Taiwan, Emerging

Increase brand awareness
Utilize market intelligence to develop key relationships and align supply chain

Market	Products
Canada	AA/AAA Carcass sets (retail) AAA Middle meats (Foodservice) Source Trim (QSR)
USA	Chuck Primal, Thin meats (Retail) AAA middle meats (Foodservice)
Mexico	Chuck Primal, Thin meats (Retail) AAA Middle meats (Foodservice)
Japan	Chuck Roll, Rib Eye, Short ribs, (Retail) AAA Middle meats, (Foodservice)
China	Chuck Primal, Rib eye, (Retail) AAA Middle meats, (Foodservice)

Opportunity:

In order to be responsive to rapidly changing market access conditions, an opportunity budget will be allocated to allow for rapid allocation or re-allocation of resources to the applicable market to implement tactical initiatives. Specific tactics will be defined as required and approved by the board before implementation.

Alignment with Industry:

As part of the industry input process, Canada Beef Inc. has ensured that strategic and tactical alignment is leveraged with industry partners and their distribution networks in global markets wherever possible to identify targeted customers and priority products in key markets and segments.

Commitment to Transparency:

Canada Beef Inc. is committed to creating a global awareness around the value of the Canadian beef brand, and delivering return on investment for its funders. The plan is representative of our commitment to transparency. The plan includes strategies and tactical initiatives which will be deployed in each market. Also included are expected outcomes of combined strategies and tactics, as well as clear performance metrics and projected budgeted expenses by market.

Total budgeted expenses for the 2012/13 (15 months, January 1, 2012 to March 31, 2013) Canada Beef Inc. business plan is $14,447,500.

Revenues from National Check Off are projected to be $6,190,000.

In order to fully implement this plan $6,968,438 will be requested from the Canadian Cattlemen Market Development Fund.