Now and for Generations to Now and for Generations to ComeCome

Anchorage 2003Anchorage 2003

Now and for Generations to Now and for Generations to ComeCome

Anchorage 2003Anchorage 2003

AGENDAAGENDAAGENDAAGENDA

Darden RestaurantsDarden RestaurantsGrowth of AquacultureGrowth of AquacultureGlobal SupplyGlobal SupplyGlobal DemandGlobal Demand

– USA Focus

Buyer’s PerspectivesBuyer’s PerspectivesGuest Drivers (Romance Food)Guest Drivers (Romance Food)RecommendationRecommendation

FY’02FY’02June ’01 – May ‘02June ’01 – May ‘02

FY’02FY’02June ’01 – May ‘02June ’01 – May ‘02

$MM SKUs Suppliers Countries Purchased

Seafood Purchases

246 231 35 512.1

Revenue (May 26, 2002)

$4.4B Up 19% from May

‘00

Population Trends Are Favorable Population Trends Are Favorable for Seafood in the USAfor Seafood in the USA

Population Trends Are Favorable Population Trends Are Favorable for Seafood in the USAfor Seafood in the USA

CONCEPT RESTAURANTS MARKET SHARE

Red LobsterRed Lobster 673673

46% of46% of

Casual Seafood DiningCasual Seafood Dining

Olive GardenOlive Garden 516516

35% of35% of

Casual Italian DiningCasual Italian Dining

Bahama BreezeBahama Breeze 3131

Smokey BonesSmokey Bones 3333

Growth of AquacultureGrowth of Aquaculture(A Model of Consistency)(A Model of Consistency)

Growth of AquacultureGrowth of Aquaculture(A Model of Consistency)(A Model of Consistency)

Effects on Alaskan FisheriesEffects on Alaskan Fisheries– Decreased demand, thus price for Wild Caught

Salmon

– Increased competition against Fresh Fish (Halibut, Cod, Sole, etc.)

– Conversion of Japanese preference to Atlantic Salmon alternatives

Why did this happen? What changed?

Global Wild Harvest Fish Supply Global Wild Harvest Fish Supply History & ForecastHistory & Forecast

Global Wild Harvest Fish Supply Global Wild Harvest Fish Supply History & ForecastHistory & Forecast

SOURCE: FAO

World Population GrowthWorld Population Growth1968 – 2020E1968 – 2020E

World Population GrowthWorld Population Growth1968 – 2020E1968 – 2020E

SOURCE: U.S. Census Bureau2000-2020 are Projections

Relative Consumption of Seafood Relative Consumption of Seafood in the World: in the World: 1968 – 2000, Per Capita1968 – 2000, Per Capita

Relative Consumption of Seafood Relative Consumption of Seafood in the World: in the World: 1968 – 2000, Per Capita1968 – 2000, Per Capita

19681970

19721974

19761978

19801982

19841986

19881990

19921994

19961998

2000

Year

80

100

120

140

160

180

200

220

240

Index

ed t

o 196

8 =

100

U.S.A. Europe Japan Developing Nations

Source: FAO

Relative Consumption of Seafood in the World1968-2000, Per Capita

SOURCE: FAO

World Supply of Beef, Pork, Poultry & World Supply of Beef, Pork, Poultry & Seafood:Seafood: 1968 – 1998, Per Capita1968 – 1998, Per Capita

World Supply of Beef, Pork, Poultry & World Supply of Beef, Pork, Poultry & Seafood:Seafood: 1968 – 1998, Per Capita1968 – 1998, Per Capita

SOURCE: FAO

FY’02FY’02June ’01 – May ‘02June ’01 – May ‘02

FY’02FY’02June ’01 – May ‘02June ’01 – May ‘02

$MM SKUs Suppliers Countries Purchased

Seafood Purchases

246 231 35 512.1

Beef, Pork, Poultry & Seafood Beef, Pork, Poultry & Seafood Price Trends: Price Trends: 1968 -- 20001968 -- 2000

Beef, Pork, Poultry & Seafood Beef, Pork, Poultry & Seafood Price Trends: Price Trends: 1968 -- 20001968 -- 2000

SOURCE: U.S. Bureau of Labor Statistics

6869

7071

7273

7475

7677

7879

8081

8283

8485

8687

8889

9091

9293

9495

9697

9899

0001

02

50100150200

250300350400

450500550600

650700750

800

Price I

ndex (

1968=

100)

BeefPork

PoultrySeafoodSource: U.S. Bureau of Labor Statistics

Beef, Pork, Poultry, and Seafood Price Trends1968-2002

Wild vs. Aquaculture SpeciesWild vs. Aquaculture SpeciesCod and Salmon Prices: 1990 -- 2000Cod and Salmon Prices: 1990 -- 2000Wild vs. Aquaculture SpeciesWild vs. Aquaculture SpeciesCod and Salmon Prices: 1990 -- 2000Cod and Salmon Prices: 1990 -- 2000

SOURCE: Urner Barry

U.S. PopulationU.S. PopulationHistorical & ProjectionsHistorical & Projections

U.S. PopulationU.S. PopulationHistorical & ProjectionsHistorical & ProjectionsU.S. Population

Historical & Projections(Estimate .9% Average annual change from base of 1999 @ 272,690,813)

220,000,000230,000,000240,000,000250,000,000260,000,000270,000,000280,000,000290,000,000300,000,000

Population

Year

(Estimate .9% average annual change from base of 1999 @ 272,690,813)

SOURCE: U.S. Census Bureau

Population Trends are Favorable Population Trends are Favorable for Seafoodfor Seafood

Population Trends are Favorable Population Trends are Favorable for Seafoodfor Seafood

Age 1998 2008 % Change

Index to

Casual Dining

TotalTotal 270.0270.0 292.9292.9 8%8%

< 10< 10 39,14139,141 38,92238,922 -1%-1% 4646

10 – 1910 – 19 38,79738,797 42,22642,226 9%9% 4343

20 – 2920 – 29 36,01936,019 39,76339,763 10%10% 119119

30 – 3930 – 39 42,76842,768 37,19337,193 -13%-13% 118118

40 -- 4940 -- 49 40,62440,624 42,92942,929 6%6% 127127

50 – 5950 – 59 28,10828,108 39,12439,124 39%39% 138138

60 – 6960 – 69 19,83319,833 26,05026,050 31%31% 129129

70+70+ 24,71224,712 26,71926,719 8%8% 9595

SOURCE: CREST, 2001 Includes Sandwiches and Entrees

Population Trends Are Favorable Population Trends Are Favorable for Seafoodfor Seafood

Population Trends Are Favorable Population Trends Are Favorable for Seafoodfor Seafood

Seafood Beef Poultry

Under 18 52 53 12418 - 34 83 86 11235 - 49 105 117 9350 - 64 135 129 8365+ 153 122 78

SOURCE: U.S. Census Bureau

Protein Consumption Indexed to Age

U.S. Per Capita Consumption of U.S. Per Capita Consumption of Seafood: Seafood: 1980 – 2007E1980 – 2007E

U.S. Per Capita Consumption of U.S. Per Capita Consumption of Seafood: Seafood: 1980 – 2007E1980 – 2007E

7576

7778

7980

8182

8384

8586

8788

8990

9192

9394

9596

9798

9900

0102

0304

0506

07

Year

12

13

14

15

16

Pounds p

er

Pers

on

Source: FAO

U.S. Per Capita Consumption of Seafood1980-2007E

SOURCE: FAO, University of Southern Illinois

Future U.S. Seafood SupplyFuture U.S. Seafood SupplyFuture U.S. Seafood SupplyFuture U.S. Seafood Supply

Million Pounds Edible Weight

3500

4000

4500

5000

5500

0 05 10 15 20 25

2000 Total Additional Lbs Required

To maintain per capita status quo (15.6 lbs.) will require approximately one billion additional pounds (edible wt.) by 2025

SOURCE: University of Southern Illinois

Total U.S. Seafood Supply – Total U.S. Seafood Supply – Estimated Share of Supply (%)Estimated Share of Supply (%)

Wild vs. AquacultureWild vs. Aquaculture

Total U.S. Seafood Supply – Total U.S. Seafood Supply – Estimated Share of Supply (%)Estimated Share of Supply (%)

Wild vs. AquacultureWild vs. Aquaculture

0%10%20%30%40%50%60%70%80%90%

100%

2000 2005 2010 2020 2025

Domestic Wild Imported Wild

Domestic Aquaculture Imported Aquaculture

The Four Sources of Seafood The Four Sources of Seafood Supply and Outlook to the U.S.Supply and Outlook to the U.S.The Four Sources of Seafood The Four Sources of Seafood

Supply and Outlook to the U.S.Supply and Outlook to the U.S.

Domestic WildDomestic Wild– Stable to gradual decrease over time

Domestic AquacultureDomestic Aquaculture– Modest increase in production, but niche seafood

only Imported WildImported Wild

– Stable to gradual decrease over time Imported AquacultureImported Aquaculture

– Will produce to fill any supply vacuum

From a U.S. Restaurant Buyer’s From a U.S. Restaurant Buyer’s PerspectivePerspective

From a U.S. Restaurant Buyer’s From a U.S. Restaurant Buyer’s PerspectivePerspective

Seafood industry is supply driven.Seafood industry is supply driven. Consumption of seafood in the USA Consumption of seafood in the USA

projected to increase in response to aging projected to increase in response to aging population and consumer preferences.population and consumer preferences.

A shortfall of seafood supply is anticipated A shortfall of seafood supply is anticipated (one billion pounds {454 million kgs} edible (one billion pounds {454 million kgs} edible weight by 2025).weight by 2025).

Wild harvest is expected to remain stable Wild harvest is expected to remain stable to declining.to declining.

From a U.S. Restaurant Buyer’s From a U.S. Restaurant Buyer’s PerspectivePerspective

From a U.S. Restaurant Buyer’s From a U.S. Restaurant Buyer’s PerspectivePerspective

Aquaculture Offers:Aquaculture Offers:– Ability to partner with suppliers and contract prices

– Consistency in supply

– Price stability

– Uniform quality

Importance of Price and Importance of Price and Supply StabilitySupply Stability

Importance of Price and Importance of Price and Supply StabilitySupply Stability

Food Service and Retailers benefit:Food Service and Retailers benefit:– Fixed menu prices with reasonable margins

– Base menu applications…eliminates the need to re-print menus

– Product moves from seasonal to everyday availability

– Ability to nationally promote products without fear of supply disruptions or price escalation during a promotion

The Cod ExampleThe Cod ExampleThe Cod ExampleThe Cod Example

Demise of Cod at Red LobsterDemise of Cod at Red Lobster– Prior to 1999, Red Lobster purchased 2.5 million

pounds of frozen Cod annually.

– In 1999, once frozen Cod prices soared to over $3.50 per pound.

– Red Lobster promptly removed Cod from the menu.

– To this day, Cod has not returned to the Red Lobster menu.

The Cod ExampleThe Cod Example(Continued)(Continued)

The Cod ExampleThe Cod Example(Continued)(Continued)

Important LessonsImportant Lessons– Consumers determine a product’s worth…not

restaurant’s, retailer’s, processor’s, or fishermen’s expectations

– There are abundant seafood alternatives. Each product competes for a “share of stomach”.

Drivers of Guest TrafficDrivers of Guest TrafficDrivers of Guest TrafficDrivers of Guest Traffic

Shrimp, Crab, and Lobster are considered guest Shrimp, Crab, and Lobster are considered guest count driverscount drivers– Red Lobster consistently nationally promotes Lobster, Crab,

and Shrimp.

– These shellfish are considered gourmet and guest relate them to Red Lobster.

– With current health trends, Fresh Fish has increased in popularity and preference.

– Frozen Fish, for the most part, is considered a commodity. Most food service establishments offer frozen fish in some

form. What’s special about that?

Alaskan Snow Crab QuotasAlaskan Snow Crab QuotasAlaskan Snow Crab QuotasAlaskan Snow Crab Quotas

Note the lack of Note the lack of stability in quotastability in quota

No stability = no No stability = no ability to maintain ability to maintain the reputation of the reputation of Alaskan Snow Alaskan Snow Crab Crab

0

50

100

150

200

250

300

350

1991 1993 1995 1997 1999 2001 2003

Live Wt. Quota

MM lbs.

Alaska Fishing Industry Alaska Fishing Industry WeaknessesWeaknesses

Alaska Fishing Industry Alaska Fishing Industry WeaknessesWeaknesses

CrabCrab– Very volatile quotas lead to erratic market

availability

– Regional equity / marketing allure is diminished.

Alaska Fishing Industry Alaska Fishing Industry Weaknesses (Continued)Weaknesses (Continued)Alaska Fishing Industry Alaska Fishing Industry

Weaknesses (Continued)Weaknesses (Continued)

Fresh FishFresh Fish– Limited market exposure for fresh Salmon products

– Underdevelopment of distribution system to the United States

– Long-term dependence on Japanese buying

– Inability to offer market forms that meet current consumer needs

Alaska Fishing Industry Alaska Fishing Industry Weaknesses (Continued)Weaknesses (Continued)Alaska Fishing Industry Alaska Fishing Industry

Weaknesses (Continued)Weaknesses (Continued)

Frozen FishFrozen Fish– Lack of a customer-focused marketing program

– Higher cost of production than in other countries Twice frozen fish processed in other countries are

arguably equal in quality to U.S. produced once-frozen fish.

– Inability to offer market forms that meet consumer needs

RecommendationsRecommendations“Regaining Competitive Advantage”“Regaining Competitive Advantage”

RecommendationsRecommendations“Regaining Competitive Advantage”“Regaining Competitive Advantage”

Develop a better management program for Develop a better management program for Snow and King CrabSnow and King Crab– Decrease volatility of quotas

– The availability of Crab offers Alaska the strongest marketing tool to increase guest awareness for all Alaskan products.

RecommendationsRecommendations(Continued)(Continued)

RecommendationsRecommendations(Continued)(Continued)

Develop better Fresh Fish distribution Develop better Fresh Fish distribution systemssystems– Comprehensive system that delivers product

throughout the United States

Process product to market forms Process product to market forms demanded by guests (i.e. pre-portioned demanded by guests (i.e. pre-portioned Sockeye Salmon)Sockeye Salmon)

RecommendationsRecommendations(Continued)(Continued)

RecommendationsRecommendations(Continued)(Continued)

Determine the viability of processing Determine the viability of processing frozen product in Alaska vs. other frozen product in Alaska vs. other countries. Is the perceived difference in countries. Is the perceived difference in quality valued by the American consumer?quality valued by the American consumer?

RecommendationsRecommendations(Continued)(Continued)

RecommendationsRecommendations(Continued)(Continued)

Explore the possibility of developing Explore the possibility of developing Aquaculture fishing farming Aquaculture fishing farming – Sockeye Salmon

– Arctic Char

– Turbot

– Atlantic Salmon

ClosingClosingClosingClosing

We are in this together!We are in this together!– Our guest is your guest

We will help champion your ideas.We will help champion your ideas.We believe that Alaskan seafood products We believe that Alaskan seafood products

should be…should be…

Now and for generations Now and for generations to come!to come!