 Good afternoon. I'm Rebecca Marquez, a Business Intelligence Coordinator with PMMI, and I'd like to welcome you to today's webinar on trends shaping the meat, poultry, and seafood packaging and processing industries. Over the next hour, we will listen to the findings of this report by author Donna Ritzen with DDR Communications, where she will discuss what's current, what's new, and what's changing. President of DDR Communications, Donna founded the company 25 years ago. DDR's business is based on a direct response methodology that delivers market research, business development, strategic alliance and marketing intelligence to companies in virtually every business to business industry. DDR's experience is backed by over 35 years in marketing communications. A few housekeeping notes before we get started. Everyone is muted throughout the webinar. If you have any questions that you would like to ask the presenter, please type in your question in the chat box that is located in the bottom corner of the screen. At the end of this presentation, which will last approximately 45 to 50 minutes, Donna will be available to answer your questions. At this time, I would like to hand the webinar over to Donna Ritzen. Thank you, Rebecca, and thank you all for joining today's webinar on the meat, poultry seafood industries. It's a very dynamic report, and I do encourage all of you to actually download the report, but today I will go through the highlights that are in the report and help you understand what kind of benefits this information will provide. Overwhelmingly, the meat poultry seafood industry is automating processes. They are human contact and contamination are two things that continue to cause problems, particularly, obviously, in the meat poultry seafood industries. You'll hear more about automation throughout this entire report, but also be aware that PMMI is in the final stages of delivering an entire report solely on the subject of automation, but we'll hear about it a lot here in Meat Poultry Seafood as we go forward. I'll give you an idea of who we talk to, whose voice is in this report. We had 50 interviews, and we researched 110 secondary references that help support and bring attention to some of the key industry concerns and challenges that we hear about in our interviews and read about in all of the press throughout the industry. We talk mainly to large companies, but certainly a handful of medium and small companies are represented in this report. We talk to people in manufacturing and operations engineering, maintenance, both processing and packaging ends of the line. We talk to senior level management and some people in procurement as well. In each of our reports, we do try to talk to the top industry leaders, and we've talked to the top four out of five in meat poultry, the top eight out of the top 40 in meat poultry as well, and the top two out of 20 in fish and seafood. In this report does encompass all the different types of meat poultry seafood and fresh, ready to eat, frozen, deli, canned, and individual quick frozen foods as well. So it gives you an idea of whose voice this is as we go forward. We have taken a look here on the left hand side pie chart. It's a $227, almost $228 billion market when you evaluate that as total value of shipments. The largest segment of this market is animal slaughtering, and it's described in much more detail as to what all this encompasses in the actual report. The next category is meat processed from carcasses, and then the last small sliver in the meat industry is meat byproducts. Poultry takes up a little over a fourth of the entire market, and seafood is a much smaller market, taking up only about 5.2% when you look at the total market of these three segments. When we look at why we talk to a lot of the leaders in this market, in each of these industries, the leaders all except for seafood make up a significant portion of the industry. The top five meat companies make up about 75% of the industry, located mainly in California, Texas, and obviously the Midwest. Poultry, the top five poultry industry leaders for ready to cook chicken, account for over half of the industry. Again, California ranks top, and Texas are the two top states for all of these industries, with a higher concentration in the southern states for poultry. For seafood, the top 50, it's much more fragmented, or I should say smaller companies that make up this industry. The top 50 make up 75% of this industry. Again, California and Texas are very high in this industry, and as well as you would assume along the coast is where the major companies are located. We look at distribution a little bit. Club stores have gained share and distribution for meat poultry and seafood purchases, which is only a slight shift away from your traditional grocery stores and some of the specialty stores that are continuing to arise. When we look at the meat poultry seafood markets, they're really looking, and you'll continuously hear this throughout the presentation. They're looking to improve sanitation. Obviously, meat global demand, it's increasing, it's increasing for all food products, and to minimize labor. We hear this continuously in all industries as well, the difficulty in finding labor, retaining labor, training labor. The meat poultry seafood industries are looking at those and facing those same challenges. When we look at the outlook, though, the meat poultry seafood industries really are positioned well to move into automation and answer consumer preferences of just healthier food, smaller portions. This is again much covered in the full report. The technology solutions, there really is a collaborative effort going on that we've heard through the end users of working with the OEMs and suppliers to actively meet the customer needs and bring automation to this industry. Some of the global demand for food certainly steady gains both in meat poultry, continuously hearing the middle class developing in other countries, expansion of food safety regulations, particularly here in the US, but it's also a global initiative. Just global trade is continuing to increase. For seafood particularly, it has helped the industry. We'll get into this a little bit more, but the origin naming of seafood has helped to revive that industry so consumers know where their products are coming from. When we talked with end users as to where is the most costly element in their manufacturing and continuously points at labor, hence the drive towards greater automation. When we look here, this is describing where automation is taking place currently and how will it evolve in the next five years. When we're looking at this chart here in the middle, if you look at the now section here, it's about a third is operating their plants right now between no automation and a level of 10% automation and another third is operating at about 20 to 30% of their line is automated and in the next five years that will begin to switch. The automation percentage will continue to increase at each manufacturing plant and about one of three plant locations predicts to be 60 to 90% automated in the next five years. That could expand out a little bit further into 10 years and that gets into a lot greater detail when we start to look at the automation report, but this follows the same trend as we're hearing in other industries. At this point right now when we talk to the end users, nearly every company that we talk to does plan to increase their level of automated machinery in the next three to five years and that includes all of the data acquisition software that is also occurring to collect data, transfer data, interpret data. We're using the term in this report broadly to mean both machinery and software automation. So how are they going to fund that? We talked about how are they growing? How are they their significant growth going on in this industry? Nearly half of the companies that we talk to are growing from three to 10% annually which is a significant growth rate in itself and another 12% are actually seeing some major significant growth of 20 to 40% annually. How are they answering that growth? They're really starting to look for solutions in purchasing and procuring new equipment, looking at packaging changes. We'll get into this in a little more detail. There's new lines going in or there's certainly line expansion going in at a lot of these companies. I won't look at too many of these quotes but a particular interesting one here was from a co-packer. They're going to be moving from zero automation to a level of 70 to 75% automated in the future. So there's some significant opportunities and with that comes some challenges as companies are implementing and operating more automated equipment. So when we look at again here is 96% we talked about this are planning to advance automation, looking at specifically where are they going to be automating depending on the processing or packaging operations. About two out of five companies are looking to automate their incoming supplies. So they're going to be putting in automation is the food products and the meat poultry products coming in the door. And then there's about a fourth of the companies that are going to be automating their slaughter and process areas. And the largest majority of companies, almost three out of four companies are looking for end of the line. And in some instances that means moving to more robotics. And about a fourth of the companies did specifically talk about robotics being the solution that they're going to be looking for as they automate in the future. And again, there's so much greater detail in the full report that talks about this more specifically. So looking at how are they going to fund this operation in terms of moving into more automation and procuring capital equipment. Half of the industry predicts that their budgets are increasing. This industry particularly is looking at nearly half of them are going to be spending on processing equipment. And three out of four of them are going to be looking at spending on packaging equipment. So some tremendous opportunity here for both the front of the line and the end of the line. And what kinds of trends are driving these investments, clean labeling certainly, sanitary design, and again, just the automation advancements that are taking place, either replacing older equipment or just installing new equipment to automate manual process. In some of the important influences that are driving this is just a lower cost of financing at the moment, increasing their output. That's significant, as I mentioned earlier, across all food industries. Customer orders are increasing overall growth in their company in general. And the age of equipment always does play a role in replacing equipment. And a lot of that then is going to more automated processes. What are they looking for in equipment in the future? What technology advancements are end users looking for? When they're evaluating new equipment, they're really going to focus on service, cost, and quality. Certainly no surprises there. Almost all of the companies that we talk to do specify customized equipment at some level. That brings a set of its own challenges in timely equipment delivery and just the communication between engineers at the building, as well as the end user, in terms of deciphering those specifications and what exactly is needed on customized equipment. End users are recommending some improvements to be focused on, certainly cleanability that runs right in hand with this whole sanitation cleaning process, improving operator safety, and just flexibility and changeover, which is something that we again continuously hear in all industries as products are changing, skews are increasing. There's a need for highly flexible and fast changeover. What kind of things are they looking for in general? Wash down vision components was something that was talked about frequently. Wash down in this industry, obviously, as all of you know, is paramount. Preventive maintenance guidelines and just remote access ready machines. While a lot of companies continue to be hesitant in allowing remote access, we hear that that's going to continue to change and those channels will open up more and more. When we look at how are they measuring their performance, either through OEE or TCO, both of them are being used. TCO, total cost of ownership, seems to have gained popularity a little bit over OEE just because the measurement is a little more straightforward, taking the three primary costs of acquisition, operation, and maintenance and then calculating that into a total cost of ownership over the long-term use of the machine. But OEE also has its advantages and companies are looking towards that. But in both instances, we heard a lot of this in the automation report when we got into this a little bit more specifically. Companies are really looking to or end users are really looking to help them understand what these calculations are and look for some kind of standardization in the outcome and the calculation of these. PMMI has calculators for these, so certainly something that it's referenced again in the full report attached with the link to get to that site. What are OEMs? Companies want OEMs to build into the HMI, certainly real-time tracking, downtime metrics to the software automation and data collection, hours log looking for production counts, maintenance schedules, maintenance dates. They're looking for simpler and easier to use and operate machinery. It needs to be able to be disassembled and reassembled easily and quickly and certainly online remote connectivity. Preventing human error is certainly one of the things we talked about as we opened up this report. In order to do that, they're looking for operator instructions and greater safety. Again, going back to the HMI, looking for that clear and concise information available right there. More intuitive instructions, looking for almost push button operations in some instances where it can be an easy plug and play. Also, companies are looking for limitations in accessing the HMI recipes so that people who are not authorized to make those changes are locked out of that system in some type of verification or validation to ensure accuracy and that the right recipes were chosen. Operator safety, just in terms of general operator safety barriers or sensors that can shut down if an operator has entered an area that is unsafe. Again, just looking for less manual adjustments on their equipment, hence moving towards more automation. Training is always something that comes up in our conversations. It's continuously needed. They're looking for easy ways to train new operators and retrain existing operators. Certainly, as machinery advances and everything becomes more automated, just understanding how to operate, maintain, and connect those machines in the future. Again, here's machine cleanability. It comes up. It is the greatest challenge that we heard about. Again, what we talked about, the need to be able to disassemble and reassemble equipment very quickly. We asked and had discussions about do they have safety teams at their locations that are involved in these specifications, and for the most part, companies do. IP69K washdown is often required. Not always required. Sometimes it's the IP66 or even the IP65 standards that are required. But in all instances, sanitation and preventing contamination is paramount in this industry. We'll move in here next to look at their cleaning processes. Four out of five manufacturers are looking for more hygienic processing and packaging machines. What they're looking for is 82 percent, almost all of the companies, high percentage, four out of five, are actually specifying more hygienic machines, even if that machine comes at a higher price. They're needing to have more CIP clean in place. It's not often enough in this industry. It will often require deeper cleaning processes beyond just CIP. One another area they're looking at is the antimicrobial coatings for both food and equipment. We talked about this with the end users. There's really only a handful of companies that are even exploring or using it at this time. Those that are using it are finding it to be very successful. So something I would think that other companies will look to the leaders and begin to emulate that as another way to prevent contamination and keep food safe. We talked about who is actually doing their cleaning process for the most part. It's completed internally. Only one of four companies that we talked to were using third party cleaning. That is an area of concern is having the crew and the workers able to perform the cleaning processes accurately and thoroughly and consistently. So hence again looking for some automation in that area as well. If we look at the changes in packaging and their changes in materials and shelf life, two out of three of the companies that we talked to are updating their packaging materials in general. There was a shift towards some flexible, certainly more clear packaging as consumers want to be able to see their product in all of the food purchases that they're making. Close to half of the companies that we talked to were using both MIP which is Modified Atmosphere Packaging and combining that with vacuum packaging to extend shelf life. Certainly that's being driven by a greater increase in case ready products. About a third of the companies are using HPP which is the high pressure processing. Again I think that's something that is being used by some of the larger companies in the industry and having success with that as well. Good portion of more than half of the companies we talked to were looking for film improvements. Less wrinkling, easier to handle, a couple other aspects of film. Certainly in the case ready they're using a lot of film with trays and looking for some improvements in that area. When we're looking at getting closer to the customer, there's certainly, again, their single gray is concerned is to not have contamination anywhere in their product. When they're looking at their most critical concerns, it sounds redundant but to me it says that it's bigger than other topics that they talk about in the industry. Food safety is number one, sanitation and just overall operational efficiencies which we hear about in all industries but food safety and sanitation in this industry is particularly high. They're already regulated by FDA, USDA, FISMA laws, the Food Safety Modernization Act. While they do apply to this industry it's not directly, they are already under some strict guidelines that FISMA covers through the FDA and the USDA. Food safety, they're just looking to extend shelf life and deliver the best, safest product they can, retaining the taste and the appearance and the look of food to the consumers. They are operating under global food safety regulations as well. Product traceability, that's where a lot of the FISMA laws come in and just looking for greater seal integrity in a lot of instances to keep that food sanitary. They need to validate machine cleanliness, obviously prevent any type of bacteria either listeria or other bacteria that can enter into the process just looking to eliminate contamination anywhere in the process. Operational efficiencies, obviously no surprises, everyone's looking to maximize uptime, they need to keep up with technology, again the investment in automation will continue to occur. They're looking at and struggling with rising feed costs, animal feed costs are rising and that is a challenge in the industry. It's a challenge in the industry with the profitability overall and just keeping a good workforce and a safe environment for their workers. So there's areas where the OEMs can certainly build lasting relationships with customers looking at preventive and predictive maintenance plans and parts and certainly any on-site access services that can help them understand how do they keep a cleaner, safer operating environment. So when we look at opportunities, one of the things we do spend time with in our interviews with the end users is understanding what specifically are they looking for, how can the machine builder help them achieve greater sanitary procedures, looking at customized equipment, certainly more intuitive and simpler to use equipment and obviously as we talked and heard earlier just equipment that is more flexible to operate. So they're looking for a higher sanitary equipment design, certainly focusing on the documentation needed to validate those processes, equipment that's specifically washed down and components that are washed down. We heard earlier in the presentation here, companies are willing to spend more on hygienic equipment. They're going to need the regulation standards, IP69, 65 or 66 washed down standards and vision equipment particularly as a component needs to have washed down compatibility. When we're looking at customized equipment, they're certainly looking for a quicker response time although there is an understanding that customized equipment does take longer and communicating those specifications can be a challenge, they're aware of that. Looking for no hollow tubing, they need a solid frame, no harbor points and certainly customized equipment needs to have an ROI justification. Intuitive automation equipment, what they're looking for there, again we talked earlier, intuitive HMI, being able to troubleshoot that machine easily, remote access machines and any upgrades that have already been done in the industry and users are looking to have that shared with them so they can make those updates as well. When it relates to flexible machinery, they're looking for just again a better design to be able to handle a variance in package sizes and package styles. We've even heard comments in conversation about combining several operations into one machine and keeping machines simple, the operators are not engineers and so the machine directions and operations need to be simplified to reduce any type of human error. When we look over then here on the column in the right, opportunities to form stronger relationships certainly center around at the onset of a project, there's some very good detailed information in the report about that. Calculating operating costs, helping them understand that and providing technical training. The information that they're looking for at the onset of a project is to bring the data that they're needed, the specifications, the cost, the performance, the documentation at the onset of a project so that they understand how to begin to evaluate that equipment and implement it into their operations. We do continuously hear about just understanding the end users challenges to really understand the regulations that they're faced with in this industry particularly, again around sanitation and cleanliness, come with experts that know these markets that they're facing, offer educational programs and consulting services that help everyone to get on the same page with what the challenges are and what they're faced with in their manufacturing facilities and just help them understanding as I spoke earlier on this, what is TCO, how do they calculate it, how does it stay consistent, OEE, how do they begin to look at the costs and what is involved in making the calculations for OEE and again for predictive and both preventive maintenance, preventive maintenance certainly is something that many of the companies are using, predictive maintenance is growing in interest and they're going to need help understanding how that all is calculated and how what kind of standards are around that, that there's consistency. And then lastly just really better training and understanding what all of this, you know, how to use this equipment, how to clean it, what are the cleaning protocols, what specific equipment capabilities can they use to reduce contamination and again being redundant but using the HMI is a really valuable training tool. And we did hear in the industry the unknown is something in the meat poultry seafood that does when we talk about keep people awake at night. It's the unforeseen bacteria that is potentially out there, that how do we prevent against it, how do companies even, you know, understand what could plague their meat poultry seafood animals that could then be seen as the food chain begins to move through the processing and packaging that they just don't know about. It's, you know, certainly nothing to be answered, it's just a great concern that if they've taken care of one bacteria, if Listeria is out of their plant, what's the next bacteria that could move into their facility? And as I mentioned, downloading the full report, I highly encourage it. It's packed full of information, really looking more at the advancements in packaging. It looks closer at the equipment procurement, what's needed, where are they increasing, specifically by machine regulations and standards. Again, we talked about this, but it's covered in more detail what some of the regulating industries and regulating bodies are that regulate this industry and then how and what is the impact on manufacturing. In the full report, all the references and sources that have been used as secondary research are cited and listed in the full report. So that brings us to the conclusion today. I do thank you for attending. Also keep in mind that the PMMI Media Group has many different playbooks that pertain to this industry on food safety, specifically end-of-the-line equipment, packaging development and labeling, and are always a good resource for additional information in this industry. Rebecca, I'll turn this back over to you to see are there any questions or comments that we can address here before we include our presentation. Donna, thank you for the insights that you've provided on this latest report on trends shaping the meat poultry and seafood industries. We do have one question so far coming from the audience, from the attendees. Wondering if you could speak about some of the sanitation approval agencies that are currently out there. I'm assuming that the question is asking beyond just the FDA and USDA and SQF is another one of the regulators in that industry. I'm not positive. I understand that question, Rebecca. Sanitation approval agencies is not something we looked into. I would assume they're talking about agencies that are coming in and approving their sanitation processes. I would assume that would be from our experience and from what we've heard FDA and USDA are certainly working much closer together in this industry to enforce compliance with regulations and standards because in this industry particularly what's occurring is a meat processor might also be making soup in their facility. So that would fall under both FDA and USDA guidelines. So the industry is changing in that they could have more than one regulatory body looking and overseeing their operations. Okay, and what I'm going to do is just kind of give a couple minutes to see if there's any other questions that are coming through. So we'll give a moment for that. Yeah, I think you've got one more here. We do have a question about there being any PMMI documents governing what sanitary standards should be met for this industry in the form of a benchmarking report of some sort and how to design or construct facilities against, let's see, for this industry. This question I can actually email the questioner about this with anything that PMMI has currently, we're currently offering to answer this question. Yeah, I'm sure there are. We didn't cite it in our last slide here, but very good question. And again, if you have any questions, please feel free to leave them in the text box in the bottom portion of your screen. Now I would add, Rebecca, that as you bring this information back to the people in your company, if there are questions that arise after you've looked at this webinar again or you're reviewing the full report, you certainly can get back to Rebecca or Paula with any questions you have specifically and we can address them as quickly as possible. Absolutely. There is a question. I did mention there is a PMMI automation report that I did mention at the beginning. That report is scheduled. I don't know if I can exactly answer that. It will be completed and ready for review by the Intelligence Committee in the next week or two, and then shortly after that, that report I'm assuming will be released. It will be discussed at PAC Expo Las Vegas, so that that report is in the next couple of weeks I think we'd be safe to say that. That report is actually scheduled to be released right around the show. Okay. And if there are any other questions, please feel free to leave them in the bottom of the text box located at the bottom of your screen. And there's one specifically there to be notified when that will be discussed at the show, so you could answer that directly offline, Rebecca. Yes, absolutely. Okay. Well, I don't think we have any other questions, so I think we can conclude here. On behalf of PMMI, thank you to everyone for participating in today's webinar. As a final note, you will receive an email to complete an evaluation for today's webinar. Please complete the evaluation as soon as possible and let us know how we can improve our webinars in the future. And again, Donna, thank you so much, and we can conclude our webinar here. Thank you very much, everyone. Have a good day.