STATEMENT OF RALPH H. COLE, OF NEBRASKA

Due to the low level of livestock prices during the closing months of 1955, there developed a keen interest in the possibilities of advertising and promotion of the sale of meat. Gov. Victor E. Anderson, of Nebraska, appointed a farm products study committee of 13 members, whose first assignment was to study the problem and make recommendations.

A similar committee in lowa was already functioning, and Governors Anderson and Hoegh arranged a joint meeting of the two committees in Omaha in February 1956 at which plans were made for cooperative action. It was suggested at this meeting that a poll be taken in each of two important livestock-producing counties in each State, to determine the reaction of livestock producers toward the voluntary deduction of a nominal amount from the proceeds of each head of livestock sold, for the purpose of advertising and promotion. The amounts suggested were 10 cents per head on cattle, 5 cents on hogs, and 5 cents on sheep. The results of the poll in Iowa were slightly over 80 percent in favor of the voluntary checkoff and in the Nebraska counties approximately 65 percent in favor of the checkoff.

Following these activities two national meetings were held, one in Omaho and one in Des Moines, resulting in the formation of a group called the National Livestock Promotion Board.

These meetings were attended by representatives of the National Beef Council, National Swine Council, National Sheep Council, National Livestock and Meat Board, and a number of feeder groups.

The National Livestock Promotion Board has continued to work toward the development of a program which will enable livestock producers to join together in a common effort to advertise and promote the finished product-meat. The proposed legislation which you are considering here is an outgrowth of the work of this board.

On February 15, 1957, Dr. Herrell DeGraff, Babcock professor of food economics at Cornell University, addressed the National Farm Institute at Des Moines, Iowa, on the subject "Methods of Expanding Demand-Market Promotion." Dr. DeGraff's talk is a splendid analysis of the need for and the soundness of a program to advertise and promote meat. Dr. DeGraff's address is attached for your information.

There is also attached a copy of a program recommended by the Nebraska Farm Products Study Committee in May 1956.

METHODS OF EXPANDING DEMANDS-MARKET PROMOTION

By Herrell DeGraff, Babcock Professor of Food Economics, Cornell University, presented at the National Farm Institute, Des Moines, Iowa, February 15, 1957 A year ago last summer I was asked to discuss this topic at the annual meeting of the American Farm Economic Association. I do not know whether that bad any bearing on the invitation to participate here today. What I said on that previous occasion represented all I knew then about the subject-if not, indeed, somewhat more. I have found little reason since to modify my views, and in consequence cannot do much more today than to repeat some of what I said then. We live in an economy that is much influenced and that has been much modified by sales promotion. As consumers in this economy we have been sold automobiles-in endless new models-radio, television, numberless gadgets and services developed by people who are always dreaming up something new that they are sure all of us need. The offspring of their inventiveness have been sold to the rest of us to satisfy "wants" that we did not know we had.

This process, however, points up a very important fact. It is that an expanding economic society, with rising productivity per person and rising levels of living, goes forward not on producing ever-increasing per capita supplies of traditional things. Rather, such a society, actually is characterized by the development and production of new goods and services designed to satisfy newly created wants. Basically this is what underlies the declining relative importance of agriculture in our increasingly industrialized society.

In such a society salesmanship rises to eminence. The further any society advances beyond subsistence, the greater is its capacity (1) to divert productive resources to new products and new services; and (2) to indulge frivolous whims

in consumption. Certainly if we now were to look at ourselves with a good, puritanical conscience, we would have to conclude that a considerable part of our present American level of living is pure frivolity. That this is true is a tribute to salesmanship.

Salesmanship is a dominant factor in creating demand. Much more than most of us would acknowledge, we are molded by salesmanship. We may pride ourselves on our capacity to sort out self-serving appeals to our pocketbooks. But we still fall for whomever peaks our curiosity, stimulates our imagination, and ends up creating a "want" in our minds where this particular "want" did not previously exist.

I do not mean that I consider myself and my fellow citizens to be economically irrational. The point is that human wants are insatiable-not for the essentials of life, but completely so for the frivolous things.

In a market where consumer spending power is very limited-that is where all capacity to spend is absorbed by the essentials of living-little gain is to be expected from aggressive selling behind any product. But exactly the opposite is true in a society like our own, where the capacity for what we might call discretionary spending is very large.

Over the years in this country, the essentials of living have required progressively less and less of our productive efforts. More frivolous things have correspondingly absorbed more and more of our total expenditures. Again let me emphasize that this is the kind of an environment in which salesmanship becomes a primary economic function.

In this kind of environment, advertising and merchandising-the sum of which is sales promotion-become an important part of selling. They are salesmen's tools. Their purpose is first, through advertising, to tell what is available, what are its characteristics and values, and why the prospective purchasers would find satisfaction in the product. Second, if it is good sales promotion, it includes the merchandising activities carried on somewhat closer to the prospective purchaser, that follow up on the advertising and convert a mere interest into an actual sale.

Advertising and merchandising have become notably useful sales tools in a market as large and diverse as that with which we have to deal in the United States. To reach this mass market, it is necessary to use mass selling media. How else can anyone reach 170 million people spread over 3 million square miles. This does not mean that salesmen have been displaced. They still have the sales-clinching job to do. But their job is made easier by the rise of mass methods of communicating with potential customers and stimulating their interest. Thus advertising and merchandising are successful tools only when used in a sequence, that follows all the way through from mere interest-getting to a completed sale. They are tools in selling, but only tools. They do not automatically assure sales. They are useful because our market is so wide and diverse that primary personal contact is otherwise diflicult to establish. They work because unlike the economic models of earlier theorists, the market is composed of consumers whose knowledge is not perfect and whose demands are highly subject to influence.

In such a market, aggressive selling may function so well as actually to affect the demand schedule of the public-in other words, to cause them to take more of a product or a service at a given price. Another goal of aggressive selling is to increase the elasticity of the demand for a product-resulting in a greater sales response whenever the price may be lowered.

Through changing the charactertistics of demand, it becomes possible that competition in the market does not need to concentrate solely on price. Rather, at least in part, it can center on service and convenience, or on emotional appeals. or on doubtful propaganda, or-more desirably-on highly ethical efforts to educate consumers toward product values. All these techniques are used in promotional efforts, because in one situation or another, each one has successfully boosted sales. All of them will continue to be used, because in this extremely competitive market in which we all operate no stone can be left unturned by the producer who would successfully appeal for consumers' spending.

No other national group at any time or place in history ever attained the level of purchasing power-and especially the capacity for discretionary spending (or alternative spending the money that can go one way or another) that now rests with the American public. But that is only half the story. Among sellers the competition for this spending is equally great. It is the kind of market in which the producer who tells his sales story most effectively-and follows

through on his sales effort all the way to the actual consumer-is the one who gets the business. It is pointless to argue that people are gullible and often get less total satisfaction for their money than they might get. Desires ("wants") are individual, and in our present economic society are more acquired than they are inherent. And both the desires and the satisfactions of them stem largely

from selling.

I do not think that food selling is essentially different from other products. Food is, of course, more necessary-far less frivolous and less luxurious than many other consumption goods. But this is much more true for the ag gregate of all foods than it is of individual foods. In our highly diverse diet there is a great potential for substitution-and consequently, an equal potential for successful aggressive selling. In other words this is a setting in which the producers and processors of any one food can expand their market—at least relative to other foods-by effective promotion.

Someone might argue that the food market is so different from the market for many other products that it makes aggressive selling self-defeating when looked at from the point of view of all farmers and all food handlers. What one might gain, it could be argued, others would lose. Granting for the moment that this is true, I would argue that it is meaningless--or at most, an academic point. The aggregate of all farmers is meaningless-for the simple reason that agriculture is not one single business unit. It is about 2 million commercial farms about 2 million business units-producing many different commodities. Commodities that may be substituted one for another are competitive and the producers of each such commodity are striving to improve their own place in the market, to increase their own share of the consumer's food dollar. And the same is just as true of food processors as it is of food producers. As long as farms are specialized-and they are becoming more specialized instead of less-the economic facts of life will be more that different groups of farmers are strongly competitive than that all of agriculture is one big happy family, all with the same interests. The interests of different groups of farmers are not the same they are competitive. And in this setting, aggressive selling serves their competitive interests.

Next I would like to emphasize that the total market for food is expandable. More than a decade ago, Dr. H. E. Babcock, lifetime farmer, educator, and agricultural statesman, very clearly and forcefully called attention to this fact. He refused to accept the 40-ounce capacity of the human stomach-even when multiplied by 170 million people (170 million such stomachs) as a measure of the market available to farmers. He recognized that however diligently we may try, we cannot expect to sell more pounds of food per day or per year to most individual American consumers. For as long as we have records-nearly 50 years the consumption of food per person in the United States has varied only slightly from an annual figure of 1,530 pounds. But still the 40-ounce size of the stomach is not the measure of our market. The reason is that the compo sition of the American diet can be changed even though the pounds of food consumed per person cannot.

American farmers need more market. They are getting this in part through the growth of our population. But rapid as the increase is compared to what it was a few years ago, it is not enough to give us the market we need. My interest in food promotion is to enable us to develop additional market. In order to do this we have to find out how, and on what, to concentrate our sales promotion in order to achieve the market expansion we need.

The fundamental question is this. Can we expand the use of agricultural resources per capita, even if we cannot expand the pounds of food consumed per capita? That is, can we get each person (or a significant fraction) to consume the product of slightly more agricultural resources? I think we can-and the answer is an expanded per capita consumption of livestock products.

The average pound of meat from our flocks and herds of livestock requires feed equal to between 7 and 8 pounds of corn. On an overall basis, the land area that would support 7 persons on a 100-percent plant-product diet would support only one person on a 100-percent animal-product diet. The total crop harvests of the United States would maintain at least 500 million people (3) times our present population) on a wholly plant-product diet, and less than 70 million (or only 40 percent of our present population) on a wholly animalproduct diet.

Apparently few people understand this power of livestock to convert and concentrate crops into much reduced quantities of more nutritious and more desirable foods. But this is one of the luxuries of life that the American people can abundantly afford-and we are not making quite as much use of this con

verting and shrinking power as we might. We are said to be producing 4 or 5 percent more per year than can be sold at reasonable prices. Another way of saying it is that each year we are producing at a rate that would be adequate for the population 2 years hence. In 1956 we produced enough for the prospective population of 1958. In 1957 we are most likely to turn out enough for the population of 1959. What we need is the product of about 2 percent more agricultural resources consumed per person. How to get it is easy to state-it is about 2 percent more livestock products consumed per person-without a decrease in prices received by producers.

One great force we have working with us. It is that consumers themselves want exactly the kind of improved diet we are talking about, and that would use a little more resources per person. Improvement in the American diet has expanded the market for United States farm production in the last 20 years much more than is generally realized. From 1938 to 1957 our population increased 30 percent. What this has meant to our markets is obvious. The improvement in diet that we already have experienced, has not been as well understood.

From 1935-39 to 1956 per capita consumption of red meat increased 30.5 percent; eggs, 23.3 percent; and poultry meat 88.2 percent.

An enormous quantity of additional feed-additional market for United States crop production-is represented by the much-expanded output of livestock products which has provided both for the increase in population and these increases in per-capita consumption. The question is, how much?

In this 20-year period, feed conversion efficiency has been improved in greater or lesser degree for each type of livestock. These improvements have been considered in calculating the quantities of feed used.

In the 5 prewar years, 1935-39, the annual consumption of all feeds utilized in the production of beef, pork, poultry meat, and eggs was 213.5 billion pounds of corn equivalent. In 1956, the total was 365.3 billion pounds of corn equivalent or an increase of 71 percent above prewar.

In other words, the expanded market for farm crops represented by the increased consumption of meat and eggs per person was considerably more important than was the growth in population.

Dr. Babcock was right-the market is not measured just by the number of stomachs. Instead, it is the number of stomachs adjusted either plus or minus for what we put into them. More persons-more stomachs-fed on plant products might be a smaller market. More persons fed an even larger proportion of meat, eggs, and milk result in a much larger market.

American consumers have bought their improved diet-these sharply increased quantities of meat and eggs-without anything like a corresponding decrease in the retail price of livestock products. What is the explanation? Is it nutrition education? Is it increasing recognition of the joy of good eating? Is it the result of the food promotion work that has been done by the food industries, such as the meat advertising of the American Meat Institute, and by producer groups, such as promotional work of the National Livestock and Meat Board, Poultry and Egg National Board, and the American Dairy Association. If anyone wants to concede effectiveness and given credit for the gains to such proportional work, then promotion already is a proven success. If anyone wants to go to the other extreme and withhold any credit from such efforts, then at the very least we have consumers proven to be ready to go along with us toward our promotional goals as proven by their own purchases in the market places.

Fifty percent of the pounds of food in the average American diet are now livestock products. But it isn't quite enough to give us the market we need. Two percent livestock products per capita would give us a balance between total farm production and total consumption. Three or 4 percent more would give us a significant lift to all farm prices.

To attain either goal requires the stimulation of a further substitution of animal products for plant products. It means shifting demand schedules for livestock products so that larger quantities will be bought at a given price.

Here, then, is the place to concentrate sales promotion that can really serve the needs of American farmers. I think the goal of a continuing expanded market for the full production of our farms and ranches can be achieved only by aggressive educational programs and sales promotion, concentrated on the products for which the market is most expansible-that means on the livestock products.

A variety of appeals can be used for the larger share of Mrs. Homemaker's dollar that we are trying to get. Health angles, the enjoyment of eating, and gracious living are potent appeals, but probably not the only ones. It is a large

and complex job that must be done because Mrs. Homemaker is not easily moved when price is not the basis of appeal.

Yet the competitive bidding for the consumer's dollar is so intense that agriculture certainly cannot ignore it amid all the appeals for enticing but frivolous things. And it seems to me unnecessarily fatalistic to gain sales only through price declines.

One of the first lessons taught me by the first sales manager I ever worked under was that anyone can give things away, but it takes work, and imagination, and aggressive promotion to really sell. That lesson was learned in the 1930's. It applies equally in any competitive market-and agriculture has the most competitive market it has ever seen yet. The promise for the future is only that it will be more competitive still. In this kind of market you will or you sink.

A NATIONAL PROGRAM TO ADVERTISE AND PROMOTE MEAT

Suggestions and recommendations of the Nebraska Farm Products Study Committee in session at the Hotel Cornhusker, Lincoln, Neb., April 24, 1956

The States of Iowa and Nebraska have worked very closely in the effort to develop a nationwide program to advertise meat, supported by voluntary contributions of producers. In this undertaking they have had the support and close cooperation of existing livestock agencies.

The National Beef Council, the National Swine Council, the National Sheep Council, State and regional feeder organizations, and others have cooperated fully toward the common objective of restoring the livestock industry to a profitable basis. All these groups are working together closely in developing plans for, and in the conduct of, the Meat Promotion Conference to be held at the Kirkwood Hotel in Des Moines, Iowa, on Thursday, April 26.

Certain basic principles have evolved during the months of study, discussion, and factfinding devoted to this program. They include the following:

(1) The program should be voluntary.
(2) It should be financed by producers.

(3) It should be controlled by producers.

(4) Funds should be expended in accordance with their source. That is:

(a) Money raised from sale of cattle should, in the main, be used to advertise and promote beef.

(b) Money raised from sale of hogs should be used mainly to promote pork.

(c) Money raised from sale of sheep products should be used mainly to promote mutton and lamb.

Development of the program on a working basis involves the working out of a number of problems. This process will take time and will require much effort and patience. It will require a certain amount of compromising, of “give and take," before we come out with a final program which will be sound, efficient, effective, and fair to all the participating groups.

It has seemed to the Nebraska group that the most important job in the development of the entire program is that of evolving a sound, efficient, dependable organization to handle the funds and administer the program.

There has been suggested the formation of a National Livestock Council. This suggestion appears to have merit. There are a number of ways in which such a council might be formed. One approach would be to authorize 1 swine representative from each of the top 20 (or 25) hog-producing States, and 1 cattle representative from each of the top 20 (or 25) cattle-producing States, these representatives to constitute the board of directors of the National Livestock Council. Appropriate representation should also be provided for sheep producers when they decide to participate in the program.

If desired to give representation to the States with less volume of livestock production, some method of grouped representation might be worked out.

It seems advisable, also, to give direct representation on the board to the National Beef Council and the National Swine Council. It is suggested that five directors at large be chosen by each of these two organizations to serve as a part of the board of directors of the National Livestock Council. Further representation of livestock feeder associations may also be provided, as well as appropriate representation of the national sheep and wool organizations.