REPRESENTING AUSTRALIAN SHEEP PRODUCERS Graham Smith, CEO C ONTENTS - - PowerPoint PPT Presentation

REPRESENTING AUSTRALIAN SHEEP PRODUCERS Graham Smith, CEO

CONTENTS

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• Background on Sheep Producers Australia (SPA)?
• Major SPA projects and activities
• Some national Industry & SPA challenges
• Observations from recent trips to the Gulf States, Middle East &

America

SHEEP PRODUCERS AUSTRALIA

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• SPA is the Prescribed Body for the

sheepmeat industry in Australia within the Red Meat Industry MoU, under the Australian Meat and Livestock Act 1997

• As the recognised peak body for the

sheepmeat industry under the Act, SPA sets the strategic objectives to be pursued by the levy funded

• rganisations and examines and

approves their programs and budgets.

Animal Health Australia Meat and Livestock Australia National Residue Survey

PURPOSE OF SHEEP PRODUCERS AUSTRALIA

SPA’s purpose is to provide national representation and leadership for Australian sheep meat producers. This is achieved through wide and regular consultation with key industry organisations, relevant Federal Government Departments and other bodies regarding issues of national and international importance to the sheep meat and live sheep export sectors.

OUR VOICE….

Structure and Policy Development

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OUR VOICE….

Role of Sheep Producers Australia

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Scrutiny of levy investment Policy development Advocacy

OUR VOICE….

SPA Priority Pillars

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Improving Sheep Health and Welfare Securing Markets Guaranteeing Product Integrity Driving Innovation Influencing Business Outcomes Building Industry Leadership

NATIONAL INDUSTRY STRUCTURE!

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Deliv livery ery / Operati erations

• ns

Poli licy cy / Strateg trategy

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State te Farmi ming ng Organ rganisa sation tions s / Producer

• ducers

National Residue Survey

RECENT SPA PROJECTS

• Red Meat MoU
• Australian Red Meat Industry

Strategic Plan (MISP)

• Australian Agri R & D capabilities
• Live Sheep Exports
• Lamb Definition changes
• Sheep Traceability
• Future of national Sheep Industry

Representation

• Bio-Security (incl RBP)
• Sheep Sustainability Framework
• Sheep Leadership Network
• Lamb Survivability
• SPA Board Selection project
• Melbourne Policy Meeting
• Trips to the Middle-East & America

SOME CONTENTIOUS SHEEP INDUSTRY CHALLENGES

• National Industry

Representation & Direction

• Drought
• Supply of Animals to Processors
• Live Sheep Exports
• Animal Health & Welfare,

including Mulesing

• Sheep Feedlots
• Traceability
• Level of Industry R & D and

Product Development intensity

• Biosecurity

VISIT TO THE GULF STATES & MIDDLE EAST

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Objectives were:

• 1. Engage and understand first-hand the current situation of

Australia’s live sheep export trade within major Middle-East markets. NOTE: About 1.2 million sheep exported in 2018. The largest Australian markets in the region (by volume) are:

• Kuwait (34%)
• Qatar (33%)
• Jordan (10%).
• 2. Begin to determine what the Australian sheep industry needs

to focus on in the next 5+ years to maintain and grow its market share and revenue

TRIP TO THE MIDDLE-EAST

BACKGROUND

• Most red meat is imported into the region from at least 10
• countries. Australian product is well regarded & represented
• All markets sell a mixture of Live Sheep (locally slaughtered),

Chilled portions and Carcass meat. Volumes within each sector depend on the size, sophistication and prevalence of western cooking styles in the market

• There are long traditions, religious beliefs and behaviours

associated with meat. This underpins how it is bought & consumed (very different to the average Australian)

• e.g. many like to choose their animal to slaughter (increasingly
• n an App), visit a processor to see via a viewing room

DIFFERENT VALUES AND EXPECTATIONS

GULF STATES & MIDDLE EAST

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• Great cultural, economic and market diversity, with meat

consumption underpinning diets

• Chicken is dominant, followed by beef and lamb (in UAE

seafood is second only to chicken)

• Traditionally an animal was killed & eaten quickly due to a lack
• f refrigeration in a harsh climate. This is changing
• Markets are evolving, with large sophisticated supermarkets in

the Gulf States and growing in Jordan. The Live Export trade has fallen as a percentage of all sheepmeat imports & it appears this will continue in the years ahead

• Food security and continuity are “top of mind” in all countries
• Significant markets for Chilled, Frozen and Live Animals

Australian Sheep at a Dubai Feedlot

MAJOR MARKET SEGMENTS

• 1. Supermarkets and supermarket butchers: Dominant in the Gulf

States and growing in Jordan. Core buyers are middle-upper class local Arabs, and western ex-pats

• 2. Traditional Wet Markets: Not as strong as they once were, but still

important to many local people and large numbers of foreign workers, generally doing manual jobs. Very price sensitive, more so than quality. Many believe these markets provide the freshest & safest meat

• 3. Viewing Chain/supervised slaughter: Live animals are selected whole

and then slaughtered under direction to specification

• 4. Butcher shops: Both high end and traditional shops. A mix of chilled

carcass, chilled portion and locally slaughtered. Some are embedded within a supermarket.

• On-line sales: Appears to be very small at present, but growing

A Modern Supermarket

GULF STATES & MIDDLE EAST

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• Australian live sheep exports have been traditionally been very

important in ensuring high quality supply & product

• Australia is perceived as being in the “A league” (well

regarded), as is New Zealand, at the quality end of the market

• Due to interrupted supplies of live sheep from Australia,

importers are turning to other countries (losing market share)

• Australia’s major live sheep competitors include; Somalia,

Sudan, India, Romania & South Africa (although seasonal)

• Australia is seen as the country best able to consistently supply

the volumes and high quality required

GULF STATES & MIDDLE EAST CONT…….

• Meat and Livestock Australia (MLA) have a very important role

to play, with excellent “on the ground” capabilities, (essential). This includes; relationship building, technical assistance and training to Importers and Processors

• MLA Marketing programmes have also stimulated demand for

Australian products in an increasingly competitive environment

• Live Exports will remain a significant segment in all of the

countries visited for many years due to the supply chain being less sophisticated (than what we are used to in Australia)

GULF STATES & MIDDLE EAST CONT…….

• Younger, more affluent

people are prepared to buy packaged cuts of meat without supervised slaughter, including prepacked meat from the supermarket shelf

• Supermarkets are also taking

the place of the traditional markets, by offering over-the

• counter full carcass meat

sales from supermarkets

Modern Processing Facility

GULF STATES & MIDDLE EAST CONT……. But:

• Australia needs to leverage its market position gained from a

long history of trading Live Sheep exports & think more about new Sales Channels & Marketing

• Who are potentially the key customers within each of the
• channels. How are they changing? What do they want & how

do we supply greater margin products and services?

• Given the rise of better educated millennials & changing diets

across the region, value added chilled products are likely to grow in volume

Processing Facility-with viewing room!

THE CHALLENGE

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The markets in the Gulf States and Middle-East are changing. The challenge for Western Australia (& SA to a lesser extent) is to supply greater volumes of chilled and frozen products and to further develop processing capabilities and change flock structures to capitalise on these changes. But:

• Can this be done economically & at good prices?
• Will processing capacity increase?
• Will increased uncertainty drive more farmers away from

sheep?

• Can transport and supply-chains cope commercially?
• What type of transitional period will be required to get a better

balance between Live Exports, Chilled and Frozen?

SPA AMERICAN TRIP Accounts for 50% of total American beef production And consumers perceive that its healthy!

Major American Meat Sales

Strategic Context

• The Australian Red Meat sector has done incredibly well in

recent decades to export $13b, or approx. 60% of what it produces to overseas customers

• This has a significant (positive) impact on our domestic cost

structures, capabilities & investments

• America is our most profitable market (just, with China rapidly

catching). In 2018 the US bought approx. $1.5b in beef (40% grounded beef for hamburgers) & $800m in lamb/mutton But, will Australia be able to maintain its American red meat revenue streams at similar or greater levels in the future?

Global Markets for Australian Red Meat & Livestock

Source: HIS Market, Global Trade Atlas

The Big Lessons

• We are part of a global Food Industry: We are not just farmers. We

are part of an increasingly global food value chain dominated by multi-national food companies and some retailers

• Australian exports to America are vulnerable: We are the major

red meat exporter into a $80b American market, with over $1.5b in beef & $800m of lamb/mutton. But we don’t sell to many customers

• Competitive advantage at Risk: Feedback from several major retail

red meat buyers highlighted that they saw Australia’s “competitive advantage” as; reasonable volume, reasonable quality & reasonable

• prices. Is this a sustainably competitive position ?
• A lack of well known consumer brands: Australian companies don’t

appear to have many established or leading consumer facing food brands

2019- Major Australian Meat Customers by Sector in America

Beef

Supermarkets account for about 60% of all American beef sales

• Wholefoods Supermarkets

Foodservice (mainly restaurants) accounts for approx. 40% of all US sales

• McDonalds
• Burger King
• Chipotle

McDonalds & Burger King collectively account for about 60% of Australian beef sales

Lamb

Foodservice accounts for approx. 60% of total American lamb sales

• Roti
• Cava
• Darden

Supermarkets are about 40% of total US lamb sales

• Costco
• Safeway
• Giant
• Publix

On-line Sales (very small, but growing quickly)

• Amazon
• Fresh Direct

Costco buys the most Australian lamb

American Millennials-now the largest purchasing group Do we engage and understand them enough?

The Big Lessons-Plant Based Meats Going Mainstream

• Noel White, the President and Chief Executive of America’s

largest meat company, Tyson Foods, stated on the 14th February, 2019 that: “Tyson is using all its resources to make “great tasting protein alternatives that are more accessible to everyone.”

• Nestle will launch its “Incredible burger” this year
• From meeting with Impossible Foods, they will launch their

first steak product during the later half of 2019, followed by chicken and pork products in 2020

• “Cell” based meats are likely to be launched by companies

before 2025

The Big Lessons

• Technology is accelerating new products & services cont.

Start-ups are accelerating food value chain disruption, e.g. ➢ All Things Bugs (funded by Bill Gates) for new insect based food ingredients ➢Perfect Day: Applying gene sequencing & 3D printing to develop milk without the cow ➢Memphis Meats producing meat from animal cells Some estimates suggest alternative milks in the last 10 years have achieved about 15% market share in some advanced

• economies. Will alternative proteins do the same to the meat

Industry?

Are we effectively plugging into these Innovation networks?

The Big Lessons

• Americans don’t eat lamb: Apart from “European” or “Middle-

Eastern” Americans, they don’t know lamb (less than 0.5 kg’s) per person; generally assume its American, & for those that have tried Australian lamb, its “too strong in flavour”.

• Australian Lamb: A real Opportunity: Over half of lamb

consumed in the US is in the food service sector (restaurants), where higher prices & margins often prevail. Its also where many Americans get their first taste of lamb

• We visited Sysco (a US$50b food service company). They are

looking for new lamb products and serving suggestions

• This provides Australian companies will a real upside, although

it will be expensive to develop the market (e.g. do more with mid sized food service companies & mid range cities)

Convenience is a Key Driver

Australia is vulnerable

• Millennials are increasingly driving purchasing decisions. Do we

understand them (in an American context)?

• Our Red Meat sales are to a small number of American

customers, with relatively low value products (grounded beef). The burger market is growing & Australia is facing increased competition from American supplies, Brazil, Argentina and new technologies (plant & cell based meats)

• Our competitive advantage appears to be based on: reasonable

quantity; reasonable quality & reasonable prices

• Is this sustainable? Can we be a major commodity player in this

market, or do we need to become a nimble, niche, value added export sector to America?

• Do we increasingly have to sell meat like the wine Industry has

for decades (different taste profiles, different regions, all telling their story)!

What has SPA done since the American Trip?

• SPA presentations to interested groups
• SPA workshops with MLA’s international

team (IBM’s)

• Discussion with MLA (who have excellent
• n the ground international capabilities)
• n whether additional “account

management” resources are required in Australia to engage with the local Industry & be a bridge to the IBM’s

• Discussions with key Australian exporters
• Feeding SPA insights into the Meat

Industry Strategic Plan

STAY IN TOUCH

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Keep up-to-date with the latest from Sheep Producers on social media! Twitter: @SheepProducers Facebook: www.facebook.com/SheepProducers Graham Smith: gsmith@sheepproducers.com.au