The days of bemoaning our meat exporters’ lack of flexibility when everything was exported as frozen carcases are now a distant memory. Even the days of growing the profitable chilled lamb business without upsetting the EU authorities are receding into the distant past, as meat marketers cope with the complexities of marketing to previously time poor, technologically sophisticated consumers around the world now living in lockdown without ready access to restaurants.
AFFCO Group Sales and Marketing Manager, Mark de Lautour, sees the Covid-19 pandemic as a critical point in time which will result in a permanent shift in buying habits, placing huge emphasis on further processing capacity and weight ranging capability. He sees online as a distinct buying channel where consumers will not seek individually branded products, but a home solution delivered to the door. A local example of this trend is Auckland based Hyper Meat which offers three meat packs for home delivery at different price points, all at specific weights, as well as a range of wines and other beverages.
Meanwhile meat exporters have to think outside the box to find markets and customers for products, previously sold to food service customers, which would traditionally have found willing homes at a guaranteed price. Rick Walker, ANZCO’s General Manager Sales and Marketing, says his company has found Chinese retail buyers willing to take some of the higher value cuts, while food service is also on the way back, albeit working through an inventory backlog. Ultimately there will be pressure on the carcase return which will have to be reflected in the schedule.
Viewed simply, meat sales have always gone either through retail or food service with online or e-commerce growing from a small base; each requires a tailored product presentation which makes it difficult to divert at short notice from one to another. Each market has a different composition – for example the UK lamb market is approximately 75% retail (legs particularly), 20% food service and 5% online, whereas the EU is fairly evenly split between retail and food service, but the USA is almost the opposite of the UK market. Beef sales are about 60% food service, 35% retail and 5% online, reflecting the high proportion of manufacturing beef from the dairy herd. The growth of the online segment will command a lot of attention when the world eventually settles down to a new normal.
New Zealand’s meat exporters are fortunate to some extent because of the time of year for the pandemic disruption and shape of the season with cull cows coming through in large volumes, at a time when there is plenty of demand for commodity product in the USA with consumers keen to eat hamburgers rather than cook expensive cuts at home.
With Chinese beef prices coming under pressure, because buyers know there aren’t any higher paying alternatives, AFFCO’s strategy is to divert as much product as possible to the American market in the hope of starving China for a time. A sharp decline in the amount of lambs being processed currently, although a problem for farmers, is positive for market returns. Another positive factor may be China’s recently announced ban on red meat exports from four Australian meat plants which flags the deteriorating relationship between the two countries. China currently takes more than 18% of Australian meat exports.
Food service demand has collapsed worldwide as a result of restaurants closing, some for good, others having to trade with substantial restrictions on customer numbers and inevitably higher costs. Only time will tell how quickly and how far this type of business will recover, but even when it does, there will be significant frozen inventory to work through before more traditional demand returns.
The products most affected are French racks, tenderloins, striploins and ribeye, but the volume and price obtainable for these cuts through retail will not match foodservice. Alternative processing options, such as a six way cut, offer the chance to reduce labour content and retain flexibility.
In future meat must increasingly be sold in specifically weight ranged retail formats at identical prices, not dollars per kilo. In the present environment de Lautour maintains online sales would have doubled except for the limitation of weight ranging capacity.
Alliance Group’s marketing head, Shane Kingston, notes the company is seeing signs of stabilisation of food service business in Asia, except for Japan and Singapore, but also confirms the rest of the world remains in lockdown. Other than middle and loin cuts, Alliance is not having any difficulty selling the rest of the animal, but the diversion of product from food service to retail puts downward pressure on price which on average is slightly below this time last year, although further erosion is inevitable. Kingston takes confidence from Alliance’s early problem identification and action at the first sign of Chinese demand falling in December, its agility in the face of the challenges and its strong partnerships in key markets.
Flexibility, agility and willingness to innovate neatly sum up the response of New Zealand’s red meat exporters to turbulent and unpredictable trading conditions. When the market settles down again, it will not be exactly how it was before, but the marketers will be ready to respond to whatever new normal presents itself.
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