Comment: Little impact on trade from M&S Scotland decision to drop NZ lamb

There will be little impact on New Zealand lamb exports to the UK as a result of a decision by British retail giant Marks and Spencer (M&S) to drop New Zealand lamb from its Scottish stores, but it does show the importance of maintaining trade contacts.

News filtered through last week from the UK that M&S had announced that it will be dropping New Zealand  lamb from its Scottish stores, through not switching into New Zealand product at the end of the British season as usual.

The well received announcement was made at the Farm Stock Lamb Supply Chain Conference held on 5 October at Murrayfield by Steve McLean M&S head of agriculture and fisheries, a familiar meat buying figure in New Zealand over the years.

New Zealand lamb has been a stable fixture on M&S shelves to ensure consistency of quality and supply for the store’s customers throughout Britain, but it seems the company has bowed to pressure from Scottish sheepmeat marketing bodies and the National Sheep Association.

McLean warned the conference, however, that in order to ensure consistency of supply, the Scottish supplier will need to hit target specifications.

“We find 15-18 percent of (Scottish) lambs arrive too heavy and are therefore out of spec. The fact is simply that is a lamb is too big it won’t fit in the retail packs,” he said, adding that the company is working to attract younger customers to the product through promoting innovative products, such as lamb lollipops and lamb kebabs.

As New Zealand suppliers know only too well, consistent tenderness will be another demand from the sophisticated food retailer, particularly at the end of the British season. Another concern for all producers is maintaining the presence of lamb on the supermarket shelves year round so consumers do not turn away to other proteins.

Beef + Lamb NZ chairman James Parsons, who was over in the UK and Continental Europe meeting with farming counterparts to discuss areas of common interest including lamb consumption and maintaining  year-round supply for European consumers, had already spoken at the conference on the realities of the New Zealand lamb chain. He told delegates of the halving of the national ewe flock since 1990, the rise of dairy and increasing efficiency.  This means that  nine percent less lamb is produced from 47 percent less ewes, he said.

He has said since he was disappointed at the announcement, but that M&S Scotland – which would account for a small number of the retailer’s 914 UK stores – only imported a small number of lambs from New Zealand affecting perhaps 10-12 New Zealand farms.

Alliance Group has an exclusive contract to supply lamb with M&S. Its general manager marketing Murray Brown confirmed the minimal impact. He says the decision represents a minimal reduction in a small account for the cooperative, accounting for less than two percent of its chilled business in the UK.

“This volume will be comfortably replaced within our current UK market partners. As New Zealand’s largest lamb processor and customers in more than 65 countries, we have the scale and expertise to manage any variations in volumes.”

The M&S Scotland announcement is a relatively small blow in the scheme of things, but is it a harbinger of things to come?

New Zealand lamb has had a place on the British people’s plates for over 134 years, since the first shipment of New Zealand lamb to Britain, and the UK is still a very important market for New Zealand sheepmeat which fills the seasonal gaps in British production.  Meat Industry Association analysis of Statistics NZ figures at the year ending June 2016, show that 69,046 tonnes of sheepmeat worth $564.6 million was exported to the UK over the period, putting  it second only to China.  The majority is frozen New Zealand lamb, but it remains the top market in the world for chilled New Zealand lamb, of which M&S would be a small but prized retailer.  Of total sheepmeat exports to the UK,  chilled accounted for 41 percent worth a total of $304 million in the June 2016 year.

In their Fortnightly Agri-Update – that coincidentally came out the same day as the conference (5 October) – Westpac economists, noting the wave of protectionist sentiment currently sweeping the globe, wrote it, “may play into the hands of British sheep farmers who are already riling against the ‘unacceptably high level’ of New Zealand lamb imports.  They would like to see tighter controls on NZ lamb entering the UK market and are wary of Australia’s reported attempts to use Brexit to support their case for increased access,” adding that at the same time, British farmers will be wanting to ensure their own access to their biggest export markets in the EU remain as free from barriers as usual.

However, after discussions with British and European farming leaders during his visit, Parsons believes that this is unlikely with those leaders well aware and fearful of the potential retaliative trade backlash.

At this stage, New Zealand’s sheepmeat exports to the EU are protected under arrangements agreed in the mid-1990s in the World Trade Organisation’s Uruguay Round. However, implications of the UK’s Brexit from the European Union still remain uncertain and have affected exchange rates, which are already impacting on NZ returns, and the market pressures will have some affect on traditional alliances.

New Zealand’s red meat sector does have other markets and has been active in developing emerging markets. Access for New Zealand chilled sheepmeat has been negotiated with China, for example. However, practicalities mean that there is still some way to go for full plant accreditation and the development of a suitably secure cold chain to handle deliveries of this high-value product to Chinese customers, which means maintaining existing markets and customers remains just as important as the hard task of finding and developing new ones.

The world is a tough place and the New Zealand red meat sector shouldn’t be complacent about its place in it. The task ahead for New Zealand’s red meat sector leaders and trade negotiators in the UK and EU is vital and promises to be tough.




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