Be smart: keeping consumers happy

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Keeping its consumers happy and listening to what they want has significantly improved McDonald’s business performance including financial returns, according to one of the company’s top China-based executives.

Introduced as a “good friend of New Zealand beef” at the Red Meat Sector Conference, Arron Hoyle, McDonald’s senior director and head of strategy for China and Hong Kong and a major customer for New Zealand’s lean manufacturing beef, said that the result deserved “a massive thank you to the New Zealand meat industry.”

McDonald’s had selected New Zealand and Australia as its sources of beef for the region because of the two countries’ reputations for food safety. While the US is still the largest market for the company, the company is significantly growing its presence in the APMEA countries.

In 1990, McDonald’s entered China, the fastest growing market in the world, when it opened its first store in Beijing. In 2010, it had 1,000 stores open and by 2013 will have 2,000.

All new stores will have a uniquely McDonald’s style, reflecting Chinese expectations for a modern, trendy image.

“We found that we need to ensure consistency in supply of style and expectations.”

There is no silver bullet, he went on to say. “You have to work extremely hard and to understand your consumer better than your husband or wife.”

He believes that New Zealand is well positioned to grow in Asia, particularly in China with its need to “import virtual water” due to ever growing water constraints as the country develops.

The Chinese market changes rapidly depending on the supply/demand dynamic. McDonald’s is forecasting beef growth to 7-8 million tonnes a year by 2020 and McDonald’s China demand alone to surpass 60,000 metric tonnes per annum.

McDonald’s likes to think it’s a great partner for NZ, says Hoyle, “the industry and all suppliers we partner with, we really like New Zealand beef. We don’t manage the supplier, we manage the business together in a partnership with suppliers.”

For the New Zealand beef team, it’s going to be a case of being better at the value chain, to execute against the opportunity, measure effectiveness versus efficiency and being faster than the competition to solutions.

“The data is showing us the opportunity is behind the hill. We need to work together to get there,” he said.

This article appeared in Food NZ magazine (August/September 2012).

Delivered: second Red Meat Sector Conference

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Delivered, as promised: Excellent, inspirational and thought-provoking speakers, all appearing in a packed programme for the 250 delegates attending the second Red Meat Sector conference.

Congratulations must go to the Meat Industry Association (MIA) and Beef + Lamb NZ Ltd (B+LNZ), joint organisers of this year’s well-attended Red Meat Sector Conference at Rydges Lakeland Resort hotel in Queenstown.

Alongside heartening optimism for future demand for red meat, recurrent themes were the massive potential for New Zealand of emerging markets in Asia, especially China, water issues, the need to utilise best practice, the need for all links in the chain to tell the industry’s story to the public, plus the rapid emergence of social media as a tool for communicating with consumers.

In his opening comments, MIA chairman Bill Falconer also noted that, while not as quickly as some would like, encouraging progress is being made on the Red Meat Sector Strategy and that “small starts are being made across the board.” Later in the day Rob Davison, from the B+LNZ Economic Service, outlined a number of matrices that the Economic Service is developing that will help to track progress against the strategy, and these matrices will “focus conversations, thinking and actions to drive the future”.

The Conference also saw the announcement of new Primary Growth Partnership (PGP) funding for the red meat sector, for a project to develop high-value grass-fed marbled beef, using Waygu genetics.

All the presentations were a veritable smorgasbord of information, packed with facts, statistics and views from many facets of the industry, enabling delegates to pick out what was relevant for their part of the value chain. While every single one of the speakers was passionate and eloquent about their topic, from an export food manufacturing perspective the highlights were excellent presentations from McDonald’s Arron Hoyle and vertically integrated meat processor Agri Beef’s Rick Stott from the US.

Besides the serious business, there was entertainment and laughter too. Lunch – finger food featuring B+LNZ Ambassador chef Ben Battersbury’s speciality “alternative cuts, not cheap cuts” like lamb riblets –  was amusingly heralded with witty comments from him. After dinner speaker Davey Hughes of Swazi Apparel gave an hilarious account of hunting expeditions in Africa and shared a few (tongue-in-cheek) items from his latest collection, including a new ‘mankini’.

Also noteworthy, was a significant Australian presence at the conference in the form of representatives from Meat & Livestock Australia and Aus-Meat. This put physical form to MLA’s managing director Scott Hansen’s opening comment in his presentation that “Australia sees a close collaboration with New Zealand.”

There was positive feedback from delegates, who came from all parts of the sector, including farmers, processors, equipment suppliers, researchers and media.

This article appeared in Food NZ magazine (August/September 2012). Copies of most of the conference presentations are available at www.mia.co.nz or redmeatsector.co.nz.

 

Stock numbers holding

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The good pastoral production year has seen New Zealand sheep numbers increase by 2.6 percent and beef cattle numbers increase by one percent for the year to 30 June 2012, according to Beef + Lamb NZ Ltd’s Economic Service.

“This partly makes up for the 4.4 percent decline in sheep and 2.6 percent decline in beef cattle the year before,” says executive director Rob Davison.

B+LNZ’s annual stock number survey, which establishes the productive base of livestock for 2012-2013 shows that while sheep numbers were up 2.6 percent most of this increased will be stock carried over for slaughter in July-September.

Ewe condition is good across the country, he noted. “Scanning results for most regions show in-lamb ewes are carrying more multiple lambs with the general comment that scanning percentages are up five to 10 percent on last year. All we need now is an excellent sprint to ensure high survival of the lambs born.”

The scanning results lead to expectations that the 2012 lamb crop could be up on last Spring by one million lambs (+ four percent). This outcome would lift the ewe flock performance measured by lambing percentage to around the highest achieved, which in 2009-2010 was 123 percent. There is potential to exceed this performance level, Davison says. Each one percentage point change in lambing percentage, equates to about 200,000 lambs.

 

 

 

 

 

Full cup, steady hand

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While New Zealand sheepmeat producers have been enjoying a ‘full cup’ in recent times, with strong farmgate returns, a ‘steady hand’ will be needed to balance future production levels with demand uncertainty across European markets.

A newly released report Sheepmeat – full cup, steady hand from global agribusiness banking specialist, Rabobank, says that the strong farmgate returns in the past two seasons, have been as a result of retail price increases and limited supply availability.

Report co-author Hayley Moynihan says global sheepmeat supplies are forecast to increase from 2013, off a low productive base, although this volume growth is expected to be modest and availability will not recover 2010 levels until 2015.

“While sheepmeat demand has softened in developed markets, we expect retail prices will normalise at new levels – typically 10 percent higher than the three-year average for most regions,” she says.

“For New Zealand producers, a positive outlook will persist in export markets as the economic outlook improves and the market balance remains tipped in their favour.”

As the governments of the EU countries seek to restore balance to their economies, policy changes are expected to place increasing pressure on consumer purchasing powers, says Moynihan. In real terms, the increased cost of living for the average EU consumer is likely to exceed any growth in income, at least for the next 12 to 24 months.

Meat price inflation has led the charge in annual food prices, averaging 4.5 percent year-on-year, with eastern European countries experiencing increases as high as 10 percent in 2011.

“These factors can be expected to weigh heavily on sheepmeat demand and to limit growth prospects.”

Rabobank is picking a slow recovery for developed markets through to the end of 2013. “Emerging markets will continue to grow, albeit slightly below the rate of previous years and offer opportunities for sheepmeat demand growth,” says Moynihan.

The Rabobank report says retail prices will also be influenced by continued strength of competing meat prices; the impact of lower beef production from the US and EU on global supplies; and the rising beef production costs from Brazil, China and Australia..

“These factors are likely to mean that retail price movements for lower-value cuts will continue to rise faster than high-end cuts. This will be particularly evident across emerging economies and consequently only provide limited upward pressure on farmgate returns for exporters,” it says.

Moynihan says that by 2015, sheepmeat production from key exporting regions is expected to lift by an additional 135,000 tonnes a year, which would bring global export supply back to 2010 levels.

Meat price outlook is positive in spite of short-term wobbles

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The exchange rate and uncertainty in the Eurozone remain the biggest negatives for red meat exports in the short-term, but industry commentator Allan Barber believes the outlook is sill positive heading into next year.

“It’s very hard to pick what will happen in Europe, which will inevitably have a large impact on lamb prices for the foreseeable future,” he says. “Southern Europe and the UK are technically in recession and are unlikely to improve much, at least until the European Central Bank (ECB) manages to sort out how it will cope with the trials of Greece, Spain and others.

“But the longer term prospects for lamb are still favourable, once inventories from the season just completed have moved through the trade.” Read more ….

Call to arms for agri-food

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A proposal for a new Agri-Food Board is centre of a comprehensive new strategy aimed at tripling the value of exports for the agri-food sector to about $60 billion.

The Riddet Institute, a national centre of research excellence focusing on food, digestive physiology and nutrition, issued a ‘Call to Arms’ yesterday through the launch of its independent report on the future of New Zealand’s agri-food sector. The report calls for a joint approach from industry and government to drive the activities needed to treble the value of exports in the sector by 2025, as suggested in the Government’s Economic Growth Agenda in 2009.

The report contains options on how sector leaders can work together and why the agri-food industry should lead the strategy implementation work.

It was commissioned by the Riddet Institute and developed by an independent ‘thought leadership’ team led by Dr Kevin Marshall, former chief executive of the Dairy Research Institute, and prepared in response to a call by industry senior executives, who challenged the Institute in 2010 at its annual summit to develop a strategy for science and education-led economic advancement of the New Zealand food industry.

Dr Marshall said: “Our strategies are neither new nor unique, but, in the past, implementation by industry has failed. Crucially, we have provided a pathway and a proposed mechanism for action that will work. There is urgency now because New Zealand faces a mediocre economic future if we don’t drive the major recommendations in this report to fruition.

“Agri-food leaders need to know what to do, how to do it and how to develop the resources they need to do it effectively.”

Welcomed by the Minister

Minister for Primary Industries David Carter welcomed the report, which he said was a vital contribution.

“The Strategy Report highlights that if we are to achieve the standard of living we aspire to by 2025, we must treble the real value of our food exports to about $60 billion,” the Minister said, adding that to achieve a target of real compound growth rate of seven percent over the next 13 years, New Zealand needs to close a gap of current progress of around three percent.

“While the agri-food sectors have been successful, we need to grow faster. To realise growth, we need to collaborate, be innovative, build on our strengths and continue to earn our reputation for safe, high quality food, produced in a sustainable manner.”

New Zealand is lucky to have repositioned itself away from traditional markets, which are currently facing problems, towards Asia. “In the past financial year, exports to China have jumped by nearly 40 percent,” he said.

The Strategy

The task at hand “will not be achieved with business as usual,” Marshall explained.

He outlined the four transformational strategies proposed in the report are to:

  • Selectively and profitably increase the quantities and sales of the current range of agri-food products.
  • Profitably produce and market, new, innovative, high value food and beverage products.
  • Develop value chains that enhance the integrity, value and delivery of New Zealand products and increase profits to producers, processors and exporters, and
  • Become world leaders in sustainability and product integrity.

Four ‘enablers’ back the strategies. These include the development of transformational industry and Government leadership, strong consumer-driven export marketing of branded and consumer and ingredient product, increasing the capability and skills of the agri-food industry and supporting industries and increasing the amount and effectiveness of investment in innovation, research, development and extension supporting the agri-food industry.

He said the think-tank determined that current food industry strategies have not been achieved as they “depended too much on government taking the lead” and that the “captains of industry have not stepped up to take the leadership role.”

For that reason, the most important proposal is to establish an Agri-Food Board “to be the focal point for sector leaders to work together and for industry to lead the work with Government, overcoming barriers to implementation.”

Elements of the strategy link in with thoughts in KPMG’s Agribusiness Agenda for 2012, ‘People Unlocking the Future’ ably presented at the launch Ben van Delden. It also reinforces what the meat industry is already doing with the Red Meat Sector Strategy, B+LNZ Ltd chairman Mike Petersen said.

Strategic echoes include opening access to markets, together with the sector becoming more consumer-driven and collaborative. Discussion also worked its way around the need to attract, develop and retain new graduates and workers for the agri-food sector, the need to develop leadership within the industry and for behaviour and attitude change.

Over 120 attended the launch in Wellington that was attended by the Minister, agri-food industry leaders and senior government officials. Also speaking was NZ Merino’s John Brackenridge. The report will be on the agenda at the forthcoming Primary Industry Chief Executives’ Boot Camp in August at Stanford University, California.

Meat industry leaders, including Keith Cooper of Silver Fern Farms, Sir Graeme Harrison of ANZCO Foods, Sam Robinson of AgResearch, were amongst those who had contributed to the report.

The report is well worth a read to see where the sector’s going. Download a pdf copy of A Call to Arms: A Contribution to New Zealand Agri-Food Strategy or ask for a hard copy by emailing [email protected].

 

Recommended reading …

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The development of electrical stimulation of meat, how New Zealand pharmaceuticals were founded on gall, protein quality, animal genomics and the people behind each are just some of the inspiring stories of New Zealand agri-food innovation contained in a book from the Riddet Institute.

Floreat Scientia, published for the Riddet Institute by Wairau Press, 2011. ISBN:978 1 927158 081.

Farmers recycling more plastic

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More than 650 tonnes of plastic farm waste has been recycled nationwide during the past year thanks to a government-funded scheme, according to the Environment Minister amy Adams.

Under the product stewardship scheme, Plasback supplies more than 1,000 recycling bins to New Zealand farms and collects agricultural plastics such as bale wrap, silage wrap and covers, agrichemical containers and crop bags. The waste is then recyled into plastic resin pellets and then reused in new plastic products.

“Many farmers have been frustrated by the lack of options for dealing with plastic farm waste and know that burning or burying waste is not a sustainable option,” Adams says.

“This voluntary scheme is about getting alongside farmers and providing an environmentally-friendly alternative.”

The programme received $130,000 from the Government’s Waste Minimisation Fund which supports projects that increase resource efficiency and decrease the amount of waste going to landfill.

Product Stewardship Schemes, which meet the criteria for reducing waste and environmental harm are accredited by the Minister for the Environment.

Transformational change (and how to make it)

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One farmer who has made transformational change to his farm business is Marlborough farmer Doug Avery.

In an inspirational and entertaining presentation at the Red Meat Sector Conference, he talked of working “smarter and harder” and the need to “lift yourself up above and see what’s going on around you.”

The tipping point that made him see that he needed to change was sustained drought in the region, over a period of eight years,  which meant that Bonavaree Farm and the Avery family were facing a very uncertain future. In 1998, Doug Avery attended a seminar where Lincoln University pasture Professor Derrick Moot proposed using lucerne as a primary grazing pasture plant. Using that idea started change.

In 2004, with the area still gripped with drought, the NZ Land Care Trust answered a call for help from Avery and a few other farmers. A six-pronged attack on failed systems was engaged with science and the help of funding from the Sustainable Farming Fund and others. This saw the transformational change of the operation from one of failure to one of success.

Having run the emotional gamut of the ‘Three Ugly Sisters’ – envy, anger and blame – Avery realised, when he started looking, that there were some things he could control and others he was concerned about – climate change, weather and the value of the dollar – that he had no control over at all.

Avery realised three things: that the farm business could run 44 percent less sheep but only produce five percent less product; also, that a one percent increase in soil carbon can increase water holding capacity by 144,000 litres per hectare; and, finally, “how much time do we spend telling our story?”

Change of mindset

A change of mindset was also needed, he decided. He would work in what he calls the influence circle, become proactive not reactive, move to solution and enquiry (away from blame and excuse), he would influence thinking and adapt his business systems to the changing climate.

Better practice influenced the systems in place at Bonavaree, says Avery. The year was broken down into three periods: the risk period from mid-December to mid-February where they farm as little as possible; the recovery period from mid-February to late winter, when crops are grown on summer-fallowed land and ewes and hoggets are mated on lucerne and the system charges back into life; and the revenue period, from late summer till mid-December.

“We grow our stock at fast rates to finishing weights before the summer dry,” he said, adding that ewes wean fat and the ewe weights are heavy.

Precious water was conserved by using summer fallow, which intercepted the weed cycle, storing water and creating a water reservoir. Organic matter was built into the soil by stopping tillage. Plants were used that could tap water from deeper layers and also create rapid animal growth and performance. Finally, animals were made for performance, using designer genetics.

Results

The results today speak for themselves. “Lots of wonderful lambs that grow like mushrooms”, and “hogget scanning gone from 40 percent to 165 percent”.

Today, Bonavaree has 1,500 hectares owned and 280 ha leased which will be wintering 13,000 stock units this year (5,000 sheep, 1,650 cattle), growing 90 ha of lucerne for seed and the family is retiring an increasing number of natural areas production. The property has six full-time staff and lots of busy contractors.

Better practice

Better practice for Avery is about using quality contractors, rather than trying to purchase expensive machinery and do it himself, using smart systems like Farmax, inspiring the young who learn by what they see, working with good value chains and smart brands, growing top crops and lambing onto top quality feed, he said.

Reminiscing to the start of his transformational journey, Avery said: “I always wondered why somebody didn’t do something about that, then I realised I am somebody.”

His message for farmers looking to create resilient businesses is to create relationships, manage the soil and water “more crop from every drop”, look at the plant selection for sites and purpose, manage feed supply and demand, work with the natural forces of the local climate, collaborate with science, agency and industry, engage in processes which create financial reward and to create a culture of excitement and fun in the work place.

Bonavaree is now looking to build on its successes through improved management structures, more measuring and collaboration through FarmIQ, better feed conversion in the rumen, improved plant mixes and genetics (plant and animal) and enhanced native plantings and over lay business, says Avery.

Doug Avery has received a number of award for his work at Bonavaree including the 2008 Green Ribbon from the Ministry for the Environment, 2010 Lincoln Foundation South Island Farmer of the Year, 2011 Marlborough District Council Farm Environment Award and the 2012 New Zealand Land Care Trust Ambassador title.