Those exporting, or thinking of exporting, to China will be interested to see four new videos recently added to NZ Trade and Enterprise’s You Tube channel. Subjects covered include:
Hyperglobalisation, China, mega cities, urbanisation and water are some of the big issues that will play their part in the future of the New Zealand and global export meat industry, according to several Red Meat Sector Conference speakers.
In his presentation about the political and economic environment facing the industry, Colin James of the Hugo Group said it is becoming more and more difficult for a nation to act independently these days. ‘Hyperglobalisation’ refers to the increasing global interdependence and interconnectedness, which make protection from global economic forces more difficult, he said.
We can expect more of the same over the next 20 to 25 years, he explained. “It’s going to need a fair amount of resilience.”
Water, along with fossil fuels, will be the big issues, he predicts. Multinationals are rebranding and adopting a “fresh, clean, natural” stance rather than ‘clean, green’ approach to capitalise on the emergence of an affluent middle class in emerging markets. This growing middle class around the globe is calculated to encompass more than 210 million new households with income of US$20,000 or more by 2025, which he believes New Zealand is well placed to serve.
Four percent global GDP growth predicted
New Zealand’s top ten trading partners are projected to grow roughly four percent a year in 2012 as weighted by the goods trade. “Modest, but not boom time,” James commented.
Four percent in global GDP growth also stood out for Richard Brown of market research company GIRA, who admitted to being surprised that the forecasts were so positive. The leader is China, whose GDP is anticipated to grow in 2011/2012 by 8.5 percent, “not as good as expected but still OK”, followed by Indonesia (6.5 percent). He anticipates similar growth in 2012.
In his detailed look at the outlook for various meats, including beef and sheepmeat, he said that global prices for meat are generally, “fundamentally more exciting than they have been.” He was reassured with the direction of the trends, which he said were, “very good news for the producing sector.”
In 2011, prices had gone up boosting producer morale, because total global meat production was down – largely as a result of the outbreak of the pig disease PRRS in China, Brown explained. “What that illustrates is the Chinese effect on global trade is profound.”
This point was echoed in a later presentation from McDonald’s senior director and head of strategy for China and Hong Kong Arron Hoyle, who said that China is having a dramatic effect on global commodities.
“We don’t sell beef at McDonald’s, we sell a burger, so other commodities have to be taken into account.”
Rise of the dragon
Both James and Brown pointed to the current difficulties in the US and in Europe, which is facing big problems with the Euro. Europe had a “spectacularly fragmented meat industry,” Brown said and pointed to problems with the region’s biggest meat company, Vion, which is now in trouble after a period of rapid acquisition. This reflects a lower rate for now for global corporate processor consolidation “with a long way to go and an unproven success record.”
Arron Hoyle also pointed in his presentation to the ‘rise of the dragon’, the lean away from the west to the East, with McDonald’s choosing to target consumers in what it calls the APMEA (the Asia Pacific, Middle East and East Asian) region.
Unprecedented urbanisation
Hoyle talked about urbanisation in those emerging markets, such as China and India, “like we’ve never seen it before.” In the APMEA countries populations are moving from rural to urban settings in a similar manner to Britain’s Industrial Revolution, “but it’s happening 20 times faster and involves about 800 times more people,” he explained.
“We’re living in an era where we’re seeing different dynamics to the previous 50 years,” he said, adding that volatility will be more extreme than ever before.
‘Mega Cities’, those with populations of more than 10 million, are on the rise and currently count Shanghai, Mexico City, Sau Paolo, Beijing, Mumbai and Delhi as the top six.
“In addition, emerging market cities will be a key driver of global food demand with key 440 cities identified across Asia. With this explosion in urbanisation we see many ‘tier two cities’ with populations over one million evolve: By 2020 it is projected China will have 221, India 50, Indonesia 15 and Korea nine.”
With this trend comes a “massive” transport and infrastructure need, but also a forecast quadrupling of per capita of GDP by 2020, said Hoyle.
“It’s a world of opportunity for years to come,” he said cautioning that it also comes with higher rents and increased pressure on costs for McDonald’s stores or other businesses that target Asia as a key future growth driver.
This article appeared in Food NZ magazine (August/September 2012).
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, 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.
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:
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].
The production boom, alluded to by several at the Red Meat Sector Conference, has been confirmed in the Ministry for Primary Industries (MPI)’s latest primary industry statistics released today. They show increased production of beef and sheepmeat, corresponding with growth in the export volumes for the meats, but falls in export revenue earned from lamb and venison.
‘Primary Industries Production and Trade‘ for the March quarter 2012 is the first release of a new combined primary industry quarterly report, comprising production and trade statistics for the meat, dairy, wool, forestry and seafood industries. It replaces separate quarterly reports for forestry and seafood that were previously released by the Ministry.
The report shows that the primary sector continued to be an economic driver, with total primary sector exports accounting for 71 percent of all merchandise exports in the year to March 2012.
MPI reports favourable climatic conditions led to a continuation of better-than-usual pasture growth during the March 2012 quarter. As a result, farmers achieved near-record carcase weights for slaughtered livestock and an 11.5 percent increase in milk solids’ production, compared with the same quarter in 2011.
However, the stronger New Zealand dollar coupled with easing international dairy prices meant that overall primary sector export revenue for the quarter was down 2.4 percent on the previous year, at $8.3 billion.
At the same time, total export revenue for the year to March 2012 was up 6.2 percent on the previous year at $32.3 billion.
In the year to the end of March 2012, exports of New Zealand’s beef and veal, lamb and mutton, venison and other meats, earned revenue of $5.6 billion, while hides, leather and dressed skins added a further $591 million to the export pot. This made a total of $6.233 billion, accounting for 13.6 percent of total NZ merchandise exports.
According to the report, beef production increased by 1.4 percent in the March 2012 quarter (compared with the March 2011 quarter), due to increased carcase weights, the highest since 2006. This was despite lower adult cattle slaughter numbers. Lamb production was up 2.4 percent because of increased slaughter numbers and a record average carcase weight of 17.6 kg.
The volume of beef and veal exported increased 1.3 percent to 98,450 tonnes in the March quarter, in the March quarter, while export value decreased 4.5 percent to $570 million because of the strong New Zealand dollar. Beef and veal exports to New Zealand’s major export market, the US, increased 9.3 percent by volume and 5.3 percent by value because of stronger demand.
Export volumes of lamb increased 4.7 percent to 79,000 tonnes, while export values decreased 1.3 percent to $722 million. Lamb exports to New Zealand’s main market, the European Union, decreased 9.1 percent by volume and 9.6 percent by value, which the report says was due to a decrease in frozen export volumes and increased export sales to China and OPEC.
Revenue earned from venison exports fell slightly by 0.4 percent at the end of March 2012, compared to the previous year, though volume had dropped by 4.3 percent.
A pdf copy of the report can be downloaded by clicking the link below or at the MPI website (search on ‘Primary Industries Production and Trade’).
The future
looks bright for New Zealand’s red meat export business, if you go by the presentations at the recent Red Meat Sector Conference in Queenstown.
Over 250 delegates, drawn from processing, farmers, service companies, shippers, economists, and government officials, crammed into the Rydges Lakeland Resort hotel on Monday 16 July for an absolutely packed itinerary of presentations from 17 excellent speakers – several of them from overseas – all with inspirational and thought-provoking messages.
The veritable smorgabord of information, mustered back into its time slots by some able session chairmen, revealed recurrent themes of massive potential for New Zealand meat in emerging markets in Asia, especially China, water issues, the need to engage in best practice, to tell the industry’s story to the public and the rapid, mind-boggling change the emergence of social media has wrought on getting those messages out there.
The first early shoots of progress on the Red Meat Sector Strategy (RMSS) were evident too, not as fast as some would like, but it’s a start. Nearly a quarter of billion dollars of industry-government money is being spent on re-shaping and vertically integrating some parts of the red meat chain over the next seven years through Primary Growth Partnerships (PGP) programmes. These are alone forecast to add somewhere in the region of $3 billion to the country’s GDP by the mid-2020s. Meanwhile B+LNZ Economic Service’s team, under the guidance of Rob Davidson, have been developing a natty set of matrices that will enable industry to see how it is progressing along the Strategy’s path (more of that later).
Delegates will be picking out of it what they need. They were certainly upbeat and eager to hear more right to the last speaker of the business sessions, Nigel Latta, who talked about behavioural change and how to make it.
There is no doubt that more is bound to come from discussions at conference and later. Well done to the joint organisers, the Meat Industry Association and Beef+Lamb NZ Ltd.
A more full report will appear in Food NZ August/September 2012 magazine in early August and MeatExportNZ will be covering other items emanating from the conference over the coming week or so. You can find most of the presentations already up online at the MIA website, along with the programme.
There was plenty going on at the Red Meat Sector Conference in Queenstown this week, but there were also a few other things appearing in the press.
China eyes up top-end lamb cuts, writes Tim Cronshaw, in an article about Alliance Group sensing growing interest from its Chinese customers in some of the higher value cuts, rather than the lamb flaps traditionally used for hot pot dishes.
B+LNZ Ltd held it’s ‘Farming on the Edge of Science’ Day at Massey University on 11 July. Dominion Post farming editor, Jon Morgan, was in attendance, alongside the farming participants. His report (Science day teaches farmers new tricks, 19 July) makes good reading and shows how farmers were shown the latest in pastures and forages, management and new technology and animal production in a series of three workshops (this is not available online as yet).
Water is also on the mind of our politicians. Water – New Zealand’s ‘liquid gold’ – is possibly New Zealand’s biggest opportunity to grow the productive part of our economy, according to the Minister for Primary Industries.
David Carter was speaking to the Federated Farmers’ annual conference last week, when he talked about New Zealand playing to its strengths.
“We can’t go past our abundance of water or New Zealand’s ‘liquid gold’.”
Despite difficult fiscal conditions, he pointed to the Government’s fronting with $35 million for the Irrigation Acceleration Fund to 50:50 fund the feasibility studies of schemes around New Zealand.
“The Government’s also committed $400 million through the Future Investment Fund to invest as a cornerstone shareholder in large water storage and irrigation schemes.
“We are making progress, particularly in Hawke’s Bay, Canterbury and Otago, but achieving consensus of all the various stakeholders means progress is slower than I would like.”
Most important aspect
In his speech, the primary sector was referred to as “the most important aspect driving our economy forward.
“The healthy performance across most of the primary sectors has enabled our economy to weather the storms of the global financial crisis and, locally, the Canterbury earthquakes,” he said, pointing to the fact that the primary sector now makes up 71 percent of New Zealand’s total merchandise export trade.
Carter referred to the EU’s “major challenges” and the “subdued” US, which in the past would have had a huge impact on New Zealand. New Zealand is fortunate to have repositioned itself so significantly with Asia, he said.
“We are well on the way to realising the Prime Minister’s ambition, which is shared by China’s leaders, to double our bilateral trade to $20 billion by 2015. The government’s trade agenda, led by Tim Groser, has the potential to deliver more opportunities to primary producers and exporters.”
Talks with eight other Trans-Pacific Partnership countries, including new partners Mexico and Canada, and also Russia, India, South Korea and the Gulf States “and you sense the size of the potential prize,” he told delegates.
The Minister had just returned from Russia, with which free trade negotiations are progressing. Two-way trade is currently worth about $700 million. “But, if a deal is reached, it will be Russia’s first international trade deal and our exports will grow significantly,” he said.
Highly regarded
“One of the things that was reinforced to me during my trip was how highly regarded New Zealand is internationally. We are renowned as producers of some of the best food in the world, at a time when food security is the world’s greatest challenge.”
The Minister also referred to the importance of biosecurity, local government reform, rural broadband initiatives and a new animal welfare toolkit for farmers being launched by the Ministry for Primary Industries in his speech.
