Page 4 - Australian Pork Newspaper

Country of origin labelling – what has been done?
What the statistics are telling us now
☛ from P3
ysis show that as of June 2018, about half the increase in pork production since Oc- tober 2013 has been caused by a combi- nation of carcass size increases and higher sow numbers.
Somewhat surpris- ingly, the other half has all come from productivity increases in pigs sold per sow, per year.
So, we have quite a few extra sows but all our sows it would seem have become much more produc- tive over the past five years.
The productivity increases were prob- ably enthusiastically planned but the in-
creased production was maybe more of a hidden side benefit.
This could be one reason why the price crash was such a sur- prise at the time.
It may also be a rea- son the industry has had such difficulty in getting supply vol- umes matched better to demand since the price crash.
The statisticians and mathematicians out there might be able to pick holes in the detail of what I’ve laid out in this personal explanation, and there are probably plenty of other credible alterna- tive theories.
If we’re to learn from our experiences, it’s a good debate to have.
☛ from P1
APL also hosted a work- shop between the large processors and ACCC to review the complexities of the new law and con- firmed that all large or- ganisations were on track.
Contact with ham and bacon manufacturers since then has been ap- proximately monthly.
At this meeting the AC- CC confirmed there was no substantial consumer education campaign planned.
It was recommended they go back and ask for an education campaign.
Most brands were plan- ning their packaging changeover to new CoOL requirements between March and May 2018. February to May 2018
The PorkMark team fo- cused on getting as many PorkMarks onto new packs as possible and pre- serving the PorkMark on existing packs.
The Policy and Market- ing teams were also in frequent contact with ACCC.
February 22, 2018
Met with Coles to in- vestigate ranging of Aus- tralian and their CoOL plan for July 2018 – while these have not borne fruit yet, proposals are ongo- ing.
March 9, 2018
Sent out the first pro- ducer, PorkMark licensee and butcher briefing on CoOL rules and timings.
These have since oc- curred seven times for producers, six times for PorkMark licensees and three times for butchers.
Three butcher briefing meetings, organised by
their industry body, were also attended.
March 21, 2018
Met with Woolworths to investigate ranging for Australian and their CoOL plan for July 2018 – while these have not borne fruit yet, proposals are ongoing.
March to May 2018
A TV advertisement has been developed as a contingency in case the Government changes its mind, or if awareness of CoOL grows to be a big- ger consumer issue than it currently is.
Late April
The four largest ham and bacon processors confirm they are willing to take Australian product if producers are prepared to commit to a monthly volume and price com- petitive with imports.
That price is lower than the current pig price. May 29, 2018
Presented a four-phase plan to Delegates’ Forum: • Provide information to producers who sell direct and butchers with free CoOL point of sale ma-
terials;
• Expand PorkMark li-
censee base and increase engagement with existing licensees;
• Consumer campaign is ready – if there is an op- portunity when CoOL is a significant story; and
• Develop meanings for Australian pork that justify a 20 percent-plus premium (as Australian is not enough by itself at the moment). June 14, 2018
Pig Industry Marketing Committee endorsed the plan presented at Dele- gates’ Forum.
June 25, 2018
Sent information via di- rect mail to 2800 butch- ers.
Over 200 businesses have responded and asked for materials.
June 24 to July 16, 2018
Total CoOL media cov- erage measured by iSen- tia monitored 216 items, reaching a cumulative au- dience of 6,723,186.
This coverage was largely general in nature, covering the July 1 imple- mentation, and included the listeria in frozen vege- tables and imported honey issues.
This figure is on par with pork’s media cover- age for an average month. May 2018 – present
The APL Policy team continues to work on clar- ifications such as where the CoOL responsibil- ity lies when retail-ready pork planned to be ex- ported is redirected to the domestic market (without CoOL label attached).
This decision rests with the person/organisation choosing to sell this prod- uct domestically instead.
There are other exam- ples.
Obviously, there is much more than has been in- cluded in this article, and suggestions on how to im- prove our approach are welcome.
What is the latest in- teraction we had with government?
The latest interaction with the Minister of Ag- riculture and Water Re- sources was the week commencing June 25 to brief him on the current situation.
Given the present issue
is market driven, there is little government can do. Why hasn’t APL taken the lead on getting pro- cessors to take more Australian product?
This would require APL to get involved in com- mercial arrangements, which historically, pro- ducers have told us not to do.
Practically, if large inte- grated producers wanted to do this they could.
However, it is those without contracts that are the most exposed.
These producers will probably need to collabo- rate with other producers.
They would likely need to use the same abattoir in order to get enough vol- ume commitment for each future month.
The big manufacturers will not want to deal with many small producers.
If there is interest, APL will be happy to connect parties.
Pricing will be lower than the current aver- age prices reported each week.
Below is an order of magnitude estimate.
Imported pork lands here boneless at around $4.15kg with about $0.30/ kg on-costs.
A total import cost of pig meat is $4.45/kg.
Australian pork farm gate price would need to be at a price of $1.93/ kg (hot standard carcass weight - trim 1) assuming a $1/kg boning cost to achieve price parity with imported pig meat.
There may also be par- ticular cut opportunities, and while wholesaling is not part of APL’s skill set, if there are specific things we can help with, please contact me.
Why are we not aggres- sively promoting Aus- tralian at the point in time that CoOL has be- come mandatory?
First, because investing producer funds in a busi- ness that generates $2.34/ kg on average is better than investing in a business that generates $1.93/kg.
Also, history says this oversupply is a cycle and the fresh business will again become sustainable.
However, we will need structural cost reduction to be able to maintain a business profitably at im- port parity pricing.
Second, timing would have been important if the Government was going to do an education program (they have said they are not going to).
The current PR does not provide an adequate springboard but consumer familiarity with CoOL may occur over time.
If it does and CoOL be- comes a bigger consumer issue then we should re- visit the priorities.
Why are we not telling consumers to look for the gold bar chart on labels, in collaboration with other industries?
In addition to the above priorities, the gold bar chart is in fact not gold on many products, as the colour is not mandatory.
On many ham and bacon products that do comply, the logo, statement and bar chart are monochrome and remarkably small.
If the labelling is un- clear, why don’t we get the labelling laws changed again?
Changing the law again
straight after just having changed it is not some- thing governments do (ex- cept after an election to reverse the previous gov- ernment’s legislation).
It makes them look like they made a mistake the first time.
Commercial considera- tions of more Australian ham and bacon
For any product to suc- ceed it must be wanted and profitable to all the links in the supply chain.
With that in mind, let’s consider each of those re- quirements from the per- spective of the relevant stakeholders.
Who wants more Aus- tralian ham and bacon?
• Australian consum- ers – 90 percent claim to have a preference to buy Australian if it’s the same price. Where their ham and bacon comes from (for the vast majority) is not important enough for them to actively search out Australian. 20-30 percent of consumers say they are prepared to pay a premium for a product that is targeted at them.
• Retailers – Want enough Australian to sat- isfy their customers and to avoid a competitive disadvantage. Are really interested in how many shoppers come into their shops and how much mar- gin they make from each shopper.
• Ham and bacon mak- ers – The large ones are open to Australian as it adds flexibility and some have businesses that op- erate in fresh pork too. Main focus is how they can make a margin on what their customers want (high quality at low cost). There is not a lot of product differ- ence between local and imported products
• Australian pig produc- ers – Have a very strong preference as it gives us another source of de- mand. It is a big market and more in a producer’s interest than it is in the rest of the supply chain’s. Is more Australian ham and bacon profitable?
• Australian consumers – The ones who buy vol- ume are not prepared to pay the 20 percent-plus premium that is required to be as profitable to the supply chain as import- ed. We should continue to attempt to build prod- uct stories that are worth the premium with sup- ply chains and retailers (which we are).
• Retailers – To be as profitable as imports, Australian needs to be sold at a premium that reduces the volume sold versus imports.
• Ham and bacon mak- ers – Can’t be competi- tive in pricing to retail- ers using Australian in a normal market. There is no discernible differ- ence in product except cost between imports and Australian (except Danish middles are seen as more consistent). A re prepared to buy more Australian at import par- ity prices.
• Australian pig produc- ers – The prices required for volume in processed are significantly lower than that in fresh, except for premium niches that are already being served. Processed is less profit- able than fresh pork for most producers.
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Page 4 – Australian Pork Newspaper, August 2018
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