Archive for December 2012

Market Information

Newsletter No. 23 – February 2005 Item 5

Newsletter #17 discussed the increasing power of the supermarkets.  Figure 1 demonstrates their dominance in the UK market.  Butchers have only 1% share of the total grocery market.

Retail Meat

Figure 1 - United Kingdom Share of Retail Grocery Market 2003 and 2004
[source: Meat and Livestock Commission Monthly report to Jan 2nd 2005]

A survey on customers visiting butchers reported that the customer spends on average 7 minutes and 24 seconds at the butcher purchasing their meat.  By comparison customers buying meat in supermarkets at the pre-packed shelves, spend between 24 and 37 seconds.

The top 3 reasons given for purchasing meat at a butcher are:

  • Relationship with butcher 51%
  • Better Quality than supermarkets 46%
  • Ability to get cuts that they want 45%

The top 3 reasons given for purchasing at the service counters of supermarkets are:
- Request portion size to suit 42%
- See products clearly 38%
- Value for money 33%

Decisions for buying loose meat:
Butcher purchases
- Planned - Know exactly what meat before going to the butcher - 71%
- Semi Planned - Have some idea of meat they are to buy - 21%
- Unplanned - Decide what to buy once in butcher - 4%

Supermarket serve-over customers
- Loose Meat purchase planned - 59%

Loose Meat Customer Purchase Survey

Table 1 - Loose Meat Customer Purchase Survey
[source: Meat and Livestock Commission Profile of a Butcher's Customer 2003]

The primary reasons given by butcher customers for purchasing their meat at the butcher are:

- Trust
- The Personal Touch
- Value
- A special experience
- Good Presentation

The full report can be viewed is no longer available on the Internet.

No single market report should be read in isolation - but I am sure all agree that any strong marketing organisation needs to be continually understanding the markets in which we operate as they are very sophisticated markets?

Figure 2 - Movement from open markets to rearing on contract.
[source: USDA Farm Policy 2001]

It is very clear that world volume of ostrich production is so small that it can only be measured in a meaningful manner against the output of single production units of other specie.


Quality Marks

Newsletter No. 23 – February 2005 Item 3

The UK Pig industry is introducing a Quality Standard Mark.  The industry is investing £1million (US$1,87m) to launch the initiative.

Consumers are becoming increasingly concerned about the manner in which animals producing their meat are raised and how they are fed.  Legislation banning the use of stalls and tethers in pig farming came into force in 1999 in the UK.  A British consumer survey showed that 92 percent agreed that imported meat should be produced to U.K. minimum standards.   Currently more than 50 percent of all pork, bacon, and ham on supermarket shelves is imported -- a figure which rose by four percent in 2003.  The price of this imported pork is cheaper as there are cost implications to raise the pork to the new British standards.

The promotional campaign includes national press and magazine advertising, direct mail, and a public relations campaign. A website is due to be launched, which will allow consumers to find out which supermarkets stock pork, bacon, and ham meeting U.K. standards.

UK Pig farmers are being put at a very real disadvantage as more and more supermarket shelves are being filled up with cheaper imports that would be illegal to produce in the UK.  The industry makes it clear that it is not an anti-import campaign. Imported products can carry the Quality Standard Mark if they meet UK standards in production methods.  The industry is simply trying to make consumers aware of this issue. The Quality Standard Mark gives them clear, simple information they need to make an informed choice.

An organisation in the United States have introduced a quality standard label - Certified humane raised and handled.  The certification recognises the increased consumer concerns and provides a certification for producers wishing to operate best practices to gain competitive advantage.  Their mission is to improve the welfare of farm animals by providing viable, credible, duly monitored standards for humane food production and ensuring consumers that products meet these standards.   Key areas they are looking at are raising animals with sufficient space, quality feed, with no added antibiotics or hormones.  Funding is through a headage payment, which obviously adds to the rearing costs, but is recuperated from the added value.

These type of quality marks are only of any value if all producers in the scheme operate them with pride and do not try to cheat the system.   They are also only of value if the buyers are aware of the benefits, hence the need for strong promotion.  Pork production in Great Britain for 2004 amounted to 158,974 metric tonnes.  Therefore the US$1.87m is equivalent to a little more than 1cent per kilo of meat when measured against the annual production.  This demonstrates the benefits of economies of scale and pooling resources for promotion.

Best Practice vs Good Practice

Newsletter No. 23 – February 2005 Item 2

The definition of Best Practice is leading edge thinking, practically applied which brings competitive advantage.

The definition of Good Practice is established wisdom, widely applied and often embodied in law, codes of practice or assurance schemes.

Good Practice is valuable and important but is too commonplace to bring competitive advantage.

No Raw Material No Industry

Newsletter No. 23 – February 2005 Item 1

The purpose of our newsletters is to keep our members informed of industry issues and developments.  The greatest challenge that our industry faces at this time is lack of production.  Frik Kriek summed it up well at the 2nd SA Industry conference in 2002.

NO RAW MATERIAL NO INDUSTRY

A major concern of many members is market development and understanding the markets.   All of us are confident of the demand for our products, but many are failing to capitalise on those opportunities.  Over the time I have been writing these newsletters I try to find market information that is relevant to our industry's marketing program.  A market research company employed by a major South African slaughter plant reported back that the biggest mistake the South African industry had made was to market through dealers and traders in Europe.  The meat was being treated as a commodity rather than as a niche product, which it should be while volumes are so very low.  Many newcomers to Ostrich production are not aware that the ostrich meat market is only about 10 years old, prior to that the South African industry was strictly controlled with single channel marketing focusing on feathers and leather.  Continuously we receive communication from those new to the industry stating they need to export their meat as the meat is new to their country.

The message is that Ostrich meat is new everywhere.

Dealers and traders have little or no concern on sustainability of supply, meat is simply a commodity.  They buy at the lowest price they can, sell at the best price they can and make sure they have their margin.   Ostrich meat represents a very small proportion of their overall turnover and do not traditionally 'market' the meat.  There is also a need for a sustainable supply chain to support any marketing initiative.

The principle of WOMRAD is recognising that our competition is not each other.  Our competition is the other specie.  Other specie are under pressure from many angles.  They have become increasingly efficient in their production methods in order to survive, and it is getting harder to cut margins through increasing efficiency further.   Ostrich, when farmed correctly, are proven to be extremely efficient, offering producers tremendous scope for very significant improvements in efficiencies.

Creating Long-Term Value

Newsletter No. 27 – June 2005 Item 1
Contributed by Paul Benson, Ontario, Canada

In any well established industry, the only source of value to participants comes from the end-user of the products. Their purchase dollars pay everyone’s bills and provide the profit due to anyone who participates in providing that product in a professional, customer-focused manner.

There may be short-term opportunities for profit by some participants in the chain prior to the industry reaching a stable, consistent, and productive level, but these opportunities are most likely transitory.  For example a breeder market develops, typically using investor capital, until volume production is achieved.

Similarly, there may be “fire sale” pricing as some participants exit the industry and others address production and quality issues. These types of opportunity are unlikely to enhance the value of industry products as seen by the retail customer, and may indeed put them off purchasing (too much uncertainty).

In assessing value, the customer is likely looking for quality, value, consistency and availability of product.

If everyone involved is focused on enhancing final customer value, the customer recognizes it and the size of the industry “pie” grows exponentially.

Problems occur when any one part of the chain operates without providing any additional value, or acts in a way that reduces value. Examples might be aggressive trading of poor quality product and dumping it on unsuspecting customers. Other “value leaks” occur when either availability or quality is unpredictable, or one portion of the chain takes profits disproportionate to their contribution (“starving out” other effective participants).

Examples of these problems abound in agricultural history in many countries and continue today!  The challenge lies in learning from them and reducing or avoiding similar practices. The value chain is really only as strong as the weakest link. Overall strength requires partnerships based on mutual respect and understanding.

Delighting your customers and looking out for everyone in the industry is the best policy for building a loyal customer base and growing the industry into a competitive presence in the food production environment.

Concentrate on building you own strengths as professionals in agro-business, but also support your business partners in achieving a win-win result for your customers. The results will repay your efforts handsomely, as the ultimate value delivered grows exponentially, and your share will reflect that growth.

Good luck with the development of an effective, responsible, and sustainable industry!

Benchmarking

Newsletter No. 26 – May 2005 Item 4

A benchmark is: a standard by which something can be measured or judged.

Benchmarking is the process of determining who is the very best, who sets the standard and what that standard is.

Benchmarking is a management tool used by many businesses to measure their performance against the standards or other businesses.  In the case of agriculture, performance is measured against other producers.

This is one reason why maintaining good records is essential in commercial agriculture.  Monitoring methods and costs, benchmarking helps farmers have a greater understanding of their production systems and how one or two changes can make a significant difference to their bottom line.

To help UK red meat producers become more competitive with the changes in the subsidies, the Red Meat Industry Forum has set up a benchmarking scheme.   A quote for the discussion on the benefits to producers:

Quote:  One issue is very clear.   The meat industry will no longer be able to afford to produce over 50% of its product outside market conformation and fat class, or 20% outside the target weight range.  By using this free benchmarking system, we can help producers understand just how crucial this is to profitability. End quote

There is a very good reason that increased supply of the food on the market is coming from a decreasing number of suppliers, who are growing progressively larger.  That reason is not confined to the fact that the major buyers require large scale producers.  The reason is that they are the suppliers (producers/processors) who recognise the current market needs.  They also operate to a high degree of precision with high standards of management.

That fact became very clear to me the very first time I entered an ostrich abattoir.  An excellent abattoir working to get the best product they could to the market - but they had no control over the birds offered for slaughter.   They had to do the best with what they were presented with.  Quality production starts on the farm.

Are you Setting your Goals High Enough

Newsletter No. 25 – April 2005 Item 3

Taking the discussion above a step further let me cite a few papers that prove the current production challenges facing our industry:

a.  Recent Advances of Ostrich Nutrition in South Africa: Effect of Dietary Energy and Protein on Production
Authors:  Tertius Brand - Elsenberg Agricultural Research Centre and Kobus Nel - Oudtshoorn Experimental Farm

This paper discusses variable rations on what the author's considered to be low, medium and high energy and low, medium and high protein rations.   The paper reports the use of low quality ingredients and does not discuss any details of vitamin and mineral supplementation.

In slaughter birds it reports surprise at the minimal changes in feed conversion between the different rations, and reference their inability to understand this.

The point missed is that the study had proven beyond doubt that all rations were severely nutrient deficient as all birds produced lower slaughter weights than the Degan study carried out in 1991.  The Degan study of 1991 worked with rations designed for Turkeys.   It only makes sense that if birds can produce greater growth on rations designed for different specie, then something must be wrong with rations and management systems that result in slower growth rates!!

b. Are your Goals High Enough?
Author: Kim Bunter - Animal Genetics and Breeding Centre, University of New England, Armidale, Australia

Bunter carried out a major International survey.  The results are from data from over 200 ostrich producers in 35 countries.

Kim Bunter Table 1

Table 1 - Reproductive performance (%) achieved in farmed ostriches
[note: 103 to 110 contributing records in full data; 25 contributing records for >20 hens category]


Table 1 proves the serious problem with breeder production and chick survival.

Quoting Bunter's words:  Currently for each chick surviving to 3 months of age 2.1 eggs on average were incubated, supporting the commonly held view that less than one slaughter bird will result from every two eggs incubated.  After allowing for differences between producers in the percent of eggs incubated, overall efficiency of chick production was very poor (approximately 49%).end quote

Productivity measures of farmed ostrich

Table 2: Productivity measures of farmed ostriches
[Note: 81 to 111 records contributing to full data; 25 contributing records for >20 hens]


c. Latest Feeding Standards for Ostriches
Tertius Brand and Bennie Aucamp - Elsenberg Agricultural College and
Zanell Brand and Kobus Nel, Oudtshoorn Experimental Farm

This paper discusses a similar study to above referenced study carried out on slaughter birds.  The study was based on 9 different diets with differing energy and protein levels and then followed a year later with a further study reducing nutrient levels further.

Latest SA Feeding Standards for Ostrich Breeder Results

Table 3 - Latest SA Feeding Standards for Ostrich Breeder Results

There was no report on chick survivability.  The authors reported that the hens in Study 2 demonstrated significant weight loss during the season.  There was no report on which hens were used for the different studies.  Nutritional history and past performance are exceedingly important when evaluating results in this way.

The study concluded: quote:  The most recent research results indicates that current nutritional specifications for ostrich diets may be lowered under certain circumstances, without a loss of performance. end quote

The study proved quite the reverse..............it proved that all diets resulted in breeder performance that is uneconomic for producers.

d. Conclusion:
Currently most every paper or study one reads proves beyond any doubt that our industry has to change the approach as producers cannot be commercially viable with such low levels of production per hen.

Obtaining Meaningful Data

Newsletter No. 24 – March 2005 Item 4

The World Ostrich Association has an important role to play in communicating meaningful data.

In 1997 I developed a questionnaire.  The reason I developed the questionnaire was that most all in the industry were looking for meaningful answers.  The questionnaire was published on the web site of a member of the Blue Mountain Ostrich list and publicised through the Blue Mountain ostrich list and several country magazines that were published at that time.  When studying this survey form, an important fact to remember is at that time I was not involved with Blue Mountain in any other way than just another member of the Blue Mountain Ostrich list seeking solutions.

Only 3 completed survey forms were submitted and a number of private emails.  The motivation for developing the survey was so many were asking for meaningful data.  With an industry that is so small, every member must contribute in order to build a meaningful database.  Do not be ashamed of poor results because you are not alone.  A study of the publications from the members of the South African Ostrich scientific program report no more than 60% hatchability (conversion eggs to day old chicks).  Quote from page 33 "The Report on the Investigation of the effects of Deregulation of the South African Ostrich Industry":

Quote
"Chick mortality is a serious destroyer with devastating and varied financial implications.   For the last two decades, in all surveys and opinions polls, the vagaries of chick mortality have been listed as enemy number one".
End quote

Now add high chick mortalities to 60% conversion from eggs to day old chicks, it is clear to see the reasons why we do not yet have a commercial industry.

Comparative Industry Growth Rates

Newsletter No. 24 – March 2005 Item 2

Aquaculture, another new agri-processing industry, has shown rapid expansion in recent years, going from 7million metric tonnes in 1980 to 38million metric tonnes in 2001.  Figure 1 shows the comparative growth rate of just one specie, Farmed Atlantic Salmon over the same period and Ostrich from 1993, when the first records were published.  The early years of farmed salmon were on similar levels to Ostrich. In a period of 20 years it has increased production to 1.2 million metric tonnes, showing phenomenal growth year on year.

Salmon-ostrich comparison

Figure 1 - Comparative Production Atlantic Salmon and Ostrich
[Source: Atlantic Salmon - FAO. Ostrich see Figure 2]

By comparison, Figure 2 shows that in the same period the Ostrich industry has continued to stagnate and decline.

World Ostrich Production

Figure 2 - World Ostrich Slaughter Figures
[Source: NOPSA, Peter van Zyl, Report on the on the Investigation into the effect of deregulation on the South African Ostrich Industry]
* South African 2004 figures estimated

Postscript:
The principles demonstrating opportunities discussed in this newsletter remain available to commercial ostrich production.  It was addressing the management system failures that provided the trigger to the significant growth experieneced in commercial Atlantic Salmon.