1. Purpose of Newsletter
2. Best Practice vs Good Practice
3. Quality Mark Support
4. Market Statistics
5. Market Information
6. Industry Solutions
7. Contributions
1. Purpose of Newsletter
The purpose of our newsletter 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. The 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.
2. Best Practice vs Good Practice
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.
WOMRAD would be introducing Best Practices to
Ostrich production.
3. Quality Mark Support
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. The benefits of economies
of scale and pooling resources for promotion.
WOMRAD would carry it's own branding and therefore
quality marks associated with that brand.
4. Market Statistics
The following was published in a Canadian magazine called Farm Market
in December 2004:
Quote: Statistics from 1998 show that
Canadians on average spend just 12.4 per cent of their income on food.
Only the United States (10.9 per cent) and the United Kingdom (11.5 per
cent) spend a lower percentage.
Marketing boards have provided some protection for producers, but even
these have experienced a decline in the share of the food dollar.
- The retail price of milk, for example, jumped by 110 per cent between
1981 and 2003, while the price paid to the dairyman climbed by 44 per
cent.
- The price of chicken, as paid to the producer, increased by 10 cents
a kilogram over the same 22-year period, while the retail price of
chicken climbed by an astounding $1.85 per kilogram.
With retail increases like that, it’s no wonder that the authors of
Compare the Share were able to conclude that processors and grocery
stores experienced massive profits during the 1990s -- especially when
the cost of their “raw materials” were kept low.
It’s not like farmers had that choice. Compare the Share finds that, on
average, the prices received by farmers climbed by 16 per cent between
1992 and 2003, but the cost of their inputs jumped by as much as 74 per
cent.
Whoever said that farmers are price-takers and not price-setters wasn’t
far off the mark.
End quote
The full article can be viewed at:
http://www.farmmarketnewspaper.com/story.php?id=130426
A quote from another article published on the same website in December:
Quote: Farmers may need to get involved with
the processing industry to obtain a larger share of the retail food
dollar, says the president of the Ontario Federation of Agriculture. end quote
Michael Sunderland, a member from Canada, has reported that their group
of farmers are involved with such an initiative. The article goes onto
state:
Quote: “Unless we get money from the
marketplace, we’re not going to be sustainable,” he said. Bonnett said
the issue of a closer relationship between farmers, processors and
retailers was discussed at the Premier’s Roundtable, held Dec. 9.
“Farm income was discussed, and the processors realized that they have
to start talking to farmers.”
Bonnett said it was pointed out to processors that primary agriculture
must be economically sustainable, or the processors’ source of raw
material will dwindle and disappear.
But Bonnett said farmers shouldn’t wait for the processors or retailers
to make the first move. He said the OFA (Ontario Federation of
Agriculture) is setting up a meeting with both sectors, and he
suggested that it would be in the best interest of the Federation to
hire an economic development officer to pursue such interests on the
membership’s behalf.
“We need to take charge of our destiny, and not leave it to someone
else,” said Bonnett. End quote
The full article can be viewed at:
http://www.farmmarketnewspaper.com/index.php?id=601
WOMRAD would become the direct marketing arm for
the producers.
5. Market Information
In Newsletter #17 (http://www.world-ostrich.org/member/news17.htm)
I
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.
Figure 1 - United Kingdom Share of Retail Grocery Market 2003
and 2004
[source: Meat and Livestock Commission Monthly report to
January 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%
Item
|
Butcher Customer
|
Supermarket serve-over
customer
|
Quality
|
36%
|
16%
|
Freshness
|
24%
|
19%
|
Amount of Fat
|
14%
|
16%
|
Visual Appearance
|
10%
|
7%
|
British Meat
|
8%
|
6%
|
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 at:
http://www.redmeatindustryforum.org.uk/images/upload/documents/looseredmeat.pdf
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.
WOMRAD as a commercial operation would monitor
market trends in all areas of operations.
6. Industry Solutions
WOA membership is from all continents. All members share a common
goal, doing all we can to understand our industry and how to turn our
investment into real returns. Working as individuals a few may have
managed to make a reasonable living, many have lost their total
investment and left the industry, some are members to network and some
are members as new entrants to learn more about our industry . The
common interest is that for any business to succeed it needs to operate
at a profit and hoping to learn how to achieve that objective.
When our current world production is measured against production of our
competitors - other livestock industries - we are too small. Take the
UK red meat consumption as an example. It is 1.15million tonnes per
annum.
Global Ostrich meat production is no more than 12 thousand tonnes at
its peak and that figure has fallen over the last few years.
WOMRAD can work for the good of all through the
pooling of resources.
7. Contributions
As always, I ask for contributions from Country Liaisons and other members. A sharing of your experiences, what is happening in your area - anything you believe that would be of interest to other members. Any contributions for inclusion in future news letters please send to Fiona at [email protected].
Any comments or suggestions, please post either to the members list [email protected] or Craig at [email protected]