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Industry’s marketing effort cuts its cloth to suit its budget

by Jon Condon, 22 March 2012

 

Japan Task Force chairman, Lachie HartFaced with a $4.5 million deficit in marketing funds next financial year due to lower than average income from cattle transaction levies and rates of slaughter last year, the red meat industry is having to cut its cloth to suit its budget in this week’s deliberations over 2012-13 marketing strategy.

Six industry marketing task forces are meeting in Sydney this week, one of their key tasks being to decide how best to ‘share the pie.’

The taskforce meetings, ending this afternoon, cover key markets including Japan, Korea, North America, Australia (domestic), Europe/Russia, South East Asia and the Middle East/North Africa.

Typical of the deliberations was the outcome from the key Japan Task Force meeting held on Tuesday – easily Australia’s largest and highest value export customer, despite its difficulties over the past 12 months. Despite natural disasters, Japan still took close to 23 percent of all Australia’s beef exports in 2011, and a greater share than this by value.

Australia’s marketing effort in Japan in 2012-13 will take a ten percent haircut, bringing the overall marketing budget a little under $10 million, taskforce members were told.

Most other key markets for Australian beef will also see reductions – some less than Japan in percentage terms – but generally the emerging markets are less affected, or will receive modest increases.

Beef Central asked Japan Task Force chairman Lachie Hart, from Stockyard Meat Packers, how much the looming re-entry of US beef from animals older than 20 months of age had on Tuesday’s discussions.

“It was definitely a consideration in the process,” he said.

“Relaxation of Japan’s protocol for US beef is going to happen – it’s just a matter of when. There are different views from various exporters and other stakeholders as to when that will occur, but the trade is certainly expecting it to happen some time this year,” Mr Hart said.

“But Australia obviously has no control over that process, so we are better off concentrating on the aspects we can control.”

As a result of the Japanese trade anticipating the presence of more abundant supplies of US beef from animals 20-30 months, recent purchases out of Australia have been restrained.

But with the previously anticipated April 1 approval deadline now out of the question, many Japanese importers have now been caught-out, with a shortage of grassfed and shortfed product now evident in Japan. This has led to a recent increase in orders out of Australia.

Some Japan market stakeholders now question whether the US re-entry for older beef will happen at all this calendar year, but this is speculation-based only.

“Despite all this, Australia needs to defend its market share as much as it possibly can,” Mr Hart said.

“There is no doubt that North America is buying itself back into the Japanese marketplace. The trade is supportive of that, and shows evidence of wanting to see more parts-type business come back into the market.”

Perhaps Australia’s greatest asset was its wonderful reputation in the Japanese marketplace for its reliability, diversity of supply, and food safety.

“We have some wonderful fundamentals to work with. While there’s not a lot of new activity we can do to push that, we are certainly going to continue to promote the meat safety message very strongly, and believe it is a major consideration in Japanese consumers’ decision-making processes.”

Asked whether the current tighter economic climate was a time for Australia to be promoting grassfed and shortfed beef more vigorously in the Japanese marketplace, Mr Hart said where Australia definitely could succeed over the next year or two was in the more competitively-priced products.

“Our manufacturing beef we will succeed in; our lower-cost cuts including grassfed are going to do very well and will find a place in the market very easily, without any extended promotional activity. The retailers are demanding it.”

“At the other end, we see good demand at the high-quality end – our Wagyu and Angus-derived products are also finding solid homes in the marketplace.’

Nakashoku new retail target

Mr Hart said there would not be a greater focus on either food service or retail this year, based on current market circumstances, with a need to maintain strong momentum in both segments.

However within the broader Japanese retail spectrum, MLA will focus more resources on the expanding Nakashoku convenience store/delicatessen style items. These are often value-added in some way – pre-cooked, semi-cooked, ready-to-cook, marinated and pre-sliced or enhanced in some other way.

Japanese consumers who have moved away from eating out in restaurants since the natural disasters of March last year are increasingly frequenting Japan’s thousands of convenience/delicatessen style stores, or the deli counters in larger department stores and supermarkets for such products, for preparation at home.   

“It’s a segment that has seen considerable growth since March last year, and is particularly well suited to product out of Australia,” Mr Hart said.

Generally, the value-adding/further manufacturing process would occur in Japan, rather than in Australia, mostly because of tariff structures.

“It’s product that is ready, easy and convenient for the Japanese consumer to pick-up on their way home to serve,” he said.

Asked whether the recent 12-month anniversary of the natural disasters of March last year might act as an important part of the healing process for Japanese citizens, and again lead to higher levels of beef consumption (beef consumption fell about 20pc after the Earthquake/Tsunami),

Mr Hart said this was likely.

“The anniversary was extremely important to the Japanese people. The reconstruction phase is now likely to rapidly gain pace, and that will drive a lot more confidence and consumer demand,” he said.

“But there is still a long way to go, and we certainly would not want to over-estimate that demand pattern. It’s still going to be a difficult market for Australian exporters, particularly with the high A$.”

‘Together with Japan' program continues

Mr Hart said Australia wanted to continue with its “Together with Japan” program, for which some funds remained from the Australian fundraising efforts of July last year.

“We’re looking at ways of extending that, and ways of increasing that program – it’s been very effective in developing closer ties between the beef industries in both countries, and expressing our sympathy to the Japanese people.”

Mr Hart and the Japan Taskforce congratulated MLA’s Japan region manager Melanie Brock for her efforts during what had been very trying times in the Japanese market since early 2011.

“The industry is 100 percent behind her in her effort to build those ties with the Japanese community after their earlier tragedy,” he said.
  
 

  • After being headquartered in Tokyo’s World Trade Centre in Minato-ku for the past 25 years, MLA’s Japan office will relocate to a new location in Shinagawa in May this year, as part of a broader streamlining program.

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