Beef 2018 Report

Aussie Angus fuels Costco’s China expansion

Fiona Myers, May 9, 2018

AUSTRALIAN Angus beef will supply the first Costco Warehouse retail outlet in China when it opens next year.

Costco’s commitment to stocking only Angus beef will see its supplier – Australia’s NH Foods – switch more and more of its feeder cattle passing through its 52,000 SCU Whyalla feedlot to Angus, a Beef 2018 seminar hosted by Angus Australia heard earlier today.

Costco’ Marcel Moodley addresses yesterday’s Beef 2018 seminar

The new China warehouse in Shanghai which will open in March or April next year, is expected to rank among the biggest Costco stores in the world.

There are expectations the first Chinese store will have a similar turnover to those in South Korea and Hawaii, which each generate $400 million a year.

Costco Wholesale assistant general merchandise manager Marcel Moodley said Australian Angus beef was the highest quality the company could obtain for its customers.

Costco, which is the second largest global retailer in the world, sources all its beef for its Australian stores from NH Foods, with the beef grainfed for 150 days at Whyalla feedlot, near Texas on the Queensland/NSW border.

Costco sourced product through several Australian suppliers including Cargill, JBS and Stanbroke, before signing up NH Foods for its supply in 2013.

Since then, the company has sold $111 million worth of Angus beef through its nine Australian stores, and will now only stock grainfed Angus beef.

Mr Moodley said the mission of Costco was to provide members with quality and service at the lowest possible price. Customer loyalty was integral to the business, and that did not come without supplying consistently high-quality products.

Oakey Angus Reserve topside roasts on sale in a Costco outlet in Brisbane

“We like to say we offer quality product in a Bunnings warehouse environment,” he told the Beef 2018 seminar.

“We know how important it is to have consistently high quality, and we are very happy with our partnership with NH Foods.

“The benefits of Angus beef are that it offers consistent quality, and it’s exactly the same, fed for 150 days and with a minimum marbling score of 2.

“People talk about Angus and its quality, and that’s because it is quality beef. As long as I am here (in the role at Costco), Angus will be here.”

Mr Moodley said Costco was happy to embrace brands, and as such had embraced the Angus brand with logos appearing on all the meat sold.

Popularity stakes

The Costco customers, who range from mums and dads to butchers and restaurant owners, have voted with their wallets, with some of the food service businesses buying pallet-loads of the Angus beef from Costco.

Mr Moodley said he had forewarned their supplier, NH Foods, that the Chinese store was to open next year, so that provisions could be made to source more livestock and place on feed in preparation.

“We have given them enough notice and an idea of what we might sell in China so they can be ready,” he said.

But he would not be drawn on predicted sales for the Chinese store.

As well as China, Australian Angus beef will also be sold in a new Costco store in New Zealand, which is expected to open in 2020.

Mr Moodley said he did not anticipate any negative feedback from Australian beef being sold in New Zealand.

“Quality is what is most important,” he said.

Feeding the demand

Meanwhile NH Foods is swinging more and more of its production over to Angus or Angus-cross cattle in order to supply the seemingly insatiable demand from Costco and other customers.

The company’s Whyalla Beef feedlot is currently at full operating capacity of 60,000 cattle, and of those, 70 percent are either pure Angus or second-cross.

NH Foods general manager Pat Gleeson, who is also general manager of Thomas Borthwick and Sons and Oakey Beef Exports, said the yard had reduced other feeding programs to concentrate more heavily on Angus.

The company processes 5000 cattle a week from the feedlot, and every part of the process is audited.

It is this, plus the longer shelf-life of 140 days compared to the best from the US of just 70 days – which had helped Australian Angus product demand swell in international markets.

While Mr Gleeson would not commit to a time frame of when the entire feedlot would hold Angus or Angus-cross cattle, he said it was “the vision of the feedlot to do this.”

Supply concerns

What could hold that goal back is the supply of cattle.

NH Foods Whyalla livestock manager Stephen Fry said 10 years ago the feedlot was “a sea of Brahmans.” Some observers playfully called them “white Angus.”

Now the company is scouring the countryside from Tasmania to Queensland trying to find black feeder steers to put into their program to supply customers like Costco.

Feeders are taken at anywhere from 300-500kg liveweight, and a team of six buyers looks for suitable stock on-property rather than from the saleyards. The cattle go out of the feedlot averaging 800kg.

But the search for stock is proving hard.

“We are struggling to get enough cattle at the moment,” Mr Fry said. “We may have to drop our weights at some point to get those cattle.”

Mr Fry also spoke of the additional challenge faced by feedlot in sourcing reasonably priced grain.

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Comments

  1. Ian McKenzie, May 11, 2018

    Mr Moodley is set on Breed is best rather than the eating quality of the many Breeds and their composite crosses that Australian Grass Fed Beef has to offer. Choice is the corner stone of competition .

  2. Glen Feist, May 10, 2018

    An interesting article and a rare one that has a view from a retailer rather than the usual view from the other end of the supply chain. It is a very gutsy move by Costco to lock themselves into one breed and one brand and there is nothing wrong with marketing brands at retail level. However a few things in the article jumped out at me. For Mr Moodley to say that Angus was the highest quality the company could find in Australia tells me clearly that he needs some education in the vast range of high quality beef available in Australia. Add to that the MSA program that is based on eating quality rather than just breed or feeding regime. The next thing was the fact that he thinks the New Zealanders wont have a problem with buying only Australian beef in his stores. Saying as much that New Zealand does not have as good a quality of beef as Australia does. I would think that would impress them about as much as Aussies bowling under-arm. Finally in the last few paragraphs the designated lotfeeder says he is having trouble finding enough Angus cattle. So good luck keeping up with the requirements of the supply chain. A perfect example of “putting all eggs into one basket” and then not having enough eggs when the basket gets dropped.
    Retail customers want “choice.” For sure branded programs are great but good food retailers offer a variety of choices from grassfed to grainfeed, from organic to specific brands. Have you ever wondered why there are so many choices of breakfast cereal? It is because consumers want to choose between many options to find the one that suits them. Just think if we all had to eat Kellogg’s Corn flakes for breakfast because the buyer thought they were the best quality breakfast cereal on the market so we didn’t any other options. Just have a look at Costco on your next visit. You will see 100 feet of meat case with all the same brand and quality of beef for sale as Mr Moodley plans. Then go to the grocery aisles. You won’t see 100 feet of the same brand of nuts, or washing powder or even TV’s. You will see a variety of brands, qualities and prices that all offer “choice” for the customer.

  3. Tim Kelf, May 10, 2018

    It should be remembered that Angus cattle dominate the grain fed sector not so much grass fed. I have always asserted that Austraia’s greatest opportunity both domestically and internationally has always been grass fed. We should not shy away from strongly promoting the grass fed product. Even in USA grass fed is becoming stronger. Herefords and other breeds will always be demanded for this product. Furthermore there appears to be a much greater focus by decerning beef consumers for more ‘beefy’ flavour in their beef. I would not dispair.

  4. Sue Grant, May 9, 2018

    It is now official. If you are not breeding angus you will not be able to sell your cattle in 5 years. MSA is to blame for all of this.

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