Japan marketing budget under the microscope

Jon Condon, 12/12/2011

The next three months will see some intense scrutiny of the Australian beef industry’s marketing and promotion expenditure in Japan, given the slow rate of economic recovery since the March Tsunami and a likely increased competitive challenge from US beef exports in 2012.

With the slide in Australian beef trade to the US this year driven by currency movements, Japan is now easily Australia’s largest export beef market, measured both by volume and value.

However there is now a wide expectation within the trade that Japan will agree to a new BSE risk protocol early next year that is likely to see US beef age limits raised from animals less than 20 months to under 30 months.

Such a move, seen by many in the trade as likely to start from the commencement of Japan’s new financial year on April 1, could trigger stronger supply competition out of the US, especially given exchange rate advantages, trade contacts say.

The Australian beef industry’s Japan Marketing Task Force met recently as part of a mid-year review designed to examine current 2011-12 financial year strategies set back in March. The current financial year budgets and strategy were agreed to just days after the Japanese Tsunami hit, making it very difficult to predict the performance of the market for the remainder of 2011-12.

The formal mid-year review held recently followed an earlier update, designed to make sure that the Australian industry’s strategies remain aligned with the state of the economy and overall market demand.

Similarly, plans for the next 2012-13 financial year will be considered during February/March next year.

'Continuous engagement' strategy

Japan Task Force chairman Lachie Hart, from Stockyard Beef, said the Japanese nation was still heavily traumatised by the Tsunami, earthquake and associated events of March, meaning it was not currently an environment conducive to a heavy consumer beef advertising blitz.

“Instead, the strategy and profile the task force has endorsed is one of continual engagement, getting in front of the trade, the key decision-makers and the government, reinforcing the merits of Australian beef,” Mr Hart said.

He said trade volumes into Japan were holding up reasonably well, despite the fact that there had been less major promotional work carried out in the market this year.

“Overall Australian trade is down a little, but we believe that is more a consequence of growing competition from the US, and the higher A$, rather than any lack of Australian trade or consumer market promotion.”

The expectation was that those volumes would probably continue to decrease compared with earlier years, but not that substantially, Mr Hart said.

“If anything, the trade volume is likely to decline further in countries like Korea than Japan. Over a long period Australia has built a very good reputation in Japan for a safe and clean product – consumers already know that and are familiar with it – so we see the current priority being to convince the trade to make sure they do designate shelf-space (in the case of retail) and menu space (in the case of food service) for Australian beef.”

“If that happens, we know Japanese consumers will buy it, because they have the confidence in the product, built-up over many years,” he said. 

While MLA regional staff and others were working now on plans for next financial year, it was not as if there was a ‘cut-off’ date after which the Australian industry moved to the next plan, Mr Hart said.

“The program is evolving all the time. Next year some time, we are anticipating that the US will re-enter the Japan market with beef in the 20-30 month bracket, which in itself will be a strong consideration about how Australia spends its marketing budget in Japan during 2012-13.”

“There are two streams of thought in play, given that prospect: do we go out and heavily defend our patch, or do we pull back a little, knowing that whatever strategy and expenditure is applied, the trade is likely to focus more on those opportunities from the US,” he said.

Mr Hart said the Australian beef industry certainly did not want to waste money. If there was an expectation that larger volumes of US beef would inevitably arrive in Japan next year, and the US Meat Export Federation was already starting to build its marketing programs around that, then there was likely to be little impact from larger marketing expenditure by the Australian beef industry.

Being more selective and strategic in Australia’s Japan marketing strategy might be the best answer.

“The strategy of continuous engagement with the trade has been very effective this year, and we think it could be equally effective post April 1, regardless of what happens in US trade expansion,” he said.

Much of the in-store product sampling work previously funded outright by MLA is now occurring under the Industry Collaborative Agreement programs, where cost is typically shared between exporters, importers/end users and the industry. In-store sampling work also had tended to be less active this year, because the Japanese consumer remained under a lot of pressure and the economy generally was still in difficult times.

More parts markets

Australian exporters now were also much better equipped to export different cuts to different countries, based on individual demand, meaning Australia was much less reliant on a fullset trade to Japan than it once was.

While the Japanese market had always been well-known for barbecue items, forequarter cuts and a loin market, because those items were more expensive, there had been a tendency for consumers and the trade to shift more to lower-value cuts, including leg cuts, the round items, clods and similar items, Mr Hart said.

“We’re expecting that to continue, and that’s fine, because there are some very strong emerging markets for barbecue items and loin cuts in other regions,” he said.    

There was also an expectation in Australia that because the new Japanese Prime Minister Noda had been elected without any prior voter expectations, he and his Cabinet might have a freer license to take some tough decisions to drive some stimulus back into the national and regional economies. If successful this could further boost beef demand.

Mr Hart said while Australia’s overall trade with Japan might not be as critically important to overall export performance as it once was, with emerging markets in Russia, the Middle East and elsewhere, it remained Australia’s single largest export customer.

“It is, and will continue to be a very important market for Australian beef, and one we will need to continually focus our attention on,” he said.


• See today’s separate story “Ludwig leads trade delegation to Japan”


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