Opinion

An e-commerce giant ventures into red meat retailing

Peter Noble, 12/03/2020

Peter Noble

In the first in a series of articles on data rich disrupters emerging in the meat industry, former Australian Meat Processor Corporation executive chair Peter Noble draws attention to web giant Amazon’s recent entry into red meat retailing, and lessons Australia’s red meat industry can learn from France’s Languedoc wine growers.

 

WHEN I finished my last reflection on the state of the red meat industry, I knew I’d need another bottle of special wine if I were to examine any more issues. Here is the first of three articles looking at data rich disrupters.

I pulled out REDMEAT 2030 to read and decided very quickly that it is worthy of a good bottle.

I had thought of a bottle of wine from a small producer in Languedoc might be such a wine giving relevance and thought-provoking ideas.

Gently rolling hills carpeted with vines in the Languedoc region of France. Image: http://www.creme-de-languedoc.com/

This region of France is challenged by a changing climate and changing consumer preferences. Both these issues were called out in the AMPC Sustainability Report 2016 and it might be worthwhile tracking the progress against those major risks later. But the Languedoc wine growers have responded, emphatically.

Miren de Lorgeril, the first female president of the Languedoc wine region’s generic body has shared the following about what Languedoc had been doing.

The latest preoccupations evolve around climate change. A lot is being done to prepare for it, and a lot of progressive thinking derives from it. There’s a general motivation in our region to have a more sustainable viticulture, and we are proud to represent 30% of France’s organic vineyards. Yes, for instance, we have think-tanks about sustainable irrigation. We are also re-introducing forgotten grape varietals in our region, because they are better suited to more warmth and less water.”

The fortunes of the growers in Languedoc have improved substantially. Upgrading of the wines has been very effective, and with exports to China amounting to 19% and like Australia this is where the greatest scope for growth lies.

It is an interesting story and there are many parallels for Australia’s Red Meat Industry.

However, since I was in Chicago at the time, I thought I would go to my favourite wine shop, have a chat to the sommelier and choose some Languedoc wine with relevance and a story. Unsurprisingly, there are no Languedoc wines on offer but according to Miren only 10% of their production reaches the US. No surprises here then.

I guess it’s something local then but a Pinot nonetheless.

My favourite wine shop is in the Whole Foods Store nearby, where I am surrounded by organic produce from all over the world. Knowing my penchant for Pinot Noir he suggested a Penner-Ash Pinot Noir 2016 from the Willamette Valley, Oregon. The tasting notes are very colourful.

“This wine has a perfumed nose showcasing strawberry, anise and tea spice aromatics. Experience ripe, fresh raspberry, red plums and strawberry compote with a hint of subtle cedar. The fine texture and silky tannins enhance the vanilla, brown sugar, and leather notes on the finish.”

What a great description and the wine was certainly quaffable. My preference though is for a pinot with more forest floor undertones.

Anyway, with the wine under my arm I walked over to the meat section to choose some red meat to accompany my wine. The display is a vibrant well-lit rhapsody of red and white. Looking more closely I noticed some tired looking lamb and upon asking its whereabouts I was informed that it was from New Zealand. It surprised me for the Australian lamb that I know is a far superior quality.

“Just wait for the Icelandic lamb, my customers line up to get it when its available. It’s produced in the old sustainable way and is far superior in taste”.

As a former lamb producer and processor, I was rather offended, but I did note how important the background story is for Wholefoods. And I did wonder why there is no Australian lamb.

I got to thinking about where I was standing and looked around the busy store packed full of organic sustainable produce and teaming with customers.

Amazon has paid USD13.5 (AUD20.0) billion for Whole Foods to get a stake in the USD750 billion Retail Food Business. This is about 75% of the total sales of Red Meat in Australia and about 33% of the REDMEAT2030 target. This gives on an idea of size and possibly relevance.

However, when Amazon enters a segment, everyone feels the pressure. So, I guess Amazon is now in the meat business and what does that mean?

It means that all meat companies need to realise that they are not playing in the old game. They will need to step up and build new capabilities. Old practices will no longer cut it!

If Amazon is true to form, it will commoditise niche markets in a similar way that YouTube is being consumed, or more recently the newest and most successful streaming platform, Netflix. Risk will be transferred or reduced throughout the supply chain and competitive pressures will intensify. And access to real capital is not a problem in this market for Amazon.

Amazon is a data driven company and all decisions will be made off robust data. Amazon will use sophisticated algorithms that sound the depths of markets and may even come up with a formula to crack the two markets conundrum; the market for cattle and the market for meat. It will challenge the old formula of Buy, Make and Sell.

Just imagine the supply chain management when these powerful algorithms are brought to bear. You will see sophisticated pricing, superior services, significant logistics efficiencies and different product assortments. Nothing will be the same!

So, with this in mind what could a data rich red meat industry look like in 2030?  And what else is Amazon doing?

Tomorrow: Is blockchain a hidden source of great efficiencies in the meat industry supply chain?

 

  • Sydney based lawyer Peter Noble is an adjunct associate professor in law and agriculture at the University of New England, a director of Australian Country Choice, and a former executive chair of the Australian Meat Processor Corporation.

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