FOR 46 years, Queensland’s Australian Country Choice has operated under a unique business model as a toll processor providing an exclusive service kill for Coles Supermarkets’ northern beef supply chain.
Output from the Cannon Hill plant, in either retail-ready or carton form, has gone into hundreds of Coles retail outlets across eastern Australia. Valued-added items from the facility been distributed nationally for the last 10 years.
But changing circumstances are now seeing Australian Country Choice transition into a much more diverse, multi-stream vertically integrated processing/supply chain business model.
Beef Central was afforded a briefing this week on where the business is heading.
To put things into historical perspective, ACC’s arrangement with Coles began to transition from 2017 when the two agreed to disengage from their long-standing exclusivity arrangement. It meant that Coles was free to kill its northern supply chain cattle elsewhere if it chose, and ACC could process stock and offer value-adding and retail ready products for other customers, or from its own cattle business.
The current formal livestock, slaughter and manufacturing and retail packing agreements between the two officially ends in June next year. It is unclear whether Coles will continue to kill any cattle at ACC, having already moved some of its kill elsewhere.
In a convenient coincidence, at much the same time that ACC was looking for new customers for the first time in more than 40 years, national supermarket group Woolworths was looking for new pathways for its Queensland kill, having lost access to the Churchill abattoir near Ipswich which closed abruptly in 2017 (see that story here).
As a result ACC won the business in a competitive submission for a substantial kill for Woolworths’ northern supply chain.
New business model
With the previous Coles exclusivity arrangements dissolved, ACC’s management and board has focused on new horizons, and a new business model has been developed.
In broad terms, ACC plans to continue to devote about 40 percent of its weekly kill capacity (of around 6000 head) to domestic service kill, currently occupied by Woolworths and Coles; 40 percent for export kills for a range of other customers; and the remaining 20pc producing high quality beef processed, packed and marketed under ACC’s own beef brands.
Domestic service kill
After more than 40 years as a service kill provider, ACC’s board felt this function remained a core strength of the business, and this will continue under the new model, through the new alliance with Woolworths. Woolworths yearling cattle will account for about 40pc of ACC’s weekly kill capacity.
With retail store numbers now topping 1000 across Australia, Woolworths’ young beef requirements continue to grow, and ACC will occupy a significant part of that, under a ten year contract.
In addition, ACC’s own feedlots – Brindley Park, near Roma, Opal Creek, near Cecil Plains and Brisbane Valley near Lowood – now hold Woolworths supply contracts, and in fact ACC has quickly grown to be amongst Woolworths’ largest grainfed yearling cattle suppliers.
The second string to ACC’s new bow is export kills for a group of high-value heavy grainfed and grassfed beef brand supply chains.
Currently these include prominent Wagyu and Angus longfed supply chains Rangers Valley and Jack’s Creek, and specialist Certified Organic beef supply chain Arcadian.
“Given our history as a service provider, we have three ‘legs’ to the ACC stool – toll processing, lotfeeding and cattle production on company properties,” ACC’s Managing Director David Foote told Beef Central.
“What we have aimed to do is identify new customers who will see the benefits and utilise at least two of those three legs.
“Some may use our cattle generated from our properties plus our feedlots; while others may use our feedlots and toll processing, to best utilise the assets that the company has.”
In the case of Rangers Valley and Jack’s Creek supply chains, that will extend across cattle production on ACC’s breeding and growing properties, plus toll processing and feedlotting while with Woolworths, the agreement covers lotfeeding and processing.
Recent disruptions with China access for some other Australian beef processing plants had certainly attracted attention to ACC, which holds China frozen beef access, as a potential service kill provider. But equally, the company was only interested in long-term supply chain relationships, Mr Foote said.
“Longevity comes with partnering with entities which have a strong track record and that supply chain mentality,” he said.
ACC’s Anthony Lee said every one of the company’s new customers had been looking at ACC’s ‘back-end’ supply capability. “It is one of our key points of difference,” Mr Lee said.
He said ACC currently had more prospective service kill customers than it could handle.
“We do have a ideally located and state of the art facility here, and there are not too many large modern establishments where a service kill is available. Having the back-end supply chain capability adds to what has drawn potential customers to us,” Mr Lee said.
‘Open heart surgery’
In order to cater for the widest possible range of slaughter cattle weights, as ACC’s Cannon Hill plant does under the new business model, the facility has undergone some ‘open heart surgery’ and significant capital investment in recent years.
In its original design format devised back in 2000, as an exclusive yearling beef processor for Coles, carcase rail heights in the plant were designed specifically to accommodate Coles light carcase weights only. For example Coles carcase weights back then were as little as 180-200kg.
Although built with twice that capacity, the physical dimensions and weights of longfed Angus and Wagyu carcases are not be supported by the plant’s existing carcase rail transfer system.
As a result, a five-stage process followed over three annual seasonal shut-downs to retro-fit a new rail system throughout the plant to accommodate much heavier and taller carcases. This required both lifting rails, as well as strengthening them to support heavier carcase weights. Last November and July saw the last of those major installations.
Another big area of change has been in sortation and boning of different carcase types. During the Coles-exclusive era, there were long production runs of virtually identical yearling carcases each day, boned into a traditional 16 -18 cut model.
Today, with carcases of dramatically different weights and types being processed for different customers or ACC’s own programs, the boning room has been set up differently to cope with much smaller production runs of different types, including additional boning and slicing stations, and more segmentation.
ACC launches brand program
The third component of ACC’s new business model is the company’s expansion of its own branded beef supply chain, which has already commenced under the brand name ACC 1620 – a reference to the plant’s DAWE Establishment Number.
The new ACC 1620 brand has started with a 120-day grainfed program using lower bos indicus cattle genetics, with an Ausmeat marbling score target of 2 or better.
‘We’re aiming for a quality point-of-difference from the more generic 100-day grainfed beef’
“We’re aiming for a quality point-of-difference from the more generic 100-day grainfed beef through breed type and longer days on feed, targeting premium food service and retail customers, mostly in export,” Mr Lee said.
“Early runs have marbled closer to 3 than 2 on average, which has been an encouraging start,” he said.
Prior to the onset of COVID this year, up to 1000 head per week were being processed for the new 1620 brand program, but that declined as lockdowns and trade distortions impacted the market. Now that COVID obstacles are clearing, volume is again gathering momentum. Additionally ACC prioritised it’s toll processor requests over its own brand.
Enclosed supply chain
A key marketing feature of the ACC 1620 brand program is that it is an unbroken, closed loop supply chain, with traceability from calf conception on ACC’s own Queensland breeding properties, through to time spent in ACC’s feedlots, and processing at Cannon Hill. No bought cattle are included in the program.
As part of that process, ACC in July this year purchased all the remaining shares in the Australian Cattle and Beef Holdings joint venture from Acton Land & Cattle Co that was originally formed in 2015. Of the original properties in that group, Millungera, near Julia Creek, and Rugby Run in Central Queensland, which have been retained by original JV partner Evan and Kim Acton.
The remaining ACBH properties, including Barkly Downs, have now been integrated into ACC’s existing property portfolio, including existing lease arrangements through Central Queensland including the lease of Croydon at Marlborough from Jenny Acton
Depending on seasonal circumstances, ACC is targeting to breed will 50,000 calves for supply back through the ACC supply chain system each year.
Even beyond this year’s absorbing of the ACBH properties, ACC has itself continued to make property acquisitions, with six additional purchases in the past two years, for breeding/backgrounding work, or feedlot commodity production.
While ACC has always had its own sales and marketing division to service its toll processor customers, with 30pc of the plant’s output going overseas , that function has now expanded under the new brand program era.
The choice to use the establishment number 1620 in the brand name is a reflection that the China market represented the largest export target, and that the Chinese meat trade identifies closely with establishment numbers, rather than brand names or titles.
Gradually since 2018, ACC’s own cattle operations have moved to build a foothold in the Wagyu industry, establishing Fullblood and F1 Wagyu x Angus breeding herds in Central and North Queensland using high quality, marbling-oriented genetics.
Currently the business runs a herd of about 2000 Fullbloods and about 4000 Angus cows producing F1s, with plans to expand to 10-15,000 crossbreds and 4000 Fullblood breeders over time.
‘In what may be a unique approach, ACC ‘reverse engineered’ the design of its Wagyu programs’
In what may be a unique approach, ACC ‘reverse engineered’ the design of its Wagyu programs, deciding first how many Wagyu beef shipping containers it wanted to fill per week or month for export customers, based on likely demand, and working backwards from there to arrive at appropriate stock numbers to deliver it.
Through genetics and management, the objective is to produce average marbling scores among the Wagyu cattle of 6-7 with consistency, at considerable scale. To optimise growth in the Wagyu segment, ACC earlier bought two high quality foundation Fullblood stud herds, and relies heavily on IVF to multiply elite genetics.
Currently, calves produced out of those breeding programs are directed into the F1 or Fullblood Wagyu supply chains operated by ACC’s processing customers, Rangers Valley and Jack’s Creek. Some other non-Wagyu cattle are also directed into Jack’s Creek’s 100-day programs.
“It is so much better for our overall business, in being able to move into those categories that may be able to add more value,” Anthony Lee said.
“ACC is now a much more complex business than when we simply killed yearlings for Coles, but these new developments have created a tremendous sense of energy within our business,” he said.
“It’s created new challenges – many of our livestock and meat production team members are loving the arrival of the Wagyu program, for example, and that’s having a flow-on effect into our trade herd. The same applies on the processing floor – killing such a wide variety of cattle for different end-points is more complicated and challenging, but it is something new, and our staff see this as a key to longevity and sustainability in the business. Working for a single customer means you have all your eggs in one basket,” Mr Lee said.
Current business changes are also being seen in impacts back at the feedlot level. Previously feeding only 50-70 yearling steers and heifers for Coles, ACC’s Brindley Park, Opal Creek and Brisbane Valley feedlots arguably had some of the highest stock turnovers of any feedyards in Australia. This earlier Beef Central article calculated that there were close to 5000 stock turnovers at Brindley Park feedlot each week, alone.
However while the move to feeding more 120-day and Wagyu cattle will see stock turnover greatly reduce, average carcase weights through the Cannon Hill plant will increase dramatically. The net result will be more beef produced per year, from fewer slaughter cattle.
Partly to offset that lower stock turnover, Opal Creek feedlot has recently expanded in capacity by 5000 head, taking the site to full licensed capacity of 30,000 head. Options are also being examined to apply for further license expansion.
In other parts of the business, ACC’s existing 8000sq m retail ready and value-added food facility located beside the processing plant will continue to operate as it did under the previous Coles agreement, but will now be utilised by a much broader basket of supply chain partners looking for shelf-ready cut steaks, mince, burgers, stirfry, dice and a wide range of other value-added products.
Other stand-alone food brand customers may now also utilise the facility, other than ACC’s suite of processing customers. Potentially, other proteins may also be included apart from beef.
The change in direction for ACC’s business model outlined above also heralds some major changes in senior management ranks.
Current group managing director David Foote, who has been with the company since 1999, plans to step down from a full time role next year, handing the CEO reins over to Anthony Lee, eldest son of ACC founder and owner, Trevor Lee.
Mr Foote will continue in a part-time advisory role as the company’s Director of Industry and Corporate affairs, to support the Lee family and the ACC group of companies and their respective boards.
Mr Foote started with the business in 1999 as general manager for properties and livestock, followed by seven years as CEO, and the past eight years as Managing Director.
Anthony Lee moves into the CEO role after 16 years working in the company.
After completing a business degree at University of Queensland, he has spent the past 16 years full time in the business, and has progressed from supervisory roles in manufacturing production to management of retail-ready operations through to executive business management roles across the Cannon Hill operations.
Over the course of the past year, as part of the management succession program, his role as executive director of operations has incorporated the properties and feedlot divisions in the ACC agribusiness.
Mr Lee said the current evolutionary phase the company was going through had certainly not come on, ‘all of a sudden.’
“The succession we are currently seeing has been in motion for some years. Even though it’s currently being enacted on, there’s still a soft transition that’s occurring. The people who have been in the business for a very long time are still around, and the younger people coming through are providing a great mix of talent, energy and enthusiasm,” he said.
“We’re getting to a really exciting position with the team now where we have the right mix to take on these new challenges. One of the hallmarks of our business is that key staff tend to stay with us for a very long time.”
“The challenge now is to determine what that team looks like for the next 20 years.”