A big deficit exists in many Europeans’ appreciation of what constitutes quality beef, compared with consumers in markets like Japan and the US, according to the industry’s Europe region trade manager for the past two years.
Jason Strong vacated his Europe regional management role for Meat and Livestock Australia recently to take up a newly created senior management position with the Australian Agricultural Co, starting this week.
In one of his last industry speaking engagements in an MLA capacity, he provided a recent lotfeeder audience with some surprisingly frank opinions about the typical quality of beef sold within the EU market, none of which were particularly complementary.
“One of the big problems Australia faces is customer awareness, and appreciation of high quality beef product,” Mr Strong said.
While the situation varied a little from country to country, in Belgium, where MLA’s office is located, the domestic beef production system was focussed on young, grassfed Belgian Blue bull meat.
“Given my background in MSA and quality butcher shops selling grainfed beef, I had a lot of challenge in buying a steak in a Belgian retail outlet,” Mr Strong said.
“To be honest, I haven’t tried in two years. We bought all our steaks from an Australian importer.”
Beef Central is intimately aware of Mr Strong’s prodigious talent for quality beef consumption, having witnessed him perform over a lot of steaks at Brisbane’s famed Breakfast Creek Hotel steakhouse over the years.
“In Belgium you’re dealing with domestic bull beef that is very, very lean, is light in colour and basically, you can’t eat it. Their perception of beef is that it is a good raw material for practising your sauce-making skills on.”
“When you go to a Belgian restaurant, you can’t buy a steak without sauce on it. The perception of steak at retail and food service is that largely it is likely to be tough, it is not going to have a lot of flavour, and it’s going to be inconsistent.”
“Have a conversation with a Belgian consumer about the prospect of having a tender, flavourful, consistent piece of beef and the first problem you strike is belief: they simply don’t accept that it can happen,” Mr Strong said.
But once they start sampling Australian product, the outcome was not dissimilar to what was found with MSA in Australia, 15 or 20 years ago, he said.
“We’re coming off a position where we are trying to sell European consumers a high quality product, at a time when they are used to a lower quality, poor-performing, inconsistent product. That represents a real challenge in terms of consumer awareness of Australian beef.”
Another question was whether it was worth trying to build consumer awareness among 500 million EU citizens, when Australia only had 15,000t of product annually in a market that annually consumes 8.5 million tonnes.
“That comes back to our logistics challenge, and where we put our trade emphasis. A lot of what we do in Europe is based around working with the trade – working with specific importers and distributors to ensure that their knowledge and understanding of the Australian product allows them to build the relationship with their end users.
“We’re not looking for a very high percentage of EU customers or end-users – we’re looking to target the highest end of the market so we can maintain the value of what we’re sending.”
As a part of the response in this, MLA’s Europe bureau had done a large number of chef’s tables and other activities with food service and retail contacts designed to enlighten them further about possibilities with imported beef from Australia.
Activities around trade shows, and product sampling was also fundamental to what MLA was doing in the Europe market.
“We’re only trying to find the distributors and importers that have the access to the higher-end customers and consumers. We only need a very small percentage of the EU’s 500 million people buying our product, but it needs to be the right people who will pay a premium for it,” Mr Strong said.
“But we still have to get over the hump of the contrasts in appearance between an Australian grainfed Angus striploin and a strip coming off a grassfed domestic yearling bull. Getting the purchasers’ head around that comes down to sampling the product. All the trade shows attended by the Australian industry in both Europe and Russia now have a ‘kitchen/restaurant’ for product displays, demonstrations and sampling.”
Mr Strong said while Europe these days was often somewhat simplistically portrayed in newspapers as an economic ‘basketcase’, while there were challenges evident, there was still considerable prosperity and wealth in many areas.
“Looking at the EU market in total, the 500 million consumers account for about 8.5 million tonnes of beef a year,” he said.
Historically it has been a grassfed market for Australia, typically around 8000 tonnes a year, albeit significantly constrained by quota access.
A new opportunity emerged in 2009 as a result of a World Trade Organisation settlement between the US and the EU over non-access of US HGP-treated beef. The result was the creation of a brand new quota for grainfed beef, non-country specific totalling 20,000 tonnes. That has now increased to 48,200 tonnes from August 1 this year.
Because it was created as a result of a WTO dispute, the Europeans could not have a country-specific quota, allowing Australia to qualify, along with the US, and three others.
“Most importantly, this is a tariff-free quota, unlike the grassfed quota which attracts a tariff of 20pc, meaning this is a significant opportunity for tariff-free access,” Mr Strong said.
As the attached graph shows, volumes of grainfed beef as a proportion of exports to the EU have grown dramatically since 2009-10, but not at the expense of grassfed, which has also grown 4pc over the same period. In total, Australian beef shipments have increased 63pc in the last two years.
“The thing that is really positive about this is that we have not actually cannibalised our original grassfed position, by diverting eligible cattle into grainfed production streams,” Mr Strong said.
For the 2011-12 year, Australian grainfed exports totalled around 4700t.
“That signals that we have responded on the supply side – historically we’ve had a very constrained number of cattle eligible for the EU market, but we’ve responded by increasing the number of cattle available.”
There had also been a shift in the composition of Australian exports to the EU, largely driven by optimising market value, under quota limitations. Traditionally it was a seven-cut market – middle meats and a couple of butt cuts – but while there has been an increase in all cuts sent, the emergence of grainfed has largely been in fullset sales.
Looking at the breakdown of cuts sent, the cut percentage has changed significantly for the high value cuts. Tenderloin, striploin and cube-roll on a percentage basis have actually declined, while secondary cuts have risen.
“But most importantly, even while that has happened, we’ve maintained the value of the market. The EU is currently about a $10,000/tonne value market for Australia, while the next highest customer countries are Hong Kong (very small volume) on $5600 and Japan and Korea in the low $5000/t range.
“So the EU is a high value market where we have been able to get incremental gains by selling a broader range of cuts, while still maintaining the value,” Mr Strong said.
The same applied with the EU destinations serviced, where Australia had maintained shipments to existing countries, while also adding new ones. The UK was Australia’s traditional market, which had grown, but not at the expense of more volume going into other significant markets like Italy, the Netherlands and Denmark.
“It’s important to remember that while we might think of the EU as one market, it is actually 27 different countries, and the specifications that are required for each vary considerably,” he said.
“Looking at the northern/southern split in Europe, the current financial difficulty is a lot more real in the south than the north. The financial position of consumers in Germany, the Netherlands and to a lesser extent the UK is very different from those in Greece, Spain and the southern regions.
“That means there is quite a deal of difference so far as the country-by-country requirements and cut selection goes.”
Challenges remain
One of the constant challenges faced by Australian exporters to the EU was logistics and transport distance, with a typical sea voyage of 35-38 days to get product into the north of the continent – the longest of any Australian beef exports.
Logistics challenges also presented themselves once the product arrived, particularly when dealing with sparsely scattered high-end supermarkets and food service operators.
From a competition viewpoint, the US has access to the same EU grainfed quota as Australia, and was quite competitive, given Australia’s current currency position. Certainly the perception of ‘USDA Choice’ as a global standard was also a challenge for Australian exporters.
Equally, eligible livestock supply remained a challenge in order to adequately service the market.
“We are well past the early setting in period, and getting a more consistent flow of product coming into the market.”
Mr Strong said the EU grainfed market was a good example of Australia responding quickly to new opportunities as they arose.
“Opportunity was presented with the creation of the new quota and the industry put together supply chains swiftly, getting cattle on feed for 115 days, in a much faster response than any other qualifying country, including the US,” he said.