IN AN export beef market where product substitution is said to be rife, an Australian-driven project in Vietnam is developing a beef business model aimed at guaranteeing the integrity of the term, ‘product of Australia.’
Businessman Matthew McMahon is behind a beef supply chain project which is targeting the upper end of Vietnam’s hotel, restaurant and resort food service industry.
His Australian Premium Pastoral Holdings business has exported beef into Asian destinations for the past three or four years, but is now building a boning room and further-processing facility near Da Nang in Vietnam, due for completion around November this year.
“We need to look at alternate ways to develop beef trade in these emerging market regions like Vietnam and other parts of Asia,” Mr McMahon told Beef Central.
“The beef supply chain models that have applied in established markets like Japan or the US do not necessarily apply well in markets like this,” he said.
The company claims to be the first foreign-owned enterprise outside of Saigon or Hanoi to be granted a beef producers’ license from the Vietnamese Government’s People’s Committee.
While Vietnam was an exciting and growing prospect for Australian beef, it was also a very price sensitive market, and prone to substitution, Mr McMahon said.
“Vietnam is the fastest growing food and beverage business anywhere in Indo-China, outside of China. In Da Nang, there are now 130 hotel projects on a 30km stretch of beach at Son Tra. The Hiltons, Sheratons and Hyatts are all there.”
The company 18 months ago sought to raise US$12 million for the project, attracting financial backing from a Japanese investor, and a substantial beef-producing family in Australia.
The plant is now 50 percent completed, with plans for completion and commencement of operations around November. The boning and further processing facility includes its own water treatment plant, and will include a Darfresh packaging line, full traceability delivered through the installation of Marel systems, and burger pattie grinding and forming lines.
Mr McMahon, who previously sold product from Bindaree Beef and other Australian beef brands in emerging Asian markets, has more recently traded in service-killed boxed beef out of the Northern Cooperative Meat Co plant at Casino – mostly high quality mid-fed grainfed Angus and Wagyu cross beef, destined for Vietnam’s booming hotel, restaurant and resort trade.
Over time, Australian Premium Pastoral Holdings plans to develop four separate production streams to service different segments of the Vietnam beef market:
- Export of quality grainfed chilled boxed beef cuts out of Australia, which the company is already doing, will continue. Most of this ends up in the hotel and restaurant trade.
- Export of chilled bone-in quarter beef from Australia, for boning, portioning and further processing in the company’s soon-to-be completed facility near Da Nang in Vietnam
- Production of burger patties and other value-added items, using both imported boxed trim and secondary cuts, and output from local boning of Australian quarter beef, to service large international burger restaurant chains
- Ultimately, the business may also source carcase beef from Australian cattle imported live and fed and slaughtered in Vietnam.
The business which in Vietnam also trades as Epicure Fresh, has plans to eventually turn over between 280 and 400 carcase equivalents per day.
Drive to cut costs to remain competitive
Mr McMahon said meat (most of it low quality) was currently being dropped into the Vietnam market at very cheap rates out of Cambodia and China, and even South America.
He admitted that there could be some backlash in Australia over ‘offshoring’ Australian processing jobs, by proposing to bone Australian quarter beef in Vietnam. But equally, the Vietnamese market was very price-sensitive, and boning the beef locally, at lower cost, would ultimately expand sales opportunities for Australian beef.
Additionally, the business wanted to do more with secondary cuts, that hold a greater value in a market like Vietnam, but which in Australia often end up in the grinder.
“The traditional boxed beef sale model out of Australia won’t work in large parts of this market, nor in Cambodia or Thailand,” he said. “The answer, to remain competitive, is to cut costs.”
Mr McMahon said financial modelling had suggested a saving of as much as $8/kg on importing quarter beef and boning/portioning the product in the Vietnamese market, over importing the same beef as boxed cuts from Australia.
“We will have a considerable advantage in boning out the product in the market. But it won’t affect the return to the Australian farmer at all.”
Preserving product integrity
Mr McMahon said a significant issue in the Vietnamese market was substitution of locally-processed beef from imported dairy cows and other second-grade cattle, packaged into counterfeit vacuum-package bags bearing the identity of an Australian beef exporter.
He said such substituted product could easily be found in the market bearing well-known labels from Australian exporters like Thomas Foods International or Kilcoy.
“I’ve had top chefs from international hotels ask me to verify whether a product marked as Australian they had in their cold room was genuine. It was very evident it was not. Even the vacuum-pack plastic used was inferior to that used in Australia,” he said.
“The fact is that while the Australian government and Austrade know it happens, they don’t want to offend anybody in Vietnam, any more than they have.”
“But what we want to do is lead by example, establishing a product in the market that can absolutely stand by its credibility and legitimacy as Australian beef,” he said.
“That’s why we have engaged with Marel to install traceability systems through the production process in the new facility, and that will deliver credibility right through to the customer,” he said.
“We see this as the means of overcoming this authenticity problem, and restoring confidence among important food service customers.”
One of the plant’s other activities will be to manufacture burger patties to supply the larger international Carl’s Jr and Burger King chains in Vietnam, with patties carrying a high degree of traceability.
“To be realistic, if Australian beef wants to be a player in a market like Vietnam, it is going to have to look at options like this,” Mr McMahon said.
Shelf-life important factor
Another big issue in Vietnam for imported beef is delays in customs and quarantine clearance, (and in distributing product along the length of Vietnam), which can impact on shelf-life of chilled product in the market.
For that reason, APP sees the future in servicing the needs of the upper end of the food service industry in the country as being in Darfresh-packed, individually-portioned cuts, with a far superior chilled shelf-life of 45-60 days.
Eighteen months ago, APP was the first company to introduce Darfresh-packed beef into the Vietnam market, produced at the Argyle Prestige Meats facility near Bomaderry, NSW.