QMS Rising to the Challenge Conference

Chief Executive UEL Morton welcomed more than 140 delegates to QMS's “Rising to the Challenges” conference at Airth, their conference. One theme shining through was the importance of good communication between the different parts of the red meat industry was emphasised. A willingness to listen and participate in two way communication. He said:-

“This flow of communication and transparency is vital to set the scene for a sustainable industry which is willing to change, rise to the challenges and respond to the opportunities in a changing marketplace,” said Mr Morton.

He also pointed out the importance of recognising the value which is added by each link of the red meat chain, from one end to the other.

“For this value to be maximised for everyone's benefit it is important there is a willingness to listen, understand and work closely with the other parts of the chain.”

“It is well recognised that the most successful value chains are those where recognition is given to the value being added and the rewards shared accordingly.”

Addressing delegates at the start of a full programme of speakers covering the challenges and opportunities faced by those working in different parts of the industry, Uel Morton said this was a period of very significant change.

“I think we all recognise that we're operating in a time of unprecedented change for the livestock industry,”

He said this era of change was one in which the value of QMS's role is particularly clear.

“This is the third industry conference we have hosted in Scotland in the past six months including a successful pig conference in November and a marketing conference in January.

“This was aimed at the processing and retail sectors and looked at opportunities for the industry's brands – Scotch Beef PGI, Scotch Lamb PGI and Specially Selected Pork – as a result of changing retail and consumer trends.”

Mr Morton also highlighted the fact that the industry development team at QMS delivers an important and wide-ranging workload using what is only a relatively modest amount – around 20% – of QMS's total spend.

“The vast majority of our spend, more than 70%, is targeted at consumer-facing activity such as the marketing campaigns behind the Scotch Beef, Scotch Lamb and Specially Selected Pork brands,” he reminded the audience.

The objective of the free one-day event was to consider the current challenges that beef and sheep farmers face due to market volatility and reduced support payments, and explore ways that producers can offset the impact of these challenges including the potential to further improve efficiency. Presentations followed:-

Laurent Vernet, Head of Marketing QMS.

1. Since 2007 retailers have entered price wars, consumers shopping around and so are retailers.beef, lamb and pork have experienced greater inflation than food and chicken. Volume of beef and pork declining, lamb holding its own. In short term beef up 1% yoy, but in Scotland 5% up.

2. Second massive trend is use of red meat as an ingredient. No longer is a steak, stew or chop the main dish. Moved red meat into ready meals. London and Scotland both buying less red meat and more ready meals. Preparation time for evening meals again reminded the average time spent has halved to 40 minutes since 1980.

3. Older generations showing less tendency to cook. They do however buy premium steaks and are prepared to pay more for the product.

4. Now consumers have many choices when it comes to ready meals. QMS see the lack of need to identify country of origin in ready meals as a threat.

5.Eating out: since 2014 there have been 7% more occasions to eat out. Country of origin also a problem

6. What I want when I want. Online activity greatly more than time in kitchen. Consumers expectations are changing fast and if they do not like what they experience they share it right away with their friends.

Looking at Retailers
Tesco, ASDA and Morrison sell 58%, Lidl is as big as Sainsbury, Aldi and Lidl sell us much as the Co-op. More completion all round.
Consumers expect promotions – about a third of all supermarket meat sales on price promotions and someone has to pay for it.
30% of meat in Scotland bought online, 43% in London.
Greater top up shopping creates new opportunities for butchers. 8 out of ten seeking inspiration for evening meals.

Scottish origin beef volume increased by 8.8% while at the same time UK origin declined by 8%. Country of origin is only important in Scotland.

Stuart Ashworth, Head of Economics QMS

A look at the processing sector. Edible meat from cattle 40%, lamb 35.5%. Stuart explained revenues possible from by products, these had declined significantly. £60-£70 ripped out of value of cattle beast.

Challenges to the 'Intermediate' products
Regulation limits market opportunity
Demand for leather dropped
Environmental pressures in global tannery sector
Price of oil has affected value of tallow
Dog food market declining while cat food market is stable.

The meat market:
Direct to retail outlets – just over 50% of beef, more of pork and lamb
Commercial wholesalers
Food service
Food manufacturing
Export

Retail behaviour:
Kantar says sheep meat demand is spikey with peaks in leg roasts at Easter, Christmas, Ramadan. (600,000 tons of leg roasts needed for Easter.)
Mince dominates the beef retail market, peaking at Christmas and Easter. Challenge to processors is to manage the carcase balance.
Number of shoppers buying meat is increasing but they are buying less of it when averages are compared. Size of roasts purchased has shrunk in response to customer behaviour.

Hierarchy of customers:
Butchers attract premium retail customers seeking high product specification and just in time management. Challenge to have enough product to vote with fluctuations on demand. There is a difference in price points within the range of product required.

In Summary:
Not enough people buying leather shoes or boots!
Regulation limits opportunities for some offal.
Pet food market is flat.
High street retail market is more dynamic and faster moving than ever, smaller portion size, just in time management, greater interest in ready meals.

Identifying Opportunities for Change – Douglas Bell, Head of Industry Development

An Industry View:- Need to adapt to change and take the opportunities out of that. QMS industry development team highlight the opportunities.

Rising to the Challenges – John Ritchie

A farmers view from a typical upland farm – Montalt Farm, Perthshire.
No aspirations about being the biggest, just wants to be more efficient and better at what he does.

Major problem is that income includes subsidy figures and when taken out suggest that the farm is not sustainable. Payments are down £10000.
Challenge then is how to be sustainable, market gives what you are given. Need to maximise what is sold and reduce the cost of getting it to market.
Cattle – moved away from far too big cows, introduced Hereford but Hereford heifers did not attract premiums in store ring. Cattle return was embarrassingly woeful and was not achieving enough calves on the ground.
John continued to relate how as a monitor farm he had made changes to both cattle and sheep production. Grassland management he highlighted as key, letting grass rest and fill up.