WOA "Members Only" Section
Newsletter #23, February, 2005

Issue No: 23


1. Purpose of Newsletter
2. Best Practice vs Good Practice
3. Quality Mark Support
4. Market Statistics
5. Market Information
6. Industry Solutions
7. Contributions


1.  Purpose of Newsletter


The purpose of our newsletter is to keep our members informed of industry issues and developments.  The greatest challenge that our industry faces at this time is lack of production.  Frik Kriek summed it up well at the 2nd SA Industry conference in 2002.

NO RAW MATERIAL NO INDUSTRY

A major concern of many members is market development and understanding the markets.   All of us are confident of the demand for our products, but many are failing to capitalise on those opportunities.  Over the time I have been writing these newsletters I try to find market information that is relevant to our industry's marketing program.  A market research company employed by a major South African slaughter plant reported back that the biggest mistake the South African industry had made was to market through dealers and traders in Europe.  The meat was being treated as a commodity rather than as a niche product, which it should be while volumes are so very low.  Many newcomers to Ostrich production are not aware that the ostrich meat market is only about 10 years old, prior to that the South African industry was strictly controlled with single channel marketing focusing on feathers and leather.  Continuously we receive communication from those new to the industry stating they need to export their meat as the meat is new to their country.

The message is that Ostrich meat is new everywhere.

Dealers and traders have little or no concern on sustainability of supply, meat is simply a commodity.  They buy at the lowest price they can, sell at the best price they can and make sure they have their margin.   The meat represents a very small proportion of their overall turnover and do not traditionally 'market' the meat.  There is also a need for a sustainable supply chain to support any marketing initiative.

The principle of WOMRAD is recognising that our competition is not each other.  Our competition is the other specie.  Other specie are under pressure from many angles.  They have become increasingly efficient in their production methods in order to survive, and it is getting harder to cut margins through increasing efficiency further.   Ostrich, when farmed correctly, are proven to be extremely efficient, offering producers tremendous scope for very significant improvements in efficiencies.


2. Best Practice vs Good Practice

The definition of Best Practice is leading edge thinking, practically applied which brings competitive advantage.

The definition of Good Practice is established wisdom, widely applied and often embodied in law, codes of practice or assurance schemes.  Good Practice is valuable and important but is too commonplace to bring competitive advantage.

WOMRAD would be introducing Best Practices to Ostrich production.


3.  Quality Mark Support

The UK Pig industry is introducing a Quality Standard Mark.  The industry is investing £1million (US$1,87m) to launch the initiative.

Consumers are becoming increasingly concerned about the manner in which animals producing their meat are raised and how they are fed.  Legislation banning the use of stalls and tethers in pig farming came into force in 1999 in the UK.  A British consumer survey showed that 92 percent agreed that imported meat should be produced to U.K. minimum standards.   Currently more than 50 percent of all pork, bacon, and ham on supermarket shelves is imported -- a figure which rose by four percent in 2003.  The price of this imported pork is cheaper as there are cost implications to raise the pork to the new British standards.

The promotional campaign includes national press and magazine advertising, direct mail, and a public relations campaign. A website is due to be launched, which will allow consumers to find out which supermarkets stock pork, bacon, and ham meeting U.K. standards.

UK Pig farmers are being put at a very real disadvantage as more and more supermarket shelves are being filled up with cheaper imports that would be illegal to produce in the UK.  The industry makes it clear that it is not an anti-import campaign. Imported products can carry the Quality Standard Mark if they meet UK standards in production methods.  The industry is simply  trying to make consumers aware of this issue. The Quality Standard Mark gives them clear, simple information they need to make an informed choice.

An organisation in the United States have introduced a quality standard label - Certified  humane raised and handled.  The certification recognises the increased consumer concerns and provides a certification for producers wishing to operate best practices to gain competitive advantage.  Their mission is to improve the welfare of farm animals by providing viable, credible, duly monitored standards for humane food production and ensuring consumers that products meet these standards.   Key areas they are looking at are raising animals with sufficient space, quality feed, with no added antibiotics or hormones.  Funding is through a headage payment, which obviously adds to the rearing costs, but is recuperated from the added value.

These type of quality marks are only of any value if all producers in the scheme operate them with pride and do not try to cheat the system.   They are also only of value if the buyers are aware of the benefits, hence the need for strong promotion.  Pork production in Great Britain for 2004 amounted to 158,974 metric tonnes.  Therefore the US$1.87m is equivalent to a little more than 1cent per kilo of meat when measured against the annual production.  The benefits of economies of scale and pooling resources for promotion.

WOMRAD would carry it's own branding and therefore quality marks associated with that brand.

4. Market Statistics

The following was published in a Canadian magazine called Farm Market in December 2004:

Quote:  Statistics from 1998 show that Canadians on average spend just 12.4 per cent of their income on food. Only the United States (10.9 per cent) and the United Kingdom (11.5 per cent) spend a lower percentage.

Marketing boards have provided some protection for producers, but even these have experienced a decline in the share of the food dollar.

- The retail price of milk, for example, jumped by 110 per cent between 1981 and 2003, while the price paid to the dairyman climbed by 44 per cent.

- The price of chicken, as paid to the producer, increased by 10 cents a kilogram over the same 22-year period, while the retail price of chicken climbed by an astounding $1.85 per kilogram.

With retail increases like that, it’s no wonder that the authors of Compare the Share were able to conclude that processors and grocery stores experienced massive profits during the 1990s -- especially when the cost of their “raw materials” were kept low.

It’s not like farmers had that choice. Compare the Share finds that, on average, the prices received by farmers climbed by 16 per cent between 1992 and 2003, but the cost of their inputs jumped by as much as 74 per cent.

Whoever said that farmers are price-takers and not price-setters wasn’t far off the mark.

End quote

The full article can be viewed at:  http://www.farmmarketnewspaper.com/story.php?id=130426

A quote from another article published on the same website in December:

Quote:  Farmers may need to get involved with the processing industry to obtain a larger share of the retail food dollar, says the president of the Ontario Federation of Agriculture. end quote

Michael Sunderland, a member from Canada, has reported that their group of farmers are involved with such an initiative.  The article goes onto state:

Quote:  “Unless we get money from the marketplace, we’re not going to be sustainable,” he said.  Bonnett said the issue of a closer relationship between farmers, processors and retailers was discussed at the Premier’s Roundtable, held Dec. 9.

“Farm income was discussed, and the processors realized that they have to start talking to farmers.”

Bonnett said it was pointed out to processors that primary agriculture must be economically sustainable, or the processors’ source of raw material will dwindle and disappear.

But Bonnett said farmers shouldn’t wait for the processors or retailers to make the first move. He said the OFA (Ontario Federation of Agriculture) is setting up a meeting with both sectors, and he suggested that it would be in the best interest of the Federation to hire an economic development officer to pursue such interests on the membership’s behalf.

“We need to take charge of our destiny, and not leave it to someone else,”
said Bonnett.  End quote

The full article can be viewed at:  http://www.farmmarketnewspaper.com/index.php?id=601

WOMRAD would become the direct marketing arm for the producers.


5.  Market Information

In Newsletter #17 (http://www.world-ostrich.org/member/news17.htm) I discussed the increasing power of the supermarkets.  Figure 1 demonstrates their dominance in the UK market.  Butchers have only 1% share of the total grocery market.


Figure 1 - United Kingdom Share of Retail Grocery Market 2003 and 2004
[source: Meat and Livestock Commission Monthly report to January 2nd 2005]

A survey on customers visiting butchers reported that the customer spends on average 7 minutes and 24 seconds at the butcher purchasing their meat.  By comparison customers buying meat in supermarkets at the pre-packed shelves, spend between 24 and 37 SECONDS.

The top 3 reasons given for purchasing meat at a butcher are:
- Relationship with butcher 51%
- Better Quality than supermarkets 46%
- Ability to get cuts that they want 45%

The top 3 reasons given for purchasing at the service counters of supermarkets are:
- Request portion size to suit 42%
- See products clearly 38%
- Value for money 33%

Decisions for buying loose meat:
Butcher purchases
- Planned - Know exactly what meat before going to the butcher - 71%
- Semi Planned - Have some idea of meat they are to buy - 21%
- Unplanned - Decide what to buy once in butcher - 4%

Supermarket serve-over customers
- Loose Meat purchase planned - 59%

Item
Butcher Customer
Supermarket serve-over customer
Quality
36%
16%
Freshness
24%
19%
Amount of Fat
14%
16%
Visual Appearance
10%
7%
British Meat
8%
6%
Table 1 - Loose Meat Customer Purchase Survey
[source: Meat and Livestock Commission Profile of a Butcher's Customer 2003]


The primary reasons given by butcher customers for purchasing their meat at the butcher are:

            Trust
            The Personal Touch
            Value
            A special experience
            Good Presentation

The full report can be viewed at:  http://www.redmeatindustryforum.org.uk/images/upload/documents/looseredmeat.pdf

No single market report should be read in isolation - but I am sure all agree that any strong marketing organisation needs to be continually understanding the markets in which we operate as they are very sophisticated markets?


Figure 2 - Movement from open markets to rearing on contract.
[source:  USDA Farm Policy 2001]

It is very clear that world volume of ostrich production is so small that it can only be measured in a meaningful manner against the output of single production units of other specie.

WOMRAD as a commercial operation would monitor market trends in all areas of operations.

6. Industry Solutions

WOA membership is from all continents.  All members share a common goal, doing all we can to understand our industry and how to turn our investment into real returns.  Working as individuals a few may have managed to make a reasonable living, many have lost their total investment and left the industry, some are members to network and some are members as new entrants to learn more about our industry .  The common interest is that for any business to succeed it needs to operate at a profit and hoping to learn how to achieve that objective. 

When our current world production is measured against production of our competitors - other livestock industries - we are too small.  Take the UK red meat consumption as an example.   It is 1.15million tonnes per annum.  Global Ostrich meat production is no more than 12 thousand tonnes at its peak and that figure has fallen over the last few years. 

WOMRAD can work for the good of all through the pooling of resources.

7. Contributions
As always, I ask for contributions from Country Liaisons and other members. A sharing of your experiences, what is happening in your area - anything you believe that would be of interest to other members. Any contributions for inclusion in future news letters please send to Fiona at editor@world-ostrich.org.
 
Any comments or suggestions, please post either to the members list woa@world-ostrich.org or Craig at secretary@world-ostrich.org
 


Ask not only what the WOA can do for you but also what you can do for the WOA.



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