STRATEGICALLY POSITIONING THE AUSTRALIAN SHEEPMEAT ...€¦ · In the longer term, it is suggested...

S T R A T E G I C A L L Y P O S I T I O N I N G

T H E A U S T R A L I A N S H E E P M E A T I N D U S T R Y

F O R T H E Y E A R 2 0 0 5

1 S T D R A F T

P R E P A R E D B Y

S H E E P M E A T C O U N C I L O F A U S T R A L I A I N C

W I T H R O B E R T M C E N T Y R E A N D

M E A T A N D L I V E S T O C K A U S T R A L I A L T D

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2 S T R A T E G I C P O S I T I O N I N G - A U S T R A L I A N S H E E P M E A T I N D U S T R Y

C O N T E N T S

Foreword 3

Producer Responsibilities following the Industry Restructure 4

1. Introduction 5

2. Major Influences on the Australian Sheepmeat Industry 6

3. �Vision 2005� - Strategic Focus 8

4. What We Must Achieve - Industry Goals and Initiatives 9

5. Initiatives Required to Achieve the Goals 10

6. Lamb Industry Goals and Initiatives 11

7. Mutton Industry Goals and Initiatives 16

Attachment 1

Industry Background 20

- Australian Sheepmeat Industry 20

- Summary 1998/99 Transaction Levy Expenditure 22

Attachment 2

Detailed Overview of 1998/99 MLA Transaction Levy Expenditure 23

Attachment 3

Small Group Output from October 1998 Albury Workshop 28

3S T R A T E G I C P O S I T I O N I N G - A U S T R A L I A N S H E E P M E A T I N D U S T R Y

by the year 2002. Australia andthe USA have recently signed abilateral agreement wherebyAustralia will be at the forefront ofglobal e-commerce development,particularly in the Asia-Pacificregion (The Australian FinancialReview, 1 December 1998).

Primary industry is no different.While agriculture is still importantto the Australian economy, theoverall importance of it as anindustry continues to decline.Family farms will remain a keypart of Australian agriculture, atleast in the short to mediumterms. As as agricultural industryundergoing change the Australianwine industry continues toundergo transformation, becomingincreasingly competitive in theglobal �entertainment� market.

A recent Rural Press article(5 November 1998) titled �GlobalPush to Continue�, indicated that:

� Consumers, not producers, willdrive product development andmarketing

� By the year 2010, farms will bebigger, fewer, more corporatisedand more closely integratedwith their downstreamcustomers

� Smaller, progressive farmers willfill market niches

� The emergence of large scalemulti-product, multinationalorganisations will occur

� There will be less governmentinvolvement in primaryindustry - more riskmanagement to private sectororganisations

� Local perspectives will bereplaced by global perspectives.

The pace of change acrossnations, industries andorganisations has significantlyincreased during the 1990s.Consumer food, fashion andentertainment preferences arechanging, and related lifestylesdetermine how, when and wherepeople are using their time andmoney.

New countries have emerged,such as those resulting from thebreakdown of the former USSR.In the longer term, it is suggestedthat four of the world�s largesteconomies will be in China, India,Iran and Indonesia.

By the year 2005, over half theworld�s population will be withinnine hours flying time fromAustralia, and over 50% of thesepeople will be categorised as�middle class� as we understandthe term today.

The population of developedcountries will decline in the muchlonger term, while that indeveloping countries will continueto increase. The populations ofIndia and China will continue torepresent over one-third of theglobal population.

It has been stated that�economic growth will result fromincreased productivity from anindividual�s knowledge andknowledgeable people. There will beno long term competitive advantagefor any country, industry or company- the only comparative advantage ofthe developed countries is in thesupply of knowledgeable people�.

New industries continue toemerge, particularly associatedwith information and technology.The developing global �on-line�,electronic (e)commerce economyis estimated to be worth $475bn

F O R E W O R D


Producer Responsibilities

following the IndustryRestructure

The new industry modelimplemented on 1 July 1998 isshown in the diagram below.

The recent red meat industryorganisational re-structure has, forthe first time, given sheepproducers responsibility foridentifying sheepmeat industrygoals and initiatives to be pursuedwith their levy funds.

Producers are now alsoresponsible for makingTransaction Levy raterecommendations to the FederalMinister. The rate of TransactionLevy recommended will bedirectly related to the cost ofprograms which deliver againstthe goals and initiativesidentified in this document.

The Sheepmeat Council ofAustralia, as the peak councilfor sheep producers, willoversight this strategic planningand levy rate recommendationprocess. Through theworkshop it convened inAlbury during October 1998and in circulating this draftplan, it is providing you theopportunity to give your adviceon the initiatives the industryas a whole should pursue with

levy funds, and to establish someunderstanding of industry priority.

Once your comments areincorporated into this document,a final plan will be released andpresented to the threeorganisations delivering levyfunded services for the sheepindustry. These organisations inturn will develop, implement andmanage programs to achieve theoutcomes you identify.

The three organisations are:

. Meat and Livestock AustraliaLtd (MLA) which is responsiblefor delivering the research,marketing and informationneeds of industry

SheepProcessors

Live SheepExporters

JOINT FUNCTIONS

Sheepmeat Councilof Australia

SHEEP PRODUCERS

Meat andLivestockAustralia

Core

Joint

PROGRAMDEVELOPMENT ANDIMPLEMENTATION

IDENTIFY SHEEPINDUSTRYOBJECTIVES

Australian AnimalHealth Council

NationalResidue Survey

INDUSTRY STRUCTURE

. The Australian Animal HealthCouncil Ltd (AAHC) whichmanages national animal healthprograms and;

. The National Residue Survey(NRS) which undertakes arandom residue survey ofAustralian sheepmeat productsdemanded by the domestic andimporting markets.

The processing and live sheepexport sectors also contribute tolevy funded activities whichmutually enhance industryperformance and which are ofdirect benefit to their sectors.These jointly funded activities aremanaged by Meat and LivestockAustralia.


This document represents afirst draft to �strategically positionthe Australian sheepmeat (lamband mutton) industry for the year2005�.

It presents a summarised,interpreted collation ofinformation obtained fromindustry stakeholders:

. Albury 1998 SheepmeatIndustry Strategic DirectionWorkshop

. Pre-workshop questionnaireresponses

. Information from the 1995Lamb Industry Strategic Plan(LISP).

The main sections of this firstdraft strategic positioningdocument are:

. Major influences on theAustralian Sheepmeat Industry

. �Vision 2005� - Strategic Focus

. What We Must Achieve -Industry Goals

. Initiatives Required to AchieveGoals.

Attachments to the documentinclude industry background, adetailed overview of 1998-99 MLATransaction Levy Expenditure anda summary of output from theOctober 1998 Albury workshop.

Your views on the goals andinitiatives outlined in thisdocument are important to ensurethat those presented in the finaldraft are genuinely reflective of aconsidered and majority industryview.

Please provide your commentseither directly to the SheepmeatCouncil of Australia or via yourindustry association or group.

The Sheepmeat Councilcontact details are as follows:

Sheepmeat Council of AustraliaPO Box E10KINGSTON ACT 2604Fax: 02 6273 4479Phone: 02 6273 3088Email: [email protected]

1 I N T R O D U C T I O N

The ‘Big-Ticket’ FocusItems

The vision for theSheepmeat Industry

The Goals andInitiatives for the Lamband Mutton Industries

VISION

GOALS &INITIATIVES

STRATEGICFOCUS

The main sections of this first draft are:


In considering the strategicdirection for the lamb and muttonindustries, the major short tomedium term influences to beconsidered include:

� Market Access

� Consumer Preferences

� Competition

� Supply Chain Management

� Product Supply, Quality andImage

� Production Efficiencies

� Government Support.

Market Access

Tariffs, quotas and technicalbarriers (eg. veterinaryagreements, inspection programs)imposed by most trading partnercountries are significantly limitingincreased business opportunitiesfor Australia.

These barriers will be a majorfactor impacting on the growthand further development of theAustralian sheepmeat industry.

There is evidence of a return toindustry protectionism tomaintain local economic andsocial stability as a result of shortterm economic difficulties inselected global markets.

Consumer Preferences

Population and lifestyle changesin both developed and developingcountries will create bothopportunities and threats to thesheepmeat industry. A wide rangeof food and health food products,including home mealreplacements, are increasinglycompeting with traditional

foodstuffs.

Meat consumption indeveloped countries will declineand consumption in developingcountries will improve. Consumersin developed countries eat fastfood, like �eating out�, seek value-added semi-prepared meals andshow a general decline in cookingskills.

The effective targetedpromotion of branded lamb andmutton products, focussing ondesirable consumer attributes,eating quality, health and safetycharacteristics, will impact onsales volumes, financial returnsand market share.

Competition

New Zealand will continue tobe Australia�s main internationalcompetitor for lamb products.

2The competing balance

between wool and muttonproduction will continue.

A collapse of the internationalwool industry would impact onboth lamb and muttonproduction.

Other food products such aspasta, rice, beef, chicken, fish,pork and vegetables, all related toconsumer eating habits and foodpreferences, will impact on bothlamb and mutton sales.

Supply Chain Management

This can be defined as:

�An integrated approach that aimsto satisfy the expectations ofconsumers, through continualimprovement of processes andrelationships, that support theefficient development and flow ofproducts and services from producerto consumer�, (Chains of Success,Commonwealth of Australia,September 1998).

M A J O R I N F L U E N C E S O N T H E A U S T R A L I A N

S H E E P M E A T I N D U S T R Y

CONSUMER

rising expectations for

product quality andservice

increased timeshortage - time poor

consumers

total need for products ofconvenience to match

busy lifestyle

customisation of allproducts to suit their

immediate needs

decreased consumerloyalty greater market

competition

growingacceptance of re-

seller brands

increased pricesensitivity to product

offers

decreased perceptionof product differences


Accountability and effectivebusiness relationships between keyplayers in the supply chain willinfluence the success of theindustry. There will be ongoingmovement towards economies ofscale in production, distributionand marketing.

Supermarkets will increasetheir market share.

E-commerce will increasinglybe a significant trading medium ofthe future.

Management capabilitieswithin the supply chain willimprove, with a focus on strategicthinking, business planning andinformation management.

Product Supply, Qualityand Image

The declining numbers ofAustralian producers and sheepnumbers worldwide will impact onthe year round global availabilityof lamb and mutton products.

Impacting on both lamb andmutton product marketpenetration will be the ability toproduce a continuous supply (theseasonality of production hasdeclined) of a healthy and safeproduct. This will be perceived bysupply chain customers as a result

of disease and chemical residuemanagement practices, andeffective processing practices.

The application of genetictechnology on-farm will be asignificant influencer on the lamband mutton industries. Lambgrowth rates and carcase weightswill increase as a result of theeffective implementation ofanimal genetic developments,creating versatile productopportunities and processingefficiencies.

The substitution of mutton forlamb will continue to be adomestic issue in the short tomedium terms.

Animal welfare issues willremain important to thesheepmeat industry.

Production Efficiencies

Ageing farming populations inAustralia and other developedcountries will affect technologyuptake and hence, on-farmproductivity.

The trend towards largerprivate land holding and corporatemanagement of rural properties,will continue internationally.Larger and fewer farms will existin the longer term.

Productivity gains in intensiveagriculture (e.g. poultry and pigs)will continue to outstrip gains inextensive agriculture (e.g. cattleand sheep). Feedlotting practiceswill increase, and will impact onboth production efficiency andproduct quality.

Government Support

The ongoing support providedby the Australian Governmentand agencies will be a keyinfluence on the sheepmeatindustry.

The industry will make best useof available governmentopportunities to improve marketaccess. Work will continue withagencies such as the AustralianQuarantine Inspection Service(AQIS), the Department ofForeign Affairs and Trade(DFAT), Agriculture, Fisheriesand Forestry Australia (AFFA),Austrade, the CSIRO andAustralian overseas embassies.

In areas of research anddevelopment, the AustralianGovernment will continue toprovide financial support.

Diagramatic representation of the supply chain

Global ConsumersAnimal Genetics

Seedstock Production Sheep Production Wholesaling

Food Services

Retailing

Processing

Transportation and Storage


The vision for the AustralianSheepmeat Industry is to be:

�THE LEADING GLOBAL

FOOD MARKET PROVIDER

OF SHEEPMEAT

PRODUCTS, WITH AN

INDUSTRY VALUE OF

$4.0BN BY THE YEAR 2005�

In this context, the sale ofmutton will double its currentvalue of $0.6bn to $1.2bn, andlamb will increase its sale valuefrom $1.6bn to $2.8bn.

To realise this industry vision,the overarching strategic focusthat emerged from the workshopfor the Australian sheepmeatindustry is:

� Globally focussed, consumerdriven

� Expanded access to exportmarkets, whilst maintainingthe domestic market

� Effective supply chainmanagement

� A knowledge based industry.

Globally focussed,consumer driven

The industry will becomeincreasingly global and consumerdriven, with value-adding throughproduct and packaging innovation.It will provide valued, safeproducts to both customers (in thesupply chain) and to consumers.

Specialist lamb and muttonproducers will be integral to thisstrategy.

Research and development,including enhanced on-farmanimal genetics application, willplay an increasing role in ensuring

the right products are readilyavailable for markets.

Animal health, welfare andfood safety management,including the reduction in productsubstitution, will be critical to thisstrategic focus.

Expanded access to exportmarkets whilst maintaining

the domestic market

There are opportunities tofurther explore and access newexport markets, improve access toexisting export markets, and focuson the global supermarket, retailand food services sectors.

Marketing and promotion,using internationally recognisedspecific lamb and mutton productbrands, and product categorypromotion will be a criticalcomponent within accessedmarkets.

New product developmentcoupled with repositionedpromotion and merchandising willbe critical to both export anddomestic market success.

New markets will be found formutton (eg. India, Turkey, EasternEurope and some Asian countries).

The support from theAustralian Government will be akey factor in establishing effectivemarket access and in internationaltrade negotiations.

Effective supply chainmanagement

Global supply chains will bepredominant in global primaryindustry, with key profitablebusiness relationships sustainedbetween seedstock producers,sheepmeat producers, processors/

wholesalers, retailers and the foodservices sector.

Production and processingefficiencies will continue to beimproved. The focus will be onproviding high quality productsrelevant to both market andconsumer preferences.

Linking product quality andvalue to price through the supplychain is crucial to effective supplychain management � particularlyin the lamb industry.

E-commerce will beincreasingly used for tradingthrough the supply chain.

The effective transfer andmanagement of technical, marketand business information, themonitoring of supplier/providerperformance, and accountability,will form an integral part of effectivesupply chain management.

A knowledge basedindustry

The knowledge based industrywill result from a focus onresearch and development(R&D), communication,information and performancemeasurement systems, andongoing education and training.

Key and pertinent R&Dfindings will be made available onan ongoing basis to supply chainenterprises. A key focus area willbe �on-farm managementpractices�, to improve efficiencies.

There will be enhanced andcoordinated communicationthrough the supply chain byproviding simple and useableinformation, which will integratethe industry.

3 � V I S I O N 2 0 0 5 � - S T R A T E G I C F O C U S


For the next 3-5 years, and inthe context of �Vision 2005� andthe strategic imperatives, theAustralian Sheepmeat Industrywill focus on achieving key goalsfor the industry to remain globallycompetitive.

The nine (9) proposed sheepmeat industry goals are:

1. To improve market access

2. To provide consumers with innovative, modern food products

3. To grow market share, specifically in global retailing and

food services sectors

4. To bring about further industry cultural change

5. To continue the development of relevant industry alliances

6. To enhance QA and food safety management practices

7. To ensure consistent product supply and product quality

8. To achieve greater industry accountabilities

9. To realise profitable, efficient and sustainable producer

enterprises.

4 W H A T W E M U S T A C H I E V E - I N D U S T R Y G O A L S

1 0 S T R A T E G I C P O S I T I O N I N G - A U S T R A L I A N S H E E P M E A T I N D U S T R Y

The major initiatives cover:

5 I N I T I A T I V E S R E Q U I R E D T O A C H I E V E T H E G O A L S

1. Marketing and Promotion

2. Research and Development

3. Communication, Information and Performance Measurement

Systems

4. Value Based Marketing

5. Industry Alliances

6. Education and Training

7. Quality Assurance, Animal Health and Welfare, and Food

Safety

8. Government Support

In section 3 the industry identified four overarching strategies, these are: Globally focussed, consumer driven,expanded access to export markets, whilst maintaining the domestic market, effective supply chain managementand a knowledge based industry. Pursuit of these strategies by each supply chain sector is critical foradvancement by the Australian Sheepmeat industry as a whole.

The tables in Sections 6 and 7 link the goals and initiatives for lamb and mutton respectively with keyperformance indicators and targets.

Global ConsumersAnimal Genetics

Seedstock Production Sheep Production Wholesaling

Food Services

Retailing

Transportation and Storage

Marketing and Promotion

Research and Development

Industry Alliances

Education and Training

Communication, Information and Performance Measurement Systems

Quality Assurance, Animal Health and Welfare and Food Safety

Value-based Marketing

Government Support

INITIATIVES:

IMPACT OF INITIATIVES ON SUPPLY CHAIN SECTORS

Processing

1 1S T R A T E G I C P O S I T I O N I N G - A U S T R A L I A N S H E E P M E A T I N D U S T R Y

6 L A M B I N D U S T R Y G O A L S A N D I N I T I A T I V E S

GOAL ONE

TO IMPROVE MARKET ACCESS

- To reduce barriers to international trade

Initiatives Performance Indicators Targets

Review and prioritise trade barriers

Use 1999 WTO negotiations toimprove/pave the way for furthertrade liberalisation

Maintain and improve governmentrelations

Impact of international trade andtechnical barriersExport volume and value

Reduce

Increase

GOAL TWO

TO PROVIDE CUSTOMERS WITH INNOVATIVE, MODERN FOOD PRODUCTS

- To reposition lamb by aligning the product to changing consumer needs

- Innovate and customise the range of lamb products for market sectors


Up-date research into existing andemerging consumer food preferencesand competitors (food types andcountries)

Research into packaging and productinnovations, meal preparation, eatingquality / tenderness and lamb feed-lotting

Volume and value of new products Increase


GOAL THREE

TO GROW MARKET SHARE, SPECIFICALLY IN GLOBAL RETAILING ANDFOOD SERVICES SECTORS

- To achieve greater penetration into global markets, particularly the export food services sector


Targeted branded lamb and productcategory promotion both domesticallyand overseas

Vertically integrated brandedalliances to access levy funds withapplications to MLA underpinned byappropriate business and marketingplans

MLA to under-take joint promotionactivity with processors, wholesalers,importers, and /or retailers

Linking marketing and promotionexpenditure with growthopportunities

Focus on existing and emergingoverseas markets, and specifically theretail and food services sectors

Investigate the global marketopportunities for new lamb products,skins and co-products

On-going consumer awareness ofproduct use, preparation and cookingmethods, through a variety ofmediums (eg. branded promotion;food and lifestyle magazines; theInternet; and in store demonstrations

Industry volume and value marketperformance

Number of sustainable brandedalliancesVolume and value performance ofbranded alliances

Joint promotional activity

Consumer awareness

Increase

Increase

50% of all activity producer funded

Increase


GOAL FOUR

TO BRING ABOUT FURTHER INDUSTRY CULTURAL CHANGE

- To become increasingly consumer focussed


Develop supply chain alliances

Review existing training programs:develop a 3-5 year Training andDevelopment program focussing onall sectors in the supply chain(including consumer awareness)

The training initiative to encompassfarm business and financialmanagement, LAMBPLAN,information management, QA,animal health and welfare, foodsafety, market and consumer research,supply chain and relationshipmanagement

Improve technology uptake, includingthe use of e- commerce

Number of sustainable alliances

Number and size of successful farmbusiness

Use of education / training programs

Technology uptakeUse of e-commerce

IncreaseIncrease

GOAL FIVE

TO CONTINUE THE DEVELOPMENT OF RELEVANT INDUSTRY ALLIANCES

- To consolidate and further develop the number of relevant alliances between producers, processors,wholesalers and retailers


Develop communication betweenproducer and processor groups,though existing and emerging forumsand business relationships

Further develop producer (horizontal)alliances between breeders, finishersand feed-lot operations to improvesupply capacity

Continue to develop domestic andoverseas alliances between producersand other supply chain participantsto enhance supply chain management- build on existing domestic andoverseas networks

Number of sustainable alliances Increase


GOAL SIX

TO ENHANCE QA AND FOOD SAFETY MANAGEMENT PRACTICES

- To increase uptake of relevant QA practices in the supply chain


Understand and act on the demandsof trading partner countries

On-going adoption of QA principlesand accurate product description

Develop a national sheepidentification system to enhancetrace-back and for the efficientmanagement of disease / food safetyincidents

Maintain disease surveillance to meetinternational obligations and enablerapid response

Exotic disease management plans tobe maintained and enhanced

Address animal welfare issuesaffecting the trade � Livestock Codesof Practice will be promoted

Improve the National Safe FoodSystem through ongoing monitoring,evaluation, correction and review

Consistently meet trading partnercountry demands

QA practice uptake throughout thesupply chain

Disease rates

Residue / Pathogen levels

100%

Increase

Reduce

100% free

GOAL SEVEN

TO ENSURE CONSISTENT PRODUCT SUPPLY AND PRODUCT QUALITY

- To improve eating quality

- To eliminate domestic lamb product substitution


Research an appropriate lamb eatingquality grading system

Increase enforcement of lamb stripbranding

Trading lambs and lamb productsobjectively

Grading systemValue and volume of graded productconsumedNumber of prosecutions

Number of lambs traded over thehooks

IntroduceIncrease

Increase

Increase


GOAL EIGHT

TO ACHIEVE GREATER INDUSTRY ACCOUNTABILITIES

- To more clearly define and implement relevant supply chain performance indicators to monitor industry sector performance

- To ensure the effective and efficient use of levy payer funds

- To achieve more rapidly implemented R&D findings by the different sectors in the supply chain


Define (meaningful), implementedand acted upon performanceindicators for all areas of levy fundedactivity

R&D activities will be strengthenedthrough enhanced national co-ordination

Research outcomes will becommunicated in ways easilyunderstood by producers and othersectors of the supply chain

Relevant global R&D findings,particularly from recently completedproduction research, will be madeavailable through a centralisedinformation source

Return on utilised levy funds

Innovations

Technology uptake

Distribution of information

Increase

Positive returns for R&D investment

Increase

GOAL NINE

TO REALISE PROFITABLE, EFFICIENT AND SUSTAINABLE PRODUCER ENTERPRISES

- To increase producer control over selling prices

- To increase growth rates and carcase weights

- To improve on-farm efficiencies including the reduction of production costs

- To increase the use of e-commerce


Develop sustainable alliances

Adoption of objective selection ofterminal sires (LAMBPLAN)

On-farm production practices (forimproved operating efficiencies) �R&D and commercialisation ofresearch results

Explore opportunities to enhanceproduction/sales efficiency through e-commerce use

Sustainable alliancesGross margins of participantsGrowth rates and carcase weights

International benchmarks

e-commerce use

IncreaseIncreaseIncrease

Increase


M U T T O N I N D U S T R Y G O A L S A N D I N I T I A T I V E S7

GOAL ONE

TO IMPROVE MARKET ACCESS

- To develop new markets

- To respond to threats of new barriers


Review and prioritise trade barriers

Use 1999 WTO negotiations toimprove/pave the way for furthertrade liberalisation

Maintain and improve governmentrelations

Impact of international trade andtechnical barriers

Export volume and value

Reduce

Increase

GOAL TWO

TO PROVIDE CONSUMERS WITH INNOVATIVE, MODERN FOOD PRODUCTS

- To redefine mutton’s image

- To establish retail quality mutton products

- To differentiate mutton on qualities for particular products and markets


Develop different classes of mutton �mutton product description, productdevelopment and associatedcharacteristics (eg. meat colour andtenderness)

Research existing and emergingconsumer food preferences andcompetitors (food types andcountries)

Develop table quality mutton product

Volume and value of new products

Volume and value of new product

Increase

Increase


GOAL THREE

TO GROW MARKET SHARE, SPECIFICALLY IN GLOBAL RETAILING ANDFOOD SERVICES SECTORS

- To maintain Australia’s position as the dominant global supplier

- To increase domestic usage

- To increase export performance into higher value markets

- To investigate market opportunities for Merino lamb


Promotion initiatives will include theeffective targeted promotion ofbranded mutton products

Marketing expenses will be linkedwith growth opportunities and focuson existing and emerging overseasmarkets

Investigation into global marketopportunities for new muttonproducts, skins and co-products

Undertake research into Merino lamb:- quality attributes (eg. meat colour

and tenderness)- supply consistency- develop a viable multi-purpose

Merino lamb

Market sector share by volume andvalue

Increase

GOAL FOUR

TO BRING ABOUT FURTHER INDUSTRY CULTURAL CHANGE

- To become increasingly consumer focussed

- To increase uptake of new technology

- To improve on-farm management practices



Develop supply chain alliances

Review existing training programs:develop a 3-5 year Training andDevelopment program focussing onall sectors in the supply chain(including consumer awareness)

Number of sustainable alliances

Number and size of successful farmbusiness

Increase

Increase


QA practice uptake throughout thesupply chain

Disease rates

The training initiative to encompassfarm business and financialmanagement, LAMBPLAN,information management, QA,animal health and welfare, foodsafety, market and consumer research,supply chain and relationshipmanagement.

Improve technology uptake, includingthe use of e-commerce

GOAL FOUR continued


Use of education / training programs

Technology uptakeUse of e-commerce

Increase

IncreaseIncrease

GOAL FIVE

TO CONTINUE THE DEVELOPMENT OF RELEVANT INDUSTRY ALLIANCES

- To develop relevant industry alliances between producers, processors, wholesalers and retailersfor the purpose of selling table quality mutton products


Establish parameters for table qualitymutton (eg. age, meat colour, eatingquality)

Develop alliances to underpin supplyand product consistency ofinnovative mutton products

Number of sustainable alliances Increase

GOAL SIX

TO ENHANCE QA AND FOOD SAFETY MANAGEMENT PRACTICES

- To increase uptake of relevant QA practices in the supply chain

- To achieve high health status without residues


Consistently meet the demands oftrading partner countries

On-going adoption of QA principlesand accurate product description

Develop a national sheep identificationsystem to enhance trace-back and forthe efficient management of disease /food safety incidents

Maintain disease surveillance to meetinternational obligations and enablerapid response

Exotic disease management plans tobe maintained and enhanced

Increase

Reduce


GOAL EIGHT

TO ACHIEVE GREATER INDUSTRY ACCOUNTABILITIES

- To more clearly define and implement relevant supply chain performance indicators to monitor industry sector performance

- To ensure the effective and efficient use of levy payer funds

- To achieve more rapidly implemented R&D findings by the different sectors in the supply chain


Define (meaningful), implementedand acted upon performanceindicators for all areas of levy fundedactivity

R&D activities will be strengthenedthrough enhanced national co-ordination

Research outcomes will becommunicated in ways easilyunderstood by producers and othersectors of the supply chain

Relevant global R&D findings,particularly from recently completedproduction research, will be madeavailable through a centralisedinformation source

Return on utilised levy funds

Innovations

Technology uptake

Increase

Increase

Address animal welfare issuesaffecting the trade � Livestock Codesof Practice will be promoted

Improve the National Safe FoodSystem through ongoing monitoringand evaluation

GOAL SIX continued


Residue levels 100% free

GOAL SEVEN

TO ENSURE CONSISTENT PRODUCT SUPPLY AND PRODUCT QUALITY


Establish supply chain alliances Number of sustainable alliances Increase


GOAL NINE

TO REALISE PROFITABLE, EFFICIENT AND SUSTAINABLE PRODUCER ENTERPRISES

- To increase producer control over selling prices

- To increase growth rates and carcase weights

- To improve on-farm efficiencies including the reduction of production costs



Develop sustainable alliances

Adoption of objective selection ofterminal sires (LAMBPLAN)

On-farm production practices (forimproved operating efficiencies) �R&D and commercialisation ofresearch results

Explore opportunities to enhanceproduction/sales efficiency through e-commerce use

Sustainable alliances

Gross margins of participantsGrowth rates and carcase weights

International benchmarks

e-commerce use

Increase

IncreaseIncrease

Increase


The Australian sheep industry(lamb, mutton and associated by-products) gross returns arecurrently valued at $2.2bn peryear. Of this, the lamb industryrepresents $1.6bn and the muttonindustry $0.6bn.

Lamb

There is a current goal �toimprove returns from lamb toreach $2.0bn by the year 2000�.

Australia represents the largestmarket for lamb. The Australianmarket consumes in excess of200,000 tonnes annually, worthapproximately A$780m. Thedomestic market offers little or nogrowth opportunities. While theimmediate goal is to arrest thecontinual decline in per capitalamb consumption - currently at11kg - it must be remembered thattotal product disappearance isdeclining at a much slower ratedue to population growth.

Consumer attitudes andbehaviour towards lamb havestrengthened across a range ofattributes, particularly in terms oftaste, health and cooking. Asignificant number of consumershave become aware of theavailability of lean lamb cuts. Themain consumer issues with lambremain fat and cholesterol.

As the importance of the foodservices sector grows, trimmedlamb products should continue tobe promoted to gain synergies andefficiencies with retail marketingactivities.

The principal overseas marketsfor lamb include the United Statesof America, the United Kingdom,Japan, Switzerland and the UnitedArab Emirates in the Middle East.Export volumes are increasing andcurrently represent 30% of totalproduction while values represent26%.

Lamb exports to the USrepresented 32% of totalAustralian lamb exports in 1997/98 and have increased by 15% onaverage each year since 1990.The US is the highest valuedmarket for Australian lamb worthin excess of A$85m in 1997/98.While Australia�s volume sales aredestined to the retail sector,significant growth, albeit from asmall base, has occurred in thefood service sector whereincreased per unit returns areyielded.

The UK represents a majormarket for Australian lamb whichwas worth A$27m in 1997/98.Retail sales consist of frozen legand loin items with limitedpenetration at food service. Todate, the Australian industry hashad limited penetrationthroughout the UK and other EUmarkets due to the limited quotaaccess granted to the Australianindustry each year. In 1998,access stood at 18,650 tonnes.

Japan provides an effectivemarket for bone-in and bonelessfrozen shoulder items worthA$23m while Switzerland,although small volumes, providesa market for fresh and frozen loincuts of high value resulting inindustry income of A$17m.

The UAE is a traditional lambcustomer for Australia and prefersfresh carcases with Westernsupermarkets, catering to theexpatriate population,merchandising legs and otherprimal cuts. In 1997/98, thismarket totalled A$16m in sales ofAustralian lamb.

A T T A C H M E N T 1 : I N D U S T R Y B A C K G R O U N D

A U S T R A L I A N S H E E P M E A T I N D U S T R Y

Lamb Value Share1997/98

Source: ABS

Australia73.8%

Export26.2%

Other 38.6%

USA 31.5%

UK 9.6%

Japan 8.2%Switzerland 6.2%UAE 5.9%

percentage share of product value measured on a wholesale equivalent basis (Australia) & an FOBequivalent basis (export) showing the top 5 export markets


Lamb Industry Strategic

Plan

The Lamb Industry StrategicPlan (LISP) was developed fouryears ago (1994) and has beenintegrated into current industryactivities. The development ofthe LISP has encouraged greaterindustry understanding, especiallyamong dedicated prime lambproducers.

Seven important factors wereidentified in the LISP to develop asuperior Australian lamb industry:

� Meet Market Segment Needs

� A Customer-Focused Culture

� Consistency of Products

� Improved Image

� Consumer-Driven TradingMechanisms

� Frequent, MeaningfulCommunication WithinIndustry

� Appropriate Education andTraining Programs.

Four years later (1998), theindustry has taken stock of whereit is at, acknowledging that manyelements of the LISP are stillrelevant for the progress of theAustralian sheep meat industry.

Mutton

Unlike the lamb industry, only35% of total mutton productionwas consumed on the domesticmarket with the balance beingexported to over 80 destinations.Mutton on the domestic marketconstitutes an ingredient forsmallgoods manufacturing, withlimited quantities being used as atable meat product, greatopportunities are found inpursuing fast food manufacturers.

The mutton industry currentlyis generally buoyant given strong

demand on export markets forboth meat and live sheep. There ispotential to position a youngbranded mutton product in bothretail and food service niches toachieve product premiums.

Supply of Australian muttonhas always been dictated by thefortunes of the wool industry.Current weak wool prices haveresulted in Australia�s sheep flockreaching record low levels withincreased numbers of muttonsheep being sent to market forslaughter purposes. This isincreasing the availability ofmutton and Merino lambproducts.

The major destinations forAustralian mutton include SaudiArabia, Japan, South Africa,Taiwan and the United States ofAmerica. Export performance, asa percentage of total production,has remained relatively stable overthe last 5 years with over 220,000tonnes (carcase weight basis)being exported each year.

Mutton exports to SaudiArabia constituted 12% of totalindustry value in 1997/98consuming in excess of 20,000tonnes. Being a Muslim society,the Australian industry exportsHalal certified product to the

Middle East in addition to anumber of live sheep animals to beconsumed in time for theirreligious festivals throughout eachyear.

The great majority of muttonproduct bound for Saudi Arabia isshipped by sea in frozen carcase orbone-in cut form. Traditionallysold in the Souk or wet markets,there is a greater presence ofAustralian mutton being retailedat western style supermarket chainstores and butcher outlets acrossthe region. Australian mutton inthe region has been supported bytargetted business developmentactivities with the trade.

Japan remains a substantialmarket for the mutton industryconsuming in excess of 14,000tonnes each year worthapproximately A$43m in 1997/98.The product is sold in the Northand used for further processing forGhengis Khan style Korean BBQsin large mid-scale dining facilities.

South Africa has emerged as animportant market for theAustralian mutton industrypurchasing frozen carcase andboxed carcase cut packs each year.In 1997/98, South Africapurchased A$40m worth ofmutton destined for the black

Mutton Value Share1997/98

Source: ABS

Australia41.4%

Export58.6%

Other 48.1%

Saudi Arabia 12.4%

Japan 11.4%

South Africa 10.7%

Taiwan 8.8%USA 8.6%

percentage share of product value measured on a wholesale equivalent basis (Australia) & anequivalent basis (export) showing the top 5 export markets


communities throughout theregion. Stock levels in SouthAfrica have reached relatively lowlevels influencing the demand forimported protein products.

In 1997/98, Australia exportedA$32.8m of mutton to Taiwan.Growth over recent years hascompounded annually at anaverage of 12% since 1992/93.The US uses mutton as aningredient in further processedmeat products purchasing inexcess of A$32m in 1997/98.

Function Lamb Mutton

National Residue Survey $682,000 $418,000

Australian Animal Health Council $193,000 $364,500

Meat & Livestock Australia

Joint Marketing $930,000 $1,060,000

Core Marketing $7,997,000 $555,500

Joint R&D $447,000 $290,500

Core R&D $1,163,000 $1,500,000

Levy Collection $248,500 $101,500

Total $11,660,500 $4,290,000

Attachment Two outlines the details of levy expenditure by MLA for1998/99.

Summary of 1998/99 Levy

Expenditure

A capped transaction levy hasbeen introduced to fund producersupported initiatives undertakenby the National Residue Survey,the Australian Animal HealthCouncil and Meat and LivestockAustralia Limited. Below is asummary of 1998/99 expenditureby each of these threeorganisations.

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