Alliance seeking outside capital
Reeling from two consecutive years of heavy losses, Alliance says it has appointed Craigs Investment Partners to explore external capital-raising options.
WE’VE PROBABLY all heard of Generation Y, but ‘millenials’?
The term is common parlance in the US and becoming a buzzword in New Zealand meat marketing circles.
“The millenials opportunity is very, very exciting,” Alliance director Dawn Sangster told Rural News last week.
Sangster is doing the rounds of Alliance shareholder meetings and other farmer meetings relaying her observations from a five week tour of the meat company’s key customers and markets during June and July.
“Millennials are aged 1-34 years and are more likely to eat lamb than their parents and grandparents. Best of all there are 78.3 million of them. They would pay more for no added hormones, free range food, grass fed and antibiotic-free.”
In the USA, New Zealand’s largest French rack market and Alliance Group’s second-largest chilled market behind UK, Sangster spent time with the New Zealand meat companies’ joint venture The Lamb Cooperative.
US domestic lamb production has been dropping for 30 years and half of consumption is now imported. An American Lamb Board study tips imports to hit 80% by 2018.
“The USA lamb flock is only about 4.5 million so they are dependent on NZ lamb,” observes Sangster.
However, consumption is falling from 1.4kg per capita in 1972 to under 0.5kg in 2014. In comparison, they wolf down about 110kg/year of beef, pork and poultry.
“People who know about lamb will pay a premium for it so there’s lots of opportunity.
“Seventy per cent of Americans have never tasted lamb. [New Zealanders] tend to take it for granted everyone knows what lamb is.”
About two thirds of US lamb sales are to food service including some of the nation’s one million restaurants. Lamb is the second highest-priced protein, only lobster lifting more dollars from the diners’ wallets. Sangster notes a trend to less expensive cuts such as shanks and sliders (mini burgers). “Lamb burgers were trendy and Mexican cuisine had increased its use of lamb with lamb tacos as an example.”
Lamb is also showing strong growth among the US’s 40,000 food retail outlets, she notes.
Sangster’s trip also took her to the UK, Europe, China, Singapore and Indonesia.
“Everyone is talking about Asia but that market is more lower-value with potential to rise in the future…. We need to be careful to keep a diversified portfolio of customers and not put all our eggs in one basket.”
Prudent marketing partner selection is particularly important in Asia, and Sangster notes the Chinese marketing mantra ‘the last kilometre is the hardest’.
“You have to be careful who your partners are. I saw frozen product [not Alliance’s] on an open trailer being transported across Beijing. It could be your brand on that trailer. What if someone gets ill from your product because of it?”
Alliance is “very much long-term focussed” in such markets and has rationalised its partners over the years to ensure it is supplying the best people.
“Alliance has a 14-year relationship with Grand Farm which is the largest importer of meat into China. Grand Farm has had phenomenal growth with turnover in 2000 of US$1 million rising to well over US$100 million in 2014.”
Sangster says her Chinese hosts were generous and there’s an impressive work ethic. The one-child policy and recent food scares make their regulations and concerns about food safety and traceability understandable.
“The Chinese value face-to-face relationships and we must remember that much can be lost in translation and the message isn’t always received as we meant it to be.”
Sangster says in all markets she made “valuable connections and learnings” through “getting alongside customers on the ground”.
“The tour added greatly to my knowledge and insights as an Alliance director which I am working to share with the Alliance board and management, farmers and, in particular, our shareholders.
“Every market is different and in order to secure customers we must understand and cater for the individual needs of each of these markets.
“The future is positive: the world is hungry for our grass-fed red meat and there will be an increasing number of people prepared to pay a premium for high quality, safe lamb, beef and venison.”
