Page 13 - APN July 2017

‘Why is APL not reacting to imported ribs?’
THERE is some frustra- tion amongst producers regarding why Australi- an Pork Limited appears to have not reacted to the imported ribs phenom- enon.
In reality, imported ribs are being curtailed by re- duced pricing for Austral- ian ribs, which is an un- pleasant holding position.
However, APL is not do- ing nothing, but we are clear on just how hard a nut this is to crack.
Imported ribs are not materially worse than Australian – they are cheap, convenient and have enabled cafes and pubs to make money out of them where previously ribs were relatively un- profitable for the outlet.
We could have gone and executed a ‘don’t buy im- ports’ activity.
This would have made everybody feel better in the short term, but we have two decades of evidence with ham and bacon that this changes many consumers’ percep- tions and has very little effect on their behaviour.
There is a line written by Rudyard Kipling that says: “If you can keep your head whilst all about you are losing theirs and blaming it on you...” and we return to this line often inside APL.
We ask ourselves “what would producers say to- day and what would they say when they look back at 2017 in 2019?”
Today, producers are saying “do something now”, but in two years’ time we want them to say “we got through it and APL helped and didn’t waste our money doing the same as they did for ham and bacon”.
In short, we are trying to make sure we respond, rather than react.
The difference is not timing but focus.
We have long-standing
Marketing Matters
evidence that the indus- try’s approach to fresh pork marketing – slowly and steadily – is contribut- ing to the growth of total pork consumption (includ- ing ham and bacon), which surpassed beef consump- tion per capita in 2015.
So, when confronted with plummeting prices, the first activity was to accelerate base business growth, rather than divert attention to the new threat and let base business dwindle (that’s a rookie error).
The second thing to do is make ribs and bellies advertisements in the ver- satility campaign.
These target both con- tinuing base business growth while highlighting these cuts and will be on air throughout July and August.
The ads are avail- able to view at: youtu. be/FBDtxo0E7iQ (ribs 15 seconds); youtu. be/4i8y4ldmtb8 (belly 15 seconds); and youtu.be/ Lq9SuMU8cow (belly 30 seconds).
The evidence suggests that it is not the advertis- ing but the trade activ- ity (distribution and price promotion) that advertis- ing encourages, which drives volume.
In addition, chains such as Hog’s Breath Cafe are advertising specials on pork ribs in July.
Here is the ad Hog’s Breath is running at present: youtube.com/
watch?v=K6S2Xs22emE The reason this is im- portant, is it signals an attitude shift versus the industry’s reaction to ham
and bacon imports.
That is, we do have to
do something more main- stream than just public relations.
This is the first step, not the whole plan.
The third thing is to work out what the positive points of difference for Australian ribs and bellies are and celebrate those.
This is primarily a trade marketing job, leverag- ing Australian supporters in mainstream cafes and restaurants that either are pro-Australian or anti the imports due to product quality.
It appears that ultra- heat-treated ribs are more ‘fall off the bone’ than ‘bite off the bone’.
The latter is probably considered the authentic ribs experience.
The fourth thing to do is understand what we would have needed to un-
derstand to anticipate the price falls.
Given there are multi- ple causes and many ele- ments, some we are work- ing on include:
• More timely supply da- ta. This will be more use- ful to commercial players than APL, as we don’t control wholesale or re- tail pricing or distribution, which are the drivers of short-term volume.
• Work on different methods for forecasting supply monthly or weekly volumes. The fact that our forecasts eight to 12 months out are good did not stop the price fall.
• The same is true of demand forecasting. We need to work on four- weekly forecasts (because
that’s the sales data we get to understand how good our forecasts are).
• Get more detailed in- formation on imports. We don’t know if this is avail- able or obtainable, but we are working on it.
• We need to understand the wholesale channels with greater clarity. This might be hard and we may have historically not been able to do this, but when needs must, the devil drives!
Finally, we need in para- llel to work on structural cost reduction.
Had our prices not been what they were at farm gate, $20-plus per ribs would not have been nec- essary at wholesale and there would have been no
commercial opportunity for imported ribs.
While this may be un- popular, and reduced cost of production might not increase producer profit- ability, it would probably make profitability more certain.
So, we are responding to both increased total demand and to the new threats in a number of ways.
We need to remain clear that justifying a premium without a quality differ- entiator or rarity tends to create fashions or fads, which are helpful but don’t last.
In the end, almost every- body buys almost every- thing on value for money.
20%
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-10%
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Retail volume sales growth by species
4-weekly 2017 vs 4-weekly 2016
-20%
14/05/16 11/06/16 09/07/16 06/08/16 03/09/16 01/10/16 05/11/16 03/12/16 31/12/16 28/01/17 25/02/17 25/03/17 22/04/17 20/05/17 17/06/17
Fresh meat volume growth vs last year Fresh beef volume growth vs last year Fresh chicken volume growth vs last year Fresh lamb volume growth vs last year Fresh pork volume growth vs last year
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www.porknews.com.au
Australian Pork Newspaper, July 2017 – Page 13
by PETER HAYDON General Manager Marketing
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