Saturday, December 2, 2023

SFF gets an early taste of South Korean potential

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Grass-fed beef poised for uptake when shipping logistics catch up with changing consumer preferences.
Vast chillers of beef in hypermarkets are full of United States and Australian grain-fed product.
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Silver Fern Farms’ long-time South Korea country manager, Jay Shin, is excited and frustrated in equal parts by the success his company has enjoyed to date in the country, and what it could still enjoy in his home market.

Shin has spent almost 20 years as Silver Fern’s man in South Korea, going back to the days of Richmond Meats.  He and fellow South Korean Daeun Kim mark the only real presence of any New Zealand meat company in the country.

Over this time Shin has not only witnessed the major shifts in company ownership and subsequent rise in its fortunes, but has experienced the shifts in consumer habits that present it with future opportunities.

South Korea forms 3.5% of Silver Fern’s market sales value, almost half that of Japan sales and overshadowed by the United States’ 15% and China’s 34% share of sales. 

Overall, NZ’s portion of meat imports into South Korea are dominated by Silver Fern, but form only 4.8% of total import volume, dwarfed by US’s 55% and Australia’s 34%.

As a country, South Korea imports almost two thirds of its beef supply.

It is unlikely NZ’s grass-fed product will ever eclipse the grain-fed offerings of the US and Australia, which align so much with traditional tastes and have enjoyed zero to near-zero tariff entry for so long. 

But with Seoul’s 12% of land mass being home to almost half its 50 million people, Shin said there are still valuable opportunities beckoning for the niche of grass-fed, lean red meat within the city’s populous boundaries.

Silver Fern’s “Reserve” beef range has enjoyed early niche level success in the market, selling into stores serving customers with a desire to enjoy lean, sustainably produced beef. That includes the high-end Chorocmaeul chain. 

Silver Fern is also selling volumes of frozen beef product through the country’s largest meat distributor, Highland Group, to the likes of catering and food service companies.

But with covid playing havoc across global shipping networks, and with shipping reliability out of NZ still at sub-par levels, building on the burgeoning chilled trade has proven to be tough in the past year.

“The one thing buyers are most worried about is consistency of supply. It has been a challenge both for chilled and frozen, but now particularly chilled. 

“Retailers will not accept a product with less than 50 days’ shelf life, and it is hard to get a product here with no direct shipment on time now, with shipping requiring trans-shipment through Japan.” 

The Australians have a clear advantage, with a mere 12 days’ shipping time ex-Brisbane into a retail market that almost exclusively demands chilled product.

“We can’t compete with that,” Shin said.

Japan is a market that shares many similarities with South Korea in terms of urban population density, demographics, and taste. 

Shin believes the 6000t a year of chilled product sold there by Silver Fern sets a good benchmark for the potential still existing in South Korea.

Before having to pause the Reserve shipments, Silver Fern had built a trade of about 300t a year. The company’s tonnages are now significantly down, compelled to rely on expensive monthly air freight to keep a level of stock presence.

The volume potential exists in South Korea’s hypermarket trade, where vast chillers of beef are defined in sections split between Australian and United States grain-fed product. 

But, as great as that dominance is, Shin said there is a strong niche developing as consumers look for a lower fat, leaner, high quality red meat that fits with changes in eating habits.

“People are moving away from traditional soups and stews eaten when families were larger, and move towards more table and barbeque-type cuts. We are also eating less rice, which accompanies such dishes.”

As the country has grown wealthier, its population’s diet has moved ever increasingly away from carbohydrates to protein.

In 2022 for the first time ever South Korea’s meat protein consumption exceeded that of its predominant carbohydrate, rice.

The country’s Rural Economic Institute estimates the country’s per capita consumption of three major meats  – pork, beef and  chicken – was 58kg in 2022. This was 2.3kg more than the 2021 total of 56kg, and up 74%  from 2002’s 34kg, an average 2.8% increase per year. 

Meantime rice consumption continues to decline from its 125kg per capita high in 1982 to 56.7kg last year.

Shin said that “in the frozen products, we are doing well; it is the chilled that remains our main challenge”.

Shin is the sole New Zealand meat company representative in a market that is moving towards zero tariffs on Kiwi meat by 2030 to finally put it on an even pegging with Australia and US.

“We have been working to break those perceptions that grass-fed beef is somehow not as tasty. We have proven to consumers that the likes of tenderloins and strip loins are.”

A third of Korea’s population live in single-person households, and the population is aging quickly, with 20% over 65 by 2025.

“They don’t want massive cuts, they want simple, easy-to-cook protein that is healthy. 

“This is something we just need to keep working on. I believe we could match Japan, if we could get the transit challenges solved.”

Richard Rennie travelled to Seoul thanks to funding from the Asian New Zealand Foundation.

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