Q: Why has Grand Farm been so successful?
Chen: China’s growing population, control over food supply, and a focus on food quality and safety. Also it selected the right country to supply – New Zealand and partners Alliance and Gold Kiwi.
Q: What has been a major change for Grand Farm?
Chen: It is supplying less raw material to wholesalers as the identity and brand is lost. It is focusing more on its own products for hotels and retail outlets.
Q: According to a Rabobank global report there is strong competition for NZ lamb from Middle Eastern and other Asian countries.
Chen: He spent several years in the Middle East and doesn’t believe it will be able to compete for the lamb flaps. As far as the value of lamb flaps versus premium cuts, the prices for lamb flaps have risen 25-30% more than premium cuts.
“No other country is paying what Grand Farm is paying for lamb flaps.”
The only way for lamb flap prices based on the past several years is up, as they seem not to be affected by economic conditions.
Chen Xibin, pictured at Lorneville earlier this year, is a regular visitor to New Zealand.
Q: Pork consumption in China is about 35kg/per capita and analysts say it may have hit a ceiling (China Meat industry consumption figures for 2011 had pork at 66%, chicken, 23%; beef 8%, and sheepmeat, 5%. If so, will that be good or bad for beef and sheepmeat?
Chen: Beef and lamb didn’t suffer the disease problems (like bird flu). More people will switch to beef and lamb. Also beef and lamb is seen as part of a healthy diet. Lamb consumption was about 3kg/head and beef 4kg/head in China. Korea and Taiwan consumers eat 10kg/head of beef so there is good potential to catch up.
Q: How will you handle increasing competition?
Chen: The company’s high standards makes it the market price leader which is not easy for Chinese competitors to copy. Most companies can’t do it so they sell lower. If they are selling lower they are cutting costs with fake products.
Q: What challenges does the company face.
Chen: Grand Farm faces competition from businesses which use a lack of law enforcement and regulation to bring in meat through “grey channels” and avoid tariffs. Grand Farm refuses to do this but it is hard to prove that competitors are using the grey channels.
Q: Is the threat of disease and food scandals a major concern?
Chen: Food scandals highlighted in the news media have raised consumer awareness and helped the Grand Farm brand. It has a reputation for quality and safety competitors don’t have. It is backed up by a number of awards and standards which give weight to the brand’s reputation.
Q: What is the plan for the next five years?
Chen: The past five years are to improve processing facilities and supply. The next five will be on human resources – ensuring a highly educated and skilled workforce.
Post-interview:
Since the interview sheepmeat sales to China have gone ballistic.
Bigger tonnages have gone in from NZ and Australia. There are more buyers in China and more cuts.
The main end-use is still further processing but cuts like legs and shoulder cuts are going into the retail and food service.
From October 2012 to March 2013, sheepmeat (lamb, mutton and offal) sales were 70,000t compared with 63,000t for all of 2012.
NZ meat companies are getting a stream of enquiries from eager buyers in China. One company reported that 60 companies called in a week.
What Grand Farm, Gold Kiwi and Alliance are doing is building the New Zealand brand. They are building profile, improving value, and securing additional revenue streams. It has taken 12 years, because it takes time to get “all the ducks all lined up”.
So when will all this be reflected in higher farm-gate prices?
Grand Farm regards itself as a true friend of NZ and values its relationship with Alliance. Chen has been to NZ more than 20 times and has visited many Kiwi farms. Grand Farm also recognises it needs to pay good prices, and appears to do so. With the increase in sheepmeat volumes and number of traders-wholesalers in China, Grand Farm will be forced to stump up and pay more to secure supply.
There is a danger NZ will run out of the lower-end lamb to supply to China and Alliance will not being able to keep increasing supplies to Grand Farm. It needs to keep Grand Farm motivated but Grand Farm will have to decide next year if it is going to focus on value more than volume.
NZ companies are dealing with more than 30 traders in China but do not have the Alliance-Grand Farm model. Grand Farm keeps NZ product separate and maintains its integrity. Alliance has its Pure South brand displayed with Grand Farm packaging in hypermarkets and other retail outlets. It gives the NZ brand profile, Alliance greater control, and hopefully better returns. For Grand Farm the association gives greater selling power.
Traders may or may not use NZ meat companies’ branded product. Simply saying it is from NZ may be enough, but this may change quickly as bigger companies try to get their brands established.
Correction:
In the April issue of Country-Wide p32, the article said NZ sheepmeat went into wet markets. It should have said some of the NZ sheepmeat sold wholesale to China goes into wet markets but the majority until five months ago went into further processing. It can be traded several times before being processed for retail outlets and the food service industry, especially hotpots. This includes boutique stores, restaurants, supermarkets and hypermarkets.
According to a Neilsen report wet markets in China are under threat. Consumers concerned about food safety and quality are buying increasingly from the supermarkets and hypermarkets rather than the wet market. So NZ sheepmeat is in the right market but “NZ Inc” needs to promote and protect its brand.
