Australian Meat Industry Council

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2 Australian Meat Industry Council 2015 Future Scan: A tale of industry transition September 2015

3 To see a better way try a fresh set of eyes 3

4 About the future scan Mega trends snapshot What does the future look like?

6 ... there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know.!! But there are also unknown unknowns the ones we don't know we don't know.!! Donald Rumsfeld Former US Secretary of Defense

7 A USTRALIAN MEAT PROCESSOR CORPORATION FUTURE SCAN 2ND EDITION 2015

8 The PESTEL framework Political Economic Social Technological Environmental Legal Local, state, federal, global and industry politics and policy influences Micro and macro economic factors Demographic, social, cultural, lifestyle, values and behaviours trends Current and future technology developments Factors relating to the natural environment Local, state, federal and global regulations and protocols 8

10 10 Megatrends 1. Sustainability demands increase 2. Provenance becomes more relevant 3. Social licence required to operate 4. Shift from commodities to brands 5. Change in market emphasis from domestic to global 6. Supply chains become more integrated 7. Viability of the family farm model declines 8. Corporatisation and foreign investment increase 9. Market access tactics change 10. Power of technology and big data grows

12 Consumers and customers require tangible evidence of sustainability from their suppliers, not just lip service

14 Provenance is now about region of origin rather than country of origin

16 The industry is one of the most vulnerable to social media

18 Brands are now targeting specific market segments with clear value propositions

20 Long term decline in domestic consumption is being accelerated by rapid rise in the price of red meat

21 There is very real danger current high prices will drive a long term shift in consumption patterns that will be difficult to reverse

23 Processor brands and security over supply is driving supply chain integration

25 The family farm is stuck in the middle of industry transition

27 Foreign investors can see the potential Local investors are gun-shy

29 Non-tariff trade barriers are now fair game in all markets - even ours

31 Big brother will know every detail of our lives

34 The meat processing sector is transitioning from managing abattoirs to managing brands

35 The traditional abattoir business model The hunter and trader model: Maximise plant throughput Heavy reliance on saleyards for supply Trading model that sells to the highest bidder on the day Heavily commoditized Focus on cost-down (rather than value up) 35

36 The transition journey From abattoir to processor... to marketer!

37 The manifestations of change 1. The big shift to provenance brands 2. Integration of supply chains 3. The growing importance of export markets 37

38 Processor brands emerged quickly in trade and food service Its been a slower evolution in retail

39 But brands need to be underpinned by a clear strategy The rules of branding: Target a very specific market segment Understand your customer Develop a very defined value proposition - be single minded Create a clear and relevant point of difference Be authentic Brand and product consistency is paramount 39

40 Is there still a need for generic meat marketing?

41 CASE STUDY: Generic milk marketing

42 The generic milk marketing story Prior to Australian Milk Marketing Ltd, milk was a commodity Every processor had the same products The product range was narrow - consumers had little choice In-store shelf space allocated to milk was minimal Per capita consumption was in free fall despite industry marketing activity 42

43 Milk was de-commoditised The de-commoditising evolution: Collective industry brands were developed to target each milk drinking segment Producers then developed their own brands Industry de-regulation allowed the brand landscape to explode The value of the overall category grew for many years 43

44 The competitive tension between brands did a lot more to drive demand than generic marketing

45 There are now over 100 products in the milk category

46 In the current environment the generic messages are better handled by social media

47 THE LESSON: The Australian red meat industry cannot compete on price! It must compete on value and differentiation

48 The industry needs to adopt disciplines of global food companies 1. Be market and customer facing 2. Develop secure supply chains with long term strategic alliances 3. Invest in brands and treat them as your most valuable asset 4. Focus on adding value for the customer 5. Invest in market research 6. Use technology to create innovative customer solutions 7. Develop retail brands 8. Be proactive with social media and social licence 9. Drive continuous improvement 10. Invest in packaging 48

49 The transition is not complete!

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