Australian Oyster Industry Supply Chain Analysis

Transcription

1 Australian Oyster Industry Supply Chain Analysis Presented by CDI Pinnacle Management Shane Comiskey - Director Seafood Directions

2 Australian Oyster Industry Supply Chain Analysis So it is said that if you know your enemies and know yourself, you can win a hundred battles without a single loss. If you only know yourself, but not your opponent, you may win or may lose. If you know neither yourself nor your enemy, you will always endanger yourself. (Sun Zu, Chinese military strategist and author of the Art of War ) 2

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4 Two Associated Projects 1. Australian Oyster Industry Supply Chain Analysis (outside the farm gate) TODAY S SUBJECT 2. Australian Oyster Benchmarking Program Development (primarily inside the farm gate) 40 farms. Investigation of productivity, production, processing and financials measures / Key Peformance Indicators (KPI s) 4

5 Knowledge Generation 1. Transactions become relationship rather than transaction focused more likely to meet the needs of both parties. 2. Greater empathy of issues / problems facing others in the chain. 3. More efficient chains (reduced transaction costs, chain shortening, problem solving). 4. Reduced wastage / better product quality. 5. Better targetting of R&D and promotional activities. 6. Identification of new opportunities / expanded demand. More satisfied customers and profitable supply chain partners Greater industry sustainability 5

6 Australian Oyster Industry - Quick Profile State Dozens % of Australian Prod. New South Wales 6,723, % South Australia 6,058, % Tasmania 3,528, % Queensland 136, % Total 16,446,195 Plus: Imports 1,266,262 Minus: Exports 530,000 Net Australian Consumption 17,182,457 6

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8 Key Observations - Growers growers, highly fragmented, limited evidence of grower collaboration. 2. Mainly small family units with a few corporates (~$5 million t/o). 3. Farm gate value $90-$100 million pa. 4. Pacific / Sydney Rock split approx 60/ Highly variable profitability. 6. Production & processing technology ranges from traditional to world s first. 7. Demand lead industry (rel. unique in agriculture). 8. Very limited value adding. 9. Those growers who are most at risk are: Small Poor quality suppliers Transaction not relationship focused Offering nothing unique in terms of their product of marketing. 8

9 Key Observations Mid-Chain 1. Metropolitan wholesalers each capital city, regional wholesalers generally function as secondary wholesalers. 2. Specialist wholesalers eg. Oyster Bob. 3. Significant integration wholesaler / shucker / distribution functions. 4. Specialist shuckers Sydney & Brisbane predominately. 5. Oysters regarded as a low margin / difficult product but essential. 6. The large number of End Users make many transactions small & costly to service (efficiency gains difficult / high transaction costs). 7. Significant examples of Offer Bundling (reduces opportunities for chain shortening / increased efficiencies). 8. Margins lower than in horticulture (6-8%, compared with 12-20%). 9. High levels of competition, particularly for larger, metropolitan endusers eg. Casinos, large hotels drives margins down. 9

10 Key Observations - Restaurants & Food Service 1. 56% of total volume sold to end users. 2. Highly competitive, high turnover rate >10%. 3. Range of profitability's (<0% up to 30% net margin, 35% of restaurants < 0.3% net margin ) Buying a job. 4. Oysters depending on location can be a high or low profit line. 5. Apart from some ethnic food types, oysters are seen as a standard menu line. 6. Entrée only, too expensive to for main course. 7. Economic crisis caused many restaurants to lose sales (up to 40% in the last 12 months). 8. New opportunities exist eg. Oyster bars 10

11 Key Observations - Fishmongers 1. 32% of volume sold to end users. 2. Essential line, represents up to 6% of total seafood sales. 3. Variable margins dependant on level of competition, economic demographic, length of supply chain, business skills. 4. Oysters often used as a loss leader or low margin line in order to secure customers. 5. Critical of quality variability not able to get consistent lines of product (product blending and / or growers not supplying each week). 6. Shopping centres and food markets - two major growth areas. 7. Concerns about the oyster value proposition eg. +$60 per kg for meat. 8. However, sales growth of 10-15% in last months (greater evidence of eat at home). 11

12 Key Observations - Chain Retailers 1. Represents 7% of industry sales volumes. 2. <2% of over the counter seafood sales. Non-critical service line. 3. Chain retailers will not deal directly with growers. Oysters category not important enough. FOR EXAMPLE: In one chain retailer (Late March, 2009) 43% of stores sold oysters last week 54% in the last month, 85% in the last 3 months. Store manager determines if oysters are stocked. Low volumes 2 nd best performing store sold 45 dozen that week. 3. Seafood category as a whole unprofitable. Comparatively high wastage levels. Oysters are very difficult to handle in-store. 4. Sales concept store leading edge $14k per week, compared to excellent fishmongers of +$90k per week. 5. Currently, no oyster offering other than fresh (with a few exceptions). 6. Other chains eg. Aldi, BiLo, IGA don t stock oysters (with a few exceptions) 12

13 Key Observations - Export 1. 3% of end user volumes sold. 2. Generally small opportunistic shipments. 3. Poor price competitiveness questionable into commodity markets eg. Chile to Japan US$6. Australia must develop a sustainable edge. 4. Question on price competitiveness poor due to freight cost (air v s sea) & AQIS charges. 5. To be successful oyster export may need to be part of an integrated seafood offer to customers eg. Partner with NZ or WA Lobster. 6. Consistency of offer and preparedness to consistently service market is lacking. 7. Commitment by exporters and growers poor. Not unique in agriculture. 13

14 Supply Chain Price Breakdown, Standard Pacific Oyster (from South Australia) sold by Fishmonger at Preston Market, Melbourne. Item Assumption / Formula Sub-Total $ / dozen $ / dozen Grower Farmgate Price $6.70 Freight $8.15 per 25 dozen bag $0.33 Wholesaler Wholesaler / Cost (landed Melbourne) $7.03 Shucker Oyster Loss 2.00% of Wholesaler Cost $0.14 Shucking $0.95 (Contract Cost) + $0.10 (Superannuation) + $0.05 (Other On-Costs) $1.10 Waxed Cardboard Carton $0.07 per 10 dozen $0.07 Plastic Trays $0.17 per dozen $0.17 Plastic Sheets / Liners $0.03 per dozen $0.03 Margin (not including provision for overhead, $1.00 per dozen $1.36 delivery costs, other handling costs or other management costs Sub-Total $2.95 Retailer Buy Price to Retailer $9.90 Overhead Costs 6% of total turnover costs, total sales 14k dozen per year $2.00 Margin Difference between buy price of oysters + overhead costs $0.96 Sub-Total $2.96 Consumer Purchase Price $

15 Supply Chain Price Breakdown, Standard Pacific Oyster (from South Australia) sold by Mid-Tier Restaurant, Richmond, Inner Melbourne. Item Assumption / Formula Sub-Total $ / $ / dozen dozen Grower Farmgate Price $6.70 Freight $8.15 per 25 dozen bag $0.33 Wholesaler Wholesaler Cost (landed Melbourne) $7.03 Margin (not including provision for overhead, $0.70 delivery costs, other handling costs or other management costs Retailer / Own Buy Price to Fishmonger $7.73 Shucker Oyster Loss 2.00% of Wholesaler Cost $0.14 Shucking $0.85 (Contract Cost) + $0.08 $0.98 (Superannuation) + $0.05 (Other On-Costs) Waxed Cardboard Carton $0.07 per 10 dozen $0.07 Plastic Sheets / Liners $0.03 per dozen $0.03 Margin (not including provision for overhead, $1.25 per dozen $1.50 other handling costs or other management costs). No delivery costs Sub-Total $2.72 Restaurant Buy Price to Restaurant $10.45 Other Food Ingredients $0.75 Garnish $0.15 Sub-Total $0.90 $11.35 Other Labour (34% of end price) $9.52 per dozen $9.52 Rent (8% of end price) $2.24 per dozen $2.24 Overhead Costs (11% of end price) $3.08 per dozen $3.08 Net Margin (6% of end price) $1.68 per dozen $1.68 Variation $0.13 Sub-Total $16.65 Consumer Meal Price $

16 Australian Oyster Industry Benchmarking Program 16

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19 Conclusion and Thanks Shane Comiskey Director, CDI Pinnacle Management Pty Ltd 16/43 Lang Parade, Brisbane Ph: Mob: Web: 19