Lamb must move away from commodity to a premium product: Rabobank
Alliance Group is developing the concept of "terroir" for its premium lamb brands.
General manager for marketing Peter Russell said it was promoting the idea that lamb from a particular region had a distinctive taste which marked it out from other lamb.
He was commenting on a newly released Rabobank report on the future for the New Zealand lamb industry.
Rabobank analyst Blake Holgate said the industry needed to put into action a three-point plan if it was to increase profits to farmers.
These were: ensuring New Zealand lamb was positioned as a premium product; continuously improving quality and verification; and producing a product that consumers wanted and aligned with their values.
Russell agreed, saying creating added-value brands was the biggest challenge for the lamb industry. Alliance now marketed two "super premium" brands called Silere Alpine Merino and Te Mana which attracted a minimum value of 50 per cent above run-of-the-mill lamb.
In the report Maximising the Value of New Zealand Lamb - The Drive for Value Add, Holgate suggested farmers should consider changing their systems so they produce chilled lamb for export at off-peak times of the season.
In 2016 the average value of chilled lamb exports was $11,697 per tonne compared to $6096 for frozen.
Most New Zealand lambs are processed between January and June, but demand for the product is relatively constant throughout the year.
Some farmers should change their system - if they can - to produce lambs during the shoulders of the season and capitalise on the higher prices available at that time.
"We have to be careful just because it's a relatively scarce product globally doesn't necessarily mean it's going to be a premium product. People want more transparency about traceability and animal welfare," Holgate said.
There were four ways to add value to lamb: by improving lamb quality; boosting further processing, changing production systems and improving marketing and branding.
Only the warmer, northern regions of the country would allow farmers to extend the supply season, and after that they needed to improve genetics and feeding systems to carry lambs through to particular times of the year.
"But if farmers are going to the effort of doing that, they need to be assured the incentives and rewards are greater than the costs assoicated with doing it. They will want certainty and transparency from the processors," Holgate said.
Another important message was that the industry should not chase the highest value-added markets just for the sake of it, because with value-add come increased cost as well.
"You have to increase your margins between the cost of production and what you're getting in the market. While producing microwave-ready meals may give us the biggest value, the cost of producing them may be too great."
While the path to success depended on a team approach, the processors were in the best position to take the lead, and send signals to farmers by providing better prices and favourable supply contracts.
Beef+LambNZ chairman James Parsons said it was heartening the report endorsed the red meat sector story developed by B+LNZ.
"Value add of course doesn't mean greater margin and value capture for New Zealand, and this is an area that is too often forgotten. Rabobank have highlighted this key point well."
"Too often we hear political leaders touting that New Zealand needs to embrace more costly production systems in pursuit of a value-add strategy supplying the wealthiest people in the world with high-end products. There is an assumption that this will make New Zealand wealthy, yet wealth creation is about selling lots of high priced products while keeping costs as low as possible," Parsons said.