HARD-nosed commercial opportunity has swept aside the interests of the broader beef industry following a decision this week by major domestic supermarket retailer, Coles, to adopt a growth promotant-free position in its beef offer.
That’s the overwhelming view among senior red meat industry stakeholders who roundly condemned Coles for its actions taken on Monday when it declared its intention to move to HGP-free supply for all table beef during 2011.
The company’s claim that its decision was made solely on the basis of eating quality improvement has been dismissed outright by stakeholders contacted this week, who say the result is driven more by Coles’ desire to win market share from its major retail rival, at any cost, through focussing on ill-conceived consumer perceptions about HGPs in meat.
MLA managing director David Palmer said Coles had the right to differentiate itself in any way it saw fit. However there was a widely-held fear that its actions would cast such a negative image on HGPs – a government registered, scientifically proven, legitimate production tool – that it could rob the industry of a productivity driver worth $210 million annually.
Mr Palmer said there was little doubt that some export customers would now show a heightened sensitivity and scrutiny towards HGPs, needlessly, following this week’s policy moves by the nation’s second largest retailer.
“Perception and rumour is all powerful and the fear therefore is that a whole set of circumstances could now unfold, outside of the industry’s control, that will only put pressure on the continued use of a safe, scientifically-proven production tool.”
Cattle Council of Australia president Greg Brown said Coles had every right to offer a choice to its customers, but it was the method of execution of its policy that raised most concern.
“Potentially it could be very destructive, creating a dialogue out there that is against the interests of the beef industry. That could easily spill into export, as well as domestic segments,” Mr Brown said.
He said EU, Organic and other non-HGP segments typically paid a big premium for non-implanted cattle, and it would be important to monitor whether Coles did so, and continued to do so.
“It may be that Coles has not yet fully thought through this issue, and we will be seeking further dialogue with the company before they move to full implementation,” Mr Brown said.
Few other industry stakeholders were prepared to speak on the record this week for fear of being ‘blacklisted’ by Coles in future trade.
Several pointed to the origins of Coles merchandise director John Durkan, a former senior manager with the UK’s Safeway retail group, as evidence that the company had taken a ‘Euro-centric’ view towards the use of HGP in beef systems.
One respected Australian processor said the downside for the beef industry out of the announcement was always going to be bigger than any upside for Coles.
“In most cases, any marketing strategy that somebody comes up with means that somebody else in the chain has to pay for it,” the processor said.
“But in this case, Coles has struck a particularly raw nerve and has extracted a heavy price from the industry in its pursuit of commercial gain.”
Coles could have applied any number of other interventions to improve meat tenderness performance if it wanted to, from breed type to days on feed – the list was endless, the processor said.
“There is already extensive media coverage over this issue, and that in itself is going to sow seeds of doubt, unfairly, in many consumers’ minds over the relative significance of HGP. It’s obviously Coles’ strategy to take the high ethical ground on this and related issues. But if the result is that important productivity tools like HGP are removed, then where does the industry go?”
“Using the EU model, which banned HGP in the 1980s due to its huge beef surplus, consumption has been falling for years. Once the product becomes dearer to produce, it hits a different price-point and is eliminated from some consumers’ budgets.”
The processor said he did not believe Coles would wear the productivity loss itself, longer term. EU-type premiums might be offered for a while, but over time it would be whittled-away and the livestock supplier would ultimately wear the cost.
Coles meat merchandise manager Allister Watson agreed with figures put forward suggesting his company could lose $20 a head in foregone boning room yield and $30-$35 a head in lost liveweight gain productivity as a result of its decision. Given the company’s weekly national kill of around 6000 head, the difference between implanted and non-implanted stock would equate to a potential weekly productivity loss worth at least $300,000.
While that was a big financial sacrifice, the policy change did make a ‘huge difference’ to the eating quality of the product, Mr Watson suggested.
“We started a quality improvement program 18 months ago, and HGP is just one of the aspects we’ve looked at. It’s not just about HGPs in isolation,” he said.
The company planned to target an MSA boning grouping that it wanted its meat to fall into, and that might also have some bearing on adjustment in Indicus content, going forward.
Mr Watson repeated the message delivered in the company’s initial press statement that no supplier would be financially disadvantaged as a result of the HGP decision.
“Coles will absorb any additional production cost, all the way through – it will not be reflected in retail price or livestock price,” he said.
“This is a specification, no different to a spec that we might put in place for our chicken supply. We’re looking at things from our consumers’ perspective, and we believe HGP does have a quality impact when cattle are grown to the size and weight which we are looking for.”
“Customers in all supermarkets (not just Coles) still have a perception that beef in supermarkets is not as good quality as it should be. We think this move can help change that.”
MLA’s David Palmer dismissed the tenderness improvement argument put forward by Coles, saying the HGP effect on tenderness was ‘bugger all.’ “Its five points, and can be easily compensated for through tenderstretch or additional ageing,” he said.
Asked what pressure the events this week would have on other major retail supermarket groups, Mr Palmer said he could only be complementary towards the mature way that Woolworths had approached the matter.
Woolworths, at this point, says it has no plans to change its supply policy.
The company’s livestock business manager Brett Thompson said his company trusted the production expertise of Australian beef producers, who had a vested interest in ensuring their products sold around the world were safe.
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