Transcript Slide 1

Retail Meat New Zealand
23 March2012
Presentation by
DAVID BAINES
General Manager Alliance Meats

INDUSTRY

WORLD SCENE

PRICING TRENDS

ALLIANCE GROUP POSITIONING/MARKET UPDATE

INDUSTRY OPPORTUNITIES
WHERE ARE WE TODAY - Industry

Red meat sector worth circa $8 billion of export earnings

Represents 15% of NZ’s total export revenue

Compares to dairy sector of $10 billion

Diversified - 22% sheepmeat to UK vs. 94% in 1958

Almost completely NZ owned industry with 55% owned by farmers

Farming sector comprises over 12,000 individual farmers

Over 90% of sheepmeats and 80% of beef exported

Sheep numbers around 32 million compared to over 70 million in mid 1970s

19 exporters to the EU - critical mass essential to supply large retailers

Industry would benefit from fewer companies - less processing plants
FOOD STILL A GOOD BUSINESS TO BE IN

Population worldwide growing

Consumption increasing

Need for more protein

Major domestic producers - EU, South America, Australia - in decline

Food and supply security important - NZ’s ability to maximise

Extreme volatility in foreign exchange rate relativities
Next Phase: - Sustainability
- Carbon Footprint
- Food Inflation
WORLD SHEEP and CATTLE PROJECTIONS
Cattle
Source: GIRA
WORLD SCENE
WORLD SCENE … WEST to EAST - Volume 2006 to 2011
Total New Zealand tonnage
Source: B+LNZ, AGL
2006
2011
=
=
311,641
221,351
-30%
WORLD SCENE
NEW ZEALAND PRODUCTION
LAMB EXPORT
MUTTON
2008
330,000
2009
305,000
2010
295,000
2011
274,000
2012
288,000
(26.5 m)
95,100
(6.5 m)
(20.1 m)
55,000
(3.3 m)
Export tonnage loss (5 years) = 42,000 Mt - 13%
 Significant reduction
 Markets fully aware
 Supply security
 Rationalise customer base
 EU/UK - less dominant
 EU Quota -2011 down 45,300 Mt -2010 down 31,000 Mt (227,854 MT)
NEW ZEALAND
1990 – 1991 Dairy accounted for 10% of pastoral land area
NZ LAMB MARKETS - TOP 10
2006
2011
$/kg
Country
MT
UK
73,939
6.98
54,688
8.35
-19,251
19.6 %
China
20,184
1.95
37,389
4.03
17,205
106.6 %
France
23,920
8.53
18,513
9.66
-5,407
13.2 %
Germany
22,658
11.51
15,179
12.39
-7,479
7.6 %
Saudi Arabia
13,434
3.66
12,923
5.74
-511
56.8 %
USA
20,813
10.66
17,449
11.6
-3,364
8.8 %
Belgium
12,975
12.00
11,077
13.61
-1,898
13.5 %
Canada
9,652
8.26
9,738
9.33
86
12.9 %
Japan
5,980
6.15
6,688
7.78
-708
26.5 %
Mexico
11,602
3.29
3,919
4.76
-7,683
44.7 %
Totals
215,157
Total 270,000 tonne exported - 28% Chilled
(44% main primal cuts now shipped chilled)
MT
Change
187,563
$/kg
MT
Value +
-29,010
THE ALLIANCE GROUP STORY

Est. 1948 by Southland farmers unhappy with lamb prices/British control

First plant at Lorneville in 1960

Today has 9 processing plants from Invercargill to Dannevirke

Annual turnover of around $1.5 billion; 5,500 employees

Diversified product range - retail, food service and
manufacturing segments
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100% farmer owned co-operative - 5,500 farmers

AGL represents 16% of world sheepmeat trade

Largest sheepmeat player in NZ

Global distribution network across 65 countries
and ownership in UK, ME and
North American marketing companies
ALLIANCE INVESTMENT
MOVING UP AND DOWN THE VALUE CHAIN
Base
Primals
Sub Primals
THE LOW HANGING FRUIT
DMM - UK, EU, Pacific
Manufacturing
Bones - China
Soup Stock
Knk Tips - China
Stock / Hot-pot
Tails - China, Africa, PNG
BBQ / Hot-Pot
Tripe - China
Hot-Pot
Testes - China
BBQ
Fat - China
Lamb Roll Filler
Heads - China
Wool -> Garments
Tng / Brain – Eating
Balance – Pet Food
LAMB UPDATE

Supply/demand fundamentals OK – but economies impacting

Cross currencies will change trade flows - EU vs. diversified

NZ and market stocks increasing - consumer resistance at current high levels

FTA’s providing more opportunities - China, Malaysia, Korea, Russia, India

Emergence of China - low valued protein

EU Quota will not be filled

Impact of Australian product flows to market

Product Forms

Legs - continual conversion frozen to chilled

Middles - supply/demand back in balance

Shoulders – some correction on pricing

Flaps - high prices China
OPPORTUNITIES

Meat Sector Strategy process

Automation and industry collaboration projects





Shrinking supply - MLA estimates 300,000 tonne short
in next 5 years
Growing demand - protein supply needs to double by
2050
Emerging markets - becoming more sophisticated with
ability to pay
NZ producers and processors more productive - more
to come
Exports more precise in targeting right market, right
customer, right products, right price points
Prospects forward for sheepmeat never looked better
New Zealand is well positioned to enjoy its bountiful
advantages