November 26, 2020

 

Australia's AACo to focus on retail distribution of meat in US and Canada

 

 

Wagyu beef giant Australian Agricultural Company (AACo) has scaled down its meat sales in Australia and diverted attention to better paying supermarket and butcher shop options in the United States and Canada.

 

Since the start of the COVID-19 pandemic, Australia's share of AACo's total beef sales across 16 countries weakened from 14% to 11%.

 

AACo has also diverted high value beef cuts away from China, partly as one of the two export abattoirs AACo uses to service the Chinese market has been suspended for seven months.

 

"The 16% of the beef carcasses, which are considered the highest value, is now largely being sent to North America to satisfy customer demand in their homes rather than through the food service channel," said AACo managing director Hugh Killen.

 

"While the food service industry has been central to our beef brand's success and will continue to be, it has been highly disrupted by COVID-19.

 

"It's likely consumer behaviour will centre around home dining in the next 18 months."

 

Five-star restaurants, tourist hot spots, and other eating and entertainment venues worldwide now represent just 30% of AACo's marketplace, while retail sales have grown to 70% from 40% in less than a year.

 

With most of high-end dining markets shut down and with fewer cattle available for slaughter from AACo's drought diminished 340,000-strong herd, Killen said AACo had made the strategic decision to scale down sales of its most expensive loin cuts in several geographies, focusing on retail options instead, particularly in the US.

 

North American sales now represented 20% of AACo's global market, an increase from 6% last year.

 

Aside from China, AACo's sales in Asia have also risen from 51% to 55% portion of its total market.

 

Killen said while Australia considered itself a fairly major beef eating market, on a global scale, it was a relatively small and crowded market for AACo's pure wagyu and first cross beef.

 

Some rival exporters had chosen to keep more products in the domestic market due to their normal export categories - including those of overseas food service sectors - that had been badly disrupted.

 

"We're lucky we have elsewhere to send our product," Killen added.

 

AACo also worked with retail distribution partners and famous chefs to promote high quality "at home" cooking and dining experience to make the most of the company's upmarket branded beef image, he said.

 

Killen told shareholders that meat revenue had slipped down to $99.7 million from last year's almost $103 million, based on the released first half profit results for 2020 to 2021.

 

He also predicted a difficult year ahead for the brand particularly in the pandemic-shattered Europe and the US due to the "stop-start" revival nature of restaurant sales.

 

Losing the Chinese restaurant market also had its drawback. Chinese buyers tend to pay higher prices for fatty trimmed meat products.

 

"China is a really valid market for us in general, and we'd certainly prefer it to be open, but in the meantime, we have some other really good markets to pay attention too," Killen said, referring to the numerous barriers placed on farm commodity exports from Australia this year.

 

He declined to anticipate when the current complex China-Australia trade relationship would be resolved. AACo expected the geopolitical uncertainty to have an impact on different markets during 2020 to 2021.

 

Last week's half-year results saw the AACo's statutory losses slashed to $1.7 million but operating profit under its preferred overall operational reporting measure was $23.5 million.

 

 - North Queensland Register