global conference
1 1
io What'sNewS Issue 3 May/June 2001
Q&A
Day 1 - The Global Market Place,
session 2
A
t iki "A,
Thin trade
Day 1 - Changing Environment
Export barrier
Q&A
increase real consumption in develop-
ing countries and continents - with
Africa as a specific case here?
- will China enter WTO unreservedly, thus
repositioning its import potential?
- will the effects of BSE and other 'inci-
dents' be limited in time and geography?
- what will be the outcome of the GMO
debate?
Conference chairman Charles Groenhui-
jsen took the first question from the floor
in a lively Q&A session. 'Who is responsi-
ble for ongoing subsidies - the US or Eu-
rope?' Responding, Furlan believed that in
today's situation, the US blarne the EU for
maintaining subsidies, and vice versa. The
real question is: who will give first. 'It
could be the EU, due to the current health
and food safety issues,' he said, adding
that there appeared to be sonte optimisni
following a meeting in March 2001 be-
tween the EU and Mercosur.
GMOs, especially in feed, might have
dominated the conference if (the related)
health and safety issues had not been so
topical. Unsurprisingly, questions on both
Furlan and Yates' perceptions came next.
Said Yates, 'I think the story of GMOs
and what they can achieve for us has been
told badly.' 'This means,' Furlan added,
'the industry will not be using these mate-
rials, however beneficial, until the con-
sumer accepts them.'
Participants picked up on
the need, highlighted by
Yates, for a joint approach
to changing perceptions of
the meat protein industry
and asked whether promo
tion of, say, beef should be
government or industry-
driven. Yates responded by
suggesting that a general
industry levy for R&D
could prove useful. The
problem remains that the overriding con
cern for most corporates is promoting
their own brand. Competing against each
other, he reiterated, rather than against the
real danger (other food groups) could
prove counterproductive in the longer
term.
Smithfield Foods is the largest packer of
processed meat in the world, and its CEO
l
1
Joseph W. Luter III talked the conference
through the development of the industry
in the last 40 years. No other player re
mains from the days when he started the
company in 1962. Smithfield has survived,
he said, because the company has strived
for consistency in qual-
ity since the early days.
To achieve this, Smith
field went into the hog
business for itself, creat-
ing vertical integration
to ensure supply. 'It was
a risk,' he admitted. 'We
bet the farm, so to
speak.' While Smithfield
was building, other play-
ers were going to the
wall or disappearing
into conglomerates or mergers. 'There has
been tremendous change in the last 20
years and those who survive the next
quarter century will be those who are will
ing to adapt.' He also warned that too
much focus on export was not always ad-
visable.
In contrast, New Zealand's AFFCO is
looking to expand its exports, specifically
in the face of quota constraints in markets
such as the US, EU and Canada. Also an
advocate of vertical integration, Selwyn
Hayton of AFFCO flew the flag for sheep-
meat. Today, sheepmeat constitutes only
5% of world
meat produc
tion, with 75%
of output in
developing
countries.
'This is a thinly
traded prod
uct,' he ex-
plained, 'only
6% moves into
international
markets, with New Zealand and
Australia accounting for 90% of interna
tional trade.' Upbeat and even optimistic
Hayton described how AFFCO sees its
market as dernand driven; it is not in the
commodity business. This means it can
strategize according to the comparatively
new set of givens now prevalent in a
consumer-driven marketplace. Essentially,
for AFFCO, the key is firm understanding
of customer requirements. This necessi-
tates effective decision making models
and a need for forward-thinking
suppliers.
The current and future potential role of e-
commerce was next on the agenda. Kevin
Nemetz of Commerce Ventures, an e-solu-
tion marketplace for the meat and poultry
industry set up by a cluster of top
names in the business, noted that
already 2% of total food sales
take place via the Internet.
Through the
www.provisionx.com site, Com
merce Ventures already offers a
bundie of tools and services for
the meat industry. As the site
evolves, it will be an e-business
platform to streamline transac-
tions and create supply chain visi-
bility.
Next up was Liu Yonghao of New Hope,
one of the largest feed and food processors
in China. Outlining the issues currently
facing the meat industry in China, he said
low sanitation and health standards are
extremely problematic. 'And the Chinese
consumer is no different from counter-
parts elsewhere,' he added. 'Overreaction
to media reports on food safety issues also
affects consumption.' The food safety is
sue is also a potential barrier to export.
Interestingly, familiar trends in consump
tion patterns emerged. Echoing Warwick
Yates and Joseph Luter, Yonghao's pointed
out that in China, pork consumption is
declining, at the expense of other meat
products, specifically beef and sheepmeat.
Yonghao's figures further confirmed the
urban/rural difference in consumption -
per capita this works out as 69.4 kilos
against 27.5 kilos.
'Will China export?' was the first question
from the floor. Yonghao replied with an
emphatic: yes, with the qualification that
pork and beef could be destined for ex
port, but he sees China importing more
poultry in the longer term. Investment in
China was another issue raised. Flven
though environment and health control is
sues were high priority, replied Yonghao,
standards rernain lower than elsewhere,
primarily because improvements are hard
to achieve in an extremely fragmented in
dustry. 'However,' Yonghao noted, 'the
time for investment in China will conté.'
Consolidation of China's industry has al
ready started.
