Welsh Red Meat Industry Strategic Action Plan 2015 2020 Vision A profitable, efficient, sustainable and innovative industry which benefits the people of Wales; a red meat industry which is resilient to political and environmental change and capable of responding competitively to ever changing market trends
EXECUTIVE SUMMARY The red meat sector (sheep, cattle and pigs) is an important primary production industry in Wales and contributes the largest share towards Welsh Agricultural Output. Since the launch of the first Strategic Action Plan for the Welsh Red Meat Industry in 2009, the Welsh Government, Meat Promotion Wales (HCC) and the red meat industry have worked together to achieve considerable progress towards the vision of creating a profitable, efficient, sustainable and innovative industry. However in a marketplace that is increasingly competitive, there is much to do to safeguard the future of the Welsh red meat industry and to sustain the sector s contribution towards a thriving rural economy. There are a number of challenges facing the red meat industry in Wales. Responding to political and environmental change, adapting to changing market conditions, embracing innovation and adopting technical best practice, and improving overall business management, continue to pose a significant challenge to the red meat industry in Wales. At the core, profitability remains the biggest challenge and there is a need to improve the overall confidence in the industry and to encourage and facilitate change. However, there are also opportunities which must be seized if the Welsh red meat sector is to overcome the challenges in a timely manner to create a resilient, sustainable and profitable industry. Working together right across the supply chain will be integral to success and whilst some of these challenges are out of their direct control, there are many ways in which red meat producers can directly influence the productivity and performance of their businesses. To achieve this, the Welsh red meat industry must build upon the solid foundations that have been established to date and create a culture of innovation and market focus that will enable the industry to grow and develop in an increasingly competitive global marketplace. The Strategic Action Plan presented here identifies the priorities, objectives, targets and actions that will help to address key challenges and bring about a positive impact on the employment and the growth of the rural economy in Wales which will also reduce poverty in Welsh rural societies. It is intended to provide a pathway forwards whilst being flexible enough to allow the Welsh red meat industry to respond to changing circumstances in a timely and appropriate manner. This Action Plan seeks to be ambitious, yet realistic. In line with Welsh Government aspirations it is outcome driven and, as such, specific financial targets for 2020 have been included for the first time, in order to provide a clear and focussed measure of success. In doing so it is acknowledged that circumstances could arise which may have a significant impact on the ability for the red meat industry to achieve these goals. Targets will therefore be reviewed on an ongoing basis and delivery adapted if necessary so that the industry can continue to move towards a realistic outcome. 1
Its success will continue to rely upon close partnership working between the Welsh Government, HCC and the full engagement of all stakeholders across the supply chain. Implementation of the Action Plan will be funded from a number of sources including the Welsh Government, the Rural Development Programme 2014-2020, Welsh Red Meat Levy and from the industry itself. Vision A profitable, efficient, sustainable and innovative industry which benefits the people of Wales; a red meat industry which is resilient to political and environmental change and capable of responding competitively to ever changing market trends Priorities Increase demand for Welsh red meat products (thereby increasing sales and returns) Improve production efficiency (thereby increasing quality supply) whilst maintaining the environment and landscape of Wales Objectives Increase sales revenue from Welsh red meat Increase the contribution of the Welsh red meat sector to Welsh Agricultural Output Targets By 2020 the Welsh red meat industry should seek to positively impact on sales revenue from Welsh red meat by at least 34 percent, to 776 million By 2020 the Welsh red meat industry should aspire to improve the red meat sectors contribution to Welsh Agricultural Output by at least 5 percent, to 624 million By 2020 the Welsh red meat industry should aspire to improve the turnover of the Welsh food and farming sector by at least 14 percent, to 6.5 billion 2
CONTENTS Page 1. Introduction 4 2. Objectives and Key Achievements 2009-2013 6 3. The Current Situation 9 4. Challenges and Opportunities 2015-2020 12 5. Strategic Priorities, Objectives and Key Performance 20 Indictors 2015-2020 6. Strategic Actions 2015-2020 31 7. Risk and Risk Management 36 8. Desired Outcomes by 2020 37 9. Monitoring and Evaluation 2015-2020 39 3
1. INTRODUCTION The red meat sector (sheep, cattle and pigs) is an important primary production industry in Wales. Red meat producers represent 52 percent of active Welsh holdings 1 and Welsh red meat production contributes the largest share towards Welsh Agricultural Output. Welsh red meat production alone accounts for 43 percent of the total Welsh Agricultural Output and was worth 594 million in 2012. 2 As food producers and custodians of the landscape, Welsh red meat producers not only play a vital role in supporting the rural economy but are also integral to the sustainable management of the land upon which our food and tourism industries rely. Since the launch of the first Strategic Action Plan for the Welsh Red Meat Industry in 2009, the Welsh Government, Meat Promotion Wales (HCC) and the red meat industry have worked together towards the vision of creating a profitable, efficient, sustainable and innovative industry. Considerable progress has been achieved against the targets that were set out at that time, despite the continuing backdrop of economic uncertainty and upheaval. However in a marketplace that is increasingly competitive there is much to do to safeguard the future of the Welsh red meat industry and to sustain the sector s contribution towards a thriving rural economy. In developing the Strategic Action Plan for the Welsh Red Meat Industry for 2015 2020, the progress that has been made to achieve the present status of the Welsh red meat industry has been reviewed and the vision for the red meat sector going forward has been considered in light of the significant challenges that currently face all parts of the Welsh red meat supply chain. This Strategic Action Plan reflects the future requirements and the aspirations and targets that the Welsh red meat industry should seek to achieve by 2020. It takes into account the Programme for Welsh Government, 3 it reflects the aspirations of the Wales Agricultural Development Programme 4 and the contribution that the Welsh red meat sector can make towards the Action Plan for the Welsh Food and Drink Industry 5. It also incorporates the recommendations from the 2014 review into the resilience of farming in Wales 6 and takes into account the findings and subsequent discussions from the 2014 independent review of the beef sector in Wales that was commissioned by HCC. 7 The action plan supports the commitment to the principles of the Wales Animal Health and Welfare Framework 8 with respect to healthy and productive farmed livestock. 1 Source: Welsh Government. Farming Facts and Figures, Wales 2014. 2 Source: Welsh Government. 24 June 2014. Aggregate Agricultural Output and Income, 2013 Revised. 3 Welsh Government. Programme for Government 2011-2016. 4 Welsh Government. Wales Agricultural Development Programme - Draft. 5 Welsh Government. Towards Sustainable Growth: An Action Plan for the Food and Drinks Industry 2014-2020. 6 Kevin Roberts. 2014. Review into the Resilience of Welsh Farming. 7 SAC Consulting. 2014. A Review of the Beef Sector in Wales. 8 Welsh Government. Wales Animal Health and Welfare Framework Achieving high standards together, 2014 4
This Action Plan is cross-cutting and will be instrumental in sustaining the economy, the environment and rural communities. The Plan presented here identifies a number of strategic, high level actions that will help to address the key challenges that the industry faces and actions that will enable the Welsh red meat sector to take full advantage of the opportunities which present themselves. The Strategic actions are intended to provide a pathway forwards whilst being flexible enough to allow the Welsh red meat industry to respond to changing circumstances in a timely and appropriate manner. The Welsh red meat industry must strive to maintain a profitable, efficient, sustainable and innovative industry which benefits the people of Wales; a red meat industry which is resilient to political and environmental change and capable of responding competitively to ever changing market trends. To achieve this, the Welsh red meat industry should focus on the following strategic priorities: To increase demand for Welsh red meat products (thereby increasing sales and returns). To improve production efficiency (thereby increasing quality supply) whilst maintaining the environment and landscape of Wales. In line with Welsh Government aspirations, this Action Plan is outcome driven and, as such, specific financial targets for 2020 have been included for the first time, in order to provide a clear and focussed measure of success. In doing so it is acknowledged that circumstances could arise which may have a significant impact on the ability for the red meat industry to achieve these goals. Targets will therefore be reviewed on an ongoing basis and delivery adapted if necessary so that the industry can continue to move towards a realistic outcome. Implementation of the Action Plan is to be funded from a number of sources including the Welsh Government, the Rural Development Programme 2014-2020, Welsh Red Meat Levy and from the industry itself. The success of this Strategic Action Plan will therefore continue to rely upon close partnership working between the Welsh Government, HCC and the full engagement of all stakeholders across the supply chain. 5
2. OBJECTIVES AND KEY ACHIEVEMENTS 2009-2013 The Welsh economy has benefitted substantially as a result of the work carried out by all parties in the red meat supply chain over the past five years. The Strategic Action Plan for the Welsh Red Meat Industry 2009 2013 contained a series of actions that focussed on four strategic aims: To improve the industry s level of understanding of market trends and to influence consumer behaviour. To foster innovation and improve supply chain linkages. To improve the business performance of processors in response to changing market conditions, environmental requirements, climate change and consumer demands. To improve the business performance of primary producers in response to changing market conditions, environmental requirements, climate change and consumer demands. The Welsh red meat industry embraced these aims and has worked hard to develop profitable and sustainable markets for its products. Development work undertaken by HCC to support and grow the brands in both the United Kingdom (UK) and abroad has stimulated demand for Welsh red meat products and has turned Protected Geographical Indication (PGI) Welsh Lamb in particular into a global brand. The European Commission (EC) awarded Welsh Lamb and Welsh Beef the status of PGI (one of the three forms of protection within the EC Protected Food Name Scheme) in 2003 and 2002 respectively. This scheme aims to preserve and promote special foods that are unique to their terrain foods that have character, that are lovingly-crafted or that have an unbreakable connection to the land they come from. During the lifetime of the last Strategic Action Plan (2009-2013) an independent report commissioned by HCC (2013) found that recognition of the quality of Welsh red meat led to increased exports and increased demand for Welsh red meat by retailers in the UK. As a result, PGI Welsh Lamb in particular now attracts a retail premium that is passed down through the supply chain. 9 Working in partnership with producers, processors, retailers, exporters and the Welsh Government, HCC has focused on developing and strengthening existing markets and pursuing opportunities in new and developing markets. In addition to the established export markets for sheepmeat in France, Belgium, Germany, Italy and Ireland, the Welsh red meat industry has worked hard to open up a further thirteen countries since 2006. The value of sheepmeat exports from Wales have increased during this time from 56.7 million in 2004, to 109.1 million in 2009 and grown to 154.7 in 2013. 10 Beef exports from Wales have increased from 3 million in 2004 to 14.6 million when exports markets re-opened in 2006 (post BSE 11 ) and grown from 30.9 million in 2009 to 9 Source: HCC. Flying the Flag. Decade of Success for the Welsh Red Meat Brands. Review 2003-2013. 10 Source: HCC, September 2014. 11 BSE: Bovine Spongiform Encephalopathy. 6
69.4 million in 2013. 12 Whilst exports of beef from Wales have been constrained by the more limited supply and the better returns that it attracts in the home market, the export destinations for Welsh Beef have also expanded. This is partly due to inward and outward missions undertaken by the Welsh red meat industry. A 2013 independent report reviewed the activities undertaken by HCC over the past 10 years to develop the red meat brands, examining their value to industry and wider economic benefits. 13 The report concluded that HCC s investment combined with industry efforts has grown premium and new market opportunities for the Welsh red meat supply chain by more than 115 million comprising: Increased British retail market share of 64 million over 10 years. Export market increase of at least 42.5 million over 10 years. Public sector additional markets of 8.4 million since 2005. Increased British retail premium of at least 1 million per year. At the same time, capital grant investment has been targeted into red meat processing businesses, reflecting confidence in the Welsh red meat industry and helping it exploit new products and markets. Improvements in productivity and in the quality of Welsh red meat products have also helped to underpin supply and have added to the value of the Welsh Lamb and Welsh Beef brands. Knowledge transfer and innovation activities supported through the Welsh Red Meat Levy have been complemented by initiatives that were developed through the Rural Development Programme 2007-2013. These included the Elite Ram Project and the Welsh Beef Quality Improvement Project which helped to stimulate awareness of genetic improvement and created a platform for breeders to bring in performance recorded genetics. As a result, gradual improvements have been seen in growth, efficiency and productivity. The proportion of lamb carcases meeting the standard market requirements rose between 2006 and 2013 by 6.2 percent and there has been an increase in average lamb carcase weight of 0.7kg over the same period. The average weight of lamb reared per ewe has also increased over this period, by 6.3 percent. 14 The proportion of prime cattle carcases meeting the standard market requirements rose between 2006 and 2013 by 2.3 percent and the average weight of weaned beef produced per cow increased by 4 percent over the same period. The average calving interval in the beef herd in Wales decreased by 3 percent between 2008 and 2013. 15 These cumulative improvements make an important contribution to the value of red meat from Wales, particularly when considered against the backdrop of declining livestock numbers. 12 Source: HCC, September 2014. 13 HCC. Flying the Flag. Decade of Success for the Welsh Red Meat Brands. Review 2003-2013. 14 Source: HCC, September 2014. 15 Source: HCC, September 2014. 7
Welsh red meat production accounts for 43 percent of the total Welsh Agricultural Output, representing 594 million (in 2012), which is an increase in monetary terms of 174 million since 2006. 16 Over the past five years, the red meat industry in Wales has also embraced the need to develop sustainable farming practices that can utilise natural resources and deliver a positive impact on the environment. The Welsh Red Meat Roadmap 17 was published in July 2011 and offered the industry practical information on environmental issues and carbon reduction while adhering to the business model essential of increasing efficiency and profitability. As consumers become increasingly aware of the origins of the red meat that they choose to consume, the Welsh red meat industry is well placed to build upon the roadmap, work in collaboration and exploit our environmental credentials and manage resources efficiently. 16 Source: Welsh Government. 24 June 2014. Aggregate Agricultural Output and Income, 2013 Revised. 17 HCC. 2011. A Sustainable Future The Welsh Red Meat Roadmap. 8
3. THE CURRENT SITUATION The Welsh red meat industry is important to the Welsh economy in terms of employment, income and the contribution it makes to tourism. TRADING PATTERNS FOR RED MEAT FROM WALES Only five percent of red meat produced in Wales is consumed in the home [Wales] market. Approximately 60 percent of the sheepmeat and 82 percent of the beef produced in Wales is consumed elsewhere in Great Britain (GB) - particularly England - and is therefore an important market for the Welsh red meat industry. The remainder of red meat produced in Wales services the export markets (i.e. approximately 35 percent of the sheepmeat and 13 percent of the beef produced in Wales is consumed outside GB). 18 The Welsh red meat industry is heavily reliant on global export markets to achieve premium prices. Strong overseas demand uplifts farmgate prices and helps to balance supply and demand thus securing greater returns for the supply chain. In 2013 approximately 36,100 tonnes of sheepmeat and 15,800 tonnes of beef were exported from Wales to both the European market and wider afield. The combined total value of both sheepmeat and beef exports from Wales in 2013 was worth approximately 189.3 million. Minimal volumes of pigmeat are exported from Wales. The export of sheep skins, cattle hides and offal from Wales equated to approximately 33.6 million bringing the total value of red meat exports from Wales in 2013 to approximately 223 million. 19 France, Belgium, Germany, Italy and Ireland are established export markets for lamb from Wales whilst developing markets currently include the Netherlands, Austria, Switzerland, the United Arab Emirates, Hong Kong, Norway, Denmark, Sweden and Canada. Exports of beef from Wales are more restricted due to the more limited supply and the fact that it commands a premium on the home market. Nevertheless Wales currently exports beef to the Netherlands, France, Germany, Italy, Belgium, Denmark, Switzerland, Spain and Hong Kong. LIVESTOCK PRODUCTION Welsh red meat producers represent 52 percent of active Welsh holdings. 20 There have been fluctuating sheep, beef and pig numbers in Wales (and across GB). 21 Breeding sheep numbers fell to their lowest levels (below 4 million head) in 2009 but numbers have shown significant signs of recovery, with 4.8 million breeding ewes recorded in June 2014. 18 Source: HCC, September 2014. 19 Source: HCC (using HM Revenue and Customs data), September 2014. 20 Source: Welsh Government. Farming Facts and Figures, Wales 2014. 21 Source: Welsh Government. 28 November 2013. Survey of Agriculture and Horticulture. 9
The breeding beef herd (females aged 2 years or more) and the breeding dairy herd (females aged 2 years or more) has been steadily declining over the years, however the breeding dairy herd experienced an increase in numbers in 2014. In June 2014 the beef breeding herd stood at 214,200 head whilst the dairy breeding herd stood at 289,900 head. This decline in production triggered the independent review of the beef sector in Wales that was commissioned by HCC during 2014. 22 The pig breeding herd dipped to 3,200 head in 2008 but numbers have been showing signs of recovery. The pig breeding herd was recorded at 4,400 head in June 2014. Producers have continued to face a number of challenges, including fluctuating prices and the subsequent impact on profitability, which has left many farms struggling with financial viability. The provisional average farm income on LFA 23 cattle and sheep holdings in Wales for 2013/14 was 26,500 per farm which is a 15 percent increase on the 2012/13 figure (in real terms at 2013/14 prices). The corresponding figure for lowland cattle and sheep holdings was 30,200, representing a 2 percent decrease on the year earlier figures (in real terms at 2013/14 prices). 24 Farm income data is not recorded for Welsh pig farms however provisional data for specialist pig farms in England shows average farm income for 2013/14 to be 78,000. 25 The situation in Wales is however likely to be significantly different due to its structure. In 2013 the breeding pig herd in Wales accounted for less than one percent of the total UK breeding herd 26 and with the average pig herd currently comprising only 20 pigs, 27 Welsh pig holdings are significantly smaller to counterparts in England and Scotland. CONSUMPTION AND SUPPLY CHAIN Lamb, beef and pork consumption levels across the UK remain stable, with per capita consumption in 2013 for sheepmeat, beef and veal, and pigmeat standing at 4.6kg, 17.4kg and 24.0kg respectively, per person per year (carcase weight equivalent). 28 Whilst levels of UK consumption have been relatively stable (with a slight overall decline), the volume of home produced beef has also been relatively stable (with a slight overall increase). Volumes of imported beef reaching the UK market and available at retail have also been relatively stable, with a slight increase over time, driven by an increase in Irish beef production. As such, the levels of supply/demand for beef have been out of kilter for some time, a situation which has become very unfavourable for beef producers during the early part of 2014. Whilst beef prices recovered in late 2014/ early 2015, the overall downward trend in beef production in Wales remains a cause for concern. 22 SAC Consulting. 2014. A Review of the Beef Sector in Wales. 23 LFA: Less Favoured Area. 24 Source: Welsh Government. Forecast of Farm Incomes in Wales 2013/14. 25 Source: Welsh Government. Forecast of Farm Incomes in Wales 2013/14. 26 Source: DEFRA. Farming Statistics Final Crop Areas, livestock Populations and Agricultural Workforce at 1 June 13 UK. 27 Source: Welsh Government. 28 November 2013. Survey of Agriculture and Horticulture. 28 Source: HCC. The Little Book of Meat Facts: Compendium of Welsh Meat and Livestock Industry Statistics 2014. 10
The Welsh livestock auction market sector is also facing a number of challenges, including maintaining future supply of livestock and coping with regulatory burdens. During 2013, 28 livestock auction markets in Wales marketed over 1.3 million prime sheep and 11,000 prime cattle. Very few pigs were marketed through Welsh livestock auction markets. 29 In 2013, multiple retailers sold approximately 84 percent, 90 percent and 89 percent of all lamb, beef and pork sales respectively in Wales and the West of England region. At the same time, the volume of sales through butchers in Wales and West of England accounted for 10 percent, 7 percent and 7 percent of all lamb, beef and pork sales respectively. 30 ABATTOIRS AND SLAUGHTERINGS The abattoir and processing sector in Wales has experienced some uncertainty over the past few years in terms of ownership, however the structure of the sector has remained relatively stable overall. However, the underlying problem of fluctuating and at times low profitability remains and this adds to the growing pressure to consolidate and centralise processing facilities outside of Wales. In 2013, there were 24 operational red meat abattoirs in Wales, of which four were responsible for approximately 89 percent of the Welsh sheepmeat throughput and four were responsible for approximately 92 percent of the Welsh cattle throughput. Nine abattoirs accounted for approximately 94 percent of the Welsh pig throughput. 31 In 2013, 62,100 tonnes of sheepmeat, 40,600 tonnes of beef and 2,400 tonnes of pigmeat was produced in Welsh abattoirs. 32 29 Source: HCC, September 2014. 30 Source: HCC (using Kantar Worldpanel data), September 2014. 31 Source: HCC, September 2014. 32 Source: HCC, September 2014. 11
4. CHALLENGES AND OPPORTUNITIES 2015-2020 There are a number of political, economic, social, technological and environmental challenges that face the red meat industry in Wales, some of which will have a substantial impact on the future resilience, performance and profitability of the sector. Responding to political and environmental change, adapting to changing market conditions, embracing innovation and adopting technical best practice; and improving overall business management, continue to pose a significant challenge to the red meat industry in Wales. At the core, profitability remains the biggest challenge and there is a need to improve the overall confidence in the industry and to encourage and facilitate change. However there are also a number of opportunities that are available and these opportunities must be seized if the Welsh red meat sector is to overcome the challenges in a timely manner to create a resilient, sustainable and profitable industry. Working together right across the supply chain and alignment with the Welsh Governments knowledge transfer and advisory services to promote the best and innovative practices available to drive the red meat industry forward will be integral to success and whilst some of the challenges are out of their direct control, there are many ways in which red meat producers can directly influence the productivity and performance of their businesses. Welsh red meat producers must maximise the use of Wales natural resources, take advantage of the image of the PGI Welsh brand (as a premium fresh red meat product backed up by provenance and taste) and utilise their expertise to produce red meat products that consistently meet/ exceed market requirements. The key challenges and opportunities that currently face the Welsh red meat industry are outlined in the following tables. 12
Challenges Dependence on the Common Agricultural Policy (CAP) and associated payments impacts on businesses ability to attain profitable red meat production from market prices POLITICAL CONTEXT UK relationship with the European Union (EU) and the possible impact on the UK food and farming sector of a future Yes vote to leave the EU, including the potential loss of CAP and Rural Development Programme (RDP) support and likely imposition of tariffs on UK goods Increasing burdens of Government and EU regulation increase costs of production Political complexities created by independent countries operating within one EU member state impact on cross border trade Opportunities Reduction in CAP subsidies and the realignment of Pillar 2 support has triggered change and focused industry attention on alternative ways to achieve profitability Knowledge transfer and advisory services will be instrumental in moving focus away from the reliance on CAP subsidies Food and farming sector can contribute to the debate on EU activities to help ensure the industry and the general public are aware of the financial consequences of leaving the EU Utilization of the strong collaborative working relationship between Government, political representatives and industry bodies to influence regulatory development and minimise burdensome or unnecessary requirements On-going interaction with the Welsh Government s Working Smarter Review, which is striving to reduce bureaucracy for farmers in Wales Uncertainty about levels of future Government spending and/ funding for the Welsh red meat sector Increased access to digital communications, electronic management tools and central databases could help to ease reporting and administration Commitment of the Welsh Government to facilitate sustainable growth within the Welsh agricultural sector and for transformational growth via the RDP 2014-2020 should place the industry on a good footing from 2020 onwards 13
Challenges Demographics in terms of household size and demand drivers such as food preparation time are altering the demand for red meat products (from joints to smaller cuts and convenience meals). This in turn alters market specifications and increases processing costs Price remains an important driver (further exasperated by the recent recession) influencing meat purchases due to tightening of household budgets impacts on red meat sales in UK retail and how red meat (especially lamb) is sold (i.e. on promotion) The horsemeat incident and various health concerns have damaged customer perceptions of the quality and traceability of red meat and undermined consumer confidence in meat products Mis-labelling of red meat could undermine the credibility of PGI Welsh Lamb and PGI Welsh Beef Anti red meat lobby activities at Wales, UK, EU and global scale influence consumer opinions and demand for red meat MARKET CONTEXT Associations between red meat consumption and health provide an on-going challenge The current consumer age profile (aged 45+) for red meat in GB 33 and for PGI Welsh Lamb in particular is not likely to be able to sustain long term demand Opportunities Development of new and innovative Welsh red meat products will allow the industry to meet consumer demands whilst helping to improve efficiency by addressing carcase balance issues Increased overseas demand offers the opportunity to exploit new markets for products whilst continuing to drive production that can meet existing market requirements The horsemeat crisis and other health concerns have revived interest in provenance and integrity. The PGI designations allow the Welsh red meat industry to demonstrate its traceability and highlight its high environmental, animal welfare and food safety credentials; thereby retaining consumer conference Information and traceability of livestock born and reared in Wales available via EIDCymru could further enhance PGI Welsh Lamb Digital and social media platforms, alongside traditional media campaigns, provide opportunities to educate consumers and redress balance of opinion in a timely manner More widespread use of digital and social media, alongside traditional media campaigns, can support the development of innovative ways to influence consumer behaviour and to attract a new, younger demographic for PGI Welsh Lamb in particular 33 Source: Kantar Worldpanel Online. GB Total Meat Demographics. 12 October 2014. 14
Challenges Reliance on export markets (outside GB) means that the industry is vulnerable to exchange rates fluctuations/ economic downturns and export market access restrictions Increased Free Trade Agreements (FTAs) open markets for Welsh red meat but also open those markets to our competitors and present an increased threat from imports MARKET CONTEXT (continued) Opportunities Worldwide food security concerns could create market opportunities for Welsh red meat and drive production Population growth (both within Wales/ UK and worldwide) and globalisation offers the ability to spread the market risk by developing new export markets with a variety of currencies Increased FTAs and removal of artificial market access barriers will allow the Welsh red meat industry to gain access to higher value markets (e.g. the USA, China and Japan) Reliance on multiple retailers in the UK market results in the industry being vulnerable to purchasing policies of a few large companies (which are increasingly being consolidated) Welsh red meat is facing increasing competition within the UK and global red meat industries and from other protein sources and other protected food name products, so Welsh red meat will not be able to rely on provenance (or PGI) alone to sustain market advantage Technologies to quantify and qualify traits such as taste and tenderness could offer unique selling points for PGI Welsh Lamb and PGI Welsh Beef above the competition Continued globalisation of trade will support market opportunities for Welsh red meat in certain territories as well as in new and emerging markets worldwide Genetic improvement and new product innovation can create a valuable and truly differential advantage based on quantifiable traits such as eating quality Utilisation of the whole carcase can maximise opportunities at retail and help to ensure maximum return per animal Improved consistency of Welsh red meat products, in terms of availability, size, grades, taste and tenderness can create a differential advantage and maximise opportunities at retail 15
ECONOMIC (PRODUCTION / PROCESSING) CONTEXT Challenges Lack of abattoir and processing capacity in Wales, particularly for beef, alongside spatial planning and travel logistics in Wales impact upon abattoir and processor decisions on location and product sourcing - Welsh abattoirs/ processors are vulnerable to the further consolidation of businesses out of Wales Opportunities Further development of collaborative working within the industry to influence the UK Government to better represent the specific requirements of the Welsh red meat industry, including revisiting levy distribution issues Consequent reductions in Welsh Red Meat Levy income will continue to erode resources to support the red meat sector at a time when the market is becoming increasingly competitive and operating at a global level On-going reduction (and possible future removal) of CAP subsidies Reduction in CAP subsidies and the realignment of Pillar 2 support has triggered change and focused industry attention on alternative ways to achieve profitability - the availability of knowledge transfer and advisory services provisions is instrumental to support this change in focus 16
ECONOMIC (PRODUCTION / PROCESSING) CONTEXT (continued) Challenges Risk and impact of disease outbreaks on red meat production and export sales Opportunities Animal health and welfare are increasingly important consumer drivers that can be used to encourage competitiveness of Welsh red meat products The Welsh brand (and PGI) offers some distance from association with UK wide livestock health scares (historical or otherwise) and can be used to help open these markets, many of which are potentially high value Improved accuracy of information and traceability of livestock via EIDCymru, ARAMS and ScotEID will support animal health initiatives to reduce the impact of disease outbreaks Improvements in the protection of livestock through biosecurity, sourcing livestock from healthy herds and flocks, animal health plans and contingency plans can reduce disruption to businesses Ongoing interaction with government contingency planning will assist in minimising the adverse impacts on the rural and wider economy in the event of an exotic disease outbreak This will also serve to increase the industry s awareness of the organisation and systems established to respond to an exotic animal disease outbreak and how these may assist 17
ECONOMIC (PRODUCTION / PROCESSING) CONTEXT (continued) Challenges Rising costs (feed, forage, energy, water, fuel and waste disposal) make it difficult to achieve and maintain profitable production and processing businesses Opportunities Food and fuel security issues (worldwide supply and demand) will drive measures to encourage cost saving and conservation techniques Availability of extensive grass-based systems and the favourable climate for grass growing offers the opportunity to reduce costs by optimising grazing and enhancing grassland management Genetic improvement offers the opportunity to increase production and productivity from the same cost base in a manner which is cumulative Automation of abattoir processes could offer improved efficiencies and long term cost savings on processing lines when evaluating carcase yield whilst also improving supply chain transparency Industry continues to be slow to embrace innovation and adopt technical best practice Availability of red meat (particularly lamb) is seasonal and there is a challenge in meeting market demand year-round Ageing workforce impacts on the adoption of new technologies and ways of working and presents issues with succession planning If the red meat sector is not considered an attractive career choice, the skilled professional workforce could be undermined More widespread use of databases and electronic recording could allow the development of feedback systems allowing more informed decision making on farms Industry-focussed research and development (R&D) programmes will yield results that would be well suited to the demonstration of new technologies and knowledge transfer New technologies in animal breeding and husbandry offer opportunities for more efficient livestock production Mechanism to increase shelf life and adapt systems to expand breeding seasons Encouraging more young people to study agriculture related studies and increasing an interest in farming from young people will provide the next generation that can be supported to take the industry forward Working in partnership with training providers to help fulfil the Welsh Government s policy to attract people to the wide variety of careers available in the Welsh red meat sector 18
Challenges Competition for land use for crops, vegetables and environmental diversity Poor profitability on upland farms resulting in destocking change in land management will impact on pasture quality and productivity Maintaining red meat production whilst responding to environmental change Minimising red meat production s contribution to greenhouse gas and methane emissions impacts on the environment and on animal health and welfare ENVIRONMENTAL CONTEXT Opportunities The Welsh landscape is particularly suited to grass growing and offers the ability to sustain red meat production from wellmanaged grass and forage based systems (including production from the uplands) Livestock production can have a positive impact on the environment, if appropriate stocking regimes are in place and improved production efficiency through raised health standards will also contribute positively to the environment agenda Consumers are increasingly aware of how food is produced and are demanding food that is natural and which has been produced in an environmentally and ethically sensitive way. Environmental credentials and strong animal health and welfare policies can support the value perception and marketing of red meat from Wales Availability of natural resources (water, carbon, rich soils and productive grassland) and the positive impact of extensive livestock production systems on maintaining carbon storage in soils and grasslands and its role in the conservation of biodiversity must be used to reinforce the benefits of livestock and enable Welsh red meat producers to capitalise on their environmental credentials and maximise resource efficiency Experiences and ideas from other red meat producing countries around the world can be applied and utilised in Wales, to ensure a sustainable use of Wales natural resources 19
5. STRATEGIC PRIORITIES, OBJECTIVES AND KEY PERFORMANCE INDICATORS 2015-2020 The strategic vision for the red meat industry in Wales is largely unchanged. We strive to maintain a profitable, efficient, sustainable and innovative industry which benefits the people of Wales; a red meat industry which is resilient to political and environmental change and capable of responding competitively to ever changing market trends. In order to achieve this, the Welsh red meat industry must build upon the solid foundations that have been established to date and create a culture of innovation and market focus that will enable the industry to grow and develop in an increasingly competitive global marketplace. The two strategic priorities for the Welsh red meat industry are therefore: To increase demand for Welsh red meat products (thereby increasing sales and returns). To improve production efficiency (thereby increasing quality supply) whilst maintaining the environment and landscape of Wales. Progress towards these two strategic priorities will bring about a positive impact on the employment and the growth of the rural economy in Wales which will also reduce poverty in Welsh rural societies. This Strategic Action Plan is focussed on delivery and recognises the importance of measuring the impact of investments. It is proposed that two key objectives are sought to achieve the two strategic priorities identified, as shown in Figure 1. Figure 1: Strategic Priorities and Objectives Strategic Priorities Increase demand for Welsh red meat products (thereby increasing sales and returns) Improve production efficiency (thereby increasing quality supply) whilst maintaining the environment and landscape of Wales Strategic Objectives Increase sales revenue from Welsh red meat Increase the contribution of the Welsh red meat sector to Welsh Agricultural Output This Strategic Action Plan identifies a number of key performance indicators for the Welsh red meat industry which seek to address the challenges and maximise the opportunities faced by the industry. In doing so, it takes into account the Programme for Government which seeks to deliver improvements towards a thriving rural economy and the recommendations from the 2014 review into the resilience of farming in Wales. It reflects the contribution that the red meat sector in Wales will make towards fulfilling the Action Plan for the Food and Drink Industry in Wales and supports the vision of the Wales Agricultural Development Programme. 20
The turnover of the Welsh food and farming sector was 5.7 billion in 2013. 34 The Welsh Government has therefore targeted a growth in sales in the food and drink sector as a key objective of the Action Plan for the Food and Drink Industry in Wales 2014-2020. 35 The target for the Welsh food and drink industry is to increase sales by 30 percent by 2020 to 7 billion and the Welsh red meat industry has a key contribution to make towards achieving this target. The aspirations of the Wales Agricultural Development Programme are to increase the market share for Welsh agricultural produce in a global market by increasing the gross output of agriculture by 2020, by 25 percent to 1.75 billion. 36 As Welsh red meat production contributed 43 percent of the annual total value of Welsh Agricultural Output (worth 594 million) in 2012, 37 there is clearly a key role for the Welsh red meat industry in achieving the Wales Agricultural Development Programme target. 34 Source: Welsh Government. Priority Sector Statistics - Turnover of Enterprises Active in Wales by Priority Sector and Sizeband ( m). September 2014. 35 Welsh Government. Towards Sustainable Growth: An Action Plan for the Food and Drinks Industry 2014-2020. 36 Welsh Government. Wales Agricultural Development Programme - Draft. 37 Source: Welsh Government. 24 June 2014. Aggregate Agricultural Output and Income, 2013 Revised. 21
Strategic Objective 1: Increase sales revenue from Welsh red meat This objective seeks to address the strategic priority of increasing demand for Welsh red meat products (thereby increasing sales and returns). By 2020 the Welsh red meat industry should seek to positively impact on sales revenue from Welsh red meat by at least 34 percent, to 776 million. The ability to increase sale volume is dependent upon supply. To achieve this sales revenue target by 2020, a combination of interventions are required that are heavily reliant upon enhancing and communicating the competitive position of the brands, pursuing high value export markets and on new product development activity. The Welsh red meat industry should strive to achieve the objective (of increased sales revenue from Welsh red meat) through a number of key performance indicators. Three key performance indicators have been considered in this Strategic Action Plan, as shown in Figure 2. Figure 2: Measuring performance Increase sales revenue from Welsh red meat Strategic Objective: Increase sales revenue from Welsh red meat 1: Increase UK retail sales value of Welsh red meat 2: Increase UK foodservice sales value of Welsh red meat 3: Increase export sales value of Welsh red meat The ability to market Welsh red meat is heavily dependent on a limited (and in the case of beef, declining) supply. Hence product differentiation is an increasingly important mechanism to increase sales revenue. Through differentiation, the Welsh red meat industry has the opportunity to increase market share and the PGI brands for Welsh Lamb and Welsh Beef provide a mechanism for achieving this. PGI provides a point of difference in terms of provenance, traceability, authenticity and quality. There is also a need for the industry to supply products which meet other more detailed consumer demands (such as local, niche, organic or breed specific) and these requirements can work alongside the overarching mark of PGI. These objectives are therefore targeted at the higher industry level of PGI as a base, and any further differentiations could be made by individual businesses as required. 22
1: Increase UK retail sales value of Welsh red meat Welsh red meat is sold in most GB retailers, with branded Welsh Lamb in particular commanding a price premium. However, opportunities exist to increase the sales revenue derived from the UK retail sector through: - Increasing the shelf space of branded Welsh red meat; - Further enhancing and communicating the competitive position of the Welsh Lamb and Welsh Beef brands; - Increasing household penetration and purchase frequency of Welsh red meat (when not on promotion); and - Developing new products that can meet consumer demands for quick and versatile meal solutions. Approximately 353 million of Welsh red meat sales value is derived from the UK retail sector annually (2014). This value has increased by 31.7 percent between 2009 and 2014 (an increase of approximately 6.4 percent per annum). 38 An ambitious, yet realistic target by 2020 would therefore be a further increase of approximately 3.2 percent per annum equating to an overall increase in Welsh red meat sales value derived from the UK retail sector of 18.9 percent by 2020. It is proposed that the annual UK retail sales value of Welsh red meat increases by 19 percent by 2020, to 420 million. 39 2: Increase UK foodservice sales value of Welsh red meat Welsh red meat is sold in all sectors of the UK foodservice industry from public sector catering to high end hotels, restaurants and caterers. However, opportunities exist to increase the sales revenue derived from the UK foodservice industry through: - Increasing the proportion of Welsh origin red meat sold in Welsh public sector organisations; - Working with the trade to increase the rate of sale and identify new business opportunities; and - Developing new products that are versatile and can meet consumer demands. Approximately 36 million of Welsh red meat sales value is derived from the UK foodservice sector annually (2014). This value has increased by 19.7 percent between 2009 and 2014 (an increase of approximately 3.9 percent per annum). 40 An ambitious, yet realistic target by 2020 would therefore be a further increase of approximately 2.8 percent per annum equating to an overall increase in Welsh red meat sales value derived from the UK foodservice sector of 16.9 percent by 2020. It is proposed that the annual UK foodservice sales value of Welsh red meat increases by 17 percent by 2020, to 42 million. 41 38 Source: HCC, December 2014. 39 Calculated by HCC. 40 Source: HCC, December 2014. 41 Calculated by HCC. 23
3: Increase export sales value of Welsh red meat Developing export markets is of vital importance to the Welsh red meat industry in order to maximise returns and has a key role to play in increasing sales revenue from Welsh red meat. In 2013 the combined total value of both sheepmeat and beef exports from Wales was worth approximately 189.3 million. The export of sheep skins, cattle hides and offal from Wales was worth approximately 33.6 million bringing the total value of red meat exports from Wales to approximately 223 million. However, an opportunity exists to increase the export sales value of Welsh red meat through: - Accessing and developing higher value export markets; - Enhance the competitive position of the Welsh red meat brands and consumer campaigns in established export markets; and - New product development. Approximately 223 million of Welsh red meat sales value is derived from export markets annually (2013). This value has increased by 59.3 percent between 2009 and 2013 (an increase of approximately 14.8 percent per annum). 42 An ambitious, yet realistic target by 2020 would therefore be a further increase of approximately 5.8 percent per annum equating to an overall increase in Welsh red meat sales value derived from export markets of 40.8 percent by 2020. It is proposed that the export sales value of Welsh red meat increases by 41 percent by 2020, to 314 million. 43 42 Source: HCC, December 2014. 43 Calculated by HCC. 24
Strategic Objective 2: Increase the contribution of the Welsh red meat sector to Welsh Agricultural Output This objective seeks to address the strategic priority of improving production efficiency (thereby increasing quality supply) whilst maintaining the environment and landscape of Wales. By 2020 the Welsh red meat industry should aspire to improve the red meat sectors contribution to Welsh Agricultural Output by at least 5 percent, to 624 million. To achieve this by 2020, a combination of interventions such as undertaking research and development, improved market intelligence, genetic improvement, animal health and husbandry, grassland management, advisory services, knowledge transfer and training should be targeted. The Welsh red meat industry should strive to achieve the objective (of an increased contribution to Welsh Agricultural Output) through a number of key performance indicators. Four key performance indicators have been considered in this Strategic Action Plan, as shown in Figure 3. Figure 3: Measuring performance Increase the contribution of the Welsh red meat sector to Welsh Agricultural Output Strategic Objective: Increase the contribution of the Welsh red meat sector to Welsh Agricultural Output 1: Increase the number of carcases meeting standard market requirements 2: Increase the carcase weight of light lambs 3: Increase the national average sheep flock performance 4: Increase the national average cattle herd performance This Action Plan seeks to address the limited (and in the case of beef, declining) livestock supply. Hence maximising returns per animal is essential. 25