Teys’ vision for beef value

Teys’ vision for beef value


Commercial
The chiller room at Teys' Wagga Wagga plant.

The chiller room at Teys' Wagga Wagga plant.

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Value based marketing the pathway to a sustainable future, says Teys

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IRONING out the extreme highs and lows that have long played havoc with the ability of all along the red meat supply chain to stay profitable is the main driver of a new direction for big beef business Teys Australia.

The 70-year-old operation, which operates six beef processing plants and three cattle feedlots across Australia’s eastern seaboard, is leading the charge down the road of value based marketing.  

General manager corporate services Tom Maguire says every dollar made along the beef supply chain comes from the people consuming meat.

“Our collective job is to give them exactly what they want, every time,” he said.

“It’s as simple as that.”

Teys Australia's Tom Maguire speaking at the Angus National Conference in Ballarat last week.

Teys Australia's Tom Maguire speaking at the Angus National Conference in Ballarat last week.

Teys’ value based marketing (VBM) vision was about being able to communicate to the people who grow the animals what the value is to the people Teys sells to.

Mr Maguire gave an inspiring presentation at this year’s Angus National Conference which very much put in perspective just how important it is for Australian beef to meet consumer demand.

High cattle prices, he said, should be celebrated.

In order to continue to command those high prices, however, the industry would have to evolve.

It was no secret how expensive it was to process cattle in Australia, Mr Maguire said.

He cited energy costs as just one example, saying if Teys does nothing over the next 12 months to offset this issue, it expects a whopping $10 million - or $8 a head - to be added to its power bills.

Australia’s processing costs were around $300 a head. By contrast, in China it was $120/head.

Not only are other countries able to put beef onto the global market at lower prices, other sources of proteins are becoming a strong competitor.

“Beef today has the distinction of being four times the price of chicken,” Mr Maguire said.

“So our retailers are shrinking the amount of beef they offer in favour of chicken.”

What all that means is Australian beef belongs in higher value markets, Mr Maguire argued.

“And that has different characteristics,” he said.

“Beef becomes more of special occasion item and those type of items have to perform very well.”

Teys is a purpose-driven business, Mr Maguire told delegates.

It merged with Cargill five years ago but was still very much run by the Teys family.

The current cattle supply situation had been tough.

“Meat plants are the worst asset anyone can own if you can’t get stock in them,” he said.

“This year, we will process about 1.2m head, down from  the 1.5m we normally do. We’ve had to cut shifts back 20pc and we currently have 500 employees less than we were at five years ago.”

That story was uniform across the country.

And it was the reason beef needed to be right out of the commodity space.

“More and more money is being invested in this industry by people who want stable returns - they don’t want to ride the roller coaster with us,” Mr Maguire said.

“These VBM initiatives are about flattening that curve so we can all get a decent return over time.”

Figuring out the quality and yield of a carcase and multiplying it together provided the value.

That is VBM in a nutshell, Mr Maguire said.

From a processor’s perspective, technology was the start of the story but more important was the need to communicate and build trust about how things were going to change, he said.

“We can put a DEXA machine in and at the end of the day it’s just a white box, without confidence in the outcome,” he said.

“The only reason we want to provide this feedback is so producers can make good decisions about what to do next time.”

He was adamant changing the way producers are paid was not the purpose, and in fact would be years off. Giving the right information to make changes was the driver.

By way of explanation, Mr Maguire said: “Mobs will come into our business from the same source, all handled and fed the same way, and the assumption is they perform the same.

“That’s actually never true.

“Currently we pay on an average. We don’t help the producer sort out what is good or bad.

“Averaging masks individual value and removes incentive for improvement.

“The trick of VBM is to sort that out and tell the producer the truth of the value on an individual basis.”

Genetics at the moment were not adequately linked to the consumer, Mr Maguire said.

Target carcase weights were an example - they are heavier than what the customer wants.

“They might have been ok in 2008  when we were selling heavier beef into Japan,” he said.

“What has happened since then is the price of beef has risen. Consumers are trading down.

“This is not to say things are terribly wrong but we have to get our genetics linked up to what the customer wants.”

The pathway, according to Teys, goes like this: Accurate feedback to relay value; value based payment to stimulate action; a high value animal costs the same to breed, feed and process but it produces additional revenue, which is shared by all along the supply chain.

“This is the path we are committed to. It is the only way for us to be in business in another 70 years,” Mr Maguire said.

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