RÁÐUNAUTAFUNDUR 2002
The European sheep market – opportunities and threats
D. Croston
Head of Sheep Strategy, Meat and Livestock Commission, PO Box 44,
Winterhill House, Snowdon Drive, Milton Keynes, MK6 1AX
PROSPECTS FOR LAMB IN THE EU
Table 1. The EU lamb market.
MEAT BALANCES *Breeding Ewes1 / Production2 / Imports3 / Exports4 / Consumption5
Austria / 228 / 7 / 2 / .. / 9
Belgium / 83 / 4 / 32 / 18 / 22
Denmark / 80 / 2 / 6 / 1 / 6
EU-15 (e) / 68,379 / 1,142
Finland / 50 / 1 / 1 / .. / 2
France / 7,306 / 138 / 180 / 22 / 303
Germany / 1,590 / 44 / 59 / 8 / 100
Greece / 6,344 / 120 / 26 / .. / 140
Ireland / 4,014 / 77 / 7 / 58 / 28
Italy / 8,179 / 48 / 44 / 3 / 91
Luxembourg / 6 / Joint with Belgium
Netherlands / 1,040 / 25 / 18 / 19 / 27
Portugal / 2,294 / 27 / 10 / 0 / 37
Spain / 18,458 / 257 / 17 / 25 / 240
Sweden / 194 / 4 / 4 / .. / 8
United Kingdom / 18,513 / 388 / 137 / 146 / 391
.. negligible
*Meat balance for each country does not always’s reconcile as figure for different years
1December 2000. Source: SOEC
22000 estimate. Source: SOEC
31999. Source: Eurostat
41999. Source: Eurostat
52000 estimate. Source: SOEC, MLC
Net farm income for sheep and goats in EU which was around 20% less than other types of farming in 1997, varied from country to country and was particularly worse in North European countries. Trading sheep meat within the EU fell from its peak in 1995 to just over 200,000 tonnes in 1998. The main French market has seen significant drops in imports which were exaggerated this year with the suspension of exports from the UK to France as a result of the FMD crisis.
The Important French Market
France is the EU’s largest importer both in terms of live sheep and sheepmeat. About 60% of sheepmeat consumed is now imported. Sheepmeat imports have increased in the last decade (Table 2) whilst live imports have fallen a significant amount (Table 3).
Sheep meat
The French sheep industry has been declining over the last 10 years and sheep meat imports have risen to compensate for the shortfall in domestic supplies.
Table 2. Imports of Sheep meat to France.
1990‘000 tonnes / 1995 / 2000
Sheep meat of which from: / 125 / 174 / 169
EU / 114 / 145 / 137
UK / 55 / 95 / 84
Eire / 51 / 45 / 42
Spain / 1 / 2 / 7
NZ / 8 / 17 / 28
Live sheep
Throughout the last decade, Netherlands has maintained its live exports to France whilst imports from the UK have suffered a sharp downturn in 1997. Spain has steadily increased its live exports to France.
Table 3. Imports of live sheep to France.
1990‘000 head / 1995 / 2000
Live sheep at which from: / 1525 / 921 / 758
EU / 1419 / 921 / 744
Netherlands / 410 / 368 / 407
Spain / 57 / 96 / 140
UK / 472 / 411 / 129
Pressures in the EU to limit long distance transportation of animals on welfare grounds are increasing and this will diminish live import opportunities in the future.
The demand for external supplies from third countries has remained reasonable static over the last 10 years but the distribution with the community has changed, as has the product type. Chilled lamb notably from New Zealand has increased 4-fold in the last 10 years and this is creating serious competition for EU produced lamb, particularly in the French and UK markets. The full list of concessionary input quotas into the EU is given in Table 4.
Table 4: EU concessionary import quotas 2001.
Fresh, chilled or frozenTonnes, cwe / Live sheep / Live animals and/or meat
New Zealand / 226,700 / - / -
Australia / 18,650 / - / -
Argentina / 23,000 / - / -
Uruguay / 5,800 / - / -
Bulgaria / - / - / 7,000
Hungary / - / 14,125
Poland / - / - / 9,200
Chile / 3,000 / - / -
Iceland / 1,350 / - / -
Romania / - / - / 7,350
Czech Republic / - / - / 2,150
Slovakia / - / - / 4,300
Others (non-specific) / 647.5 / 105 (a)
(a)tonnes liveweight. Duty rate 10%
Source: EU Commission
CONSUMER ATTITUDES TO MEAT
There are several factors influencing meat consumption, these are summarised in Figure 1. Some of them are more important than others but all impact on consumers purchasing decision.
Figure 1.
If we take working women as an example, over 26 million women work in Great Britain representing 46.1% of the workforce. Nearly half of these are working part-time; this has an important impact on the ability of the homemaker to prepare extensive and complicated meals for the rest of the family. Meat has to compete in this type of environment. Family structures are changing with a steady growth of single households and the decline of the larger family groups. This has an important impact on the eating habits of the family with a greater emphasis on staggered eating times, TV meals and smaller portion size and inevitably much less social interaction around the dining table. Meal occasions are becoming much more informal as peoples lifestyles change, modern society is now becoming more of an eat and go mentality and snacking is on the increase. This information is gleaned from various consumer reports and studies in the UK but we know from our close contact with similar organisations in Europe that these trends are pan-European and not just confined to the United Kingdom.
The role of retailers is becoming more and more important as they have shown considerable growth over the last 10 years at the expense of the smaller independent operators. Competition between the retailers within European countries and across Europe is increasing at a dramatic pace. In the UK we have recently seen the arrival of Wal-Mart from America bringing a new approach of everyday low prices rather than the promotional activity which is so common with many European retailers. The way in which we get our products, in particular, meat to consumers is now becoming an important feature of modern retailing with pricing and promotion becoming key elements of competition between retailers. The European supply chain model is becoming more and more streamlined with bigger retailers competing firstly with each other, the number of European processors declining, getting bigger and becoming more dedicated to their retail customers and of necessity the alignment of producers groups/marketing groups with these large dedicated processors. Producers at the start of the production chain are becoming faced with income pressures on their financial margins as support from the European Union decreases and the element, which can be squeezed from the marketplace, is under increased competition from other commodities.
Livestock production systems are a small part of the network of global factors influencing meat consumption. However, the way in which we produce our meat creates issues in consumers minds relating to the way we keep and manage our animals (welfare issues), the feeding practices we adopt (health issues) and the guarantees we can provide on the way we do things (assurance). The importance of these factors varies from species to species.
Above all it is the consumer environment (household size, working women etc.) and the retailing competition which drives the need for value for money and convenience and this naturally impacts on price. It is also true that as disposal income increases the percentage spent on food decreases and consumers spend much more on leisure. Price moves down the list of absolute requirements for food products and some consumers can afford the luxury of transferring their interest away from price and value for money to the way in which their food is produced. In the UK for example disposable income rose at the rate of 13% per annum between 1989 and 1999 whilst food’s share of this has fallen from 19% to 17% in the same period
MEASURING CONSUMER ATTITUDES
Consumer attitudes to a wide range of issues are measured in three distinct ways:- Qualitative analysis, quantitative analysis and actual sales data post-purchase.
Qualitative analysis is a technique which involves speaking directly to consumers to gain quality information of their thoughts and attitudes. This is normally done through either one to one or focus group interviews and has been used to good effect by MLC in developing its marketing and promotional activity in recent years.
Quantitative analysis is a technique involving more direct gathering of data on consumer purchases and often involves asking specific questions to ascertain consumer attitudes through omnibus type surveys, which are repeated over time to give reliable measures. Actual consumer purchases are measure through sales data and there are a number of commercial companies providing services which measure purchases either by households or individuals such as Taylor Nelson Sofres.
In either the qualitative or quantitative approach it is important to differentiate between spontaneous and prompted answers to questions. In a major telephone survey across 14 EU countries in 1999 no issues raised by consumers to the question “Are there any issues about meat that concern you nowadays?” other than BSE in cattle raised more than an 11% response. However when prompted with specific questions 89% responded positively to the statement “ I worry about chemicals and residues in meat”, 85% responded positively to the statement “I worry about hormones in meat” and 77% % responded positively to the statement “ I worry about the welfare of animals used for meat production “. It is important to distinguish between rhetoric and action. For many consumers they remain at the rhetoric level Paradoxically, MLC research established that many consumers who so readily expressed negative views about the visual images of FMD and mass slaughter in the UK declared that they were buying meat as usual.
Once a issue has been identified as a consumer concern and affecting consumer purchases generally two things have to happen; either industry practices are altered to match consumer expectations or a revised communication is made to consumers to increase their awareness of the facts.
CONSUMPTION
The EU consumption is concentrated in four main countries, UK, France, Spain and Greece, where per capita consumption is also the highest (5kg and over). There is no sign that any of these major consuming markets are in decline although the recent FMD crisis in Europe has produced extremely high retail prices in France which could serious damage consumption volumes in the future.
Compared to beef, the image of sheep meat within European consumers minds has held up well over the last 25 years. The recent EU concerns about TSEs have created some questions in consumers minds which may yet have a negative impact. Overall sheep meat has a small share of the EU meat market which is dominated by pig meat. In terms of price, over the last 25 years retail prices for all meats have consistently fallen and sheep meat has held up well with other meats in this highly competitive market. Consumer loyalty to lamb is basically strong but the proportion of lamb consumers is lower in younger age groups and that it a concern for the future.
Overall the medium term outlook for the EU sheep meat market is relatively stable with both production and consumption edging down slowly we cannot afford to be complacent. In the UK over 70% of lamb is eaten by consumers age 45 and older and over 50% of lamb is sold in the form of roasting joints.
OPTIONS FOR SURVIVAL
In order to maximise the returns from the marketplace there are a number of options. First and foremost sheep production needs to be as efficient as technically possible in order to be competitive with other livestock and forage systems on farms.
The most favoured route for maintaining growing market share, or even defending a declining market share is the use of promotional marketing linked to product development. This is route favoured in Great Britain where the Meat and Livestock Commission (Appendix 1) uses a combination of media advertising (TV and radio) and trade marketing activity to attract young consumers to British lamb. A number of initiatives are also funded to encourage manufacturers to develop new lamb products and meal solutions in order to compete in the rapidly changing consumer environment. None of the work undertaken by MLC is done on the basis of assumptions - all its marketing and promotion campaign are based on in depth consumer analysis.
Consumers are asking three fundamental questions about any product particularly about meat and lamb. The first is whether lamb is relevant to the consumer, the consumers family or their lifestyles. If lamb can meet this emotional need of the consumer they then need to be reassured that it is good for them and is safe. And finally, having satisfied the consumer on this rational basis, is it in the butcher’s shop or the supermarket in a form which is convenient to the modern consumers lifestyle? We therefore need to address consumers questions in three ways; at the emotional level, at the rational level and at the convenience level.
In Great Britain the emotional advertising campaign under the title “The Recipe For Love” started in 1994 against a background of consumer concern about the relevance of meat. From that point in time with regular promotional activity in parallel with similar activity for beef and pork on the British market we were able to demonstrate a turn round in consumer attitudes and record more positive reactions to our products.
Fig 2. Red meat image improving over time
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Towards the end of 1995 a second campaign based on rational messages was launched which featured meat in contrast with other foods challenging consumers to think about the amount of fat in lean meat and the amount of iron in meat. This rational campaign built on the early successes of the emotional campaigns; the main execution differences were that this featured adverts in daily newspapers and did not feature television.
The message of convenience and relevance to modern styles was tackled in 2000 when a new campaign was built around a particularly British comedy character called Tim Nice But Dim who was featured in a number of TV commercial. There demonstrated the ease and versatility of meat, and was particularly relevant to lamb. In the Autumn of 2000 a major integrated campaign was launched which involved the use of TV, MLC’s meatmatters website, PR activity with food writers and food chefs, the production of a recipe booklet linked to the TV adverts and a wide range of activity in retailers and independent butchers in support of the meal ideas and images shown on television. The whole focus of this campaign was to attract younger consumers to lamb and early results suggest that we were successful with volume sales of frying and grilling lamb (the target) increasing by 10.6% as a result. Sadly the foot and mouth crisis at the beginning of 2001 severely damaged the supplies of British lamb onto the retail market. Nevertheless a second campaign in September 2001 used the same character and approach but also incorporating a number of additional TV adverts which reinforced the importance of meat and the countryside.
There is and needs to be a regular flow of new product ideas onto the market every year if eat food and particularly meat is constantly refreshed and put in front of an ever demanding public. The Meat and Livestock Commission does not own factories or handle meat products but through its sponsorship and development programmes it is able to encourage manufacturers within the British industry to develop new recipe and dish ideas. Each year a meat award competition is held which attracts large numbers of products from across the industry from all three species. In 1994 the number entering the competition was below 40, whereas this year we finished with 190 new products coming forward for the judging in June. Product development and innovation is particularly difficult for lamb because of all the red meats it is particularly expensive and is unable to compete in mainstream process products with imports from third countries.
Summary
In the next 10 years the European sheep sector will face severe challenges. Increased world trade will open the European market to direct competition form around the world. At the same time these competitive forces will drive the production of many competing animal products to those areas of the world which can produce at least cost. Europe itself is undergoing political change which will provide both opportunities and threats.
To survive the European lamb industries must ensure they can produce lamb efficiently to compete with other food products. Marketing and promotion linked to new product development are key if consumers interest in lamb is to be maintained at current levels.
Appendix 1
The Meat and Livestock Commission is a non-Governmental body in GB responsible for promoting the efficiency of the red meat industry taking into account the interests of consumers. It is funded by a levy collected on slaughter cattle, pigs and sheep with a total budget of £54million in 2000. A significant part of its income is devoted to promotion and marketing activities to British consumers to the benefit of each of the species it serves. In delivering this function, analysis of consumer attitudes to meat and red meat in particular is central, not only with GB consumers but also with European consumers.