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Introduction
In my role as Farm Operations Director, I have often thought how we might better operate
with our suppliers and customers in the primary production sector. My realisation that the
success enjoyed in the ‘cheese’ part of the business in these supplier / customer relationships
could be at least equalled by the pigs and farms stimulated a successful application for a
Nuffield Food Chain Scholarship. Sponsorship from the Royal Agricultural Society of England
and the Royal Smithfield Club and leave of absence from Alvis Bros allowed an in-depth
investigation of these relationships in three quite different countries.
As with many other parts of British Agriculture, the pig industry has suffered unprecedented
downward price pressure since 1998. Pressure has come from an increasingly global
competitive environment, EU and UK Governments, pressure groups, retailers, a more
discriminating consumer and a greater choice of substitute foods. As a consequence, radical
change within the pig meat supply chain has taken place over the last couple of years
(Knowles, 2004). Change has been largely reactive following price pressure and a contracting
market rather than proactive in an attempt to influence and grow the market. However, a
number of basic options have been identified to create opportunity within this crisis situation
affecting the farming and food industry, in effect distilling down to two main thrusts:
• develop niche markets / discrete supply chains supplying direct to the consumer or
retailer thus creating a position of power that attracts a premium price - product
differentiation; and
• reduce cost and compete effectively in the global commodity market – overall cost
leadership.
Each option requires a different strategy; however the one important aspect inextricably
woven into each is that of the supply chain and the networks that surround it. It is these
networks that, through identifying, analysing and refining, are likely to give the whole food
1
Nicholas Green is Farm Operations Director for Alvis Brothers Ltd., a food and farming business near Bristol. He is
responsible for the dairy, pigs, beef, arable and contracting operations. He is Chairman of the Institute of Agricultural
Management and a producer group member of the National Pig Association.
chain the greatest opportunity for improving competitive advantage in the short, medium and
long term.
Background
There are two distinct camps within the British pig industry; those that believe the future will
only strengthen with outside influence i.e. currency exchange rates; and those that believe a
collaborative effort between producers, processors and pig meat users will strengthen the
supply chain and provide better returns for those involved. However, in reality there is a
bigger threat than either of these factors currently ravaging the British pig industry – Post
Weaning Multisystemic Wasting Syndrome (PMWS) / Porcine Dermatitis and Nephropathy
Syndrome (PDNS) both categorised generically as wasting disease. This can account for up
to 20% mortality throughout the pig growth cycle. Little is known about the disease, which
severely limits what can be done to combat its effects.
Consumer Trends
There has been considerable change within the environment in which the modern consumer
operates. This is demonstrated by recent work conducted by the MLC (2004) which outlines,
amongst others, the following areas having impact on choice of food purchase:
These factors have an influence on the decision-making process and the attitude of the
retailers in their attempt to satisfy/influence market trends.
Supermarket Influence
From the late 1960’s consumer shopping habits have changed as a small number of large
retailers have offered consistency of product, value for money, national availability, product
innovation and consumer security. By 2000, the top five supermarket chains in the UK
received over 80% of the total value spent on food in the country. Retailers have responded
to the ‘litany’ of customer alerts over the recent past by introducing quality assurance based
standards (indirectly) on primary suppliers, equal to the measures in place at the food
processor and distribution stages. In all schemes, traceability is fundamental to the success of
the process. Whilst not wishing to be absolved of responsibility, the obsession, in many
farmers’ minds, of the supermarket chains to inform the chattering classes of every aspect of
food production is going beyond the realistic expectations of demonstrating due diligence.
Industry Stagnation
Much of UK agriculture is focussed on the production of commodities or raw materials and
many producers have little realisation of the value of ‘niche’ or added value opportunities. This
ignorance by many has led to restricted innovative development within UK agriculture and
allowed those that have realised the potential value to gain competitive advantage. As the
supply of different commodities has become more specialised so the gap between producer
and consumer has increased. This has been recognised by Curry (2002) as long-term
disconnection from the consumer.
Retailer Consumer
Butc
her
Cons
umer
Genetics Abattoir 2nd Stage Processor
The pig supply chain is managed in many different ways ranging from bit part, fragmented
operations loosely linked together through a series of trading strands to fully-integrated, fully-
owned supply chains. Within any of the supplying participants there is a need to innovate with
process (to become more efficient/lower cost producers) and product (to retain/gain
customers) whereas the focus for retailers is innovation in their sales and marketing with
other aspects being of a lower priority. Innovation in the supplying organisations is generally
achieved in incremental steps of development (evolution) rather than major step change
(revolution).
Depending on the perspective of the reader, one can interpret this study as an exercise in
business survival or alternatively take the view that it has the potential to provide opportunity
for the individual business and hopefully the industry on a wider scale to gain competitive
advantage over global rivals.
International Perspectives
In the countries visited, each was attempting to develop its markets in different ways: Japan
by ensuring traceability and total food security; Canada by attempting to develop export
markets and take product out of the country and the United States generically to exploit the
economies of scale by producing more and more. One obvious and interesting exception to
the USA focus was Hawaii, which, as a State, is totally market-focussed and produces
nothing without having a customer secured. Within these varying attitudes, common themes
recur i.e. those of consumer interest, education and pork promotion. Each country views
these activities as paramount in the future development and security of their pork industry.
There are various aspects of the Japanese pig industry that deserve recognition but one main
area that is worth highlighting is traceability and applied logistics.
Retailing
Japanese consumers place great value on freshness when buying food. They demand that
products such as oven fresh bread, morning harvested vegetables, raw tuna sashimi and
sushi are available in perfect condition and that the consumer can be sure of its origins and
logistical integrity.
In designing a supply chain for 24 hour products three factors need careful attention:
• Product perishability;
• Supply uncertainties; and
• Fragmented suppliers.
Whilst none of these factors impact directly on the Japanese pig supply chain to the degree of
some other products, they nevertheless are affected.
Method of Traceability
Major public investment is being directed into developing traceability systems. A Ubiquitous
Identification centre has been established with a remit to spread core technology to
automatically recognise micro-chipped objects and eventually realise a ubiquitous computing
environment. It is intended that its use will be for all sectors and will help avoid the fallout from
such problems as FMD, SVD and BSE by providing proactive visual security to the consumer.
None of the proposed traceability schemes are paper-based. They are all technology driven
with instant information input and access. The systems being developed are all based on the
use of internet-compatible mobile phones with keypad information input ‘in the field’ by the
farmer and infra-red scanning of a read only microchip by the consumer. Much of the
research in this field is based on the experience gained in other industries, the three main
ones being construction, clothing and sushi.
Price comparison with the UK is very interesting with Hawaiian ‘variety meats’ (offal)
commanding a premium over legs and loins. (Table 1)
There are two other secondary markets in addition to that supplied by the co-operative,
namely farm gate sales and off site direct to the user.
Table 1. A comparison of prices of pig products in Hawaii and the United Kingdom
Hawaii UK
Item
ppkg ppkg
Loins 3.30 3.64
Legs / Shoulders 2.70 4.36
Feet 2.20 foc
Belly 3.96 1.88
Ribs 3.65 1.88
Offal 4.40 1.15*
Head (£ per head) 9.33 0.50 - 1.00
Blood (£ per gallon) 7.33 Pay to dispose
Source: Author’s own market research
*UK offal restricted to heart, liver and kidney.
However, by far and away the most effort is directed at educating the consumer of tomorrow –
the children of today. The main routes are via advertising, media and community activity and
linking industry education with curriculum activity. As an example, the Albertan Pig Rig is a
fully fitted out trailer that is taken by members of the industry to different events through the
summer. The events range from food fairs to agricultural shows to general expos (including
the Calgary Stampede) and charity functions. Over a million visitors a year visit the mobile
unit that tells the story of pork production from breeding through to processing the meat into a
consumer form. It is viewed by the industry as an events cruiser that is an ambassador for all.
There is never any shortage of farming volunteers to man it wherever it goes and preach the
gospel of pork production.
In addition to the mobile unit there are a number of Pig Science Centres being established
through Canada. They are mainly based on research establishments, aimed mainly at primary
school-aged children and are designed to give a clear picture to all visitors of the pork
industry.
The Canadian Pork industry recognises that its ongoing prosperity relies on the continued
custom of present consumers and those of the future. Across all pig producing Provinces
there is considerable investment in direct marketing, consumer awareness and education.
Shops had to throw perishable food away and the shelves were left empty. Restaurants had
no supplies. Three days later on my visit to a processor in Burlington they were in the process
of throwing 6200 carcases away that had been spoiled on the day of the blackout as the
chillers would not work without power. The overall experience was a salutary lesson in how
vulnerable the developed world is. However well any system of operation is developed and
refined it is only as good as the base influence. In the case of the whole food chain the
underlying base requirement is power. Without that it falls apart. That experience embedded a
powerful message. Go back to basics and make the infrastructure secure before trying to do
anything else.
In general terms the larger the operation the greater the opportunity to access different sales
contracts. Smaller producers either have to collaborate to achieve volume status and qualify
for similar contracts to their larger counterparts or work independently and sell on different
contracts. For example there are three main contracts available to Kentucky producers:
However, there are certain contracts that are virtually inaccessible to the large producer. For
example one small, family farmer in Kentucky is supplying pigs to an abattoir for a slaughter
service and then having the hams returned to a processor to be marketed on his behalf as
low fat, drug free ham. Being such a small, specialised niche, the farmer and processor
through collaborative efforts are able to command a significant premium which is not
economically accessible to a large producer. This appears to be the exception in Kentucky
and Tennessee with most producers following an economy of scale route.
There is an interesting comparison to be made between the various countries visited with
regards to the % farm gate return. In both Canada and America where, in the majority of
cases, scale is seen as a main focus there is a much lower return to the farmer than in Japan
and Hawaii where added value is the main focus. Table 2 demonstrates the clear difference
between a market-led industry and a producer-led industry.
Table 2. Comparison of the farm gate value as a % of retail value (based on 2002 values)
Health issues
Obesity and human health is currently capturing much media and medical interest in the
United States with extensive work being conducted to demonstrate the positive and negative
benefits of different foods. A positive portrayal of work conducted at the Kentucky State
University demonstrates quite clearly that there is less fat in pork tenderloins and certain ham
muscles than in skinned chicken breast. This is used to great effect in marketing pork to an
ever increasingly health conscious American consumer and is leading towards a more
market-led environment.
Pork Promotion
The National Pork Board was established by an Act of Congress in 1985 that in turn set up
the Pork Checkoff. The Pork Promotion, Research and Consumer Information Act –
commonly known as the Pork Act was requested to be upgraded to be mandatory by
producers in 1988 to further enhance the levy raising of the National Pork Checkoff. One
major project that emanated from the Pork Checkoff in the early days was “Pork, The Other
White Meat®”. This marketing campaign was launched by the National Pork Board in 1987
with the full support of America’s pork producers to help turn around a declining demand for
pork. Prior to this campaign, US pork had been on a long-term decline and the popularity of
poultry was on the rise as nutritional benefits and versatility became increasingly desirable to
consumers. The promotion was based on the strategic opportunity to position pork as a
uniquely different entrée, competing with white meat rather than its traditional red meat
competitor, beef.
The concept, programme and campaign were developed to favourably position pork as a
delicious break from the boring meal routine. The campaign educated consumers that pork
offered something surprising and unexpected, answering the call for something different. For
more than a decade, large and small pork producers across America have remained focussed
and committed to this position. Nine out of ten people in the US recognise pork as “The Other
White Meat®”.
It is due in part to this co-operative effort between America’s pork producers and the National
Pork Board that the retail value of pork has steadily grown, outpacing the rate of inflation.
Production has increased 37%, US per capita consumption has climbed from 23.40kgs to
24.27kgs, annual farm sales exceed $11 billion, the retail value of pork sold to consumers is
in excess of $38 billion each year and pork activity is responsible for over $72 billion in total
domestic economic activity supporting 800,000 jobs. These factors have combined to allow
America to reposition from being an importer of pork to being a net exporter of pork products
– all from 85,760 producers, down from three million in the 1950’s. Today, the United States
is one of the world’s leading pork producing countries being equal second with Denmark
accounting for about 10% of the world’s supply.
The major integrators’ operations appear well formed, tight, well monitored and well
supported with extremely good communications through all parts of the supply chain from
genetics right through to the retailers’ shelves. However, outside of the integrators’ embraces
there is little communication between producer and processor and even less between
producer and retailer. There is one distinct market for hogs and one distinct market for pig
meat. You are either in or out and the view from the integrators is to ‘Go big or go home’.
Conclusion
One common theme emerges from the studies in all of the countries i.e. commitment to
support, promotion and advertising. The support is from producers at all levels, promotion is
from individual businesses, producer organisations and marketing groups and advertising is
either on a national or State / Province basis. Advertising and high profile promotion combines
to keep pig meat in the public domain and encourages the consumer to put pork on their fork.
Every opportunity to promote the industry and its product is taken whether to producers,
customers or the consumer.
There is commitment in Canada and the United States to education above the general level
adopted in the UK which will provide objective information from which tomorrow’s consumer
will be able to make their purchasing decisions.
Hawaii has a great advantage in that it is an island state. However, the state industry realises
that continual efforts are required to maintain the level of success currently enjoyed through
controlling the market and promoting the ‘fresh is best’ label.
The embrace of technology in Japan will lead the country’s advance into developing a more
self-sufficient pig industry at the expense of the American, Canadian and European
industries.
In each of the countries visited there are good examples of dedicated supply chains and value
adding opportunities. Some are being exploited but there are many more with the potential to
be developed.
Organisations such as the National Pig Association need to work with education authorities,
processors, retailers and farmers to educate the future consumer about pork production in a
fun, transparent and health orientated way. The mystery and poor perception of low cost pork
production needs to be overcome by an honest, positive portrayal of the industry.
The industry needs to educate the consumer to want to buy British Pork because it has been
promoted as being the best quality, the best value for money and a healthy option. This
should be led by producer organisations working with appropriate bodies such as the British
Heart Foundation, Department of Health, Local Authorities, etc.
The Wider Industry
Agricultural organisations should work with the Government to encourage British farmers and
growers to become more IT literate and introduce an electronic system of traceability.
Whatever is developed needs to have the integrity of a fully functioning backup infrastructure.
This should take into account the ever increasing use of a finite power source and threats of
bio- terrorism.
The industry needs to collaborate to launch a major effort to market, promote and inform more
pro-actively. Defra, BPEX and producer organisations should research and launch a
scientifically-based healthy pork promotion based on ‘British Pork - The Other White Meat’
Summary
The points of recommendation made here are by no means definitive for the British pig
industry, but more a foundation that can be used as a basis for future development. What is
definitive is the dire state the industry is currently in and the realisation that something needs
to be done. That said, the industry doesn’t have to change – Survival isn’t Compulsory!
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Journal of the Royal Agricultural Society of England
Volume 165 2004
ISSN - 0080 - 4134
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