Memorandum submitted by the Welsh Lamb and Beef Promotions Ltd
1. BACKGROUND
1.1 Welsh Lamb and Beef Promotions Ltd (WLBP) is a farmer co-operative with 7,500 livestock farmers in Wales as its shareholding members. WLBP has the corporate mission to promote and market branded Welsh Lamb and Beef in global consumer markets.
1.2 WLBP operates the Farm Assured Welsh Livestock Scheme in which all its members are eligible to participate subject to their achieving the necessary standards.
1.3 WLBP was restructured in April 1999 when it became an independently managed business. Prior to that date WLBP was part of the structure of Welsh Food Promotions Ltd. This restructure has enabled WLBP to develop freely as an independent co-operative of Welsh Livestock farmers and following the restructure there have been some significant marketing successes in addition to a substantial increase in membership from 4,000 to over 7,500.
1.4 WLBP is a totally independent business owned by its shareholder members. It's funding in the main is derived from three main sources:
(a) members subscription—currently £60 per annum;
(b) the equivalent share of the species promotional levies for lamb and beef collected by the Meat and Livestock Commission (MLC). The Welsh share is currently 5 per cent of the British total collected for beef and 9 per cent of the total collected for lamb promotion;
(c) a facility grant from the WDA Food directorate; and
(d) European Union Structural funds—currently in the form of an objective (5b) programme for the promotion and marketing of Welsh Beef.
In the current year (2001) the forecast income from these sources is anticipated to be the following:
|
Members Subscription |
£400,000 |
|
|
MLC species levies: |
|
|
|
Lamb—£440,000
Beef—£270,000 |
£710,000 |
|
|
WDA Food Directorate |
£370,000 |
|
|
Objective (5b) |
£200,000 |
|
|
WDA/NAWAD* |
£300,000 |
|
| |
£1,980,000 |
|
*(The funding from the WDA/NAWAD was from the special funding of £1 million allocated by NAWAD to help promote and market lamb and beef as a result of the Foot and Mouth crisis).
2. MARKETING STRATEGY
2.1 WLBP has set its objective to differentiate Welsh Lamb and Beef as quality assured products from a natural free range production system and utilising the imagery and perception of the green, green grass of Wales.
2.2 To deliver it's objectives WLBP has identified the following target markets:
(b) UK Independent Retailers;
(c) the Serviced Food Sector; and
Marketing and promotional campaigns are organised in all these areas; the campaigns are however appropriately weighted to reflect the relative importance and values of the target markets.
The UK Multiples account for over 75 per cent of the total retail sales of lamb and beef, therefore a significant amount of promotions are undertaken with this sector. Typical activities include in-store promotions, point of Sale material, Consumer advertising in supermarket magazines, consumer competitions, and Product tasting.
Independent Retailers mainly butchers now only account for fewer than 20 per cent of the sales of lamb and beef, however this sector remains an important market particularly in rural areas and for speciality cuts and products. WLBP produces promotional material and POS material for all butchers that stock Welsh Lamb and Beef using the green, green grass imagery and appropriate straplines.
The Serviced Food Sector currently accounts for around 30 per cent of the entire food market in the UK and this percentage share are growing each year. WLBP are targeting the premium end of this market ie the top quality hotels and restaurants in the UK. Excellent distribution has now been achieved in London with many Michelin starred restaurants and hotels serving Welsh Lamb and Beef. Two major promotional features have appeared this autumn (2001) in the Evening Standard magazine.
The export market remains of great importance to the Welsh Livestock industry. In 2000 over 1.5 million lamb carcasses were exported, mainly to Europe. The southern Mediterranean countries are very important markets particularly to Wales due to their preference for lighter weight lambs. Currently (November 2001) the export market has re-opened following the lifting of the ban on exports introduced as a result of the Foot and Mouth outbreak and several consignments of Welsh Lamb have been despatched to Spain and France. The Export Market for Welsh Beef is also important with Welsh Beef being the first Beef exported from the UK following the lifting of the export ban due to BSE.
Estimated volumes by carcass equivalents of Welsh Lamb sold to the identified target markets.
| |
2001 |
2000 |
|
UK Multiples |
2.35 |
1.75 |
|
UK Independents |
0.50 |
0.40 |
|
UK Serviced Food Sector |
0.70 |
0.60 |
|
Export |
0.25 |
1.65 |
| |
3.80 |
4.40 |
(Figures in millions)
2.3 The effect of the Foot and Mouth crisis and the related export ban on Welsh Lamb has dramatically affected the figures for 2001. Substantial marketing successes were achieved with the UK Multiples this year with an estimated 0.6 million additional lambs marketed via the multiples. Particular successes were achieved from the Supermarkets agreeing to extend the specification and weight range for Welsh Lamb to include the lighter hill and mountain lamb, which has traditionally been exported to markets in Southern Europe. The supermarket specification for weight has been for lambs in the weight range 16-19.5kgs. Many of Wales' mountain and hill lambs have fallen outside this weight range. In 2001 the supermarkets extended the range to include, in some cases, lambs as light as 8kgs. WLBP recognises the very valuable contribution made by the UK Multiples in 2001 to the marketing and promotion of Welsh Lamb, in what could have been a totally disastrous year for the Welsh Sheep industry.
2.4 At the start of the Foot and Mouth crisis the export ban caused grave concern as a total collapse of the price and markets for Welsh Lamb were a distinct and really possibility with many Welsh Lambs being unmarketable. The actual outcome was far more favourable than anticipated with many more Welsh Lambs going into the food market than expected. This had the multiple benefits with far fewer lambs being destroyed under the welfare cull thereby reducing the compensation having to be paid to farmers and improving their returns from the marketplace. Additionally consumption of Welsh Lamb was increased with a new group of consumers being introduced to lamb eating. These benefits should continue in the future therefore some good might come from the Foot and Mouth crisis. This is also a good example of what can be achieved from increased marketing activity and its adequate funding.
3. QUALITY ASSURANCE AND LABELLING
3.1 The image and perception of Welsh Lamb in particular and more lately of Welsh Beef is very favourable amongst consumers in both UK and European markets. The green, green grass and natural image of Wales are currently being exploited to the full. Image and perception however is not enough as it is important that the products are underpinned with robust Quality Assurance Schemes.
3.2 Over the past few years WLBP have invested heavily in the development of the Farm Assured Welsh Livestock Scheme (FAWL) to underpin this perception. FAWL is an independently certified scheme that is fully compliant with European EN45011 regulations. All of WLBP's 7,500 members are now farm assured with this figure increasing by the week.
3.3 Quality Assurance schemes are also operated in all the meat processing and slaughtering plants that are approved to process Welsh Lamb and Beef. Again these assurance schemes are independently assessed.
3.4 In order to protect the brands Welsh Lamb and Beef WLBP have applied to have the brands registered under European Food Labelling Regulations as products of Protected Geographical Indication (PGI). This registration defines Welsh Lamb and Beef as products that are born, bred and reared in Wales and processed in approved plants. The PGI would provide total protection to the brands and prevent non-Welsh products being labelled as Welsh. WLBP are, however, extremely frustrated as the delay in the process to register the Welsh Lamb and Beef brands as PGI products. Consumers also have a right to clear unambiguous labelling of products.
3.5 The Foot and Mouth Crisis has certainly concentrated the minds of the consumer on meat labelling issues and the source of origin of the meat they are consuming.
4. THE SUPERMARKET PERSPECTIVE
4.1 The UK supermarkets are a very important market for Welsh Lamb and Beef with as already mentioned a market share of around 80 per cent of the retail market for lamb and beef. It is vital therefore that the correct relationships are developed with the multiples. There can be little doubt that the standards of production of Welsh Lamb and Beef are as good as, if not better, than the standards anywhere in the world. This message is now being understood by consumers, which in turn is leading the multiples to source locally produced lamb and beef.
4.2 Producers must establish stronger relationships with supermarkets; the relationships should have mutual respect that recognises each other's role and importance. WLBP is playing its part fully to help develop and maintain these relationships.
4.3 WLBP attempts to get the message to producers that love them or hate them supermarkets are a dominant force in UK and European Food Retailing and are clearly here to stay. At the same time WLBP attempts to get supermarkets to appreciate the importance of local quality producers who are producing lamb and beef to a very high standard of safety and eating quality.
4.4 A great deal of debate has already taken place over the difference in prices paid to farmers for their production and the price paid by consumers in supermarkets. This is without doubt a complex issue however, it is clear that the supply chain between farmer and supermarket is far too long and protracted it has been estimated that some lambs will pass through nine pairs of hands between farmer and consumer. Each of these pairs of hands is taking a slice of profits form the resultant price, with the farmer at the wrong end of the supply chain. Ultimately, price is governed by supply and demand mechanics; WLBP is attempting to increase consumer demand through innovative marketing and promotional strategies.
5. THE FUTURE—A WAY FORWARD AND WHAT NEEDS TO BE DONE
5.1 More resources should be allocated to the marketing of Welsh Lamb and Beef. The marketing resource is not a cheap option in any industry; the Welsh livestock industry spends a notoriously low percentage of its total output value on marketing. The increased spend should be a combination of Industry and Government funding; the Objective 1 status for rural Wales should also be an ideal source of funding to support the marketing functions.
5.2 The registration of the Welsh Lamb and Beef brands as PGI products is an important issue for the sustained profitable marketing of Welsh Lamb and Beef. The PGI status would have the effect of "ringfencing" the production and ensuring that only Welsh farmers would benefit from the marketing effort for Welsh Lamb and Beef. Consumers would also benefit from clear unequivocal labelling for Welsh lamb and beef.
5.3 The export market continues to be of great importance to the Welsh livestock industry. Every effort should be made to recover the export markets as soon as possible with bold and innovative marketing strategies.
5.4 It is important that duplication of effort is avoided and that the marketing and branding strategies of the Welsh livestock sector are totally co-ordinated to ensure that as much benefit as possible accrues back to the primary producers. The marketing and branding strategy should ensure that Welsh Lamb and Beef are positively differentiated in the market place.
5.5 The elimination of Scrapie is of key importance to the Welsh Sheep industry. Animal Health issues and related food scares remains the greatest threat to the industry and every effort should be made to remove any future threats associated with animal Health issues.
5.6 An audit of what is currently being done to market Welsh Lamb and Beef should be undertaken. Duplication should be eliminated and farmers should engage in the process. WLBP as a farmer owned co-operative is the perfect structure to enable farmers to play a proactive part in the marketing function. The recently published Farming Futures for Wales Document support this position.
5.7 Continue the development of relationships between Welsh farmers and UK Supermarkets for mutual benefits.
6. CONCLUSION
6.1 There can be little doubt that the plight of the Welsh Livestock farmer remains very serious the position was regarded as in crisis prior to the Foot and Mouth epidemic of 2001. There can be little doubt that the survival of many farmers is in the balance. The only realistic way of ensuring long term survival and even prosperity for the industry is to invest in secure returns from a sustainable market for branded Welsh Lamb and Beef. Farmers must actively engage in this process which should be supported and encouraged with funding from Government.
Don Thomas
Managing Director
4 December 2001
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