Australia’s poultry industry is poised to “catch the next wave of growth”, but needs to focus on alternative strategies to capture new opportunities, rather than relying on increasing per capita consumption, according to a new report by agribusiness specialist Rabobank.
In the report, Catching the next wave of growth, Rabobank says strong growth – in both volume and value terms – is possible, but the Australian chicken meat industry should pursue the development of new export markets, higher-value propositions for consumers and productivity gains.
“Through the adoption of these strategies, our analysis indicates that the Australian poultry industry can achieve an average annual growth rate of 3.5 per cent over the next five years,” says report author and senior animal proteins analyst Angus Gidley-Baird.
“This represents a moderation from the lofty growth rates of 5.9 per cent achieved in recent years, as the industry matures and domestic consumption stabilises, however it would still see production lift by around 40,000 tonnes per year – equating to an additional 109 million birds by 2021.”
The report warns that unless there is an expansion into new export markets, growth in the poultry industry will be linked to population growth, which is expected to be fairly lacklustre at around 1.17 per cent per annum.
Developing new markets
The report says an increase in exports, to around 10 per cent of production, will be key to increasing volume and value in the Australian chicken meat industry.
“Currently, less than five per cent of Australian chicken is exported,” he says, “however there are significant growth opportunities in South-East Asia – such as Indonesia, Thailand, Vietnam, the Philippines and Malaysia – as their per capita consumption increases.”
Mr Gidley-Baird says while it would be difficult for Australia to compete from a total cost perspective, there are opportunities to sell different cuts and therefore complement the total return per bird.
“For example, the US exports dark chicken meat and non-breast cuts into the Asian market, which is not only preferred by these markets, but complements the US domestic operations to provide a higher overall value return per bird,” he says.
Capturing a larger share of domestic consumer spending
Despite being the cheapest protein, the Rabobank report says “chicken is not necessarily the first preference protein for a price-conscious consumer”.
“In Australia, consumers tend to trade down rather than move straight to the cheapest protein,” Mr Gidley-Baird says.
With this consumer mindset, Mr Gidley Baird says, the industry should look to expand its product offering by creating higher-value products, which could potentially add a further five per cent to the overall value of the industry.
“By offering consumers a point of difference or the ability to recognise some of their values in the product (such as animal husbandry or management identifiers) there is the opportunity to extract more margin out of the market,” he says. “For example, an organic, branded chicken breast steak with lemongrass and ginger marinade could capture the customer at a higher price point.”
The report also highlights the rising social pressures for welfare-friendly and sustainable products such as slower-growing birds or sustainably-sourced feedstocks, which will add additional costs but may not attract additional margins.
Improving margins through productivity gains
The Rabobank report identifies three opportunities to increase value growth in the industry through productivity gains: the adoption of new technology, realising economies of scale and relocation of industry facilities to centralised operations.
“Industry growth should not be confined to a conversation around production, but instead have a greater focus on profitability,” Mr Gidley-Baird says.
“For example, the implementation of new technologies such as improved monitoring to lift feed efficiency and improve air quality could lift productivity by five per cent. There are also opportunities for greater efficiency at the distribution level, with the use of sensors during transport helping to manage bird stress and welfare.”
Mr Gidley-Baird says realising economies of scale will also lower costs per unit, while relocation in the industry can reduce transport and logistics costs by co-locating grain-growing, milling, chicken-growing and processing operations – with industry hubs established in regional towns such as Tamworth and Griffith.
Rabobank Australia & New Zealand is a part of the international Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 115 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 40 countries, servicing the needs of approximately 8.6 million clients worldwide through a network of more than 1000 offices and branches. Rabobank Australia & New Zealand is one of Australasia’s leading rural lenders and a significant provider of business and corporate banking and financial services to the region’s food and agribusiness sector. The bank has 94 branches throughout Australia and New Zealand.
Head of Media Relations
Rabobank Australia & New Zealand
Phone: 02 8115 2744 or 0439 603 525
Media Relations Manager
Rabobank Australia & New Zealand
Phone: 02 4855 1111 or 0418 216 103