Transcript of the lamb marketing masterclass part 4: Know your value chain

Kirstie Anderson:

Welcome to tonight's session, which is the finale of our four part series. Remember if you have missed a session, you can catch up with them by viewing the recording links, which are sent in the post session follow up email.

Kirstie Anderson:

So, I'm Kirstie Anderson. I'm an EID Technical Specialist with Agriculture Victoria and I'll be presenting for you for the first half of tonight, after which I will hand over to Tom Bull, a New South Wales seed stock and lamb artisan, who will be having a chat with you about the brand that they've developed and how he's got networks in the system.

Kirstie Anderson:

We've got our producers, which is a bureaucratic term for farmers, we've got our feed lots that may be growing out both things, sale yards where some transactions are happening or they could be going straight through to the processor, which is a nice word for abattoirs, we tend to use the word processor.

Kirstie Anderson:

And the reason for that is that we really want to change that mind shift or culture from an abattoir, which is traditionally thought of as a kill them and chill them kind of business, to these businesses are highly sophisticated, they are adopting some really exciting technology that's going along the way and they're processing a product. And in that space they've got opportunity to do some really good value add in there.

Kirstie Anderson:

From there, we're going to be sending them out in a variety of forms, it might be frozen, chilled, into domestic and export markets that head off into the retail and food service business. And then eventually land here with our consumers.

Kirstie Anderson:

And one thing that I would like to point out about this supply chain, is throughout here everyone is a buyer and everyone is a seller. So everyone has to be talking to people at the other way and down the way, and be talking about what they're doing in that part of their business.

Kirstie Anderson:

So, supply chain and value chain. It's the same thing but it's different. Quite a bit of an Ozzy classic here, from the Castle, just in case anyone hasn't seen it and if you haven't seen it, you need to go and see it. It explains Australian culture. "It's the vibe and uh ... No, that's about it. It's the vibe."

Kirstie Anderson:

And quite often when we're asked about the difference between a supply chain and a value chain, it's kind of hard to articulate [inaudible 00:02:50]. And really it's about relationships and communication of data and information within a supply chain, that creates value. So it's a vibe.

Kirstie Anderson:

I'm going to try to do a little bit better and I'm going to use some words and some pictures to maybe do some examples of what are the attributes of a value chain that makes it different from a supply chain. So the first one here is transparency. Over on the left I've got your bulk standard milk. We know a bit about it. We know that it's milk and it's full cream, it probably comes from Australia or is manufactured in some part, but that's really it. That's all we know about this particular product.

Kirstie Anderson:

Over on the right hand side, I've got the extreme opposite of that. I know so much about this milk and I've only showed you one side, but there are four sides to this carton that all have a significant amount of information on it. And on this carton, I actually know the farmer that this milk has come from. And he's even put his signature on there for me, just so that I know that it's absolutely true. So that's one of the characteristics of the value chain, it's very transparent along the way. We know where things have come from and quite often where they're going.

Kirstie Anderson:

So the next one is, in a value chain, which we really like it to have mutual benefits. And a supply chain quite often someone wins and that's at the cost of another, another person will lose. We really like in a value chain to have win, win situations. Over here on the left, and don't worry about not being able to read the tiny font, it's one of those ones that says, "What's the farmer's share of the retail food dollar?" The lettuce grower gets 30 cents, well not even that. I think it's .03 cents of the lettuce that went into a hamburger or was sold on the shelf in a super market. And if the price of those commodities goes up in the retail space, quite often the producer won't see any of that extra value.

Kirstie Anderson:

In a value chain, what we like to see and hope to happen is that the producer gets paid for that extra value. So I've put in here a couple of examples of brands or quality assurance programs that we have, where the producer is getting a premium for their product and getting paid extra. And it's quite interesting if you have a chat to some of the managers of these brands or these supply chains, and for them, the value in their business is maintaining a quality and consistency of supply, that they're quite happy to actually pass on the premium they get at the retail end to the producer, because they know that, that's better for their business in the long term.

Kirstie Anderson:

All right, our next one, a value chain doesn't tend to be price driven, whereas a supply chain does. So I've got over here on the left hand side, and once again I apologize it's small, I'm trying to figure out how to fit things on the page. So, anyone that's been through some economics training hears about the old supply and demand curve and that as supply goes up, demand will tend to drop because there's more of the product floating around, and that has an impact on the price.

Kirstie Anderson:

And sometimes the only way that you can influence the amount of product that's going out into market, is by dropping the price on it, putting your product on sale and people think that they're getting a bargain so they buy more of it. But once again, the producer's not going to be seeing any of that and can potentially have some really detrimental effects to the industry. We've got a dairy industry here in Australia, where we've got some really low cost milk that quite often thought about a race to the bottom. And is that a sustainable thing for an industry to do?

Kirstie Anderson:

So over on the right hand side and some examples of value chains, I'm going to draw your attention first to the organic produce and we absolutely know that the consumers that choose these organic products, are buying, are happier to pay a premium pice because of the attributes or the values of those fruits, vegetables, meat. They don't want them to have chemicals, they want them to be grown in sustainable, regenerative, environmentally friendly conditions.

Kirstie Anderson:

And interestingly enough, they're prepared to have an inconsistent product. The carrots don't all have to be the same length, they can have lumps, they can have bumps, they can have bruises, because that's not what that particular customer values and is choosing for. They are going for something else.

Kirstie Anderson:

On the flip side of that, but still as a value chain, is I got a Victorian local brand here, the Sungold Jersey Milk and this has got a whole suite of attributes that make people pay extra for this particular product. It's local. They know where it comes from and not only do they know where it comes from, they know the particular type of cows that it comes from and it's won a swag of gold medal awards to back up the quality of that product. So it's taking a lot of those different values and beliefs that those people are really interested in and they are prepared to pay a premium for.

Kirstie Anderson:

The next one that we will have a bit of a chat about is adds value, and I think this is sometimes the hardest one for [inaudible 00:09:03], not only do you have to visualize it, I've added text here. So over on the he left hand side here I've got these, and Kate McCue thank you very much for this image, peeled hard boiled eggs. So this is not what within our [inaudible 00:09:22] we would consider a value chain, and the reason for that is, is yes they listen to what they're customers want, but what they've done is added another processing part to the business. And they'll be charging more for that and it's to cover the extra processing cost.

Kirstie Anderson:

In reality, do we think that the people that supplied the eggs that went into there or went into the regular carton that I haven't added down at the bottom here, probably not. So someone's making more money from this, but the supply chain or value chain is most likely not. And it's also, it may be a product that was undesirable, maybe they're slightly discolored eggs on the outside that's going into there. But it's not a real change. It's not a revolution within main street.

Kirstie Anderson:

On the other side, let's have look at the free range eggs and I've got two examples here. You might be someone who's producing them and doing into still a branded product, but a mass market brand that [inaudible 00:10:35] free range egg supply. They'll be getting, that producer will be getting paid more for that particular product.

Kirstie Anderson:

Or they might take it even further and go and have their own brand like Kiss & Run have here and really make a connection with their consumers. And in this case, the consumer knows that they're free range, they know that about it. Where it comes from, not so much. Whereas here we've got quite a few things, a bit like that Sungold one. We know that they're pastured, they're free range, they're open range. So there's a lot of good buzz words on here and know location, where those eggs were coming from, which comes back to that transparency.

Kirstie Anderson:

I probably find that these mutual benefits and these adds value interact and are kind of little bit the same. [inaudible 00:11:27] but we've got some examples there of what those differences are. So then the last one, and this is the secret, special ingredient. This is the XO sauce. Is that value chains are often integrated. You probably don't see them, because they're happening in conversations between people. So over here on the left hand side, I've got the traditional, and it still happens, sale yard selling and it's prime time here, I'm located in North East Victoria and there's lamb sales happening left, right and center.

Kirstie Anderson:

The informational providence that goes with these animals is really not very much. There's a declaration about what they are. There's a NLS transfer, a NVD goes eventually with them, but that's about it. We can step it up a bit, we can add a bit more information. And I think 2020 has been absolutely the year of auctions plus. We've seen an exponential increase in the number of feed stock sales that have happened on there. It's getting going, which has been brilliant in opening up the industry, but also in the number of animals that are traded.

Kirstie Anderson:

So we've got coming up here the northeast Victorian lamb back grounding and finishing sale. And it being on auctions plus, there will be a lot more information available about those animals, photos, videos, vendor comments, inspector comments, weights, health declarations. So were definitely getting a lot more information. It's still a point of sale on the day of getting going.

Kirstie Anderson:

Whereas long over here, on the right hand side, in our value chains, it's almost a bit of an exclusive club. And Tom's going to tell you a little bit later on about how they're doing this within their business, but quite often animals or lambs that are within a value chain, you will not see them up for sale. Because they'll be forward contracted or they'll be a conversation on supplying on this day. And I'm going to use the example here, quite often we here that maybe there's not a premium for non-ewes wool.

Kirstie Anderson:

My theory, my personal opinion of that, is because that wool does not go through the traditional auction system. That wool gets contacted in, it gets delivered, it gets tested, if it meet specs it's locked in and off it goes. So we're not recording it in the system, because those people have spent a significant amount of time and money creating a product that they're really proud of. And they're not really prepared to take the risk of whacking it out on open auction system on a day and taking the price that they get. They value those relationships throughout their supply chain and they want to know who's buying their product and what they're doing with it. And they're quite proud of what the output is out the other end.

Kirstie Anderson:

There's a swag of these private blind systems that are developing within the industry, they're getting going. They exist, they're there, it's probably one of those ones of it's not what you know, it's who you know. That certainly once you get in there, and this one's an interesting one where they're may not actually be a premium for the product involved and quite often it is, but there's actually other attributes in there that makes people interested or want to be part of this. And I think one of them is for a seller is risk management. They know that someone wants to buy their product, so the buyer. They know that they've got their inventory management. They know that their supply is going to be coming in from these people, it's going to be consistent and so there's lots of benefits for everyone through that one. And then there's another layer of the industry intel that quite often gets passed between the participants of these private value chains that are there.

Kirstie Anderson:

All right, so we've changed the heading of the slide from lamb supply chains to lamb value chains. And honestly, communicating is the key, it's how the sparkly magic happens. We've got some people over here on the left hand side, and like me they're animated when they're talking, their hands are going, they're excited, maybe they're doing some jumping up in the air because they've finally had that revolution of what they're here for.

Kirstie Anderson:

The next one down is that the people aren't just talking from A to B and B to C, we want to see A and C, and D, and E, and F, and G. We want to make sure that this whole supply chain is talking to each other. That producers know what consumers want. The consumers know what's happening within producer's businesses and what the amazing things that you guys are actually doing. That's why you create such a valuable product.

Kirstie Anderson:

Over here on our data, it is not a one way street. You can see we've got two lanes. It needs to go backwards and it needs to go forwards, and to support that we need some really robust systems in place. I'm going to do a bit of a shout out to my mates over at Integrity Systems. If you haven't heard from them, they're the other arm in L.A. that manage our LPA, Livestock Production Assurance Program and the NLIS, National Livestock Identification System.

Kirstie Anderson:

And they do a great gob at LDL, Loss of Data Link. There's a lot of acronyms in this business. So, what their aim is, is to create this connectivity for you. They had a number of data bases and it's great to see that now the focus has changed within the business to not here's our product, here's our database, we want you to use these, but to what do you need and how do we help you connect the dots? Because as we go over this, they recognize that business are different, they're fluid, and what one person, or one supply chain or value chain wants or needs, is quite different to another. So this space is changing really rapidly and it is really exciting to be part of.

Kirstie Anderson:

All right, a bit of a ... What am I going to call this? A heads up, a check of why we're doing this. So I jumped online to my local [inaudible 00:18:34] store today, which is Vanilla and lamb is absolutely a premium product. So much so, that if I wanted to buy some lamb liver today to make, I don't know ... Thank you Nathan in the background helping him, I'm going to be paying eight dollars 50 a kilo for lamb liver. For two dollars a kilo less, I can get some macro free range chicken. Isn't that amazing. I'm absolutely amazed that our [inaudible 00:19:12] can command a higher price than this chicken that's got all of those buzz words whacked all over it.

Kirstie Anderson:

If I had ... I then did a search for what was the most expensive lamb that I could buy today, and surprise, surprise, it's the extra trim cutlets and they're going at 50 dollars a kilo, so I won't be going to buy them [inaudible 00:19:33], we'll do our own at home, thanks.

Kirstie Anderson:

Then I had a bit of a look and went, "Well, what about seafood? That's the fancy kind of stuff. Christmas day is coming up. We're putting those pineapples, those $50 to the side so that we've got enough money to pay the seafood bills for everyone that comes over." Well, if you go and get the crème de la crème, the Moreton Bay bugs, 46 dollars a kilo. It's cheaper to get some of those than it is to get some of our lamb.

Kirstie Anderson:

And this is pretty exciting. This is for me the reminder of why it's so important that we maintain this lead as an industry. If I go back to part one, where we're having a chat with the Tim and Tim show, Tim Leeming and Tim Hollier, we're out in front. And it's really important now that we hold this ground.

Kirstie Anderson:

There are going to be other industries that are barking on our tail that want to take our market share, and we're a tiny industry on the global scale. So we really, really need to make sure that we nail in on those themes that make our consumer trust us and are loyal to us, so that when they see this, 50 dollars a kilo and Tom's going to tell you a price that made my eyes water, that they go, "You know what, it's worth it. I'm worth it. I'm buying that because I want that."

Kirstie Anderson:

So just to give a check here about that concept, and all this data and all this information that goes in, it's a bit unsexy. It is vegetable soup. There's a lot of things going in on here and things that are holding bits together, and it's good for you and it's healthy for you, but no one really wants to look at it. And we can't sell the product with data. It doesn't work.

Kirstie Anderson:

What we use this data for is to underpin trust. We've got some really good integrity systems behind our products in red meat and in the lamb industry, and we use that to create this, this vibe, this warm fuzzy feeling that when I put some lamb on, I know that it's safe for me to eat. I'm going to feed it to my kids, it's going to be healthy for them. It's going to make them grow big and strong and it's going to feed their brains, so that they can grow and become a professional and help to pay for me when I'm in my old age, but of course I'm still going to be healthy then and have longevity.

Kirstie Anderson:

This is the image, this is what we're trying to do with our products. We want them to trust us and we want them to choose us above the other competitors in the market, and ideally we'd like them to pay us a premium for that.

Kirstie Anderson:

That trust can be lost very, very quickly. And I don't know if any of you recall this horse meat scandal of 2013, not here in Australia, thankfully. Where there were ponies at the party, but unfortunately they weren't there for the kid's rides, they were in the party prize. And we need to have systems in place to make sure this doesn't happen, so we've got some really good technology now with DNA that we can measure. There's sampling that happens within the processing system to make sure that this kind of thing does not happen to our industry.

Kirstie Anderson:

We've also got some issues with either diseases, you may recall that there was a ban on the live trade for cattle going to Japan and it was around Bovine Johne's disease. And once again, our analysts system came to our rescue and we said, "It's okay. We can manage it. We've got systems in place."

Kirstie Anderson:

So our exporting systems and our analysts are auditors, we have to get certificates, it's boring but it's really necessary so that those markets trust the product that we deliver. The other one that I've got here is one that's going on, but honestly no one really knows about it. It's the bluetongue virus that exists in Northern Victoria and New South Wales. In many other countries that don't have a traceability system like us, the occurrence of this eases would be a blanket export ban. You would not be going anywhere and you'd have to hope that your domestic market had enough barbecue and party prize that they could consume your product, and they're probably not going to pay you very much for it.

Kirstie Anderson:

Once again, we've got a really, really strong traceability system that says, "It's okay. I've got this in hand. I know the animals that are within that zone. I know where they're going and I can make sure that they do not end up in your supply chain."

Kirstie Anderson:

So it's boring, but it's absolutely necessary that we have these kind of systems behind us, and as Australians we should be really proud of the systems that we've got here in Victoria and that we've got nationally.

Kirstie Anderson:

So, from that stuff, let's have a bit of a look at this data. I'm not going too far into it because I'm looking at the time and Kate's going to start sending me text messages that I'll ignore because my phone's on silent. The story that we're creating starts on the farm. We've got some traceability aspects. And I've got them at the top because they are the most important at getting going.

Kirstie Anderson:

We've got NVDs that provide a food safety declaration basically. We have NLIS that tells us where those animals have been and creates lifetime records, and we have health statements that can provide further information about those animals. Of the animals themselves, we might be measuring the model individual data. We've got some genetic and breeding information we can capture. Fertility records, so that we can be making sure that we keep multiplying and producing more of this amazing product that we have. And we've got some growth and condition data here. And I'll just talk about this from a supply chain or value chain side of things.

Kirstie Anderson:

If you're accredited with Meat Standards Australia, just heads up about that growth that you're committing that you're going to reach a minimum daily growth of those lambs two weeks before you can sign them and that you're not going to be mixing them in mobs. How are measuring that, if someone comes to ask you that question. How can you prove the claim when you sign that MSA declaration when you sent off those lambs.

Kirstie Anderson:

And then here I've got some other information or data that may not be as obvious as this, but it's just as and if not more important. We've got some province information. There's a story behind those animals. And there's a pic that they came from or where they were bred at, but what's the story about that property behind it.

Kirstie Anderson:

We've got environmental claims, and this is going to increase significantly when we start working with climate change and carbon neutral and carbon trading agreements, and just a heads up guys, keep an eye on what's going on in New Zealand. There's some really interesting stuff happening in their carbon trading, in their nutrient management on farms, that we really need to be paying attestation to.

Kirstie Anderson:

And animal welfare claims. So we've got the pain release products that's out there, but I'm going to throw another one out there, that's probably a bit more exciting, definitely more [inaudible 00:27:23]. The internet of things and our ability to remotely monitor watering supplies, pasture cover, temperature, all of that data is going to allow us to support the animal welfare claims that our industry has put into place.

Kirstie Anderson:

We will be able to say, "My animals have never had a day where they have not had access to water." We will be able to say, "In my environmental operating procedures policy, I've said that I'm going to maintain 80 to 90% pasture cover, ground cover each year and I have done that." You are going to be able to say that the animals had shade when the temperature was over 35 degrees [inaudible 00:28:12].

Kirstie Anderson:

This is the stuff that people are interested in. They do want to know about this, because this is what connects them with that brand emotionally. So, all of this data, its supports our business aims, where we're wanting to go. It's part our unsung quality assurance programs and it's what we use to create a brand. It's what makes you different from everyone else out there in the market.

Kirstie Anderson:

It continues in the supply chain. This traceability is so important. We need to maintain that trust. If we're going to make those claims about what happened to those animals on the farm, people need to trust that the product on the packaged is what's on the label. We also have inspectors in there making sure that from an animal health, and disease, and a contamination, that those kinds of things aren't happening. So we've got some really good independent systems happening.

Kirstie Anderson:

For our animals, well carcases, now that they've become, we've got grading data that's being added to them of standard age, weight, stat. Tom's going to tell you about some more exciting stuff. We're getting our animal health information and some condemns why that happened. And then the other stuff that will come is about cuts, what's that quality and the quantity we're getting off, and we start to add some packaging, which to me is kind of the beginning of the branding. That's when you start to see a pretty picture or a logo or an image, that starts to go onto that product as it heads out into the rest of the supply chain.

Kirstie Anderson:

This is my one thing that I wanted to say here about this traceability and you've heard it here first. We have an opportunity here in Victoria with our electronic identification system, that we can provide to the AU lambs with lifetime traceability. And we're the only people that can do that. So if anyone's out there that's a bit of an entrepreneur, love to hear from you, let's see what we can do in this space. The AU, I think, has almost sorted out their trade agreements type thing and let's get in there and get ourselves on the front foot, and create a market for ourselves.

Kirstie Anderson:

All right, so these lamb supply chains, who else is here, it's a busy space. There's a lot of people in it's [inaudible 00:30:40]. We've got people doing genetic evaluation, data's going in, data's coming back out. We've got our livestock agents, who like me have got an awful lot say, they're giving us advice about our genetics and our management. Sometimes they're doing a lot of data base stuff for us and they're really importantly giving us access to markets. They know who's who in the zoo and who you need to talk to.

Kirstie Anderson:

We've got some industry experts in there, our consultants, people like me at Agriculture Victoria, your industry representative groups. We've got these service suppliers, and I really wanted to give them a bigger box, but these are the guys who make all of this happen. They support the technology and the systems that keeps our industry moving forward each day.

Kirstie Anderson:

And then we've got these people, these market analysts who are having a look at our consumers and finding out what are those values in place and de-stiling them and telling us their story. They're looking at the purchasing decisions and behavior. Sometimes what they tell us is not necessarily what they do, and it's really important that we monitor that, and then they can use that data to give us projections about where those behaviors may change or what we need to do with our product to make it suite those consumers.

Kirstie Anderson:

Alright, last slide for me is about a bit of a new concept. Some of you know about feedback and basically it tells you what you already know. It tells you the problems, so your lambs were too light, they were too heavy, they weren't fat enough, they were too fat. I love this, it doesn't always offer a plan of action and certainly this MLA and Integrity System solutions to feedback. We've got some systems there.

Kirstie Anderson:

But for me, I guess my big one with feedback, is it's great and it's an opportunity for us to improve the next product, but there's nothing I can do if the current product isn't right for the market. So what excites me more is this idea of feedforward. It's a term that's at the moment a bit of a buzz with human resources and how we manage people. But this is what I want to see, all of those, all of that data, all of that information converted into however it was that my consumer or my purchaser, wherever I am in the supply chain, wants to see it, hear it, feel it, touch it. I don't care how it happens as long as it's what they want.

Kirstie Anderson:

How do they use it, so that then they want that product and that they choose that going forward. And there's some great words here about ... because it does. It expands our possibilities. If they know what that product is, they can do more with it. It's authentic, it's important about that. We're generally, we're not trying to hide anything, we're passing information on and saying, "I want to have a relationship for you. I'm going to be honest and open about it."

Kirstie Anderson:

It does definitely have an impact. It creates value chains [inaudible 00:33:54], where as feedback doesn't often actually create value chains. So, there's some things here that you may have heard of. Blockchain, and that's a really sophisticated technical system that might be able to be used for this feedingforward information. There's simple versions of that with QR codes, which people can scan with their smart phone and find out some information. And there's also this, which is really simple but it's actually the biggest thing. People recognize, we've got QR codes built into our eyes and when you go to make a purchase, this is what they're looking for. What's his brand, what's his logo and what does that mean for me? What's the feeling that I invoke?

Kirstie Anderson:

So, on that case, and I'm going to apologize because I've gone over time, and Tom's like me, he's passionately excited about the industry. We probably will go over time, guys. It's a bit of a habit of mine.

Kirstie Anderson:

Tom, you can pull the charge out from your phone and get ready. So Tom Bull is the man behind the brand that we're showing you tonight. A quick, short bit of his CV. He's walked the walk in the abattoirs. He knows the chain, he knows how it works. He's been with MLA and worked in the researching side. He understands what he has to do to make his product better and how to measure that.

Kirstie Anderson:

He's been with Buyer Scan, which was an older yield estimate technology and as I've heard previously, by that focus just on yield alone, he single handedly ruined the New Zealand lamb industry. And for the last couple of decades, he's been focused on his own business on Lambpro and he's going to have a chat about that with us tonight. You guys can google his business and go have a look at the website. But right now, when we're finished or tomorrow.

Kirstie Anderson:

Just over the border from us, up there in Holbrook, there's some really cool numbers coming out. He's selling two and a half thousand rams a year, which are responsible for over a million of the lambs that are supplied into our system. He's not only supplying those genetics, he's also then standing behind those genetics and marketing products, their own lambing products. So, what we're going to do tonight is a bit of a Q and A session, so that Tom didn't have to produce a power point.

Kirstie Anderson:

I'm going to ask a question, Tom's going to give you an answer and we've got some good images here and some reminders for Tom and I about what he was going to say in those answers.

Kirstie Anderson:

So, Tom, let's look back first. What was the trigger that set you on this journey?

Tom Bull:

I think probably when you look at our customers and who they are, and one thing in our business, we've got a very good handle on who our customers are. 35% of our clients lambs get a [inaudible 00:36:58], 10% go to breakout meats, 10% JVS, 15% TFI.

Tom Bull:

So I think my aim is always to look at what our current customers want. Most of our lambs are going in that 23, 24 kilo weight range. A lot of exports, so they're heavy domestics. So, yeah, that's really been our bread and butter, increasing muscle, getting the fat right.

Tom Bull:

And I think when we look at a 20 year journey, you always probably try to be ahead of the curve and probably to say, "Well, what's the next move?" One of the biggest things in lamb is lamb's lamb. There is not a brand in Australia, if you've got the queen coming for dinner that you can blow her socks off with an extremely high eating quality product. And that's probably where we've been left behind.

Tom Bull:

You look at the beef industry, the wagyu industry is nearly a billion dollar industry, the Angus industry's probably a three billion dollar industry. And they've done a really good job at extracting value. I was in [inaudible 00:38:12] partner of ours with some of our lamb products. They had 10 products, eight products, sorry, that retailed this week over 100 dollars a kilo.

Tom Bull:

There isn't a lamb product in the country that's ever much retailed over 100 dollars a kilo. So, I think the reasoning why, how do we create point of difference? How can we extract more value from our carcases and how can we send that down the supply chain with probably [inaudible 00:38:44], but as well as improving and servicing our current clients, customers?

Kirstie Anderson:

Awesome. So, from there, what are the systems that you've put in place to ensure the success of that goal. How did you-

Tom Bull:

Well I think, you've got to look at say, MLA did some really good data through the sheep RAC, looking at willingness to pay data from consumers. The average lamb in the country is 4.2% IMS. However, the higher we increase marbling, increases consumer satisfactions, which then in term increases willingness to pay.

Tom Bull:

So I think really what we started to look at, well if it's 4.2%, can we increase that to say 8%? If we do increase that to 8%, can we extract more money? So, really the anomaly is genetics and if you look at the angus and the wagyu industry, it's been genetics that's enabled that to happen. If you look inside the angus industry 20 years ago, you probably count three or four bulls on one hand that really took marbling in the angus grade up a level. And simultaneous with the wagyu. It's all about three or four quay bulls that were imported back in the time that really took marbling up a level.

Tom Bull:

So really what we decided to do is look in traditional breeds and non-traditional breeds, and try to find genetics that were outliers. Animals that we could really improve willingness to pay through consumer data.

Tom Bull:

So I think the first thing is it's all about prodigy testing, getting large amounts of carcase data and understanding what animals we're working with currently. And we did that with our daughter program. We includes [inaudible 00:40:43] which increase their marbling and also a maternal program as well.

Tom Bull:

But we also started looking at other animals, including the [inaudible 00:40:53], which we always had heard had good marbling. As we found out, most of the breed actually doesn't have much marbling at all. But we did find a few outliers within that breed. And then we have been working with those outliers to try and progress those sheep for other traits.

Tom Bull:

The other parts of it is looking at nutrition, what's the impact of [inaudible 00:41:18], what's the impact of [inaudible 00:41:20] carcase wide. So the last few years for us has been investigating different levels of nutrition, nutrition types, growth patterns, do you grow them quickly, do you grow them early. Also looking at carcase [inaudible 00:41:42].

Tom Bull:

We actually had one lawn of troll lambs that averaged like 60 kilos dead. When we sent them to the abattoir, the abattoir rang us and said we actually don't think we can get them in the box. So, I don't think that's the answer, 60 kilo carcases. It was fun and actually tasted pretty good.

Tom Bull:

But, really it's all about research. I think where we're at now, we've got genetics and we've got nutritional systems that we believe we can produce a product that's between 6 to 7% IMS. That doesn't sound much, but that's a 50% increase on the national average. So, the lamb chops in the picture, that would 12% IMS.

Tom Bull:

So really, we don't see any problem at all at retail getting 120 to 140 dollars a kilo for 10% plus IMS products. When you look and say a loin, must be two kilos, that's all of a sudden a increase of 70 dollars a kilo over two kilos. So we're basically increasing 7% of the carcass, is adding $140 to the carcass.

Tom Bull:

So that's really the game we've been playing, is understanding [inaudible 00:43:05] economics, understand the links between genetics, nutrition, and what the consumer's willing to pay. And we've had some really good partners [inaudible 00:43:14] doing that and really we're launching into full-time supply in March, not only domestically, we'd be on the international market.

Tom Bull:

So that's taken a long time to not only find the genetics related, to find the size, to mass produce those size, and then have those lambs start to come through the supply chain through our current system.

Kirstie Anderson:

That's fantastic. So I've got two questions here for you on the genetics and research side of things. We heard from Cherry back in part two and there's a lot of stuff coming that's going to enable this. How have you fast tracked that? How have you chosen the technology that you're going to use, so that you can do these measurements, because they're not available to most people [crosstalk 00:44:07].

Tom Bull:

Yeah, we're working with probably two or three technologies at the moment. Yesterday we killed our prodigy test lambs [inaudible 00:44:16] and they actually used three different technologies. One was a probe based, one was an infrared thermatechnollogy which they use on salmon and the other was a camera.

Tom Bull:

So, you [inaudible 00:44:33] in probably the last three or four months, we've sent a lot of data. It's probably making us feel a lot more comfortable about the ability to measure lambs in real time for IMS. And that's exciting all of a sudden, with [inaudible 00:44:50] tracking everything else, our data collection points are just going to grow exponentially.

Kirstie Anderson:

And then my next question is over here on this selling side, your product looks very, very different to the traditional, and particularly the Australian market of what ... I showed that [inaudible 00:45:11] example earlier, and I put it in specifically because it had the words lame, which is absolutely not what your product is. Have you had to do education for want of a better word, with your consumers, about this product?

Kirstie Anderson:

Because what excites me, is if you're selling in the raw form, it's not being cooked where they're not seeing it. It's blatantly obvious it's rosemary around it. How have you approached that?

Tom Bull:

Well I think you can look at who is likely going to pay top dollar. And if you have a look at lamb, as lamb you're increasing in price point, our promissory purchase needs changing. As we get into the 50 dollars a kilo, if you're living in a western suburb of CD and you've only got $300 a week to spend on food for your family of six, you're probably not going to feed them cutlets three times a week.

Tom Bull:

Now as prices go up, we are seeing more young professionals, 30 to 55, buying our product. Now, probably what we're seeing is where we see our product sitting? We see it in top end food service, which is restaurants. But I think more importantly, and I love Professor David Hughes and I always quote it when he talks about the modern consumer, we work with a credit, debit philosophy.

Tom Bull:

During the week we accumulate credits by eating healthy and on the weekend we spend them. And I think that's where we are. It's more of a weekend product. It's nothing you're going to serve to try and impress someone and probably the other thing we're seeing is small portions. You see a lot of the podcasts and what not and even the ones coming out of [inaudible 00:47:02], who we're dealing with and they're talking about the culture in smaller portion sizes, but higher quality.

Tom Bull:

So, all of that goes with that. We don't think it's that really high end, high IMS product, the 12% product which you can see in that photo. We don't think that's something you're going to eat three times a week. We think it's something you're going to have special occasions, entertaining, high end food service. And no different as we eat, so high end [inaudible 00:47:35].

Kirstie Anderson:

Excellent. Must remember to unmute myself. Last slide of questions for you, where do you think that the Australian lamb industry and your business is going to be, let's go 2030 [inaudible 00:47:51] and what are we going to do to get there? What do we need to do?

Tom Bull:

Well I think the biggest thing we talk with our clients, our maternal carcase tripes are actually more important that our terminal tripes. The reason why, the maternal rams you buy in 2020, this year, will still have daughters in the system in 2030. So we tend to ask our clients, what's 2030 going to look like?

Tom Bull:

And we do see a change in ... We certainly see grading, we see ewe based grading, we see IMS grading, we've been seeing that for a while, but the technology is coming now. So I think the first thing we always tells our clients is get your ewe based right. And even our recent ram cells, we have seen big premiums for high production sheep, that also have high IMS.

Tom Bull:

The second thing is, I think we'll see a change in our supply chains. Where beef really changed is they actually started to control the progression of genetics. So wagyu programs, angus programs, where we look say ranges valley. They've got a really good handle on the propinquity to marble of all the steeds that are coming into the system. They know the genetics, they know previous performance and then they'll control those genetics through planned nutritional programs to head an end point.

Tom Bull:

I think we'll start seeing more of that in lamb, rather than ad hoc purchasing. We'll start to see more specialized lambs going onto feed that will have the perpetuity to marble and that will be more integrated top models to achieve target. So I think we're probably likely to see a lot of the changes we have seen and basically saw, [inaudible 00:49:43] beef was beef, a lot was grass fed, sometimes was good, sometimes was bad, there was not grading system, there was not MSA.

Tom Bull:

And really that's where lamb is now. So, as genetics start to increase our ability to marble, as we start to exploit those high end markets worldwide, I think we'll start to see a change in our supply chain, where genetics will be managed through those supply chains in a controlled manner. As opposed to simply, you send your lambs to slaughter, you get data, you come back, you make changes.

Tom Bull:

I think we'll start to see that probably more of [inaudible 00:50:24] coming through. Certainly, consumers, there's no doubt. I think lamb's expensive and that's the sad reality that we are falling out of the weekly meal repertoire of a lot of households in Australia. But, if we want eight dollars a kilo, I think we've got to be happy with that, but that's going to change.

Tom Bull:

So, I do see lamb more event based meals. I do see a real uber premium market opening up and I think a lot of even the wagyu, I remember Richard Norton was him in L.A., he made a really good point that a lot of people don't buy wagyu because they like the taste, they actually buy it for an emotional reason. "Yeah, look at me. I'm successful."

Tom Bull:

So, I think the way our brains will evolve into that uber premium market will certainly change and I think they'll be a lot more segmentation in the market. I still think you'll see a big wack of grass fed, 23 kilo domestic lambs probably measured a little bit better with a little bit better carcase measurement and grading.

Tom Bull:

But I do think we'll see that uber premium market really open up, and really as a [inaudible 00:51:42] producer, we're trying to position our clients that [inaudible 00:51:47] and continue to work on a terminals breeds. And as you can see in some of those photos, you can see some of the work we have done to be market opportunities for our clients [inaudible 00:51:59].

Kirstie Anderson:

So, just while we're on the client, you're explaining a bit to us today about how you're trying to set up the integrated system within Lambpro. Do you want to expand on that about what happens when you, and I'm not going to say the word buy a ram from you, because that may not actually be the case.

Tom Bull:

Yeah, well certainly we're changing our models. This year we've started leasing terminal sires with buy back options, that's really early days. But really it comes in that name, we want our clients we work with to be able to extract more value out of the supply chain, so we actually ... They are getting paid a premium out of market to be able to produce lambs that actually are almost called whites anyway. You got a domestic sort of 40, 45 to 48 kilos and then those lambs will go on trade.

Tom Bull:

So, our models are changing with our long-term clients, ram leasing and certainly trying to get people to target on producing a different maturity patten lamb, which will then go on feed and hit some of those markets. So our business I evolving. It's got a long way to go, but that's where we see the opportunity is working with some key finishes to measure the progression of those genetics. It is certainly a very small part of our business, it's only 6% of our business, but we do see this part taking a [inaudible 00:53:30] terminal market particularly over the next decade.

Kirstie Anderson:

Fantastic. Well, I'm pretty sure that when I go to the next one, Tom and I will get a bit of a break. I will hand the presenter role back to Kate McCue and she's just going to have a look at the questions on [inaudible 00:53:53] but we love questions.

Kate McCue:

So we don't have too many questions, but if you do have a question, just raise your hand or pop it in the chat box, if you want to stick around and ask a question. I might just start the poll as well, for those people who have got to jack off, so if you can give us any feedback that would be terrific.

Kate McCue:

If anyone's got a question just stick your hand up. There's a little hand you can click on there or pop it in the chat box.

Kirstie Anderson:

Well, while people are talking, I really wanted to thank you Tom, for joining us tonight [inaudible 00:54:40] and sharing your insights. The purpose of this series has been to show people the opportunities that are out there and what an amazing industry that we're a part of, and I think that you just rounded off beautifully with what you're doing. And it's such a good demonstration of it's a value chain.

Kirstie Anderson:

You are looking from before conception at that DNA level through to the consumer, and that is absolutely what a value chain is. So, thank you so much for all of your work before tonight, and tonight, and I wish you guys and your team all the best. You don't need luck, because you're creating it yourself. But thanks very much on behalf of Agriculture Victoria and MLA.

Tom Bull:

Thank you very much.

Page last updated: 02 Dec 2024