Product Quality vs. Differentiation

[kato]

To an extent they can, but they will fatten up pretty quick, and the size may not be there. That can lead to discounts under the current packer system.

We background calves, and you can soon see the ones that would shine on grass finishing. We've really got to watch how we feed those ones in the winter, or the grass market won't want them. They say they're too fat.

At the moment, in our present system, the premiums are not there for that type of calves, but I expect it will be in the future.

I guess if you were marketing your own beef it wouldn't be such an issue, though.

[cakadu]

One issue that comes up with selling your own product i.e. direct marketing is pricing and dealing with the consumer mindset. To give you an example, we market our whole lambs for $4.50/lb. If they want specific cuts i.e. loin chops or a leg, we charge them a different price. Where some customers get stuck is on paying $4.50/lb for ground/stew/shanks. It takes some of them some time thinking to understand that they are also getting the loin, leg and rack for that price as well. Our other problem is that people don't realize how small a lamb carcass actually is - they still equate it to a cow - and that if they want certain cuts, they can't have others.

Customers need to know what cuts are available and how they will be packaged, priced etc. You may sell your roasts at 4/5 lbs and someone may want all 2 lb roasts. That means more expense - how are you going to price it?

You as the seller have to have a good grasp of all of this so that you can explain it to your customer who doesn't have much, if any, grasp at all. The difference between rail and finished is one that must be understood by the customer and by you. Are you going to charge by the animal, on the rail or by the finished cut?

We've been doing this a long while, have made some mistakes and learned from them and have learned from others as well. Granted, we have a lot smaller carcass to deal with, but many of the issues are similar.

What are you going to do with the cuts that no one really wants? There is only so much ground, chuck, stew etc. that people want to have, so what are you going to do with the items that don't sell as well?

What will make your product different from your neighbor's? Many more are going to be trying the direct marketing avenue - what are you going to do that will make you stand out and will make people want to buy your specific product?

There is a need to have a good handle on this before the first animal even goes to slaughter, unless you're the type that doesn't mind learning as you go and can afford to "eat" the mistakes. ;-)

[nerves]

Cakadu I believe you are exactly right. We learned some things the hard way to make sure you sell quality or it will bite you in the bite.

[ALICIA]

RP KAISER - Never was a more true statment. Match your activity to you consumption and you will live as long as your supposed to live.

[rsomer]

smcgrath76 : Getting back to your question "how we differentiate our Canadian product in the global marketplace"

We can look to Australia and Aus Meat to see how they did it. Aus Meats mission is "To provide and ensure the integrity of relevant industry standards on behalf of the Australian Meat & Livestock industry " See http://www.ausmeat.com.au/standards/

The AUS-MEAT Standards Group is committed to providing a quality service that meets the needs of both internal & external customers, at all times.
Our quality system will be maintained to ensure the requirements of I.S.O. 9001 are met.
We will use recognised management tools, including I.S.O. certification, to achieve our goals as defined in the Mission Statement and to improve both individual and Group performance. Other goals of AUS-MEAT Standards Group are:
· To establish AUS-MEAT Standards Group as a vital and integral group within the Australian Meat & Livestock industry by improving and ensuring the integrity of relevant industry standards.
· To provide all our customers (external or within AUS-MEAT) with quality service in all interactions.
· To be the recognised authority for relevant industry standards relating to meat & livestock in Australia.
· To maintain I.S.O. certification and to use I.S.O. techniques to streamline and improve our performance as individuals and as a Group.
· To use Industry resources in an efficient manner to meet industry's needs.


I think it is not a given that Canada should differentiate its product in international markets. Certainly that is not the way our industry is headed as we strive to integrate and harmonize our industry with the U.S. to create a North American industry. Canada’s beef herd is about ½ Australia’s and our industry is not independent as the Australian industry is. I question whether Canada can even differentiate its product domestically given our NAFTA commitments much less successfully differentiate Canadian beef globally.

[smcgrath76]

Interesting discussion, and a very interesting point about our trade and other commitments affecting an otherwise simple industry.
I had a chance to visit Aus last year and visited with many of their industry players including Aus Meat and ABRI.
What was truly interesting was their approach to putting funding into industry so that it was trade green (did not affect trading agreements, and was not a subsidy).
There was a tremendous budget for research and industry support organizations such as Aus Meat. Perhaps less than our budgets on a per cow basis, but the money was really focused on producing and marketing of beef for and into different markets.

[cakadu]

Yes, rsomer, we need to be aware of what agreements we have entered into and ensure that we honor them (no matter how they appear to us now versus when we signed on). I do believe it was yourself that pointed out a while back that Australia had signed an agreement with the US which cannot bode well for our "integrated north american market".

Having said that though, I do believe that we need the leadership, infrastructure and resources to expand our industry and look after ourselves and our own interests FIRST. We have witnessed first hand just how much the US wants to play fair. Imagine for a moment if we would have had more cases of BSE show up here (God forbid) - how long do you think it would have been before the US let go of the notion of a north american/integrated beef market. We have watched over the last 15 months how that has eroded - political speeches and assurances aside. The US election is going to play a big part in this. While I don't want to see Bush get back in, if Kerry gets in we will think that the protectionism proferred by Bush was his willingness to work with us.

We look to our leaders to see us through these things and while this is something that has never occured before, we need vision, ideas and the willingness to take risks beyond what our agreements oblige us to do. Mr. McGrath has hit on something very important and I don't think we should overlook the significance of it.

[cakadu]

While it is fine to talk of Product Quality and differentiation, the bottom line is "We sell very little Canadian Beef". What we do do, is sell live animals to two multinational companies, advertize for them with check off dollars, and then let them look after the quality and differentiation of the beef product. We have no control over how these companies market their beef.

For over 10 years now, volume has dictated the process of kill, box, and freeze. Consumers can hardly beleive the difference in quality when buying this farm raised, fresh, aged beef that BSE have forced us into. Even good old Grant Hirshe's cull bull program seems to be bringing customers back for more.
Who's grand idea was it to add vitamin E to the diets of finishing cattle (at the feeders expense) to deceive the consumer into quality?
We can talk all we want about making decisions, but until we take back the packing industry, and hire some new sales people, all it will ever be is talk.
Laugh all you want about niche markets; we have a niche market called the Canadian consumer, who needs to be looked after first. That niche market is huge, and yearning for respect. Volume, capacity and size, has, and always will, detracted from the quality our consumers deserve.

[rsomer]

Yes, but isn’t the notion of a Canadian beef industry just a dream. We gave away our industry when we allowed Cargill and Tyson to come in and take over. Now we see the advantages of delivering a differentiated Canadian beef product globally but it is a little late, isn’t it?

I have noticed how Australia targets beef for different markets around the world. Our industry targets beef for the U.S. market. And what is wrong with that, really?

I noticed your comments that we need to look after our interests first. While I understand what you are saying I am sure you know that we need to be looking after the interests of our markets first. And that market is the U.S. even if, at times, we wish it were not so.

The U.S. is the world’s number one importer of beef, and they are right next door. We already have preferential trade access to the U.S. market, something Australia can only hope to gain in another 18 years. We have targeted our product for a specific marketplace but we seem to want to take that market for granted and look for greener grass across the sea. I look at the U.S. ownership of our beef industry and wonder how we can even consider marketing a differentiated Canadian beef product into Asia.

I am going to throw out something wild and crazy to consider here. Correct me if I am wrong but isn’t there a direct connection between the make of vehicles being driven in a country and the markets that country ships its beef to. We as Canadians drive American vehicles. I am willing to bet that in Australia they drive Japanese vehicles. I am going to venture a guess that in Brazil and Argentina you will see more German and European cars and trucks. My point is that global trade in beef has a lot more to do with trading relationships than the actual beef product and although exporting countries will fine tune their beef product offering for target markets like Japan and Europe that in itself will not gain access into the foreign marketplace if other bilateral trade is not already happening.

Bottom line, we have a differentiated beef product, specifically designed for the quality needs of the American marketplace which is our international market, a market we need to focus on, grow and protect jealously.

[rsomer]

Very good arguements rsomer. How many more fourteen month periods can we survive while our American cousins ignore our pleas?

[cakadu]

At this particular point in time, what are we jealously protecting? It seems to me that we are standing at the door, pounding on it hoping that they take notice of us at some point in time.

How has the way we have been doing things been working for us? We gave in to the american demands for dropping anaplasmosis and blue tongue testing in the hope that it would lead to better things for us. How has that decision worked for us?

Australians drive Japanese vehicles because it is likely cheaper to get them there than from the US, they are built right-hand drive, which the american vehicles aren't or they have to be converted over once they are there.

Your arguments are valid rsomer, but they also very much protect the status quo. I agree wholeheartedly that the industry went down hill when producers gave up their share of the value in the animals they were growing.

Our leaders need to look outside the box and push for what is beneficial for us. If it means that we get a better share of the pie then I'm all for it. Just because we do better, doesn't mean that someone i.e. the Americans have to loose.

We as Canadians seem to want to do what is right for everyone and ignore what is right for us. If we don't look after ourselves, no one else will.

I went to university with a lady from Jamaica and she could not believe how complacent we were. She said that if they acted like that in Jamaica they would get no where. Isn't it time we stood up for ourselves?

[rsomer]

Lots of interesting points...about Jamaica and looking after ourselves, I do not see Australia using a hard sell on any of its customers. The U.S., yes they play hard ball, they probably can because of their economic and political might. Looking at Canada and the U.S. opening our borders, should we be using NAFTA panels and WTO or cooperating with the U.S. and playing along, much like we have been? Time will tell.

Definately the U.S. would be taking a different approach with Canada if the shoe were on the other foot. Most likely if the U.S. had the first BSE cow, normal trade with Canada would have resumed by now. Still Canada is not the U.S. and there is no point in pretending we are a world super power.

I note that countries do not deal with one another on a strictly customer/supplier relationship basis. Therefore it would seem that beef does not trade on a strictly differentiated product quality, meeting customer needs basis either. Otherwise Canadian beef would have had about 50% or more of the Japanese market instead of the Japanese buying Canadian beef in a box stamped USDA inspected.

[tojo]

posted this website to another forum, but in reading on to this forum it more readily fits the topic:
http://www.farmcentre.com/english/cbc/index.htm?id=292
all part of a very interesting discussion.......hope to see more comments

[tojo]

Thanks for the tip tojo, looks like a lot of people on the same page. Just need some action.