If My Business Was a Pig Farm...

Professor David Hughes of Imperial College in London posed this question as the title of his presentation at the first National Knowledge Transfer Event organised in the UK by BPEX. Jackie Linden, editor of ThePigSite, reports on the views of the Emeritus Professor of Food Marketing's views on the future of the pig industry.
calendar icon 3 April 2009
clock icon 5 minute read

Professor Hughes opened his presentation to the audience of oe hundred leading UK pig producers at the BPEX event 'Change for Success' in Stamford on 18 March by asking "What do people value? And what will people pay a premium for?"

He went on to explain that pork is the world's favourite meat in terms of total consumption. In the UK, pork consumption has been steady for the last decade or so, and it lies behind chicken. About half of the bacon consumed in the UK is imported.

"We're going to be OK regarding demand but growth will come only from increasing population growth. Demand is not rocketing," he said.

Professor Hughes sees pork in competition with chicken and fish, which both score more highly in terms of feed efficiency than pig meat, and that will be important when feed ingredients prices are high.

His main concern about demand is that consumer surveys reveal how pork consumption is higher among traditional (i.e. older) consumers who tend to be more price-sensitive. This is a historical problem with pork marketing, he said.

"Every time I see a hearse go by, I think - there goes another fresh pork consumer!"

Drawing on his experience from the soft fruit business, Professor Hughes emphasised the vital importance of comparing one's own business with others in terms of the bottom line and its strengths and weaknesses, e.g. cost control, marketing management. The comparisons should be made with other local pig producers, as well as those in Europe and in low-cost countries like Brazil, and with other protein industries that compete for what he called 'centre of the plate' products. These comparisons are a vital starting point to achieve change and success, he said.

Looking at figures comparing total production costs in the UK with other countries in 2007, it is clear that Brazil and Canada had a significant advantage with their much lower production costs per unit weight of pig meat. "The UK cannot be a low-cost producer," he said.

The first step on the alternative road to success needs analysis of the value chain to identify how to get closer to the consumer. Ideally, the chain should be short, fast, transparent, seamless and collaborative. Too often, it is complex, price-driven, confrontational, disjointed and opaque, said Professor Hughes.

But he cited an example, showing how one producer's pack describes how the product comes from superior pigs with superior lifestyles - happy pigs, traditional breeds, free-range, GM-free and a quality product.

""Let's forget about exchange rates - we're not low-cost producers."

But this approach is not for everyone, said Professor Hughes. The present economic difficulties have changed shoppers' strategies as they go for less premium stores, foods and brands, and tend to cook from scratch rather than choosing prepared dishes. This situation may continue until 2011, and producers will find it hard to explain why cash-strapped consumers have to pay more for their products, explained Professor Hughes.

Organic eggs had achieved a share of up to 20 per cent of the UK market but all organic brands are likely to struggle as the recession deepens, he predicts.

In his Value-Added Challenge, Professor Hughes selected six ways to add value:

  • optimise scale, technology and management on the farm
  • focus on value-driven products that earn higher margins, e.g. special feed, free-range, omega-3
  • look for horizontal partners to gain scale and add critical mass. In the UK particularly, the supermarkets are all-powerful, with just six retailers controlling 80 per cent of the food market, and there will be fewer larger supermarkets in future.
  • move along the value chain from being an ingredient provider towards final customer contact.
  • identify the highest value supply chains to the consumer and work out what it takes to penetrate them, and
  • think 'value chain' by building in customer value and removing non-value-adding costs.

"If we're premium product producers, in the next few years, we'll have to do better at persuading people to pay a higher price."

All this requires strong leadership, asserted Professor Hughes, but it gives collective strength in the market place.

He listed the principal characteristics of a twenty-first century meat and livestock farm as:

  • one with a five-year vision and the strategy for getting there
  • staff who share the vision
  • profile as a food company (rather than a pig meat producer)
  • volume and value growth
  • operational excellence
  • outstanding supplier and customer relations.

"We all want a better world," concluded Professor Hughes. "Consumers want it better for themselves - regarding their well-being and how they feel - better for the world, e.g. greener and Fair Trade, and they want better animal welfare."

On the positive side, UK consumers are beginning to gain an understanding of where their food comes from and the differences between breeds and farming systems so in the long term, Professor Hughes sees a good future for the UK pig industry. In the meantime, though, times will be tough, he warned.

Further Reading

- You can view other presentations from Change for Success by clicking here.

March 2009

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