Unearthing value in the agri supply chain
Tuesday January 15, 2019
For the agribusiness sector, time and cost constraints often prove a major inhibitor to change. Similarly, looking at elements of the supply chain in isolation can lead to missed opportunities. But as EAT Group Director GAVIN EVANS explains, there is significant value in identifying and addressing the gaps between existing supply chains and evolving consumer demands.
When demand outweighs supply, value typically increases, especially when you step outside the commodity cycle.
Of course, the equation is a little more complicated with a host of external factors exerting influences on the supply chain, but on the whole, fortunes can be made or lost depending on how quickly and accurately people can respond to the waxes and wanes in demand.
The issue for agribusiness is that generally speaking, change is a slow and costly process.
Making wholesale changes can obviously involve significant time and cost, so it’s typically not possible for producers to switch out one crop or type of livestock for another just to keep up with the flavour of the day.
However, the shifts are often subtle as consumer demands tend to go through a gradual evolution rather than abrupt and unexpected about-turns.
Staying attuned to the evolution in consumer preferences and evolving with it is where valuable opportunities can be found in agribusiness.
At the moment, we’re seeing three evolutionary changes occurring in consumer habits that are impacting supply chains globally.
That includes a growing focus on personal health and wellbeing, followed by greater environmental consciousness, and greater attention to food security and proof of origin.
The outcomes of these are an increasing demand for meat alternatives, organic or “free-from” options, ethically sourced produce, and a need to provide consumers with reliable means to track products back to their source.
There’s also significant urbanisation and westernisation of the rapidly growing middle classes throughout Asia, driving greater demand for premium produce.
The good news for Australia is that we’re geographically and politically in a prime position to capitalise on these factors. We already have a global reputation for being clean, premium producers and are seeing a significant focus on improving sustainable farming practices.
We are also getting better – in terms of available technologies, value-adding processes, transport infrastructure and a reduction in red tape – at controlling produce from its source to the end market. This means we can guarantee the legitimacy of what we’re providing and protect our brand value with overseas markets.
The growth in online commerce must also be embraced. It has led to greater expectations among consumers of being able to buy what they want, when they want and to receive it quickly.
That obviously presents challenges when it comes to perishable goods, as the time to reach end consumers and the handling procedures employed across the supply chain are critical to maintaining quality.
It’s all achievable as long as there is collaboration, cooperation and control at each stage in the supply chain.
That includes primary producers, manufacturers, legislators and regulators, as well as those responsible for purchasing, transporting and delivering across international borders.
These considerations have been the drivers for EAT Group to identify and develop major projects such as King Island Beef and Australian Plant Proteins.
In both cases, we looked at consumer demands and worked back to the very beginning to determine where we could add value at each step in the supply chain.
For King Island Beef, we already had the elements required for sourcing premium produce given the unique and favourable growing conditions that King Island in the Bass Strait offers. We saw an opportunity to introduce traceability technology to fully leverage the provenance story behind this beautiful and pristine location and the high quality Angus beef produced by local farmers.
We identified opportunities to improve handling, processing and packaging, while the decision to develop a purpose-built facility on the island was made to relieve stress on livestock from live shipping, and reduce the time to market by bringing the entire manufacturing and packaging process in-house.
The benefits across the supply chain are invaluable. Farmers reduce costs thanks to improved logistics to move livestock to the local processing facility, while we will ship packaged beef in cold storage direct from the island to reach overseas restaurants and hotels within a matter of days rather than weeks of livestock leaving the farm gate.
Australian Plant Proteins is commercialising a new process to manufacture high-grade protein powder from legumes and pulses, particularly faba beans.
It was a case of addressing the growing global demand for alternative, palatable sources of plant protein by utilising common but under-utilised crops.
Faba beans, or broad beans, are commonly used as a rotational crop by wheat farmers to return nitrogen to the soil, which means they are in abundant supply in Australia’s wheat-growing regions.
But there hasn’t been a strong market for second-grade stock, which is often weather affected, so it is often used for stock feed or returned to the ground before the next wheat crop is sown.
Through our research, we identified a process to extract greater than 85 per cent protein content in the form of a powder / isolate that has a very favourable taste profile and low allergen properties, so it can be used as meat alternatives, for fitness shakes, health supplements and for various other commercial recipes looking for plant based protein.
The bonus is that it provides a secondary income stream for wheat growers who previously may not have seen any commercial value. In turn, that drives more interest in regular crop rotation and less reliance on fertilisers.
Ultimately, as well as providing major new export opportunities, the value extends back down the supply chain to provide long-term, sustainable supply contracts and viable succession opportunities for Australian farming families.
Both are examples of the key drivers behind EAT Group’s investment and development approach. It’s about identifying consumer demand for premium, high quality products and looking for ways to improve the effectiveness of existing supply chains so farmers committing significant capital, time and resources can get sustainable rewards for that effort.