Building sustainable value chains that link producers to high-value chilled lamb export markets in China

Summary

Due to export restrictions, V&V Walsh in Western Australia (WA) is the only Australian red meat processing company with an approved license to export chilled lamb to China. This presents an opportunity to develop sustainable value chains for chilled lamb to premium markets in China.

V&V Walsh tested and validated new value propositions and has innovated the chilled lamb value chain to address cost inefficiencies, capability challenges and the lack of a collective lamb supply in WA to meet market demands.

This project identified three different business models to test market opportunities for chilled lamb in China: transactional, integrated and niche models. Commercial testing and sales data associated with these business models has provided an additional $54 million in revenue to the Australia sheep industry.

Objectives

This project aimed to demonstrate how new integrated value chains that target high value market opportunities should be designed and implemented. This involves the development of new product opportunities with the objective of increasing profitability and returns for the industry.

Key findings

Three business models were developed to test the opportunities of exporting chilled lamb to China:

• The transactional model is based on the supply of chilled whole lamb carcases but has a low profit margin.
• Integrated models combine online e-commerce and offline supermarkets with consumer data, but are price sensitive and slow to acknowledge the value proposition for Australian chilled lamb.
• Niche models supply direct to high net worth Chinese consumers via ecommerce platforms and create sustainable margins while maintaining a lower sell price compared to retail.

The development of a sustainable export value chain to China requires;

• innovation and capability development through the whole value chain
• a sustainable export strategy which can design and test multiple business models in different Chinese cities, markets and sales channels
• inter-connection between the buy, make and sell functions of an export business.

Benefits to industry

Alternate supply chain models and the development of more optimal supply chain practices is contributing to increased revenue for the Australian sheep industry.

The additional demand for chilled lamb is also creating extra revenue for WA lamb producers. This project alone has generated an additional $54 million revenue for the sheep industry, mostly at the farm gate.

MLA action

MLA is applying the lessons learned from this project to other potential value chains and supply development opportunities across the Australian red meat industry, such as processing companies, livestock producers and other value chain stakeholders.

Future research

It is recommended that research continues into identifying novel value chain design and management tools and models that present feasible applications to create new value within red meat value chains. This would include further insights into high value market opportunities, alternate supply chain thinking and models and identifying the behaviours from suppliers and buyers to develop optimal supply chain practices.