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Global wrap with Andrew Cox – July 2020

07 July 2020

Throughout our key Asian markets, it has been encouraging to see customers return to dining establishments. However, apart from quick service restaurants, foodservice sales remain below average and there remains significant uncertainty driven by fears of further COVID-19 spikes and excess supplies of higher priced protein items in some markets.

Retail sales remain strong, albeit with heightened food safety concerns hastening a trend towards buying fresh food from more sophisticated retailers and online channels. Rapid change is even occurring in the most mature of markets such as Japan.

With the global economy now facing recession, what might be next for Australian red meat? It is easy to assume consumer demand will fall as people look to feed their households more economically. Certainly, like any discretionary purchase, we are not entirely recession proof, but there is some cause for optimism. Firstly, food demand tends to be less impacted during a recession than other less vital goods and services – people still need to eat! Thankfully, the diversity we have in markets and different cuts and specifications we can offer global customers means we are not exposed to any one sector of the market.

Our learnings from the past downturn in 2008-9 indicate that whilst many people ‘trade down’ to less expensive cuts of beef and lamb, total expenditure may even increase. For example, fresh meat sales in the US bucked the downward trend during the Global Financial Crisis in 2009, increasing by 4%.

Even those products at the premium end should not necessarily expect a drop in demand – there is strong evidence that as consumers forgo large discretionary purchases (television set, overseas holidays, new car), ‘cheaper luxuries’ such as a trip to the cinema or a premium cut of meat benefit. During the Global Financial Crisis Australian consumers actually increased their purchase of lamb, an item thought to be more of a ‘discretionary choice’ than a staple such as beef, and therefore more exposed to economic downturn.

Furthermore, underlying consumer preferences should not change during a recession, and any lost demand would increase as the economy recovers. One lesson from previous recessions is that brands must continue to actively invest in promotion to avoid coming out of the downturn in an inferior position. Research after the global financial crisis of 2009 showed brands that ‘went dark’ significantly underperformed those who continued their investment. And ‘powerful’ brands tended to recover much faster than average.

The good news for our industry is that in many markets Australian red meat is considered a ‘Power brand’. MLA’s research into consumer perceptions shows that in key markets our ‘brand power’ is extremely strong in the meat category relative to competitors.

Lastly, it has been very encouraging to be in a position to re-open the majority of MLA offices around the globe. As travel restrictions remain, I encourage you to contact our team should you require any support.