P.PIP.5017 - Creating and sharing unrealised value through the supply chain (Value Based Marketing)
Did you know that there are value creation opportunities from a product-value based trading mechanisms, noting that there are significant implementation challenges from increased complexity?
| Project start date: | 14 May 2019 |
| Project end date: | 11 August 2022 |
| Publication date: | 03 May 2024 |
| Project status: | Completed |
| Livestock species: | Grain-fed Cattle, Grass-fed Cattle |
| Relevant regions: | National, Cold wet, Dry, Mediterranean, Tropical warm season wet, Sub-tropical moist, Sub-tropical sub-humid, Temperate, Temperate sub-humid, Tropical Moist, Tropical wet |
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Summary
This project facilitated a suite of R&D projects under there themes:
1. Value based marketing
2. Re-branding according to eating quality
3. Value adding to enhance eating quality and consumer value.
Objectives
The project objectives were:
1. Finalise a working model for a value based marketing program.
2. Pilot a key Value Based Marketing program with key producer groups.
3. Review current eating quality based programs and conduct further research to enhance the developed innovative branding program.
4. Conduct further research and development to develop an innovative value adding program that improves eating quality and consumer preference.
5. Develop the people and systems capability within the processor and selected producers and customers to implement and support a value based marketing program.
Key findings
Key messages arising from the project are:
1. Industry adoption of transparent Value based Marketing (VBM) and value based livestock pricing (VBP) systems could drive significant industry change and underpin future viability.
2. There is a huge range of value within cattle groups (several hundred $/head) that are visually similar and currently paid on common 'average values'.
3. These differences reflect both lean meat yield and eating quality variances that relate to product weight sold and consumer value.
4. Lean meat kg should be the preferred unit of payment weight and reporting as it provides a consistent result across multiple product specifications.
5. Processor plant boning run or brand category is a preferred pricing mechanism as it directly relates to the value achieved for product sold.
6. The value differences tend to be more weighted to yield variation at lower eating quality levels and to eating quality performance at higher levels but both aspects remain critically important.
7. Well-developed consumer or customer focused brands utilising an eating quality base in addition to provenance criteria should provide a clear description of consumer value and eating experience.
8. The matching of eating quality brands to an eating quality experience or meal occasion can supplant cut description reducing complexity and simplifying purchase specification.
9. Adoption of a usage terminology can increase flexibility within the plant through flexible cut allocation and represents a change from the customer requiring expert technical product knowledge to the company becoming the expert knowledge source able to precisely meet a customer requirement.
10. Additional revenue can be achieved from separating muscles of differing eating quality within traditional multi-muscle primal cuts.
11. There is outstanding opportunity to increase carcase value through further value adding processes that raise eating quality through enhancement, packaging or cooking procedures.
Benefits to industry
This project has investigated and demonstrated a number of value-creation opportunities across areas including value base marketing, improved product quality-based market allocation and value-adding lower quality cuts.
MLA action
MLA will continue to strategically invest through internal programs and industry partnerships as opportunities arise to progress the many areas reported.
Future research
The project identified numerous opportunities across areas including improved eating quality based cut-to-market allocation, value adding of currently low-value cuts, packaging and transitioning industry to value-based (cut weight x eating quality) pricing. All areas provide further R&D opportunities, but in particular developing and piloting a value based pricing model within a supply chain to understand the change management required to successfully change the way livestock are traded.
More information
| Project manager: | Richard Apps |
| Contact email: | reports@mla.com.au |
| Primary researcher: | TEYS AUSTRALIA PTY LTD. |
