Nan-Dirk Mulder, Senior Analyst Animal Proteins for Rabobank, The Netherlands, paints the contours of the current state of affairs in the meat industry. Let’s Meat had the pleasure of asking him a few questions about the global meat sector.
From Global To Local
What should we expect in terms of global developments in meat and animal proteins during the next five to ten years? Mulder expects the market to expand. “Though there is a slight decline due to the unavoidable impact of Covid-19, that impact is not the same for the entire meat industry and it will not last forever. We see future developments occur in three stages. Initially, the market will slowly begin to recover. In the next stage, we will start to have more control over the virus. However, we will at the same time begin to feel the economic impact of the same crisis that we are beginning to transcend. In the third stage – and here we are talking post-Covid-19 – the markets will fully recover. Eventually, we will see a period of growth in both production and consumption of 15 to 20%.” This means an average annual growth of 1.5%. We should realize that not all kinds of meat will perform as well, warns Mulder. Chicken and egg, for instance, will grow more than 2% while pork will underperform. Poultry is the number one protein because it is efficient and affordable. It also knows fewer cultural limitations such as beef in India and pork in Islamic countries. Moreover, CO2 emissions could become a problem for beef and pork when reduction of emissions becomes part of official policy. Efficient poultry farms will then become important for the climate. “However,” says Mulder, “there is, at the same time, a trend diametrically opposed to that of environmental concerns. Animal-friendly policies, increasingly important in the West, could also become part of the agenda of developing economies. Such policies demand extensive livestock farming. It’s an ambiguity in the meat industry that is not going to go away for the foreseeable future. However, in all of this, efficiency continues to be of importance, because both animal-friendly farming and sustainability are pursued with profit in mind. This also explains why these issues loom large in the West. In this mature market, growth is possible through added-value and that is what sustainability and animal-friendly farming are all about in the end.”
Over the next 10 years, we will see a period of
growth of 15 tot 20% in both production and
consumption. The largest share of that growth
will occur in emerging markets.
“Perhaps even more important than the differences in performance of various kinds of meat is the regional difference in growth over the next ten years. Europe will only see an expansion of just more than 1% and the USA around 1%. By far, the largest share (around 85%) of the projected 20% growth will take place in emerging markets. Absorbing 50% to 60% of that 20%, Asia is where many of these developments will play out.” There is, however, a bottleneck for Asia in the form of the supply of animal feed. Asia doesn’t have the resources to meet that growth so the question is how that growth is going to take shape. Growth, however, is bound to happen in these developing markets because the standard of living is improving and with it consumers’ disposable income. Improvements in production methods are following suit. One also needs to look at the entire chain from the production of grain to animal feed to meat product and ask yourself two questions: Where is animal feed being produced? And Where does the meat production take place?
“Until recently, we thought that meat was going to be produced mainly in countries with efficient means of production. Reality has shown, however, that countries do not like to be dependent. Saudi Arabia, for instance, has invested heavily in meat production. Meat production is increasingly organized locally. The trend is from global to local. Until recently, large companies produced meat in central hubs for the global market, Now they understand that this needs to be accomplished locally. Particularly the pork sector will notice a decreasing demand from China. Even though China currently purchases large quantities of pork due to ASF, the expectation is that the country will recover from that crisis within three years. Especially when it comes to pork, so important for Chinese consumption, the country does not want to be dependent on external sources. This means less demand and lower prices. Added to that is the fact that the European consumer is becoming less interested in pork.”
Of course, the global pork trade will not disappear,” assures Mulder, “but the production of pork in Northwestern Europe will not increase and its share within a growing global market will shrink. I’m expecting about 13 to 14%. In the future, you will have to produce locally if you want to have access to a local market. In a way, this is good because it means you are close to your customer. Despite all this, European pork will still be exported to China because the demand for high-quality products will continue to exist. Opportunities for Europe need to be found precisely here, in the supply of added value in products like salamis and chorizos.”
Unlike meat production, the production of animal feed will continue to be organized globally. Says Mulder: “One condition is that local authorities continue to allow this. There is some uncertainty here. Europe, for instance, prefers to produce more locally with a resulting impact on cost. Opportunities are found mostly in the United States and Australia.”
Western Trends Worldwide?
“Transparency from farm to table becomes increasingly important,” agrees Mulder. “This brings us to the social issues of food safety and animal welfare that are particularly relevant in Western markets. Do not be mistaken, however, emerging markets are also increasingly affected by these themes. People are often not aware that “online” is of great influence here. On the one hand, transparency is on the agenda because the consumer considers this increasingly important. On the other hand, however, transparency is fostered by companies increasingly using new technologies such as blockchain and big data to offer a fair product. They use the internet to offer consumers transparency about origin as well as the path the product has traveled. In other words, the match between online and new technologies aids companies to add value to their products. This way, social issues become part of the marketing process itself.”
Online, new technologies and immediate availability of exhaustive product information for the consumer lead to an entirely new dynamic that demands a different mentality of all stakeholders. “I see an interplay of three parties. You have governments who, based on growing public awareness, initiate more regulations concerning animal welfare utilizing labels. A second party is formed by the retail chains for whom sustainability has become an important issue. They can use ranking systems. The third-party consists of independent companies that use a high level of transparency as a marketing tool.”
The social issues of food
safety and animal welfare that
characterize the West will also
become increasingly important
in emerging markets.
Mulder emphasizes once again the importance of emerging markets in this trend: “Naturally, the emphasis on transparency starts in the West but ultimately emerging markets will possibly move even faster because they are already changing and have become adaptive. The trend will fit in perfectly in the already established practice of ordering online that currently exists in certain countries in Asia. Blockchain, for instance, could be linked very easily to home delivery. It could even be that in countries like India, where the supermarket concept has remained underdeveloped until now, the supermarket will never take off because of the emergence of home delivery.”
“Food safety is still a weak link in the emerging markets of Asia. Supermarkets there do not yet have the power that they have in the West and are therefore not able to demand changes in food safety,” explains Mulder. “It is very well possible, however, that brands will thrive in these markets making use of emerging technologies. This may be amplified by growing consumer expectations concerning animal welfare, food safety, the use of antibiotics, etc. These brands increasingly make their demands felt in emerging markets with changed policies as a result.” More developments deserve attention, according to Mulder. One is the increasing trend of working from home. The catering industry will feel the impact while supermarkets will benefit from this. Lastly, Mulder touches on the rumor one hears in the market now and then that plant-based proteins would be a threat to animal proteins. With a mere 0.5% share in the global protein market, plant-based proteins are not at all a threat, however, but rather part of a strategy that strives to widen the product offerings.