Last year was a good year for the pork industry. The World Cup in Germany and the long hot summer, with barbecues aplenty, boosted pork sales in both the retail and foodservice sectors in the UK and throughout Europe. The foot-and-mouth crisis in Brazil undoubtedly also helped. This year, it appears the supermarkets are still waiting for the flirtatious weather to show some signs of settling down, as it makes forward forecasting difficult. "Easter has been good, May has been a washout and June has been all over the place," explains Simon Brookes, BPEX's trade sector manager, retail.
Despite the unpredictable weather, the good news is that all pork meat categories are growing their share of space on supermarket shelves. Total shelf space for British fresh pork has gone up by 5% to 75% in the past 12 months (compared with imports) and bacon by 5% to 36%, while ham and sausages have remained static at 34% and 55% respectively.
Total fresh pork sales were £661.7m in the 52 w/e 20 May, 3.3% up on last year, according to data from TNS Superpanel. Similarly, sales of loin roasting joints are up 15% year-on-year. Pork belly sales rose by a staggering 25.2%, but chops and steak sales were down by 5%, which Brookes says is not unexpected, given that there have been fewer promotions on these cuts as tertiary brands have been taken out by supermarkets following pressure from BPEX. This has resulted in a little realigning of the market.
Average pork prices are up by 5% year-on-year, which he says "shows people are prepared to pay more". He also believes this is because consumers are becoming a lot more savvy about where their meat comes from and are questioning retailers. "There will always be 20% of pork meat buyers who are unconcerned about where their meat comes from, but we believe about 80% can be tempted to trade up," says Brookes.
This, he adds, is borne out by TNS data, which shows pork sales are up 3% in value but down in volume by 2%. While processors tend to work on volume, BPEX prefers to see expenditure go up, says Brookes, as the extra money goes to the farmers. "There is good premiumisation in sausages, but a lot more work needs to be done in bacon. Tesco and Sainsbury's have proved it pays dividends." He believes there is also a real opportunity in fresh pork for premium products.
BPEX chairman Stewart Houston is pleased to see that British pork has managed to differentiate itself from its foreign competitors. "The trend towards British has been stepping up. It has not been a big switch to British, but a nice rise in line with increased production. It is good to see that all the major supermarkets are moving towards sourcing British-specific pork, particularly in the premium ranges. Marks & Spencer, Budgens and Waitrose have already done this and the Co-op has followed in their footsteps to become the fourth supermarket to do it."
Morrisons, he adds, has also been supportive, but there is still an issue with the volume of imported product being sold in Somerfield. "We are having discussions on this," he says.
A big challenge facing the meat industry, Houston believes, is the huge hike in animal feed prices. "We estimate these will be in the range of £81m next year, which we will have to recoup from sales." Houston is a pragmatist and believes there will always be room for imports as the British pig industry can only realistically supply 50% of the UK market with domestic product. "What we want to continue to do is increase the volume and value at the premium end against the imported product." He says he will be communicating with his counterparts in Europe to rally around for price rises in Brussels this month.
The good news, he adds, is that pig producers' income is now stable and at a level allowing for reinvestment in improved health and production facilities. But keeping costs down is only one half of the pig production equation; if the meat quality is not good enough, it won't be popular.
So BPEX has launched a scheme, together with the meat quality research team at Bristol University, to help improve the quality of meat. The aim of the project is to work on an individual level with pork processors. The scheme is free, although there will be a cost if any analysis or measurements are required. But Houston warns that there is no slack, so the extra £81m animal feed costs will have to come from the marketplace.
Countries exporting pork to the UK have also benefited from a rise in sales. Imports from the EU rose to 116,736t in the first quarter to March 2007 from 103,228t in the same period last year. Danish exports to the UK increased to 51,220t in the same period from 50,225t in the equivalent period last year. Imports from Germany followed a similar pattern, rising to 15,103t from 10,779t, and imports from the Netherlands were 12,559t this year compared with 12,049t last year. The volume of pork imports increased by 13%, while the value rose 17%, indicating there was an increased proportion of high-value pork cuts imported over the first quarter of 2007.
SENSITIVE TO CHANGES
Tony Fowler, MLC's senior economic analyst, explains: "EU pigmeat imports are sensitive to changes in exchange rates and also to differences in producer prices. Exchange rates are not very different to what they were a year ago, but price differentials have changed. UK producer prices are usually at a premium over average EU levels and this premium increased towards the end of last year. As a result, demand for imports from UK retailers and processors has increased. The majority of the pork imports go into processed products rather than fresh pork."
Fowler adds that pork exports have also shown a small increase. "A significant proportion of, but by no means all, exports are sow meat. Germany and the Netherlands are the main users of this meat, which is aimed at the manufacturing markets. Sow meat exports tend to be driven by supplies, as there is little home demand for it, and sow meat production has been
at relatively high levels over the past few months."
The environmental food miles/animal welfare standards debate has not gone ignored by the UK's pork-producing competitors. The Dutch and the Danes have been outlining their green and animal welfare credentials. "We meet the UK's whole pig welfare specifications and are approved by all the major supermarkets following an independent audit," says Rob Smith, Vion's head of marketing and communications. "We also work closely with the Dutch equivalent of the UK's RSPCA. Vion takes its corporate social responsibilities seriously."
Over the past year, Vion has reduced its gas consumption by 20% in some production facilities and its water consumption in various locations by 40-60%. Smith says: "The Dutch farmers, like the Danes, have been subject to strict environmental controls, particularly nitrate and ammonia emissions."
He believes Vion, which exports 40% fresh pork and 60% bacon to the UK, will continue to see growth. "The outlook is positive for 2007-8."
One of the challenges for the pork industry is getting pork on people's radars, according to Smith. "It is the forgotten meat. We have to engage young shoppers - those in the 20 to 30-year-old age bracket. In terms of people's perception in relation to other meats, it is a cheaper alternative to beef and lamb, and is seen as being old-fashioned, lacking in versatility and requiring cooking skills," he explains. "This is not the responsibility of just one person; it is the responsibility of all stakeholders."
The Danes have steadfastly retained their market share and pig slaughtering for the EU this year - at a predicted 242.2m head - will remain unchanged from last year. Both Germany and the UK remain the Danes' biggest customers within Europe. There is a little change in the mix, with slightly more fresh pork, 51,220t, entering the UK in the first quarter, compared with 50,255t in the same period last year. There have been slight decreases in bacon and ham (down from 24,144t to 22,791t) and processed hams/shoulders (from 3,658t to 2,618t) in the first quarter. "There has been a growth in shipment of fresh pork legs used for manufacture in the past few years," says Danish Bacon & Meat Council marketing director John Howard.
Unlike Vion, the Danes - who sell 85%-90% of their product through the retail trade - continue to aggressively market their product to both the UK consumer and retailers. This year, the Danes spent £1m on cross-channel marketing and advertising campaigns. Like BPEX, they have been always been supportive of country-of-origin labelling. "We are proud of the Danish 'sizzle' and encourage retailers to promote its identity, as we believe it is well-perceived by British consumers," Howard explains.
The move towards organic and free-range pork, which is perceived to offer improved animal welfare, is also being exploited by the Danish. Its sister company Friland, which produces both products for the domestic and overseas market, is seeing demand soar. Waitrose is one of the supermarkets receiving these products.
Pork sales to the foodservice sector are languishing and BPEX has been attempting to change that. At the moment, pork accounts for 5.4% of the total out-of-home market, compared with beef at 51%, according to a BPEX report released in April. "But if you look at sausage, bacon, gammon and ham, you find that very nearly 40% of the market is made up of pig meat product, which shows consumers are prepared to eat pork product, but it's plain pork where they have the problem," says Tony Goodger, trade sector manager, foodservice.
profiting from pork
The report suggests premiumisation, an emphasis on indulgence, sourcing, breed and assurance are key in the profit sector, while pork's potential as a healthy option provides scope when it comes to cost providers. "Chefs are also looking for more kitchen-ready product that will cook through quickly in a convection oven - they're not looking for me-too ready-meals. They want bespoke products," explains Goodger. There have been some inroads into this market with the Chef & Brewer chain introducing pork that is outdoor-reared on its menu throughout its 96 units nationwide.
Mitchells & Butler, which bought the Beefeater chain and is in the process of renaming it Miller & Carter, has introduced pork loin steak, which is keenly priced at £9, the same as chicken but less than beef, says Goodger, who believes more foodservice operators should follow its stance.
One pub chain, he adds, which listed roast loin of pork on the menu, indicating it was reared outdoors, found that it now outsells beef. Most of the processors in the meat sector are simply not considering the foodservice market, Goodger says, and believes processors should be pushing more information about where the pork is sourced and the conditions under which it is reared - whether outdoor or farm-assured, for example.
"There's no real engagement with menu developers. Menus are constructed around the meal solutions that are brought to them, but if processors aren't knocking on the foodservice operators' doors, they're not going to know about them,"
There appear to be significant opportunities for both British producers and their competitors, both in the retail and foodservice sectors, but it is up to them to battle for a bigger slice of the action enjoyed by other red and white meats, which are capitalising on the opportunities pork offers.