New Retail Mechanism for Sheep Farming -- New Business Opportunities

New Retail Mechanism for Sheep Farming -- New Business Opportunities

Chia-Yuan Lu(China Productivity Center Smart Agriculture Promotion Department)

Background 1--Dumping of Low-priced Imported Mutton

In the trend of globalization, countries around the world are actively accelerating the process of trade liberalization. Through Free Trade Agreements (FTA) or Economic Partnership Agreements (EPA), regional economic integration has been strengthened to lower investment barriers to open economic free markets to boost the economy. ROC (Taiwan) has not spared any effort in this regard. Most countries in the regional economic integration agreements include the market entry and tariff reduction of livestock products in the agenda of negotiation. Because of the low import tariffs, the import of mutton in a free competition environment has been growing almost every year, at NT1.2 billion per year, accounting for about 83% of the market of mutton (NT1.5 billion in total). Imported lamb and mutton are widely used in restaurants and producers of packaged meat. This has certainly caused pressure on the local livestock industry chain. An important challenge faced by the local enterprises is to adopt new business models to provide consumers with more high-quality products. For this purpose, it is necessary to upgrade domestic agricultural production technology and extend the value industry chain, and adjust the industrial structure to develop innovated marketing channels.

Most mutton products in the market are of sheep imported from New Zealand and Australia. The price is low, but the meat often has a strong unpleasant smell and taste. A lot of spices and sauces are usually used for seasoning so the true flavor of the meat hardly remains. With the stereotypes of mutton having heavy smell and mediocre meat quality, the average mutton consumption is less than 1 kilogram per person per year in Taiwan (survey by Meat & Livestock Australia, MLA). Compared with imported mutton, domestic lamb and mutton are more tender and without smell. Among the sheep species in Taiwan, Nubian and Boer mixed wethers have the best meat quality. The small amount and high price, however, have made it hard to popularize in the market. Some special parts like T-bone lamb chops are welcomed, but rare and much more expensive than average products. The other parts are not that popular and not helpful for business development.

Background 2—Seasonal Consumption Habits of Mutton

In the 1990s, the trend of mutton hot spot started and the demand for mutton rose sharply and led to a flourishing market. The climate change and the resulted higher temperature in recent years, however, have changed the market and the condition of oversupply has emerged. In terms of the consumption habits and substantial effects, mutton has a distinct image as a winter tonic. Chinese people believe in the effect of mutton as a tonic in the winter so they eat more lamb and mutton in autumn and winter. The trade volume of mutton from October to March accounts for 70% of that of the whole year. The sharp difference between the high and low seasons has resulted in the low efficiency in the use of domestic facilities of transportation, processing and marketing. Information from the Central Weather Bureau shows that the average yearly temperature recorded at 13 stations in Taiwan’s flat land has risen to 20.48 degrees Celsius, a record high in 72 years. The shortened winter also directly impacts the business of mutton stores and restaurants. An important task for the business operators is to reform the retail model and overturn the stereotype that mutton is suitable for enjoyment only in hotpots in winter. Consumers should be encouraged to take mutton in different forms in all seasons. Some restaurants have developed mutton pots with vegetable soup in place of the strongly spiced herb-based soup. It is fresh and delicious, even better presenting the high meat quality of fresh domestic mutton. A drastic change is needed for the deep-rooted concept of winter food tonic.

New Retail Opportunities for the Domestic Sheep Farming Industry

1.Certification mark system for product differentiation

Many small farmers have joined the sheep farming industry. In response to the recent industrial difficulties and the impact of globalization, the development and vitalization of the industry would require higher market reach and consumer acceptance. For a long time, the sheep farmers’ sales model has been to send their sheep to the auction market, where the prices fluctuate a lot compared with that of retail sales. Then the sheep were sent by the wholesalers to the slaughterhouse, and finally the mutton was sent to meat shops and restaurants. The end consumers receive the product after a series of transactions but, at this time, it is impossible to know the origin of the mutton. In order to ensure the quality of the mutton products, the Goat Farmer Association ROC has continuously been promoting the system of certification for the domestic mutton. More and more consumers are also beginning to be aware of the origin of the food. In addition to the certification system, domestic mutton producers also started to adopt the traceability mechanism. These efforts are helpful to the sound development of the domestic mutton retail business.

2.Vertical Integration of Supply and Demand—The Power of Brands

A vertical line of cooperation is developed between the farms, marketing channels, and restaurants to stabilize the production and sales, expand the overall consumer market, and build a sustainable value system. The future mutton market will not be limited to that of the traditional markets and the mutton hot pot restaurants. New cutting specifications are developed so mutton can enter home cooking. Consumers can be taught the recipes and the nutritional value of different parts, so the mutton of all parts can be fully used. And the farm operators can be free from the stereotyped understanding of the market. Brand management and channel marketing can be exercised with the standardized product parts specification to develop the target market. For example, as a pioneer in adopting the traceability system, Jing Chuan Domestic Meat Co., Ltd., has been making investment in branding and marketing. The brand of "December" is used for marketing in organic supermarket chains and major e-commerce platforms (such as the “Wonderful Food”), breaking the stereotype of the traditional auction channels and consumers' ignorance of the origin of the mutton they purchase. The innovated marketing channels and the traceability system have shortened the distance from the consumers. Many domestic mutton producers are promoting mutton recipes through Internet celebrities to change the dietary concepts of the consumers so they are more willing to try domestic mutton. Strategies adopted include cuisine development, online channels, marketing exposure, joint development with restaurants of creative recipes, and cooperation with marketing channels to present exquisite New Year dishes such as French stewed lamb shank. These diverse and convenient sales channels make tasty domestic mutton easily available to the consumers.

Expand and Satisfy Serviceable Consumer Groups and Channels

As a result of the aging society and the growth of the size of the middle class and the elderly population, consumers' demand for food packaging is mainly that of safety, convenience, and ease of use. Therefore, with an adequate processing and packaging process, the freshness and shelf time of the food can be extended. For example, the use of skin packaging film can ensure the vacuum condition to reduce bacterial growth and maintain the freshness of meat for about seven days. Fresh mutton packed and kept refrigerated can be delivered directly to homes, so the consumers can enjoy the fresh taste at home. Brand management is not easy. It is through stabilizing production and sales, understanding the market demands, identifying consumer characteristics, and enhancing the brand management that potential opportunities can be grasped and the momentum of industry growth can be reached.

3.Innovation of Service Products

Due to changes in the demographic structure and in response to different market needs, many domestic sheep enterprises have promoted mutton recipes and knowhow through Internet celebrities, and urge consumers to accept domestic mutton through changes in their dietary concept. Strategies include cuisine development, online channels, marketing exposure, joint development with restaurants of creative recipes, and creative development of marketing channels. Promotional messages are sent to customers through Facebook, online shopping platforms (such as the “Wonderful Food”), physical channels (department stores, meat shops, halal stores, etc.) and based on existing customer databases. The technology of skin packaging film is used on shredded and sliced mutton and the customers are provided with professional and correct methods of cooking and preservation. Experiential marketing is performed and the customers are encouraged to share their creative cooking ideas and experience in exchange of rewards and discounts on repurchase. The customers, through professional cooking lessons, also learn to maintain a quality dining habit. A stable flow of revenue is made through the sale of goods (both retail and long-term orders). The demand of the target customers for delicious and creative cuisines will be monitored so the demand can be met by constructing a value and service platform.

Conclusion - Strengthen the Value of Food Industry and Expand Business Opportunities

The rapid development of intelligent technologies has developed new cooking methods. Instruments like sous vide cookers, air fryer, steam ovens, microcomputer pressure cookers, etc. have made the entire cooking process much simpler, healthy and faster. In proper business models, if the enterprises adopt a more open and international perspective, this will change the direction of business management. It is hoped that, when operated in the many newly emerging retail channels, with the help of brand values and marketing effort, the enterprises have the ability to respond to the market supply and demand, to create the demand in situations of oversupply, and even turn the conditions to insufficient supply. The change in the output value depends on the enhancement of commercial value through innovation. The traceability and other certification system can help the development of the overall domestic sheep farming industry. The effort on the certification system and quality control will help improve the market visibility of the products. Moreover, the marketing through new media to the emerging customer groups can help them adapt to changes in the development trends and assist them to make complete market strategic plans and enhance their visibility. In terms of trend changes, it is recommended that sheep farming enterprises focus on the high-end consumer market, to enhance the competitive advantage of products in brand image and channel marketing, and to expand the consumer market and innovative business opportunities of the domestic sheep farming industry.