5 Keys to Successful Red Meat Exports
By Philip Seng, president and CEO, U.S. Meat Export Federation
The global red meat marketplace is a diverse and shifting landscape. The rewards for the U.S. industry for exports are sizable – currently equaling $249 of export value per head of fed slaughter on the beef side and $53 per head for pork.
Over the course of my career, I have come to understand the uncertainties that come with global commerce cannot be totally avoided, but important lessons can help us escape repeating past failures. That has led USMEF to adopt a core set of five principles for success in the international red meat marketplace.
With the USMEF’s broad global footprint, including representatives in 18 locations around the world and operations in 80 or so countries at any one time, we have built our strategic approach to the global marketplace on this first principle:
1. Inside knowledge of the market is essential
Decisions on the viability and potential of various markets require a combination of thorough market analysis and inside information – ideally from professionals living and working in those markets. At USMEF, we pride ourselves both on the quality of our staff – experienced professionals operating in their native countries – and our depth of analysis that looks at both the broader market and its niches.
For example, we regularly assess whether it is better to invest in an existing market versus a new, up-and-coming market. When making that decision, we weigh a variety of factors, including:
- What market share does the U.S. currently have in that country?
- What is the potential market size?
- How committed are potential partner companies to consistently carrying U.S. product?
- Do we understand our competitors’ strengths and weaknesses?
- What is the economic outlook for the country and the specific market niche?
- How politically stable is the country?
- Does the market fit the priorities of our exporting members?
- If the overall market does not offer significant growth potential, do market niches warrant a focused approach?
- Does the market have the infrastructure to support perishable imports?
After evaluating these and other factors, we will make financial commitments that typically combine short- and long-term initiatives in key export markets and exploratory efforts in new markets.
2. There are no guarantees
That lesson was brought home clearly early in 2013 when Russia – a top-six market for both U.S. beef and pork – abruptly closed its borders to U.S. red meat from any animals fed beta agonist growth enhancers. During 2012, Russia purchased U.S. red meat valued at $588.8 million. After Russia’s action in February, U.S. pork exports there fell 75 percent and beef exports slumped 95 percent for the year.
Both the U.S. government and industry are working diligently to reopen the Russian market, and we remain hopeful an agreement can be reached to expedite the resumption of exports.
3. Do not underestimate the power of relationships
Ten years ago, the scourge of BSE came to the United States and virtually closed the door on U.S. beef exports that had reached 2.8 billion pounds valued at $3.856 billion in 2003. The next year, exports fell 75 percent in volume and 79 percent in value. Two markets – Japan and South Korea – collectively accounted for 49 percent of the volume and 57 percent of the value of U.S. beef exports in 2003, but only one-half of one percent of each in 2004.
As sales to two of our top three beef markets plummeted, we could have focused on those that remained open. However, we understood that not only were both of these critical markets for the long-term profitability of the U.S. industry but, particularly in Japan, U.S. beef occupied a unique niche. Thus, over the ensuing years, USMEF focused on education regarding the quality and safety of U.S. beef, anticipating a time when the Japanese and Korean scientific communities would recognize what we already knew: U.S. beef is safe, high quality and an outstanding value.
While the rebound has been challenging, Japan is once again the No. 1 market for U.S. beef exports and South Korea continues to recover.
4. Change is constant
Sometimes change works to your advantage. Sometimes it doesn’t. In the case of mainland China, there have been changes in market access in the past, including issues for U.S. pork in 2009 related to the H1N1 virus. As for beef, China was a growing but relatively modest market just one year ago. During the first 10 months of 2012, it imported 84.4 million pounds of beef valued at $153.7 million from all international suppliers.
Fast-forward one year. China’s beef imports for the first 10 months of 2013 skyrocketed almost 600 percent in value to nearly $1.1 billion and 560 percent in volume to 558.2 million pounds. Unfortunately, the United States’ chance to participate in this growth has been blocked because U.S. beef has not had access to this market since the end of 2003.
5. Flexibility is essential
One of the biggest challenges USMEF faces in maximizing the value of U.S. red meat exports is maintaining the balance necessary to collaborate with business partners around the world while operating with the flexibility to adapt when circumstances beyond our control change the rules of the game.
Using the example of Russia, USMEF representatives in Moscow and St. Petersburg had extensive campaigns laid out for the year ahead when the market closed in February 2013. In some cases, advance commitments were made for promotions. Some programs with key importers and business partners have continued to maintain relationships and a level of visibility. And some resources were realigned to focus on regional markets that remain open, like the Ukraine.
In the case of U.S. beef exports to Japan, USMEF had anticipated the potential for expanded market access for months. While U.S. beef from cattle over 20 months of age had been absent from the market for nearly 10 years, many Japanese buyers familiar with the product had moved into other roles – replaced with younger people unacquainted with American beef tongues and other variety meat cuts from older cattle.
USMEF used the months leading up to the Feb. 1, 2013, announcement to conduct educational seminars and familiarize Japanese buyers with the attributes of U.S. beef. Then, USMEF launched a full range of activities including promotions with national retailers and food service chains as well as a large presence at Japan’s biggest food trade shows, FoodEx and the National Yakiniku Business Fair.
Within less than a year, Japan has progressed from the No. 3 volume market and No. 2 value market for U.S. beef to the top international buyer – just as it was in 2003.
There is no single key to success in the global red meat market. The U.S. beef, pork and lamb industries enjoyed record-setting exports in 2012, topping $11.8 billion in value, and it is our goal – and challenge – to maintain upward momentum. We never know when the next drought, disease outbreak or a country’s policy change could affect our ability to export, but with adequate research and preparation, we can remain nimble enough to manage the taxpayer dollars and industry checkoff dollars entrusted to us to keep expanding the presence of U.S. red meat on the world’s tables.