Indonesia domestic beef sales held up relatively well over the last two months of Ramadan and Eid Fitr, despite the COVID-19 pandemic, partly due to the delayed entry of frozen Indian buffalo meat. Consumers have been more cautious with discretionary spending, including on beef, due to the very uncertain economic outlook. With restrictions now easing and businesses reopening, many in the industry are now asking - what are the implications and outlook for the beef sector? How has consumer shopping behaviour changed due to the pandemic? What do businesses need to do to adapt to the ‘new normal’?
The third Meat and Livestock Australia (MLA) / Partnership industry updates webinar, held on July 9, 2020, attempted to answer these very questions. More than 160 people from Australia and Indonesia participated in the webinar.
David Goodwin’s, the Partnership Monitoring and Evaluation Specialist, presented the latest results from his monthly monitoring of pandemic industry impacts. He found that in May beef demand dropped after Eid and beef prices fell to around 115,000/kg, both normal occurrences after this religious festival. The pandemic continues to see the production of more processed foods, due to increased demand, and because they can be made with cheap beef substitutes and low-cost cuts.
David found that there has been some recovery within the hotel and street vendor sectors, as the lock-down eases, however, there continues to be a decrease in beef sold in wet markets. He noted that the Indonesian government has recently issued licences to import 170t of frozen Indian buffalo meat. The industry is very concerned that consumers will be driven away from fresh beef as a result.
David also found that the 5% tariff reduction on imported feeders from IA-CEPA is unlikely to alleviate the strong commercial pressures currently being experienced by feedlots. Restocking in Australia and poor exchange rates have significantly increased feeder cattle prices, which is causing some feedlots to delay purchases. In general, feedlot and processing operators are pessimistic on the immediate and medium term outlook for their sectors, even with the stronger sales experienced over the past month.
Achmad Fachmi from the Indonesian Animal Protein Association mentioned that Indonesia meat sales are highly impacted by the Islamic calendar, with peak demand around Eid-Fithr and Eid-Al Adha, and that even though overall meat sales have contracted by about 20% not all sectors were been impacted. Even without Indian Buffalo Meat (IBM) imports, beef supply between January to June, was sufficient to meet this reduced demand. Fachmi was confident that demand will significantly improve with the reopening of the catering, restaurant and street vendor sectors. He did however warn that with an increased supply of Indian and Brazil meat, together with the Government of Indonesia requiring industry to maintain supply and price points, more expensive Australian beef will very likely struggle to compete.
Ishana Mahisa, the Head of the National Meat Processor Association (NAMPA) Indonesia informed the webinar participants that NAMPA members have experienced mixed impacts from the pandemic, depending on the markets they are supplying. Producing processed meat products, using lower cost meats, remains attractive for many, due to the strong growth potential and room for product innovation. Ishana noted that over the past 4 years the capacity of sector to produce processed meats has grown by 37% and output by 40%. The key limitation to further growth is access to meat inputs at the right price. If Australian beef prices remain high, IBM will be an obvious substitute.
Terry Nolan, from Nolan Meats Australia, confirmed that beef and cattle prices are indeed high due to the industry being in a herd rebuilding phase. Terry provided MSA cuts as an example, which is selling up to AU$30/kg wholesale. Cattle prices have softened after reaching an EYCI price of AU$7.80 in March. Terry emphasized that if the industry was to get through COVID-19, appropriate and flexible government policy settings, together with efficient production is required.
Fery Saputra, the Deputy General Manager of Aeon Supermarkets highlighted the very optimistic outlook for the retail market, evidenced by a 53% increase in meat sales during the pandemic. She noted that the beef market benefited from a small shift from poultry during the pandemic, due to the perception that red meat build strength. Fery emphasized the importance of educating Indonesian consumers at point of sale, and through marketing programs and social media, particularly around the differences in the various cuts of meat and why consumers should pay more for certain products.
Jimmy Halim, the co-founder of PT Pramana Austindo Mahardika (Healthy Beef) noted that Indonesia’s beef sales channels are already saturated and IBM and Brazilian beef will put even more supply into the market. Jimmy agreed with Fery on the importance of exploiting the growing consumer niche that demands quality over price. Jimmy did however emphasise that price consistently needs to reflect quality and vice versa, to instil broad consumer confidence. The rapid expansion of on-line meat shops, many of whom do not follow this requirement, is however a significant challenge to premium beef sellers. Consumers are now finding it very difficult to match price with quality. Jimmy agreed that consumer education could be the solution, together with more control over cold chain distribution. The potential is huge as much more consumers are now cooking at home and keen to learn, through social media, about beef cuts and how each can be used.