As the agriculture sector continues to count the cost of the COVID-19 pandemic, the Partnership is laying the groundwork for expansion of Indonesian beef products into key Asian markets and is exploring the potential of the country’s US$14 billion e-commerce market.
The work was commissioned through the Partnership’s industry reference groups, which identified two viable pathways—market expansion and digital efficiencies—to secure profitability gains for red meat and cattle enterprises in Australia and Indonesia.
“This is a great example of the benefits of the Partnership and the foresight it can provide,” says Dr Ben Mullen, Strategic Advisor for the Partnership’s Advisory Support Group.
“These projects to explore value-added beef products in export markets and the application of digital technologies to red meat supply chains and marketing were endorsed by the Partnership’s Co-Chairs prior to the pandemic.”
“The specific studies were commissioned mid-way through 2020, with preliminary findings presented at the Livestock Export Program’s virtual conference on 14 December.”
Dr Mullen says that, while the industry outlook was reported as pessimistic in October 2020, the rollout of vaccines in early 2021 has shifted sentiment and operations in both Australia and Indonesia are beginning to normalise.
ASSESSING MARKET OPTIONS ON FOREIGN SHORES
The Partnership study on beef processing and market options for Indonesia was conducted by ProAnd Associates Australia, with preliminary findings presented by the firm’s Senior Consultant, Ms Winifred Perkins.
Ms Perkins revealed that, from a statistical point of view and given the outlook for market growth, there are three significant export targets for Indonesia: The People’s Republic of China, Thailand, and Viet Nam.
“These markets were followed by the Philippines and Singapore,” Ms Perkins added, “with the greatest potential being for Indonesia to export beef products in frozen and in processed form.”
Ms Perkins said that ProAnd considered a range of factors in determining the markets with potential for Indonesian beef exports.
“Our considerations included beef import statistics to help indicate demand levels, the range of chilled and frozen cuts imported, existing and future tariff arrangements, current supply sources, and historical prices achieved,” she said.
“It was noted, however, that obtaining the required approvals for the Chinese market might be complex and time-consuming.”
The study also assessed the readiness of Indonesian abattoirs to achieve export status,
determining that several beef processing plants should be able to meet international export standards in terms of construction materials and layout.
These processing plants may, however, need to invest further in training as well as meat hygiene monitoring and systems control.
Issues to be addressed included traceability systems, procedures for managing and tracking worker hygiene, and product safety systems, all features of modern cold chain management in chief exporting countries.
Ms Perkins indicated that the study team had developed a ‘Roadmap to Export,’ identifying areas that Indonesia needs to address in preparation for export readiness.
The roadmap requires a coordinated set of responses from companies and bureaucracies in both countries (Indonesia and the target market) to clear the path for a successful export program.
For a copy of the full report on beef processing and market options for Indonesia, go to bit.ly/MarketOptionsStudy.
SEEKING DIGITAL EFFICIENCIES IN BEEF PRODUCTION
The project on digital technology options in the red meat and cattle sector aims to improve the profitability of beef producers and processors through technologies that can deliver production and marketing efficiencies.
The preliminary findings of the study were delivered by Dr Dahlanuddin, Professor in Animal Science at the University of Mataram in Indonesia, and Dr Risti Permani, Senior Lecturer in Agribusiness at Deakin University in Australia.
“Digital technologies are used extensively in the Australian red meat and cattle sector, from on-farm production, feedlots, processing facilities, logistics and cold chain linkages to retail sales and the consumer segment,” Dr Dahlanuddin said.
He highlighted that, conversely, Indonesia’s smallholder producers have yet to embrace technology in cattle production beyond the use of smartphones.
“Whilst smallholder farmers are interested in technology options and have the connectivity capacity to participate, they are reluctant to pay for technologies that don’t provide an immediate financial return or are not mandated by government,” Dr Dahlanuddin said.
“The Government of Indonesia and several companies have developed information systems to monitor animal movement, behaviour, health, and nutrition, as well as digital platforms for livestock marketing, but their effectiveness and adoption rates could be improved.”
According to the Partnership’s digital technology study, some Indonesian feedlots are using radio-frequency identification (RFID) systems to comply with animal welfare standards imposed by Australian exporters, but in most cases, feed efficiency, cattle weight, and animal health information is still recorded manually.
“An opportunity therefore exits to automate information systems to improve efficiencies and the traceability of beef products,” Dr Dahlanuddin said.
He pointed to livestock frozen product aggregator, Ternaknesia, as a prime example. The company has attracted crowdfunding investment of Rp40 billion by demonstrating the profitability of their operations.
A key component of Ternaknesia’s success has come through improving its digital logistics systems for abattoirs, using global positioning systems and temperature sensors, along with an online auction system that minimises costs.
TAPPING INTO THE LUCRATIVE E-COMMERCE MARKET
Indonesia boasts an e-commerce market of around US$14 billion, with shopping for groceries and essential items emerging as a key online activity.
While many of Indonesia’s 160 million smartphone users were already engaged in internet purchasing prior to the COVID-19 pandemic, health regulations and behavioural changes have increased online uptake.
In March 2020, Bank Indonesia noted an 18.1% increase in the country’s total e-commerce activity to 98.3 million transactions.
Importantly, nearly 70% of survey respondents in the digital technology study stated that they will continue to purchase beef online.
“E-commerce continues to grow exponentially in Indonesia and is no longer just a marketing option. It is now a necessity,” says Dr Risti Permani of Deakin University.
“Additionally, more women are now participating in the Indonesian labour market and, with less time for shopping and other household chores, this is expected to further stimulate online purchasing.”
According to Dr Permani, Indonesian beef businesses have responded by expediting the transition from offline to online sales and marketing.
“We are seeing the rise of omni-channel marketing strategies,” she says.
“The growth of online marketing channels will not spell the end of offline presence and facilities. Instead, more businesses are adopting strategies that integrate online and offline, and business-to-business and business-to-consumer marketing, allowing trade partners and customers to seamlessly move across points of contact.”
“These omni-channel strategies must be underpinned by fully integrated online systems that link all aspects of offline and online facilities, such as warehousing operations, sales and payments, resources, and customer services, among others.”
The ability of Indonesia’s red meat and cattle sector to embrace advanced production and marketing channels provides an entry point to a global digital market for food and beverages estimated to be valued at US$236.5 billion.
For a copy of the full report on digital technology options in the Australian and Indonesian red meat and cattle sector, go to bit.ly/DigitalOptionsStudy.