Coles' HGP decision driven by consumers

29 Oct, 2010 04:00 AM
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Australian Country Choice (ACC) chief executive officer David Foote addresses last weeks WALFA AGM.
Australian Country Choice (ACC) chief executive officer David Foote addresses last weeks WALFA AGM.

AS an exclusive supplier to Coles, nobody was more aware of the implications of the retailer's decision to stock only hormone growth promotant (HGP)-free beef in 2011, than Australian Country Choice (ACC) chief executive officer, David Foote.

ACC is a vertically integrated supply chain organisation based in Queensland and, as well as processing, has operations in breeding, backgrounding and lotfeeding cattle.

Mr Foote had been a staunch advocate for the use of HGPs, but from November this month, the ACC supply chain will be 100 per cent HGP-free in order to meet Coles' new requirements.

Speaking at last week's WA Lot Feeders Association (WALFA) annual general meeting, Mr Foote told attendees Coles' decision was far from sudden and was in-line with consumer behaviour trends.

Mr Foote said consumers were now taking ethical and environmental impacts of products into consideration when selecting their food.

He said according to research undertaken by Meat and Livestock Australia (MLA), 74pc of consumers would have a negative reaction towards beef if they found out it was produced using HGPs.

The research also showed 42pc showed negative behaviour towards any beef containing antibiotics, and 38pc had a negative reaction to beef containing gene modification.

Mr Foote said in 2008, Coles introduced the first free-range turkey products, followed by an increase in free-range chicken and eggs in 2009.

Then came its more controversial decisions regarding pork production using sow stalls and its decision to ban beef grown using HGPs.

"The sow stall decision had an immediate impact on pork sales," Mr Foote said.

"Consumers are leading the charge, there is no doubt about that.

"Coles' HGP decision gave them a market advantage, and that advantage can be as short as 60 days because that's all it takes for other retailers to follow suit.

"You, as producers and lotfeeders, need to focus on what is in your control."

Mr Foote said the HGP decision did not come as a surprise to him as a supplier to Coles because they had been on the program since 2008.

He said the formula they worked on with producers to achieve the same weight gain for feeder cattle without the use of HGPs was 44 days longer in the backgrounding phase and nine days longer in the feedlot.

Producers were being compensated for their loss of production, to the tune of 11c/kg, Mr Foote said.

"It's not just Coles doing this, significant beef brands in Japan haven't used HGPs for 15 years," he said.

"This is a very expensive program for Coles, so it's not just a feel-good exercise.

"I've been defending the use of HGPs for eight years, but in the end, the noise surrounding the free-range issue is louder, and if I want more beef sold then I need to provide what the consumer wants."

It was the same for lotfeeders, Mr Foote said, because if they wanted to sell their cattle into those markets, they had to supply cattle meeting those market requirements.

He said there would be opportunities and benefits for producers not using HGPs, and people would work harder on their cattle genetics to select for weight gain qualities.

Mr Foote said HGP usage varied greatly from State to State, and although he was unsure what the usage level was in WA, a rate of five HGP pills were purchased per 100 head of cattle in Victoria, 22 pills/100 head in NSW, and a massive 155 pills/100 head in Queensland.

"So nobody is more aware of the enormity of changing producers' mindsets about HGPs than us," he said.

"But there are supply opportunities here, and from my perspective as a processor, if you have HGP-free cattle, we'll buy them and if you don't, we won't."

When asked about his thoughts on the WA cattle market, Mr Foote said the price fluctuations of prime and feeder cattle in WA was far greater than the east.

He described the situation as "highly volatile" and said until seasonal supply was more stable, beef would continue to come into WA from the east.

"The supply chain here is broken because there are lumps in it, it's not a price issue, production needs to change," Mr Foote said.

"If you want to change, you have to get cattle back in the grass phase and envelop the whole supply chain."

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