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Adding and Extracting Value from Paddock to Retailer

Gerard Keenan, CEO, Keenan. Adding and Extracting Value from Paddock to Retailer. June 2005 Irish beef prices drop from €3.00 to €2.40 per kilo DW September 2005 Irish Market prices €2.43 per kilo DW KK Club contract prices €3.26 per kilo DW.

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Adding and Extracting Value from Paddock to Retailer

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  1. Gerard Keenan, CEO, Keenan Adding and Extracting Value from Paddock to Retailer

  2. June 2005 Irish beef prices drop from €3.00 to €2.40 per kilo DW September 2005 Irish Market prices €2.43 per kilo DW KK Club contract prices €3.26 per kilo DW Crisis in the beef industry – prices drop by 20%

  3. KK Beef Club • Origins • 1998 • Crisis in European beef markets • New way needed • Forum for change - processors, farmers union, farming press, Keenan nutritionists, Australian Total Quality expert • Modest first steps

  4. The challenge • KK Beef Club Specification: (heifers) • Carcase weight 240-320kg @ 20 mths. max. • Colour Fat - white (no yellow) Meat – Pink • Carcase conformation U(3,4L,4H) R(3,4L,4H) • From grass-basedproduction system • On year-round basis • Project scalability • Need for the project to financially work for all parties – farmers, processors (and retailer) Keenan’s role was to contribute at all 5 levels

  5. KK Beef Club Specification: (heifers)  Carcase weight 240-320kg @ 20 mths. max.  Colour Fat - white (no yellow) Meat - Pink  Carcase conformation U(3,4L,4H) R(3,4L,4H) Carcase description - % meeting KK Beef Club specification 90% hit target Source KK Beef Club grading figures 2000

  6. KK Beef Club • Consistently hitting a tight specification on bulls and heifers • Characteristic % Hitting Spec. • carcase weight 84% • conformation 87% • fat colour 98% • meat colour 98% • Source: KK Club, bulls and heifers 2001 • Not possible with traditional production methods

  7. KK Beef Club • Outcomes • Reliable market for producers and predictable supply to processor (6 months in advance) • Dynamic competitive strategies to counter ‘copy-cats’ • Current market prices €2.48 per kilo DW • Standard KK (bulls, heifers < 24 months, white fat, pink meat) currently €2.76 and normally 14c above market price (+11% on €2.48) • GMO free (2001), strict codes of practice, currently €3.06 (+23% on €2.48) • GMO free, strict supply basis, currently €3.26 (+31% on €2.48)

  8. KK Beef Club • Outcomes • Guaranteed supply due to planned production process: • 1998 – 2,000; 1999 – 20,000; 2004 - 50,000 • 2005 – 70,000 (40,000 on GM0 free) • Keenan had critical role: • Proving it was possible to efficiently produce white fat, pink meat from grass-based system • Delivering technical know-how to producers; imparting capability at low cost • Acting as ‘honest broker’ in relationship between farmers and Kepak

  9. Key features • Trust between processor and farmer • Commitment two-way • The other side needs to win too • Both sides faced challenges to their commitment Lifted the gloom of the industry • Branded KK Club by beef journalist • Pointed a new way forward • Next generation vision for the industry Recognised as flagship for Ireland’s beef industry and role model for ‘subsidy-free’ beef industry

  10. The elimination of causes of variation in quality and productivity will create wealth for all parties in the supply chain. The potential benefits in a successful alliance are 20%-30% of total costs. • Improving total business productivity and reduced unit costs • Reducing quality ‘penalty’ costs and improved average prices • Becoming reliable, valued suppliers - building market share Adding and Extracting Value from Paddock to Retailer

  11. The elimination of causes of variation in quality and productivity will create wealth for all parties in the supply chain. The potential benefits in a successful alliance are 20%-30% of total costs. Long term Building chain capability for next stage product innovation, differentiation and competitiveness Powerful motivation for all participants Adding and Extracting Value from Paddock to Retailer

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