Going it together in SW…
Tying up with a processor
should bring greater returns
for low-value forequarter
beef. John Burns reports
JOINING up with a processor rather than going it alone is how one group of south-west livestock farmers aims to snatch back the margin lost by being a commodity supplier.
Owned by beef, sheep and pig producers, Triple S operates in the six south-west counties of England. Chairman, David Hill, says the purpose is to "take control of our destiny and, in particular, recover what we see as the margin confiscated by the retail and distributive trades".
The three Ss in the company name stand for suckled beef, sheep and swine. The move is the outcome of a series of feasibility studies over several years trying to address the need for "something to be done" about the red meat industries in the south-west.
Under plans, each species will be dealt by a separate wholly-owned subsidiary company. West Country Beef was the first to be established, the other two exist only in name at present.
In all, £12,000 has been spent on researching markets, with funding coming from beef breed societies, MAFF and individuals. The report concluded that another £30,000 would be needed to look for gaps in the market and develop and test new products, a heavy burden to a fledgling company. "So we decided to look for a partner instead and after six months and many fruitless presentations we found Abbey Vale Bakery, whose products include meat pies and pasties," said Mr Hill.
A deal was struck in which Abbey Vale was given a small percentage of shares in the Triple S subsidiaries in return for doing the marketing, processing, distribution and development of at least three new added-value products. Abbey Vale gets a share of the profits, if they make any. West Country Beef has only recently started making a day-to-day profit.
Abbey Vale agreed to pay 1p an item on any new products -they have already developed 10 – and in return benefits from complete traceability of the meat, and an undertaking by Triple S not to sell to companies competing with Abbey Vale. "That gives them a unique selling point, and they are suddenly finding that potential customers are beginning to understand the meaning of the level of traceability we can provide."
Mr Hill sits on the Abbey Vale board, and the bakery has a director on the boards of the Triple S subsidiaries. All other shareholders in the Triple S companies are producers and their livestock will be taken in preference to that from non-shareholders, though there is no guarantee that all their output will be taken.
Prices paid for beef cattle are based on the MLCs weekly deadweight average plus 5p/kg, with further additions according to the conformation/fat class grid, which, for example, gives R4L cattle a further 5p/kg. Minimum carcass weights are 260kg for heifers and 265kg for steers. Carcasses below those weights lose 1p for every 2kg below the minimum.
Producers selling cattle to West Country beef do not know at the time exactly what price they will be paid. "But this system seems to be working extremely well and our prices are in line with other potential buyers," says Mr Hill.
For the time being, West Country Beefs business is basically selling forequarter meat to Abbey Vale and hinds either whole or cut into primal joints to the retail and catering sectors. Killing and cutting up are at present done on contract for WCB, but work is already underway on a state-of-the-art processing plant in south Devon. The NFU Mutuals venture capital fund has provided a significant loan for that project.
Triple Ss target market will be the catering sector in all its variety. "It already has 35% of the food market and is growing very fast," says Mr Hill. "But in due course we could look to supplying supermarkets. If you have good products, they will buy."
Apart from the MAFF contribution of about £2500 to the feasibility studies, no grants have been involved. "That was by choice. We wanted freedom on speed, choice, and ability to move and adapt to market changes and opportunities that might come up. I am fed up seeing grants being used to subsidise trading. That is not a sound basis for a new business," he says.
Firm foundations…a new meat plant could help producers recover lost margins, says David Hill (front).