CEO Direct Channel podcast to industry #12
Hi there
This week I’d like to talk a little bit about trade and markets before answering a topical question at the end.
I did touch on trade a few months ago, where I advocated the importance of having an awareness of the differences between various markets, the geopolitics which surround them, their customer preferences, and the supply chains needed to deliver.
There are some that might prefer not to think about anything beyond the handrail on the jetty – and that’s fine – but I certainly reckon that it’s in everybody’s interests if trade and markets become part of the normal industry conversations we have.
As I’ve said before, the seafood industry needs to learn the lessons from agriculture, which never used to think beyond the farm gate – but these days they do and they’re absolutely reaping the benefits with style.
Look at NZ, their very economic sustainability as a nation came through amazing forays into faraway markets with their lamb, their dairy and their kiwifruit. They infused a market focus into every single producer and their industries boomed as a result and the premiums soon flowed all the way back to the grass roots.
So today, just for something different, I’m going to talk about some interesting markets that are well away from our current Asian area of focus.
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Let’s look at the UK.
Believe it or not, the UK is the sixth largest global importer of seafood and the value of this trade exceeds $6.5 billion dollars per year.
And that’s with a trading architecture which is deliberately heavily regulated to make it a super expensive market to access. The tariffs vary somewhere between 12 and 25%, so as you can imagine this keeps a lot of suppliers away.
But the Pommy customers have a lot of money and the demand for high-end seafood is incredibly strong.
Across the board of all goods and services, the UK is already Australia’s 5th largest trading partner – and then – interestingly the EU which is right next door, is our 3rd largest partner.
In 2020, the value of total agrifood imports from all countries was almost $85 billion dollars for the UK and $200 billion dollars for the EU.
So they clearly suck up and pay for a lot of food stuffs from overseas.
And this is now – even with all the difficult market barriers at play – so imagine what it could be like if they can be removed.
The really interesting opportunity which will soon open things up is the UK-Australia Free Trade Agreement.
This is truly of interest, because if during the negotiations Australia can pull off a reduction in tariffs to lower the cost of our exporting, then we can secure a clear commercial advantage over other global exporters who haven’t yet negotiated a free trade agreement.
Australia is at the front of the queue and these talks are happening right now – and our government (following strong input from the seafood industry) is pushing for tariff reductions, export regulation simplification, the harmonisation of food safety standards, environmental measures and biosecurity.
So if tariffs and quotas can be eliminated, plus we can secure some modern best-practice rules and importantly also some new market access commitments, then Australia as a whole – and the seafood industry specifically – can potentially be the real beneficiaries.
We’re hoping that our Prime Minister ScoMo will be meeting with the British PM Boris Johnson soon and some public commitments will then be made.
But an important thing to remember is that the EU market is only 22 miles away from the UK – separated only by the English Channel – so for us the UK can create a launchpad for something much bigger.
As I said earlier, it already is a gateway to the EU market – because they’ve shared common trading arrangements for years – so we can get complementary access through the UK – and then we can lay a foundation for increased direct trade to the EU when Australia also secures a Free Trade Agreement with them in a few years’ time.
But what do we need to know about the UK and EU markets – how do they operate and what are the consumer preferences and trends?
Well there is increasing demand for clean and green healthy or natural foods, there is a strong health awareness and an associated shift to healthier diets. Their consumption of meat is decreasing – and they’re looking for replacements – and guess what, they love premium foods.
Importantly, there is a strong demand for foods that they can learn the back story about – like where did it come from, who made it, what’s special about it – in much the same way as you see on wine labels – the story of the winemaker and the climate and soils where the grapes were grown – UK and EU consumers are seeking an experience when they purchase their foods.
Just imagine what we can offer in this respect with our wild-caught WA seafood from fishermen with convict origins?
But there is also a growing preference for simple foods that have known natural ingredients, with no artificial flavours, preservatives or GMOs.
There’s a heightened focus on wellbeing and meeting their nutritional needs through natural products; they want a fresh taste and texture; there’s increased scrutiny of the product, it’s sourcing and manufacturing processes – the consumers want surety and reliability that they’re getting exactly what they asked for; they want environmentally friendly and sustainable products (hey we have MSC); and they want to know that their products can be traced back to the source if anything goes wrong.
So there are certainly opportunities for Australian seafood exporters to both of these large consumer markets – as well as smaller niche premium markets (with products like specially presented sustainably-grown Kalbarri pink snapper with Augusta abalone sauce and sprinkled with Manjimup truffles – or the same toppings on Cervantes lobster tails or Esperance King George Whiting).
Their consumer desire for a healthy and tasty diet, sustainable production, and a unique product experience can genuinely drive demand for Australian products.
But that’s only if we offer them of course.
Importantly we can do business with a safe and reliable country or countries which understand the English basis of law (which therefore makes financial transactions a whole lot safer).
So it’s clearly important in this game that we understand our markets – to do so we need to get inside the heads of the end consumer and understand what drives their purchasing decisions.
We need to identify the critical barriers to product entry – whether they are customs requirements or supply chain challenges – and we need to build trusted relationships with purchasers and distributors.
And we need to have an awareness of the broader geopolitics – because they are so centrally important to what’s happening.
Guess what – it’s the same for each and every market that our industry deals with – the same model even applies at the domestic level.
We need to understand what makes the people who buy our products tick.
And it’s the same trick in the Middle East.
There we have wealthy customers who want premium packaged foods.
They want it Halal certified – it’ll get banned otherwise.
In the UAE there is no market access for aquaculture products.
But we have direct flights from WA to Doha and Dubai, there are established sea freight services as well.
And we have a lot to offer them – amazingly clean and green products sourced from pristine waters and accredited as sustainable; we have immaculate quarantine and biosecurity systems, excellent supply chains, we provide products which do not come from northern hemisphere fishing operations which over-catch, or have poor workplace health and safety arrangements, or have practices which lead to environmental destruction or the use of slave labour.
We can provide our markets with a unique product, and yes we can provide the back stories about who caught it, where and how. Whether it’s the UK, Europe or Middle East – we have the potential to offer high-priced premium products to customers who want them and can afford to pay for them.
So who knows, perhaps we can diversify our marketing to reduce our current over-reliance on a handful of Asian markets.
It’s certainly worth considering – as an industry, as a nation – but we need to look beyond the previous limited boundaries of our thinking.
It’s interesting that back in the 1960s, the UK kicked us and NZ out of their markets so that they could enter the European Union.
But here today, the situation has flipped.
In those old days we had been selling our apples to the UK after they had endured a three-month voyage by ship – but today we can send in our finest seafood to them in less than 24 hours – to a well-structured market which has plenty of high-end premium demand – and a love for all things Aussie.
So my question is – given all of this – is there a broader opportunity for WA seafood than we are getting under the current settings?
Of course there is.
Should we maintain a focus on China alone, on other SE Asian countries, or look to the US, India, Middle East – or even the UK and EU, even though they seem like they’re so far away.
Or maybe – it’s a little bit of all markets – and maybe too, we should be further exploring some value-adding.
I’d contend that you need to take an interest in these types of questions – because if you are a producer of an exportable product, then you have a vital central stake at play.
This is your livelihood – you can be the best catcher in the world, but if your product doesn’t sell to the best array of markets to get the optimum rate of return, then your whole show is potentially put at risk.
This doesn’t mean that you need to become an exporter yourself, it does mean that you should take a closer interest into the whys and wherefores of what your exporter is doing on your behalf – and satisfy yourself that they are acting in your best interests.
You should be asking constructive questions of those who act for you, this is called common-sense smart business.
And the discussions we have at industry forums have got to explore these subject areas too, we’ve got to develop the licence and confidence to talk about these matters – because guess what, this is our core business and the future of our industry depends upon us becoming more aware of the things that truly matter.
OK, a change of gears – I’ve been handed another weekly question to answer.
It says:
“How come I’ve got to pay my access fees to DPIRD by cheque, didn’t that payment method go out with the horse and cart?”
Yes – this is all a bit bewildering and no it didn’t go out with the horse and cart – but it damn well should have!
It seems that we can pay our CFL and pen fees and wotnot online through the DoT site, but the really big ticket payments – access fees – must be paid over the counter or by cheque.
This makes it extra hard when many of our fishermen are living in coastal communities and the snail mail can’t always be relied upon. You could well be stranded on shore and held back from fishing while waiting for the postie to get through and for the payment to be processed.
And it doesn’t help when various Fisheries Offices have been closed so there isn’t a shopfront counter to pay over – Denham is a shining example of this for the Shark Bay community. Fortunately this one is now being addressed through the local CRC, but surely our industry deserves better.
Now we’ve been in discussions with CCIWA – the Chamber of Commerce and Industry – which we are a member of – and they took up this particular issue on our behalf – with the Premier recently, in fact I think it might have been last week.
The CCIWA is looking at ways for government to introduce more efficiencies for all industry sectors which are having issues dealing with government services. They asked the Premier to consider introducing an across-the-board system like they have in NSW called Services NSW – where a single website can manage multiple payment types across different portfolios – as well as acting as a conduit for the payment from government to industry of grants and rebates and suchlike. Not that we get too many of them.
Don’t hold your breath on this, but given the clear need for improvement across many industries and portfolios, I’d be surprised if we don’t see a new system in place next year.
Talk soon.
Seeya.
Darryl Hockey
Chief Executive Officer
WAFIC