China Business: Appetite develops for chilled meat

A big chunk of sheep meat exports to China are at the lower value end - meat destined for the popular "hot pot" dishes. Photo / Steven McNicholl

Lowering of Chinese restrictions would open up the high end of the market, writes Jamie Gray.

The New Zealand meat trade stands to become a big winner, if and when China relaxes its rules around the importation of chilled meat. This will allow exporters to move up the value chain and away from the current commodities-based model.

Prime Minister John Key said during last month's trade mission to China that he had been given an undertaking the issue of chilled meat access would be dealt with, and industry participants expect the trade to get under way before the year is out.

As it stands, New Zealand meat exported to China is frozen - much of it being at the lower value end of the value chain.

Tim Ritchie, chief executive of the Meat Industry Association, said protocols around the export of meat to China were in the process of being refreshed. "It's been part of a process that has been under way for some time in terms of refreshing the meat protocol between the respective regulatory authorities," Ritchie said. "The existing protocol goes back to 2003, so the negotiations have been ... to make it contemporary.

"All the i's have not been dotted, and the t's crossed yet, but the positive thing from last month was that there were no red flags or big stop signs raised at a political level," he said.

Once the protocols are agreed, there will then be the need for New Zealand facilities to be authorised to send meat to China.

Australia, on a trial basis, already has permission for 10 or so plants to send chilled meat to China.

"It will open up a totally different segment in the market at that high end, which will complement the other activities," Ritchie said.

A big chunk of sheep meat exports to China are at the lower value end - meat destined for the popular "hot pot" dishes. Chilled meat will be aimed at the high end. It is a segment that is already a highly significant part of the export market. More than 40 per cent of exports sent to the major UK market is chilled, and that's a business that has evolved over 35 years or so.

Sir Graeme Harrison and Tim Ritchie.

"It's a higher-value product but a product that you have to treat very carefully - kept at plus or minus half a degree," Ritchie said. He said last month's development would not mean chilled meat would be "on the water" bound for China tomorrow.

"But potentially, over time, it may have a profound impact on the market," he said.

China is already New Zealand's biggest export destination for sheepmeat - taking about 150,000 tonnes of product a year compared to about 70-80,000 tonnes for the traditional UK market. New Zealand is also the largest supplier of sheepmeat to China - which itself is a huge producer in its own right.

ANZCO, which jointly owned by Japan's Itoham Foods, Nippon Suisan Kaisha and directors and management, is New Zealand's biggest chilled beef exporter. Chairman Sir Graeme Harrison said improved access to China also included "co-products" such as blood. "Obviously chilled meat is the one that offers the greatest immediate opportunity.

"People are focusing on chilled lamb but we would see beef as the biggest opportunity," he said.

Japan is ANZCO's biggest market for chilled beef and the company accounts for 91 per cent that country's imports of the product.

Harrison said chilled beef exports to China would afford exporters the opportunity to build customer relationships as it would mean more product going into the higher end of the market such as the restaurant trade.

Murray Brown, general manager marketing at New Zealand's biggest sheepmeat exporter, Invercargill-based Alliance Group, said the company was taking a cautious approach.

New Zealand plants will need to be audited and certified by the appropriate Chinese authorities before the trade can open up.

"If the market opens up for chilled, then opportunities will be created, but yes there needs to be auditing and certification for the plants," he said.

On the commercial side, it will be a matter of finding out what products will fit into the market and whether there are the logistics and distribution channels at the other end to deal with the tight specifications necessary for the product.

"But it will provide diversity for our exports."

Cool new system

Prime cuts being loaded into Foodcap's new chilled meat handling system (left), which has already been "commercially proven" in New Zealand and China.

In 2015, FoodCap installed technology for Chinese company, the Little Sheep Meat Industry Co in its primal lamb processing operation in Bayannur, Inner Mongolia, as part of a project to convert the plant from a frozen to a fresh chilled operation.

Zhang Gang, chairman and founder of Little Sheep explains, "For three years my team scoured the world looking for innovations that would lead to a competitive advantage in the extremely dynamic Chinese marketplace.

We found such an innovation in the FoodCap primal handling technology from New Zealand, a country famed for its fresh chilled meat production and handling.

FoodCap not only introduced its unique chilled material handling system; they introduced Little Sheep to a range of specialist companies and technologies which collectively deliver us a world-class chilled lamb processing operation."

At the heart of the new system is the FoodCap, a meat storage capsule. It is robust, and seals completely to maintain a modified atmosphere where oxygen is excluded, preventing microbial growth and product deterioration.

Essentially the vacuum pack and transportation device are all in one, and the capsule eliminates the need for single-use packaging, says FoodCap chief executive Julian Beavis.