Red meat sold well during Covid-19 lockdowns in the US. Photo / NZME
North American meat consumers are feeling the pinch from inflation, but the high-end products exported by New Zealand have so far been insulated from the fallout, Alliance Group says.
Executives of the Southland-based meat co-op - New Zealand's biggest exporter of sheep meat - have just returned from a tour of North America to evaluate demand for the protein category and consumer changes, post-pandemic.
Shane Kingston, general manager sales, said lamb and beef are in demand across the food service and retail sectors.
Venison is becoming more present in retail through 11-pound mince packs, which is proving an effective means of getting consumers to try the protein, he says.
Plant-based protein still exists, but has much-reduced space and visibility in outlets, and in most cases, is subject to heavy price discounting to drive sales.
"There is a strong sense of inflationary pressure starting to play out for many mainstream North American consumers, with visible recent increases in beef mince sales versus cuts and shifts from some red meat protein to white meat such as chicken," he said.
"This is not, however, reflected in the higher net worth consumer market. Based on current pricing, indications are that high-quality proteins are somewhat insulated," he said.
Pet food as a category continues to grow in scale, but beef, lamb and venison formulations are much the lesser part of the overall category, with fish, chicken and turkey forming the main base ingredients for dry pet food products.
China is Alliance's biggest export destination but North America is important - representing about $400m of its $1.8 billion revenue.
In China itself, Kingston said the Omicron variant of Covid-19 was having a significant impact on "land-side" logistics.
There were also port-side productivity issues in China, mostly in key ports of Shanghai, Tainjin and Dalian.
Logistics were also an issue on West Coast North American ports.
In northern Europe, cargo destined for Russia had been sanctioned and discharged, leading to port congestion at Rotterdam.
"In Europe, 15 to 20 per cent of all reefer equipment is currently held in locations - not moving," Kingston said.
"With China, North America and now northern Europe, that is a fairly significant disruption to the supply chain."
Amid all the turmoil, Kingston said there are some positive trends showing through in North America.
Throughout the pandemic, red meat protein had an "upward trajectory".
As more people stayed at home, they cooked more for themselves, and were prepared to go more upmarket in their choices.
"Lamb was certainly part that - there was a 30 per cent lift in value of sales from March 2020 to March 2022," he said.
In terms of global trade patterns, more and more North American meat plants were becoming licensed to export to China pork and beef to China, with more South American producers exporting into the North American market.
There has been a "recentering" of protein flows - tilted towards China.
With inflation in America running at 8.5 per cent, meat consumers were becoming more cost-conscious.
"Whilst value is holding up, volumes are reducing. That's really down to the count of transactions that are flowing through."
Most of Alliance's product exported to to the US is through The Lamb Company - a joint venture between Anzco and Silver Fern Farms.
At the high end, Alliance is working to develop its product range to insulate itself from the effects of inflation.
Its 2.2 to 2.5 kg lamb legs - typically bought for special family occasions - have been turned into mini-roasts.
In terms of Alliance's own operational costs, Alliance was feeling the impact of higher inflation - led by seafreight costs.
"We are in the middle of a very disruptive force right now, which is the supply chain - the ability to get product through."
While the situation at Chinese ports was "challenging" there, in addition the lockdown in Shanghai was significant.
"Once China comes out of that, you will see a pretty significant rebound to where we have been," he said.