Focus on New Zealand - NZ lamb in the UK

Around a third of lamb consumed in the UK is imported from New Zealand. It is a trading relationship that dates back 132 years, based on the two countries’ opposing seasons, allowing British consumers to enjoy lamb all year round.

The UK is a crucial market for New Zealand, and is still its biggest by value, although China now takes more lamb by volume. In the past few years, UK imports of NZ lamb have declined. In 2012 the UK imported 62,438 tonnes (t) of sheep meat from New Zealand. This is far lower than it used to be. "As recently as 2009, we imported over 116,000t in total,"​ says Paul Heyhoe, senior analyst at AHDB. "This has largely been pushed by falling New Zealand production and the diverting of shipments into the Chinese market."​

Although figures are not yet complete, 2013 appears to have bucked this downward trend, with data from the first 11 months of the year showing NZ imports 17% higher than 2012, as importers took advantage of reserves of frozen stock built up in New Zealand. At the beginning of 2013 there was plentiful supply and competitive pricing in the UK market, says Brian Johnston, general manager, New Zealand Farmers, although as the year progressed and the frozen reserves were used up, prices rose.

"On many lines in the frozen commodity, prices rose at least 10%,"​ says Johnston. "On chilled lamb we have seen price increases between 10% and 20% on last year. The pendulum has swung quite a lot. In early 2013, prices were competitive and stock was available, but by the end of 2013, stock available was tightening and prices were firming."​

While suppliers say this has not affected demand, Johnston believes prices cannot keep rising without an impact on sales. "We cannot expect these prices to keep going up and people to keep buying."​

According to Hugh Brown, general manager of Ovation, which imports lamb and trades with major retailers, foodservice companies and high street butchers, price rises contributed to a decline in supermarket promotions on New Zealand lamb. "Over the Christmas period, the retailers were nowhere near as aggressive on their promotions as they were previously over the past couple of years,"​ he says. "This probably reflects the fact there hasn’t been as much product around, which has meant they have had to limit the volumes they have had to promote."​

The most common promotions on New Zealand lamb are money-off deals on legs. "Retailers invest considerable amounts of their own money to give that offer to their customers and that attracts them through the door,"​ says Johnston. "It leads to increased vegetable sales at Christmas, as most of the offers are half price. There is no doubt the strength of the offer drives volume, but it does become a loss-making exercise, so they have to balance driving footfall into stores versus the cost to margin."​

Price rises in the UK have also been affected by growing global demand for more premium cuts in China, says Brown. "Demand in the Asian market has been very strong and prices for shoulders have picked up more than for leg."​

The higher average price point for New Zealand lamb has not yet affected demand, says Brown, and it is still cheaper than British lamb. "It has been selling through well,"​ he says. "It is a balancing act that there is a little bit less volume coming in, but it is a market that is in equilibrium."​

Chilled lamb is becoming increasingly predominant versus frozen. In 2012, of the UK’s imports from New Zealand 57% were frozen and 43% chilled, says Heyhoe. Back in 1997 the split was 90% frozen and 10% chilled.

The UK is also importing far more cuts versus carcases than it used to. The split for 2012 was 69% bone-in cuts, 29% boneless cuts and 2% carcase. In 1997 this split was 42% bone-in cuts, 22% boneless cuts and 35% carcase.

Legs are the most popular cut in the UK market, says Heath Milne, general manager, ANZCO Foods. "Demand for other cuts, such as loins and chops, is down, mainly because there is still quite a lot of British lamb available, so that is meeting demand for middle cuts."​

There has been a bit of a shortage of frozen legs recently, says Milne, which has held up the frozen market. The immediate focus, however, is pushing chilled product in the run-up to Easter, one of the main lamb occasions of the year. "Production is down on last year,"​ he says. "We are expecting that to continue for the year. So at the moment, prices are definitely up year on year, which is more to do with supply rather than demand, I would suggest."​

Despite higher prices, which Milne estimates are on average between 10% and 15% higher than last year, he forecasts strong demand for New Zealand lamb leading up to Easter.

Promotions have been strong throughout January, says Milne. "That is due to very strong competition between the retailers in general. Those that are losing market share see lamb as an item that, if they do promote, it brings people into their stores. They are still promoting quite heavily."​

Johnston says the next challenge for New Zealand Farmers is to work out how to tap into the retail trend for more convenience stores and more online trade. He says the company is trying to work out how to make NZ lamb appealing to consumers who want lamb in smaller portions than a whole leg.

Brands are relatively rare in this sector, but last year ANZCO Foods launched a new branded range into Waitrose, called Longdown. The range comprises six products including cutlets, lamb joints, rib and stuffed rolled roasts, burgers and kebabs. "It is an exclusive breed of lamb from a group of farmers in NZ,"​ says Milne. "We have selected it for its eating characteristics of tenderness and flavour. It has been a pretty good response from the customers. Volume is not big, but we are able to sell pretty much everything we can supply."​

Supplier profiles​

New Zealand Farmers​

New Zealand Farmers supplies approximately a third of all sheepmeat imported to the UK. Its product range includes frozen lamb cuts, carcases and mutton, plus chilled lamb destined for supermarkets. Founded in 1976, the company is a wholly-owned subsidiary of processor Alliance Group, which was established in Invercargill in the South Island in 1948. Alliance is a farmer-owned co-operative, with over 6,000 shareholder-suppliers and has an annual turnover in excess of $NZ1bn.

Silver Fern Farms​

Silver Fern Farms is a co-operative representing more than 20,000 farmers. It supplies Tesco with a branded range of lamb products, including Silver Fern lamb leg roast, lamb loin fillets, lamb rumps, lamb rack and lamb medallions.

ANZCO Foods​

ANZCO is one of New Zealand’s largest exporters, has sales of NZ$1.3bn and employs over 3,000 staff worldwide. ANZCO Foods is a multinational group of companies, whose core purpose is to procure, process and market New Zealand beef and lamb products to the world. In the UK it supplies chilled and frozen product, including the branded Longdown range for Waitrose, launched last year.

AFFCO​

AFFCO’s customer base covers six continents, including leading supermarket chains, restaurants, and leather merchants. In the UK AFFCO supplies retailers, including Sainsbury’s and Marks & Spencer, with chilled lamb, especially legs.

Ovation​

Ovation New Zealand is a 100% New Zealand-owned and -operated business. The company markets its free-range, grass-fed lamb to the UK, based on its tenderness. The emphasis is on ensuring a clean, cold and simple environment in which to process chilled products – all key factors in achieving the longest possible shelf-life. In the UK, Ovation supplies retailers and foodservice, with a particular emphasis on high-end restaurants and butchers.

Vestey​

Past of the Vestey Food Group, Vestey Foods UK specialises in the international sourcing of meat and is a specialist importer of New Zealand lamb.