This article is the follow-up to an earlier Blog post, “Is Irish beef all about mince and meatballs?”. Its aim is to illustrate why there is a differential between Irish and British beef; a differential which some farming leaders in Ireland believe there is no justification for.
In the last couple of years I cannot recall an article in the Irish farming press [admittedly I might have missed it] that goes into detail about the way beef is retailed in the UK and how the prices thus generated work through the supply chain. When over 50% of Irish beef exports go to the UK it is extraordinary that we are not being constantly informed by Bord Bia and the press about the detail within the UK beef market. In this Irish beef farmers are being poorly serviced.
Do all the United Kingdom supermarkets stock Irish beef?
Of the major supermarkets only Asda, Sainsbury and Tesco [AST] retail Irish beef. Together they control about 60% of UK food sales. The top end retailers, Waitrose and M&S operate a British beef only policy. Morrisons, the Co-operative and Budgens likewise. The so-called ‘discounters’ [although is ‘discount’ really their market position or are they really now just competitors to those in the mainstream market?] also reserve their shelves for British beef only. The latter is not a surprise as they operate a similar policy in Ireland where they highlight their support for Irish farmers; albeit in terms of placing Irish produce on Irish shelves. Sadly, their support does not go as far as stocking Irish beef in the UK; a market that is far more important to Irish farmers than their own market.
The Aberdeen Angus and Hereford beef retail-schemes
Should one assume that the price premium for AA and Hereford scheme beef be the same either side of the Irish Sea? Is it a homogenous market? The answer lies in a quote from the Beef Industry News [12th February 2106] “Premiums for Angus and Hereford sired cattle in the RoI are already almost non-existent at around 4p-5p a kilo compared with 20p-30p in Great Britain”.
Unfortunately for Irish retail scheme members, the use of the similar retail schemes in the UK beef is accompanied by country-of-origin marketing; it is the second half of the premiumization of the product. It is no different in Ireland where it is sold as Irish Hereford or Irish Angus. This translates through to a premium price for Angus and Hereford scheme cattle in the UK. This can also be enhanced by having Protected Geographic Indicator Scottish origins. Irish scheme beef might be available but it lacks one essential characteristic, it is not British. That leaves Irish scheme beef chasing a small share of the small Irish market and exports beyond the UK. More Hereford and Angus scheme beef from the expanding Irish dairy sector is unlikely to help.
What is written on the UK retailers’ premium labels
In Ireland one may be aware of Tesco’s “Finest”; its own label premium range. It is most likely to be Irish Angus [thus illustrating the use of Irish AND the AA retail scheme together]. They use the same premium-designation combination in the UK. Sainsbury’s in the UK has its equivalent “Taste the Difference” label. The third stockist of Irish beef, Asda uses the term “Extra Special”.
Now for a snap-shot of Asda’s “Extra Special range of burgers. They include Aberdeen Angus burgers, Rump Steak burgers and Wagyu burgers. In the past they have also listed Scottish Beef burgers and dry-aged burgers have been listed. Quite and extensive choice. What do they have in common? They are all from British beef and Red Tractor quality assured.
A similar pattern emerges with other products, the premium label is British origin and, probably, Red Tractor scheme assured. However, when it comes to their budget and standard ranges it is a different story. Then the beef can be of British or Irish origin, albeit still quality assured under the relevant national assurance scheme. Being quality assured in Ireland allows your beef to be sold in the UK but do not expect it to finds its way into the premium market segments.
From where do the UK retailers source their premium cuts?
Not all expensive beef cuts [i.e. steaks] are sold under the three [AST] supermarkets premium labels [as above]. When it comes to standard-range steaks there are times where the beef can be of British or Irish origin. It would, nevertheless, be more typical to see the more expensive cuts being of British origin and Red Tractor assured. Irish steak is not unknown and ensuring its availability may be a reason that Irish factories follow the specification requirement of the UK’s big three.
At times one has heard the question raised about how can all this British beef be on the shelves of a country that is only three-quarters self-sufficient in beef. The simple answer is that British beef is disproportionately focused on the upper echelons of the market. These are not necessarily the largest volume segments but when totalled up they are likely to result in a significant retail price differential between the price of Irish beef and British beef on the UK supermarket shelves.
Is mince the main volume market segment in the UK?
Data from the AHDB/Kantar shows that mince makes up the single largest segment of household beef purchases. In 2014 mince accounted for about 44% of purchases.
It is, however, not a homogenous segment. Waitrose’s offer includes Hereford mince, Angus Mince, Duchy Originals organic mince and there standard offer of British Beef mince. As it is Waitrose, it is all British beef but its offering illustrates the use of the breed-schemes to differentiate the market.
Aldi and Tesco do the same. Another common mince segment differentiator is to offer steak mince as a premium product, or in the case of Morrisons, Scottish minced steak. Needless to say it is difficult to find any Irish mince in among this premiumised crowd. That said one has seen in Asda’s mince portfolio ‘reduced fat Irish Aberdeen Angus mince’.
Reduced fat is in itself is a market differentiator. A look at Sainsbury’s mince reveals that they have a basic-range mince at 20% fat and within their standard range, 15%, 10% and 5% offerings. Their prices at the time of the research [for a 500 gram pack] were £3.80/kg, £6.00/kg, £7.90/kg and £9.00/kg respectively. Clearly less fat means a higher price. The same is to be found in other supermarkets, albeit the Sainsburys range illustrates the point well. Although not being up to speed on the specifics, one can probably assume that premiumization-by-fat content occurs mainly within the processing environment. As an aside, is there is a further opportunity to rear breeds that are known for beef that is both lower in fat and lower in cholesterol [as per the Irish Piedmontese]?
So where do you find the Irish beef in UK supermarkets?
You have to look in Asda, Sainsburys and Tesco but either when in the aisles or shopping on-line, finding Irish beef is still difficult. Typically you will find it among the mince, meatballs, burgers and diced beef. You will also find it among the roasting joints and the standard range of steaks. It is invariably in the budget and standard ranges. It will probably not be flagged as Irish. The word Irish may well be on the label [unaccompanied by a national flag or Bord Bia QAS logo] but in a way that the word ‘Irish’ can be easily inter-changed with ‘British’. It is probably fair to say that it goes into those beef products that are aimed at the price conscious shopper who is more interested in value for money than the national origin of the beef.
When one reviews the beef offerings on the UK shelves one can see that there is a beef mince category that is equivalent to the 89p for 4 pints of milk category [one could probably loosely use the term ‘loss leader’]. They are the volume focused, low-priced products aimed at bringing the customer in the door. The typical ‘bargain basement’ mince price is around the £4.00/kg [c. €5.20/kg] mark. In AST the product information is likely to say “Origin: UK/Ireland” and a mention of it being quality assured under the relevant national quality assurance scheme. There is no fanfare about the QAS but you can assume that it is required if you wish to supply the UK supermarkets. It is nothing less or more than a market-entry ticket.
Of nearly 250 beef products in my database [across six supermarkets including AST], there are just under 50 [20%] which are labelled in my database as “maybe Irish”. The AHDB survey [Nov. 2015] states that in Asda 72% of beef products were ‘British facing’, in Sainsbury it was 90% and in Tesco 67% [these are product numbers not product volumes]. There is no commitment to selling [let alone promoting a beef product that is definitively Irish. For 2014 Bord Bia states that 271,000 tonnes of Irish beef was exported to the UK so the market position that it has ‘achieved’ is extraordinary.
In what product categories do you find Irish beef?
My own survey shows that 48 out of 170 products in AST were maybe-Irish products. By numbers of products they are fairly evenly weighted across the product range with 21 [45%] being either joints or steaks [typically the higher-value products]. A number of organic products may also be of Irish origin. The weight of product is, nonetheless, biased towards the lower-value mince, meatballs, burgers and diced beef products. Although the survey is, due to the vastly complex nature of the beef offerings, not academically ‘robust’ in nature, it still suggests that lower value products account for 5/6ths of sales by weight. Or to put it another way 1/6th of the products were steaks of joints [where portion size may dictate carcass size specifications].
One can also add that five of the lowest six products [by price per kilo] in the survey were maybe-Irish and four of the five lowest priced mince products were also maybe-Irish. One could say that when in Tesco’s look for their budget Everyday Value label as all five beef products in the range are currently either maybe Irish or definitely Irish.
So what is the AST Irish-British beef price differential?
Attempting to provide specifics on the average retail price achieved by Irish beef is nigh on impossible; there are just too many beef products on the shelf. A simple average price for British and Irish products will not suffice, not least because labels may specify Irish or British. Just assessing product prices will also not work because there will be vastly different volumes sold of a basic mince and a sirloin steak. Maybe the retailers themselves would have access to the data to provide accuracy but in the absence of such one can only use a realistic weighting of product sales volumes. What is known from AHDB/Kantar is the volumes sold within different categories and the average price achieved within these categories. A weighting-by-volume was, therefore, given to each product with the category price and market share being used to ‘anchor’ the estimates. It is far from an exact science but one is, after all, only after a ‘feel’ for the figures.
What one can say is that if British beef disproportionately occupies the upper price categories and Irish the lower this will create a retail price differential. It is just arithmetic.
If one just focuses on retail sales through AST, the price evaluation suggests that the UK over Irish price premium is about 27%. This, of course, does not include retail prices from the British-only-beef supermarkets. If anything premium Waitrose and M&S prices might nudge the differential upwards whilst the others are more likely to be in-line with mainstream AST market prices. To put the differential another way, Irish beef is just over 83% of the market average whilst British beef is priced at about 6% above the market average. This is probably realistic.
In terms of average retail prices in AST, the overall average was about €9.60, the UK average €10.20 and the Irish average about €8.00. Although data suggests that the retail sector only accounts for about 30% of the total UK beef market, this price difference is significant.
So what does this mean for carcass price differential?
Another unknown in this is the prices paid for beef that is not sold through the supermarkets. As much of it is destined for the burger chains and ready-meals market segments one can assume that the average price is lower. One would also expect that there will be far less country-of-origin premium pricing. So just what is the impact of adding in sensible prices and very little British-beef price premium into the equation. As with all of this work, everyone would benefit from transparency throughout the supply chain but that is work for others.
Using a €5/kg average price and a 2% British price premium, the overall price premium for British over Irish is just under 12% [a zero British premium would leave this at about 10.5%]. If one then deducts estimates for the various supply-chain costs and margins, this leaves an ex-farm carcass price of £3.50/kg [€4.50/kg] for UK beef and €3.90/kg for Irish beef. Probably realistic.
The result of so much number crunching therefore suggests that a carcass price premium of 14.5% exists if there is no British-beef premium outside the supermarket environment. With a 2% British beef premium it is about 16% whilst at 5% it would be over 18%. The conclusion is that a carcass price differential of 15% or so is justifiable given the UK supermarkets preference to fill their higher-level, premium-priced product categories with British beef.