New mar­kets key for wool

The Northern Star - Northern New South Wales Rural Weekly - - NEWS -

THE “sheep is back”, ac­cord­ing to a new re­port, with de­mand for Aus­tralia’s sheep prod­ucts – meat and wool – set to re­main strong.

How­ever, the strength of this de­mand hinges on the in­dus­try’s abil­ity to tap into new seg­ments of the mar­ket.

Re­port au­thor, Rabobank com­mod­ity an­a­lyst Ge­or­gia Twomey said not only are mil­len­ni­als rapidly be­com­ing the largest con­sumer base in the mar­ket, but many of their pur­chas­ing be­hav­iours (driven by their pref­er­ence for qual­ity, au­then­tic­ity and trans­parency) are char­ac­ter­is­tics in­her­ent to lamb and wool.

“Sheep prod­ucts al­ready op­er­ate in a rel­a­tively niche mar­ket, mak­ing lamb and wool unique in the pro­tein and fi­bre space,” she said.

“With mil­len­ni­als will­ing to try new prod­ucts, and in some cases pay more for them, there is real op­por­tu­nity for those in the sheep in­dus­try to lever­age the ex­ist­ing char­ac­ter­is­tics of their prod­uct and cap­i­talise on this new de­mand.”

Sell­ing to this new customer will not be with­out its chal­lenges and com­pe­ti­tion will be strong, she warns, par­tic­u­larly from al­ter­na­tive prod­ucts ac­tively tar­get­ing this so­cial and en­vi­ron­men­tally-con­scious con­sumer.

GROWTH IN DE­MAND SET TO CON­TINUE

THE run of “three very good years”, with record high prices for lamb and wool, begs the ques­tion as to whether this can be sus­tained.

Cit­ing strong de­mand in global mar­kets as the driver for higher prices and strong re­turns for Aus­tralian sheep pro­duc­ers (with per unit ex­port val­ues of wool and lamb, 42 and 23 per cent, re­spec­tively, above the five-year av­er­age), Ms Twomey said sup­ply-side im­pacts will also in­flu­ence prices and pro­duc­ers’ abil­ity to cap­ture in­creased de­mand.

“While this re­port fo­cuses on the growth prospects for de­mand, the sup­ply of wool and lamb – both lo­cally and glob­ally – is ex­pected to re­main con­strained, which will also help with sup­port­ing prices in the medium-term,” she said.

Look­ing for­ward, Ms Twomey said de­mand growth will be driven by two key com­po­nents – with “tra­di­tional” con­sumer mar­kets pro­vid­ing the plat­form for strong vol­ume growth, while the new “mil­len­nial” con­sumer group will drive the high-value growth for prod­ucts.

“Meat and wool have slightly dif­fer­ent tra­di­tional con­sumer bases, but both share the com­mon trait of be­ing long­stand­ing, es­tab­lished mar­kets,” she said.

“For sheep­meat, the tra­di­tional con­sumer tends to be a par­tic­u­lar geo­graphic lo­ca­tion or eth­nic­ity – namely, the Mid­dle East, China, US and the EU – while ap­parel wool has tra­di­tion­ally been tar­geted at high-in­come con­sumers in the north­ern hemi­sphere, with China the world’s largest pro­ces­sor, tex­tile ex­porter and, due to the scale of pop­u­la­tion, user of wool at re­tail.”

MIL­LEN­NI­ALS TO DRIVE FU­TURE DE­MAND

THE real op­por­tu­ni­ties, how­ever, lie with the mil­len­nial con­sumer (aged be­tween 18 and 38 years). Ms Twomey said this gen­er­a­tion ex­hibits char­ac­ter­is­tics in the way they shop and con­sume that the sheep in­dus­try is well po­si­tioned to meet.

“Rep­re­sent­ing nearly a third of the pop­u­la­tion in coun­tries such as the US and China, mil­len­ni­als are not only be­com­ing the largest con­sumer base but their in­flu­ence is set to grow as they move fur­ther into the work­force and their pur­chas­ing power in­creases,” she said.

“De­sire for qual­ity is one of the key pur­chas­ing driv­ers of this age group, along with au­then­tic­ity, unique­ness and trans­parency in the pro­duc­tion process.

“While other fac­tors in­clude their will­ing­ness to try new things, con­ve­nience, the higher ten­dency to eat out of home, and, in recog­ni­tion of qual­ity, the will­ing­ness to pay more.”

Ms Twomey said wool was mov­ing into new prod­uct ranges to cap­ture this new con­sumer, cit­ing ac­tivewear as an ex­am­ple.

PHOTO: KIRAVOLKOV

GROW­ING THE IN­DUS­TRY: A new Rabobank re­port iden­ti­fies that mil­len­ni­als can shape the fu­ture of the sheep and wool in­dus­try with new ideas and ven­tures.

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