New markets key for wool
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.
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.