With the region’s meat market under pressure, Lee Jamieson asks the experts if the supply chain will remain consistent and profitable against the odds?
Meat suppliers and F&B operators across the Middle East are regarding 2012 with caution. 2011 was a difficult year for meat; and the region felt the pinch.
The Middle East’s meat market relies almost exclusively on imported produce, exposing suppliers and operators to price volatility on the open market. Fluctuation in the price is nothing new for the region’s F&B operators, as Ruth’s Chris Steak House executive chef Paul de Visser explains.
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“At Ruth’s Chris Steak House Dubai, we only use imported US Department of Agriculture (USDA) prime beef, so our beef prices are constantly fluctuating throughout the year. The price is always high in holiday seasons like Christmas and New Year, but it drops again in the months that follow. This pattern usually occurs twice per year and generates some big price differences along the way.”
But 2011 was different. Food prices hit the headlines when a series of natural and political events coincided. Supply from key import markets was interrupted by floods in New Zealand, tsunami in Japan and drought in Argentina. Further strain was put on the supply chain by fuel inflation and the Arab Spring.
The Food and Agriculture Organisation (FAO) reports that international meat prices in 2011 were 16% higher than in 2010, but some suppliers in the Middle East report a price increase of closer to 50% for chilled meat.
The coming year
Could 2012 offer more stability? Certainly, in the context of the past 12 months, stability has returned to the meat market. This time last year, the FAO Food Price Index hit an all-time high of 238 points. By December last year, the figure had stabilised at 211.
However, a United Nations report from October warns that higher and more volatile food prices may just be around the corner.
“I think we will continue to see price increases for meat sourced from countries like Australia and New Zealand because they currently have strong economies,” explains Meat Co executive chef, Roy Soundranayagam. “Thanks to an increase in the exchange rate with the Australian and New Zealand Dollar, we have seen the cost price of meat increase by around 12% in the past year.”
As a brand built around bovine products, sharp price rises can pose a real business challenge for Meat Co. The company imports choice cuts like fillets, rump steaks and one-kilogram beef tomahawks from a number of source markets including New Zealand, Australia, USA and Brazil. With the exception of Brazil, supply from these markets has been under stress in the past year.
“Furthermore, the issues that Japan is currently facing are causing the Middle East’s restaurants that used to buy beef from the market to look elsewhere.”
More demand, less supply
Demand for meat in the region continues to grow despite the supply issues of 2011, thereby hiking up prices.
In Saudi Arabia alone the meat per capita has jumped from 47.5 kg to 51.4 kg in five years, according to data from Euromonitor International. In 2011, the volume of meat in the Saudi meat market stood at 1,376,000 tonnes, up from 1,147,000 tonnes in 2006.
Higher consumption and bigger populations has led to increased competition for the region’s F&B operators.
“I think supply will remain stable, but the competition between restaurants keeps on growing,” says Ruth’s Chris Steak House’s Visser. “There are currently more than 50 steakhouses in Dubai and the number keeps growing!
“Therefore, you have to deliver on things like great quality and service to keep your head above water.”
Meat suppliers are also anticipating price rises fuelled by new demand from emerging economies.
“We think that 2012 will be a tough year for meat importers,” explains Aramtec food service manager, Hossam Shabayk. “We will experience an increase in demand from big countries like India, Russia and China – yet, the availability of cattle in big production powerhouses has dropped to unforeseen levels. This will all result in high meat prices.”
The need for price stability has led F&B operators to exert more control over the supply chain. This idea has informed the approach of Gaucho, the steakhouse brand that expanded into the region during this difficult period; opening in Beirut in November 2010 and in Dubai late last year.
Gaucho exerts its influence throughout the supply chain from the farms in Argentina to the end consumer.
“We work with a selection of 30 farms in Argentina that collectively produce our beef for us, so we are able to control the quality and quantity from source,” explains Gaucho international operations director, Ryan Hattingh.
“The beef industry has experienced high demand over the past few years and prices have varied considerably, but because we don’t buy meat on the open market, we don’t face the same supply issues ourselves.
“The challenge for us is in the logistics and clearing processes. Every country has different rules and procedures that need to be followed, but once you have done the research and established these practical details, it’s pretty straightforward.”
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