Adding and Extracting Value from Paddock to Retailer

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• Adding and Extracting Value from Paddock to
  Retailer

Gerard Keenan, CEO, Keenan
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• Crisis in the beef industry prices drop by 20

June 2005 Irish beef prices drop from 3.00 to
2.40 per kilo DW September 2005 Irish Market
prices 2.43 per kilo DW KK Club contract prices
3.26 per kilo DW
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KK Beef Club

• Origins
• 1998
• Crisis in European beef markets
• New way needed
• Forum for change - processors, farmers union,
  farming press, Keenan nutritionists, Australian
  Total Quality expert
• Modest first steps

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• The challenge
• KK Beef Club Specification (heifers)
• Carcase weight 240-320kg _at_ 20 mths. max.
• Colour Fat - white (no yellow) Meat Pink
• Carcase conformation U(3,4L,4H) R(3,4L,4H)
• From grass-based production system
• On year-round basis
• Project scalability
• Need for the project to financially work for all
  parties farmers, processors (and retailer)
• Keenans role was to contribute at all 5 levels

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KK Beef Club Specification (heifers) ? Carcase
weight 240-320kg _at_ 20 mths. max. ? Colour Fat -
white (no yellow) Meat - Pink ? Carcase
conformation U(3,4L,4H) R(3,4L,4H)
Carcase description - meeting KK Beef Club
specification
90 hit target
Source KK Beef Club grading figures 2000
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KK Beef Club

• Consistently hitting a tight specification on
  bulls and heifers
• Characteristic Hitting Spec.
• carcase weight 84
• conformation 87
• fat colour 98
• meat colour 98
• Source KK Club, bulls and heifers 2001
• Not possible with traditional production methods

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KK Beef Club

• Outcomes
• Reliable market for producers and predictable
  supply to processor (6 months in advance)

• Dynamic competitive strategies to counter
  copy-cats
• Current market prices 2.48 per kilo DW
• Standard KK (bulls, heifers lt 24 months, white
  fat, pink meat) currently 2.76 and normally 14c
  above market price (11 on 2.48)
• GMO free (2001), strict codes of practice,
  currently 3.06 (23 on 2.48)
• GMO free, strict supply basis, currently 3.26
  (31 on 2.48)

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KK Beef Club

• Outcomes
• Guaranteed supply due to planned production
  process
• 1998 2,000 1999 20,000 2004 - 50,000
• 2005 70,000 (40,000 on GM0 free)
• Keenan had critical role
• Proving it was possible to efficiently produce
  white fat, pink meat from grass-based system
• Delivering technical know-how to producers
  imparting capability at low cost
• Acting as honest broker in relationship between
  farmers and Kepak

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• Key features
• Trust between processor and farmer
• Commitment two-way
• The other side needs to win too
• Both sides faced challenges to their commitment
• Lifted the gloom of the industry
• Branded KK Club by beef journalist
• Pointed a new way forward
• Next generation vision for the industry
• Recognised as flagship for Irelands beef
  industry and role model for subsidy-free beef
  industry

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• Adding and Extracting Value from Paddock to
  Retailer

• The elimination of causes of variation in quality
  and productivity will create wealth for all
  parties in the supply chain. The potential
  benefits in a successful alliance are 20-30 of
  total costs.
• Improving total business productivity and reduced
  unit costs
• Reducing quality penalty costs and improved
  average prices
• Becoming reliable, valued suppliers - building
  market share

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• Adding and Extracting Value from Paddock to
  Retailer

The elimination of causes of variation in
quality and productivity will create wealth for
all parties in the supply chain. The potential
benefits in a successful alliance are 20-30 of
total costs. Long term Building chain capability
for next stage product innovation,
differentiation and competitiveness Powerful
motivation for all participants