Limited ability for stores to raise lamb price

Supermarkets have a limited ability to raise the retail price of lamb, a buyer with one of the world's largest retailers says.

Sam Pearl, the chilled-lamb buyer with British supermarket company Tesco, told farmers at a sheep and beef forum organised by Silver Fern Farms in Gore last week that, individually, supermarkets were small players in marketing sheep meat.

Several farmers told Mr Pearl that unless farm-gate prices for lamb improved, there would be a further decline in the number of lambs available for them to sell.

Mr Pearl stressed it was not in the interest of Tesco for farmers not to make money.

The solution to farmer profitability was for supermarkets, processors and farmers to work together to extract more value through developing new markets and doing things in a different way.

A decade ago, Tesco's lamb offering was confined to legs, joints and shoulders.

Today, it sold $NZ320 million a year of chilled lamb with a product mix that included chops, steaks, mince and joints along with ingredients, in organic, finest and Halal categories.

Mr Pearl said Tesco last year increased sales of chilled lamb by 12% compared with the year before, through promotions, but also by introducing more people to it.

But lamb remained a niche product.

In every 100 customers, Mr Pearl estimated 85 would buy beef and 92 chicken.

For lamb, it was 40 and that was 7% more as measured by sales than a year earlier.

Customers tended to buy their lamb every three to four weeks, while sales of chicken were eight times that of lamb and twice that of beef.

While those figures were a challenge for lamb, Mr Pearl said it was also an opportunity.

But to get more people to eat lamb, the price gap between the product and other meat had to narrow and more young adults and young families had to be introduced to it.

The lamb market was dominated by older families, older adults and pensioners, but introducing more people could be done by using lower value cuts.

This year would be challenging for red meat sales, in particular lamb, so it was important customers were given the product they wanted.

"The opportunities are absolutely colossal to be honest."

The recession had dented consumer confidence, he said, with the top three priorities being price, availability and store environment.

Within those concerns, customers were particularly focused on the price of fresh meat and poultry.

Mr Pearl said product availability was always one of the top three concerns, but increasingly products were being bought on price.

In the last year, 32% of food sales were for products with promotional pricing compared to 28% the year before.

Customers had an expectation they could buy whatever product they needed and Mr Pearl said availability regularly scored highly on consumer surveys.

Food quality was not a top-three concern in the latest survey, but it was an emerging issue and would become more so as the economy improved.