Abalone Votes 2019: How high can the abalone price go?

Abalone Votes 2019: How high can the abalone price go?

The abalone consumer education and promotion ballot closes this Sunday at 6.00pm AEDT.  If you haven’t made your mind up yet we encourage you to go to the website www.abalonepal.com and look at the information that we have put there to help you decide.

 

The aim of the proposed Consumer Education and Promotion Program is to increase the value of the industry by $100million cumulatively over five years.  To do that we will need to attract a premium price for our products. 

One question people have asked is how high can the abalone price go?

The Levy Investment Proposal that was included in your voter packs provides a lot of information about historical price trends for Australian wild-caught abalone.  We also asked Ewan Colquhoun, an expert in levies investment, about what is happening in the global abalone market and how that impacts on our price.  You can watch a short video with his response here.

 Most of issues that impact on the price we receive for our abalone are largely or completely outside the control of the industry.  What we can control is how we communicate with our consumers and the story we tell.  The story we tell will impact on the value that the consumer perceives for Australian wild-caught abalone.  That is what the Consumer Education and Promotion (CEP) Program is all about.

 Last week Undercurrent News published an article that was shared with us by the Australasian Abalone Association.  The headline “Abalone price crash in China opens market opportunities” certainly grabbed our attention!  The article itself is firewalled (you can read the full article by signing up to receive the Undercurrent News newsletters).  Here are three key points:

  1. The price of a single abalone now is as cheap as CNY 3 per piece. This is about the same as the price for a head of cabbage.
  2. Larger abalone do get higher prices but there has been a price drop across the board for Chinese farmed abalone of between 20% and 25%.
  3. Fierce competition is compelling Chinese abalone businesses to promote and differentiate their product.

Source: Undercurrent News

We can’t compete with Chinese farmed abalone on price. 

 

The challenge for our industry is to get consistent and stable increases in price for Australian wild-caught abalone at a time when competition is driving prices down.  To do that we need to get closer to the people who consume our products.

Jing Daily, a luxury branding newsletter from China, recently published an article about prestige pricing.   Prestige pricing is where prices are set at a high level due to a perceived quality. 

The Jing Daily article talks about the need for premium brands to establish “added luxury value” (ALV) which is a value that is based on perceived social status.  This is what people will pay a high price for, not the product features.  The added luxury value is driven by the brand story not the product

A well-executed prestige pricing strategy will cause the demand to go up when the price goes up! This is absolutely counterintuitive to what most people expect. 

Here is an example of how this works.

Who would pay USD2000 or even USD1000 for an omelette?  People do!  A New York hotel has been selling omelettes for USD1000 each for about a decade.  They recently increased the price to $2000 and the demand for the omelette went up!  The perceived social status associated with buying and eating the omelette caused this to happen.  It got even more prestigious.

Here is an abalone example.  In September 2018 nearly 500,000 RMB (about AUD100,000) was spent by a group of eight people for one meal.  One of the main dishes on the privately customized menu was one abalone of approximate 1.2 kg, cooked with rice wine, at a price of 102 400 RMB.  That is more than AUD20,000 for one abalone!

 

Value as they say is in the eyes of the beholder!

 

With declining quotas Australian wild-caught abalone products are becoming rarer.  As they become rarer, they become more valuable. 

We have an opportunity as an industry to get a higher price for our abalone, but we must be able to tell a compelling story that resonates with the consumer and make them want to pay more for our product.

This is what the levy funds will be used for.  Experts in each of five key markets will be contracted by the Fisheries Research and Development Corporation to undertake activities to create a price premium for Australian wild-caught abalone by increasing the perceived social status of our products.

 It is a trial, after five years another vote will be conducted to decide whether to continue the levy or not.

 Have your say on the future of our industry.  Make your vote count. 

 

 

Abalone Votes 2019: Calculating the expected return on investment

Abalone Votes 2019: Calculating the expected return on investment

If you have already voted, thank you.

Abalone Council Australia has been asked to explain how the figure of 8 to 1 return on investment was calculated.

The Consumer Education and Promotion (CEP) Program is focused on increasing the price that the consumer pays for our abalone products.  We expect that wild catch abalone quota will not be increasing anytime soon so increasing consumer demand via education and promotion is critical to the future profitability of our industry.

Where did we get the proposed figure of 8 to 1 return on investment?

In preparing the Levy Investment Proposal we looked at how other industries collect and use their levies and what their historical return on investment (ROI) has been.  In particular, the AWA Team focussed on export focussed agribusiness sectors that target Asian markets. Ewan Colquhoun, an independent business investment advisor, makes some comments about how other industries invest in this short video.

Here are some key findings about the experiences of other industries:

Meat and Livestock Australia

Meat and Livestock Australia manages a number of marketing programs on behalf of their members (beef, lamb and goat meat producers).  The last impact review was released in 2016.  Key findings include

  • The domestic beef marketing program delivered a small benefit cost with a return of $1.10 for every $1
  • The domestic lamb marketing program delivered $4.10 for every $1
  • The live exports program provided an ROI of $14.50 for every $1
  • The beef export marketing program achieved $6.70 for every $1
  • The market access program provided a return to producers of $24 for every $1 invested.
  • The market intelligence service provided a return to producers of $7.90 for every $1 invested

Source: MLA Levy Case Study

Australian Prawns

Photo Source: https://www.australianprawns.com.au/

Love Australian Prawns is a collaborative venture between Australian wild-caught and farmed prawn producers.  Their objective was to increase sales (volume) without crashing the market price.  In 2017 the University of Sunshine Coast and Brand Council evaluated the Love Australian Prawns campaign. They found a significant increase in consumer awareness of and demand for Australian prawns, an increase in demand of 38%.  In terms of prices, the report found on average, 20% price increases (across medium to large grades) between 2014, start of the LAP campaign, and now. Some fisheries reported a 20% price increase for larger grades in the 2016/17 year alone, despite having more supply than in past years

Norwegian Seafood

For quota managed fisheries it not about increasing volume of sales it is about increasing prices.  The Norwegian Seafood Council (NSC) is renowned for their whole of industry collaborative consumer education and promotion programs.  They are very active in China and Hong Kong.  In a recent study  looking at the ROI they found that the investment had returned between 5.9 and 9.2 to 1. In what is a very competitive global market (high volumes and many competitors), the NSC programs increased export revenues back to the industry of between 7.1% and almost 10% additional industry profits.

There are many more examples both in Australia and overseas demonstrating that whole of industry collaborative consumer education and promotion programs work.

Five-year trial in five markets

Abalone Council Australia is proposing that we try implementing the proposed CEP Program in our five key markets for five years.  Then we will have another vote to decide whether to continue or not.  Find out more on the website www.abalonepal.com

Make up your own mind.

Make your vote count

Vote now for the future of our industry

Abalone Votes 2019: 7 key elements of successful whole of industry promotion – lessons for abalone.

Abalone Votes 2019: 7 key elements of successful whole of industry promotion – lessons for abalone.

If you have already voted, thank you.

Many of Australia’s agribusiness sectors have already introduced levies to fund consumer education and promotion/marketing campaigns.

Australian Primary Industry Development Levies are collected via Dept of Agriculture (Commonwealth) for each of the following industry bodies:

  • Australian Egg Corporation Limited
  • Australian Grape and Wine Authority
  • Australian Meat Processors Corporation
  • Australian Pork Limited
  • Australian Wool Innovation
  • Cotton Research & Development Corporation
  • Dairy Australia Limited
  • Forest and Wood Products Australia Ltd
  • Grains Research & Development Corporation,
  • Horticulture Australia Ltd
  • Live Corp
  • Meat & Livestock Australia
  • Plant Health Australia
  • Australia, Sugar Research Australia and
  • Wheat Exports Australia

 

The AWA Team was very interested to know how some of these entities executed their “whole of industry collaborative promotion” campaigns.

 To gain some valuable insights, we spoke to Meat and Livestock Australia (MLA), Australian Pork Ltd (APL) and Horticulture  Innovation Australia’s Taste Australia program

Our discussions revealed seven (7) key elements for successful whole of industry education and promotion campaigns:

  1. Always start with the consumers. Find out as much as possible about the consumer and what they want/expect in a product and service.
  2. Let the data guide the education promotion campaigns. Understand what the data is telling you. Use the data to define your strategy, set objectives, develop tactics and measure impacts. 
  3. Prepare to experiment to see what works. Trial tactics in a small way and test how consumers respond.  The testing might show that some tweaking is needed before full roll out.  It is easier to make adjustments early on
  4. Use experts who have experience in your target marke This is critical.  What works in one market may not work in another one.  Cultural nuances and localisation have tripped up even the most experienced of brands.
  5. Keep the message simple and memorable. APL’s “put some pork on your fork “and “she porked the whole neighbourhood” messaging is both simple and memorable that have stood the test of time.  The messages directly trigger purchasing behaviour in store – which is exactly what APL is trying to do.
  6. Be consistent and look at the long term. Don’t go into the market and then disappear. Give your program five years minimum to have a lasting impact.  When you find something that works build on it. 
  7. Work with supply chain partners and be collaborative.  Whole of Industry promotional campaigns are there to support individual company efforts to sell product. The whole supply chain needs to be involved from the start.

  All seven elements mentioned above have been included in the proposed Consumer Education and Promotion (CEP) Program.

Meat and Livestock Australia (MLA)

MLA is consistent being consistent. They have a long history of undertaking promotion programs.  The objectives for these have differed over the years and between different sectors (beef, lamb and goat).  They follow a well-trodden and proven path:  strategy is based on consumer insights and market data with campaigns created and undertaken by in-market experts.

But, it is not set and forget!   

Markets, and consumers, are constantly changing.  So campaigns, even successful ones, have to evolve to continue to be relevant and have impact.  The Australia Day lamb campaigns  and Lamb Its too easy are great examples of how this works in practice. 

 

Source: Meat and Livestock Australia 2019

Australian Pork (APL)

Like Australian wild-caught abalone, is only focused on one product – Australian pork. 

Focused on where consumers decide to buy pork APL has developed some distinctive and successful promotion campaigns .  They develop materials and campaigns to support butchers and food service (restaurants, pubs and clubs) achieve sales driving demand back to farmers. 

Source: Australian Pork, 2019

How are these campaigns funded?

The ACA business advisor looked at other primary industry sectors and provides some insight here on how they do it.  (What does the data tell us? Episode 2)

Consistent branding and continuous efforts are key

In his presentation at the ACA Australasia Abalone Convention in July 2019. Sam Guthrie, until recently Australian Senior Trade Commissioner (also Deputy Consul General in Hong Kong) detailed several examples of collaborative whole of industry promotion activities that have been built around a collective brand.

Source: Austrade, 2019

ACA already has a collective trademark as well as education and promotion assets ready to roll out. 

ing that other industries do with great success.

It is your choice.  This is what you are being asked to vote on.

Abalone Votes 2019: Who are the people who eat our abalone?

Abalone Votes 2019: Who are the people who eat our abalone?

A profitable future for the Australian wild-caught abalone industry relies on having strong consumer demand for our product.  Consumer demand along with a strong healthy resource are our two greatest assets.

Consumer demand drives demand back through the chain to us, the producers.  It is what keeps us in business.

 BUT how much do we know about who our abalone consumers are, what they like about our abalone and where our future consumers will come from? 

 As an industry we need to understand our target consumers, what they value and what they will pay a premium for.  ACA market research (2010 -2015) showed that, because Australian wild-caught abalone is a premium product, our consumers are more likely to be wealthier than average. These consumers do not buy on price, they buy on value, and they value the fact that our product, among other things, is rare and is hand caught by divers. For more about what our consumers value see page 7 of the proposed Consumer Education and Promotion Program.

 Grey Group, one of the world’s largest marketing agencies, helped develop the AWA® Program in 2010.  In their research they found, among other things, that our traditional consumers were getting older and that the new generation of wealthy consumers really weren’t showing the same enthusiasm for Australian wild-caught Abalone as their parents and grandparents had.  This is a constant challenge for anyone selling any product – keeping existing consumers and getting new ones (to replace the ones who inevitably drop off). 

 The global abalone marketplace is far more competitive today than it was in 2010 (see below). For more information see pages 8 and 9 of the Levy Investment Proposal.

Our target consumers have far more choice for spending their money than ever before. 

Wealth in China is concentrated in younger consumers with the highest level of average monthly income earned by people aged 18 to 29 and the lowest level of disposable income available to people aged 46 years or older.  In USA the opposite is true, the lowest average monthly income earned by people aged 18 to 24 with the highest income earned by people aged 45 to 54. 

A recent report concluded that Gen Z in China are poised to change the landscape of luxury market globally impacting on every brand, (including Australian wild-caught abalone) targeting the luxury premium consumer.  

 Millennials (people born between 1981 and 1997) and Gen Z (born after 1998) are our future abalone connoisseurs.  They are wealthier than any previous generations and their purchasing behaviour is very different from older generations.

 We need to find this new generation of premium abalone consumers and educate them about Australia’s beautiful wild-caught abalone products

We need to know: Where do they live? How old are they? What are they looking for in an abalone product?  How do they decide whether to buy abalone or not?  What will they pay a premium for? How do they like to eat it?  When do they like to eat it?  Where will they go to find out about Australian wild-caught Abalone? 

 It is not just about finding our future consumers, we need to educate all our consumers, current and future, show them how we catch the product and how care is taken through the supply chain to get the product to them.  We need to help them find our products, and how to tell whether the product is genuinely Australian wild-caught abalone.

 Sam Guthrie, until recently Australia’s Deputy Consul General in Hong Kong, presented at the Australasian Abalone Convention.  He provided examples of what other seafood industries are doing to capture the hearts and minds of their consumers. 

The Japanese abalone industry has worked hard to educate the Hong Kong market about their product and has built a reputation based on some unique characteristics that consumers will pay significant premiums for – many of these same attributes that Australia abalone has (but we don’t tell anyone). 

If we don’t work collectively as an industry to do something different, we run the risk of becoming irrelevant to our target consumers. 

 Will Australian wild-caught abalone go the way of the typewriter and the fax machine and disappear to be museum exhibits, or will we reinvent ourselves and our product and become trendy, something that is desirable, socially relevant, a status symbol, a luxurious gourmet food?

 It is your choice.  This is what you are being asked to vote on.

We are suggesting that we collectively invest via a compulsory levy. in consumer education and promotion for 5 years.   

We need to make a change to how we interact with our consumers to give them something they want to buy and pay a premium for it. 

The Consumer Education and Promotion Program (CEP) is our plan for how we as an industry can do this.  The investment from the proposed levy will be used to implement it.

Ask the experts

Ewan Colquhoun, Director of Ridge Partners explores the data behind the Abalone Council Australia Ltd proposal to invest in consumer educations and marketing, below. Anthony Wan, Co-Founder of G-Fresh takes a look at the market trends driving consumer behaviour in China.

Abalone Votes 2019: 5 markets, 5 key activity areas for 5 years

Abalone Votes 2019: 5 markets, 5 key activity areas for 5 years

If you have already voted – thank you!

The proposed Consumer Education and Promotion Program https://bit.ly/32FT3IK details the activities that will be undertaken in each of our five key markets – Hong Kong, Japan, china, Singapore and Australia.

There are five activity areas proposed – all aimed at positioning Australia as the home of wild abalone:

  1. Managing the use of the Australian Wild Abalone certification trademark – the cornerstone of the CEP Program – to differentiate genuine Australian wild-caught abalone from our competitors
  2. Ensuring that we have full access to the global abalone markets so that we can build demand in alternative markets and spread market risk
  3. Raising consumer awareness and activating them to choose Australian wild-caught abalone over our competitors, and willingly pay a premium for it
  4. Helping all abalone enterprises, including our exporters, importers/distributors and their customers, promote Australian wild-caught abalone to consumers
  5. Staying on top of market and consumer trends and taking advantage of them

All these activities will be undertaken in each of the five key markets and tailored to the individual needs of each those markets.

An Abalone Marketing Advisory Committee https://bit.ly/2pTqpGX will be established by the Fisheries Research and Development Corporation to guide the investment in consumer education and promotion.

All in-market consumer education and promotion activities will be undertaken by specialist experts in each market. These experts will be selected by tender and contracted and managed by the Fisheries Research and Development Corporation (FRDC).

To see examples of the kinds of activities that will happen as the CEP Program is implemented have a look at these short videos https://bit.ly/2ruO5BG

QUESTIONS and ANSWERS

Some questions we were asked by quota owners last week:

There have been different versions of the document over the years how do I know that I am looking at the most up-to-date version?

The final documents have different covers to previous versions. The most up to date versions are available at https://abalonepal.com/reports-downloads-awa-marketing-levy/

If you received the documents in the mail as part of your voter pack OR you downloaded the document from the website after the voting opened at 00:01 on the 11th of November then you can be sure that you have the right one. Many changes were made to previous versions as a result of consultation with Australian wild-caught abalone stakeholders.

How will the votes be counted?

Page 45 of the Levy Investment Proposal says “The votes will be counted in two ways. Firstly, how many quota holding entities voted ‘yes’ compared to the number that voted ‘no’. Secondly, how much quota (in kgs) is owned by those entities which voted ‘yes’ compared to ‘no’”. Both metrics are important. Everyone’s vote is important.

Do you need more information or have some more questions?

Go to www.abalonepal.com and have a look at all the information that is there to help you decide how to vote.

We will be adding more information to the website and providing regular updates by email over the next five weeks.

If you have any questions, please send an email to admin@abalonecouncil.com.au We undertake to provide a response to you within 2 working days.

This is your chance to have your say on the future profitability of the Australian wild-caught abalone industry. Make your vote count.

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