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Confidential

Stakeholder Engagement for the Moojepin Merino Meat Value

Chain Final Report

Strategy Matrix

Prepared for:

Robin Jacob

Senior Research Officer, Livestock Industries

Department of Agriculture & Food WA

3 April 2017

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Contact DetailsName: Ann Maree O’CallaghanRole: DirectorMobile: 0408 603 126Email: [email protected]: 31 926 169 284

This document may be circulated for internal client review purposes. However, no part of this document may be reproduced, transcribed, or transmitted in any form, electronic or mechanical for any other purpose whatsoever without the prior written consent of Strategy Matrix.

STAKEHOLDER ENGAGEMENT FOR THE MOOJEPIN MERINO MEAT VALUE CHAIN

mailto:[email protected]

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Strategy Matrix Company Profile Strategy Matrix is a consultancy business focused on stakeholder engagement and consultation, facilitation services, strategic planning, and business development. It specialises in bringing people together to help them make sound business decisions. The business provides specialised services in natural resources and land management with an emphasis on business innovation and research, capacity building, and industry development. The business offers value via critical insights into people and group processes; strategy and business development; and expertise in regional and rural development.


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ContentsStrategy Matrix Company Profile...........................................................................................................3

Executive Summary...............................................................................................................................6

1 This project....................................................................................................................................7

1.1 Dedicated Sheep Meat Value Chains.....................................................................................7

1.2 Project Objectives..................................................................................................................7

1.3 Methodology.........................................................................................................................8

2 Background and Context.............................................................................................................10

2.1 Introduction.........................................................................................................................10

2.2 Moojepin Merino Meat Development.................................................................................10

2.3 DAFWA - Sheep Industry Business Innovation Project.........................................................13

3 Research and Investigation..........................................................................................................14

3.1 Red Meat Production & Market share.................................................................................14

3.2 MLA sheep market analysis.................................................................................................15

3.3 Restaurant Industry Analysis & Trends................................................................................17

3.4 Food Tourism.......................................................................................................................18

3.5 Supply chain - Processors.....................................................................................................18

4 Potential Models for Innovation..................................................................................................22

4.1 Not-for-Profit Grower Alliance.............................................................................................22

4.2 Cooperative Business Model................................................................................................23

4.3 Limited Liability Company....................................................................................................26

5 Stakeholder Engagement and Consultation.................................................................................28

5.1 Identified stakeholders........................................................................................................28

5.2 Targeted Stakeholder Interviews.........................................................................................29

5.3 Stakeholder Workshop Feedback........................................................................................35

6 Financial analysis.........................................................................................................................43

6.1 Products...............................................................................................................................43

6.2 Key Analysis Findings...........................................................................................................43

6.3 Status Quo...........................................................................................................................44

6.4 Producer Alliance.................................................................................................................44

6.5 Producer Entity (Company or Cooperative).........................................................................45

6.6 Value Chain Entity (Company or Cooperative).....................................................................46

6.7 Planning...............................................................................................................................47

7 Findings.......................................................................................................................................49


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7.1 Research Outcomes.............................................................................................................49

7.2 Summary of Stakeholder Engagement.................................................................................49

7.3 Areas for research and development...................................................................................51

7.4 Stakeholder Agreement and Commitment..........................................................................51

8 Funding Opportunities.................................................................................................................52

9 Recommendations.......................................................................................................................55


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Executive Summary A significant outcome of this project was the bringing together of multiply stakeholders from all parts of the Moojepin Merino Meat (MMM) value chain into the one engagement process. This was especially the case with producers, chefs and restaurant owners all acknowledging that this was a first for all of them. The critical result of this very initial collaboration was the understanding and realisation of the different challenges and opportunities that others in the same value chain deal with. Identifying this key stakeholder need (to be “in the same room”) at this early stage will help ensure any future collaboration engages and involves all key partners in the value chain.

At the same time, this project has shown just how hard it is to get segments of the same industry sector aligned for a common purpose. Despite good efforts to engage processors in the consultation, there was a very real reluctance on their behalf to participate. This is a significant challenge and barrier that industry faces and does not help with building trust or sharing of market information, essential elements that underpin a “dedicated” value chain approach. Given the strong bargaining power that processes have in the current Moojepin supply chain, stakeholders will need to make progress in terms of cost of production (priced charged by and commitment of the processor) and volume (the producers), and market demand (restaurants, retail etc).

Key participants in the Moojepin Merino Meat value chain are interested in exploring further the benefits that can be gained from cooperation and collaboration based on MMM genetics. Stakeholders consulted agreed that getting ‘the right people’ involved for the right reasons and with genuine commitment is vital, no matter what type of entity is formed. Stakeholders have agreed to initially commit to form a not-for-profit incorporated association (limited risk) to continue to explore markets and products prior to forming a new commercial entity (greater risk).

Moojepin producers agreed that getting “organised” is important and that this start with drafting a Constitution to create the Rules to operate the new supply-based group. Once in place the group can attract funds for research and development including funds to complete a detailed business plan with the aim of forming a commercial entity (company or cooperative model). The project identified gaps in available data, especially related to mutton sales, processing, consumption and export. Meat and Livestock Australia data is predominately focused on lamb. Research is needed on optimal length of dry ageing, benefits of freezing dry aged mutton on eating and cooking quality, mobile abattoirs, and new market opportunities.

Stakeholders identified that any new group must have limited overheads and structure, a small board of directors, and be built on a foundation of strong identified core brand values. Plus, it was agreed that any new structures must not pull on individual’s time (especially in a voluntary capacity). However, members must be willing to make a clear commitment to the venture. Stakeholders identified that having a clear and upfront succession plan for future development is vital and that they want to create a group where control is maintained. At the same time, it was agreed that any future development needs to protect the separate interests of members especially the genetic origins of Moojepin Merino and David Thompson’s ram breeding business.

Stakeholders are united and as such strongly believe that a customer-centric approach is vital along with engagement of all key partners in the “value chain”. The critical success factors displayed in other businesses need to form a solid foundation of any new commercial entity. The key ones being integrity, quality, consistency, supply volume, and brand strength all based on exceptional genetics


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(guaranteed). As success will be based on brand integrity, aggregation must be based on producers with 100% Moojepin genetics under the “certification” requirements of four years.


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1 This projectThis investigative project undertook stakeholder engagement to determine interest in participating in a value chain designed to aggregate sheep supply for Moojepin Merino Meat (MMM), which otherwise would be constrained by low volumes of meat product. This involved engaging with current and potential value chain stakeholders to determine their level of interest and needs in relation to them having confidence to participate in such a venture. Critically, the project engaged parts of the value chain that under normal circumstances have no or very little opportunity to come together.

There is a strong opportunity to establish Moojepin Merino Meat as a Sheep Industry Business Innovation Project (SIBI) pilot project to demonstrate transformation from open market sourcing where participants work in isolation to a dedicated value chain with close collaboration and cooperation. This project has undertaken initial stakeholder engagement to determine interest in participating in a value chain that aggregates sheep supply. The project has involved an investigative process to determine interest from a broad range of stakeholders involved in the sheep meat value chain.

1.1 Dedicated Sheep Meat Value ChainsA transformational part of SIBI is the Dedicated Value Chain project. DAFWA’s SIBI Project aims to facilitate the formation of dedicated value chains for value added sheep meat produced in WA. Open market access is currently the typical business model for the sheep industry. Progression towards value chains dedicated to customer needs will provide much needed confidence for investors to participate more actively in the sheep meat industry.

Moojepin Merino Meat (MMM) is an existing sheep meat brand that has many elements suited to a dedicated value chain including; a modern genetic program underpinning meat eating quality, value added meat products based on dry ageing, a high-end restaurant customer focus and the potential to grow through aggregation of sheep supply from ram client producers. To this end MMM provides an opportunity to design a dedicated value chain that can serve as a pilot for the sheep industry in general.

Aggregation of supply is a critical component of the design of any new dedicated value chain that necessarily will require the support of a range of stakeholders. Participation in MMM is anticipated to provide benefits to stakeholders along the value chain in several ways such as; decreased ram prices for ram clients, increased rates of genetic gain, surety of price, improved information flow along the chain, consistency of supply and quality, and increases in product value to the consumer.

This proposed activity aims specifically to undertake stakeholder engagement to determine their interest in participating in a value chain that will aggregate sheep supply for MMM, which otherwise will be constrained by low volumes of meat product. This involved engaging with current and potential stakeholders to determine their level of interest and needs in relation to them having confidence to participate in such a venture.

1.2 Project Objectives1. Communicate the proposed MMM concept to a wide range of potential stakeholders with

the purpose of determining their level of interest, willingness to participate and confidence


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to commit to the MMM value chain concept. Potential stakeholders should include but not necessarily be limited to; MMM ram clients, meat processors, meat customers (chefs) and other value chains with similar goals to MMM.

2. Identify any specific needs of stakeholders critical for them to commit to the MMM value chain concept; such as surety of payment, meat price, ram costs, seasonality of supply, quality and product development.

3. Identify from stakeholders the key cultural issues needed to characterise the MMM value chain for them to participate, with a view to exporting sheep meat to high value markets in Asia/Middle East as well as domestically. This should identify core brand values perceived by stakeholders to be important such as specific production techniques (MMM genotype, non-mulesing, product quality).

4. Identify organisational issues important for stakeholder management and communication within the value chain; including but not limited to: a preferred group structure and governance model, draft constitution, likely start-up/operational funding requirements, preferred administration and management structures, and any specialist information requirements. Any requirement of stakeholders for new systems such as legal instruments (e.g. contracts, breeding stock lease arrangements) or logistical considerations (such as transport, centralised finishing, quality assurance programs, and breeding standards) should be described in this section. This should culminate in recommendations suited to building a strategic plan for an aggregated MMM value chain.

5. Evaluate the interest and capacity of various stakeholders that could be potential sources of funds, including but not limited to the Grower Group R&D Grant Program, Meat & Livestock Australia and private equity organisations to fund the start-up of a dedicated value chain that seeks to aggregate sheep and lambs from MMM ram clients, to provide meat to customers at a commercially viable scale in the future.

1.3 Methodology In consultation with key project partners, Robin Jacobs from the SIBI team at DAFWA, David Thompson from Moojepin, and the Strategy Matrix Team, a list of key stakeholders was prepared. Strategy Matrix conducted targeted stakeholder engagement and consultation with key Moojepin and WA meat supply chain participants. The aim of the stakeholder engagement and consultation was to determine interest in the aggregation of MMM producers and the establishment of a dedicated supply chain model via several options: - the formation of a grower group; a supply chain alliance; or a new commercial entity (company or cooperative model). Project methodology included the following steps:

Identification of key stakeholders; Background preparation and preliminary research; Stakeholder consultation and engagement; Financial analysis and modelling of possible scenarios and options; Analysis of possible funding opportunities; and Preparation of report with findings and recommendations

Desktop research was conducted into the sheep meat market, sheep meat supply chain, different business model options, case studies of cooperation and collaboration in agriculture, and grower groups.


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A stakeholder workshop was conducted on 10 October at ‘Young George’ restaurant in East Fremantle. The workshop engaged existing Moojepin producers, distributors, restaurant owners, and chefs. Moojepin meat products were showcased at a Chef’s Master Class after the workshop. Targeted stakeholder interviews were conducted by phone and in person. A Moojepin producers’ workshop was conducted on 24 February 2017.

This report outlines the background to Moojepin Merino Meat development; red meat market analysis; potential business structure models; and results of the stakeholder consultation; and analysis of options and recommendations for next steps. A financial analysis was completed based on various scenarios and potential funding opportunities for a “Moojepin” group are listed.


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2 Background and Context

2.1 IntroductionMoojepin Multi-Purpose Merino (MPM) is a family owned agri-business based on a farm situated near Katanning, 300km south east of Perth. The business owner’s, David & Sue Thompson and their son Hamish, run a Merino Stud consisting of 3,000 merino ewes. The Thompson’s began their Merino ram selling business in 1998 and the business has grown with Moojepin currently selling approximately 120 rams annually throughout WA. Semen has been sold across Australia, New Zealand, South Africa and South America. In 2000, the Thompson’s commenced breeding a truly unique merino sheep – the Moojepin Multi-Purpose Merino.

The Thompson’s and their clients invest heavily in the genetics that underpin the Moojepin MPM brand. They currently have 30 clients, each producing exceptionally high quality sheep to a rigorous standard that must be maintained for a minimum of three years to be “guaranteed” with the Moojepin merino genetics. This focus on genetics combined with an exceptional breeding program are the foundations of the existing business strength of the Moojepin Multi-Purpose Merino. Currently, the 30 WA-based Moojepin clients run a total of approximately 70,000 sheep under the Moojepin genetic breeding system.

In 2016, Carbon Neutral commenced operations under the Moojepin brand. They acquired 6,000 head of Moojepin breeder ewes from existing Moojepin producers and plan to rapidly expand their flock over the coming ten years (to approximately 20-30,000 head).

The Thompson’s aim to assist their clients to add value where possible, for example by increasing the value of sheep across all age groups for those producers with guaranteed Moojepin MPM genetics. By increasing their client’s profitably, the Thompson’s aim to increase their own ram sales and profitability.

2.2 Moojepin Merino Meat Development The desire to add value in their supply chain, lead the Thompson’s to establish Moojepin MPM meat. This commenced in 2013 when the Thompson’s established a new business venture based on the exceptional genetics and breeding quality of their Moojepin MPM Merino. Their sustainable farm produces farm-to-table 21-day old dry-aged mutton and hogget meat that can be ordered and delivered to the Perth Metropolitan area. The farm fresh meat is ordered with 30 days’ notice as it is 21-day dry-aged meat. It is a unique eating experience and comes with a 100% money back guarantee. A key driver behind this new initiative is to increase Moojepin’s annual ram sales, to expand the number of Moojepin producers, and to lift this value for the producer.

This new enterprise turns Mutton - a perceived low quality, low price product - into a high quality, high value clean and green product specifically targeting the chefs of Perth’s mid to high end restaurant market. Moojepin MPM targets a premium market that understands the value of food traceability and the story behind the products origins. This is a market that recognises the benefits that exceptional genetics and breeding bring to the final eating and taste experience. These are the strengths of the Thompson’s MPM meat.

Since 2013, the Thompsons have developed and tested the product via several key restaurants and secured collaboration along the supply chain (transport, abattoir, and packaging). Business planning


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undertaken to date has shown that market entry based solely on the current volume (approx. 6-8 head per week) and target market (chefs of mid to high tier Perth restaurants) is unviable. Reliability and consistency of supply, volume scale-up and locked in contracts for supply and demand are essential for sustainable profit.

Current Business Activities and AnalysisMoojepin MPM is marketed and packaged as a high-quality sheep meat, based on quality breeding for meat tenderness (“shearforce”), and juiciness and flavour (“marbling”). The marketing story is based on knowing where the meat originates and the strict genetic program for all Moojepin producers. It is currently a customised product initially targeted at the chefs of mid to high end Perth restaurants with potential to expand into other markets (retail, interstate, international). The key product points of difference are the genetics, nutrition, traceability, and the dry-ageing process.

Moojepin Merino Meat has been developed and tested via several mid-tier Perth restaurants. In general, their clientele is middle class, educated, have a disposable income, are interested in the story behind the product, are aware of clean green agriculture, and are prepared to pay more for quality based on traceability and the story of the origins.

Some restaurants have committed to providing Moojepin as a permanent item on their menu, others have promoted the product with samples on a once off or short term basis. The following restaurants have been supplied Moojepin:

1. The Cabin in Mt Hawthorn;2. The Print Hall in St Georges Tce, Perth;3. Young George in Fremantle;4. Clarkes in North Beach; 5. Phillips Brooks Winery in Albany;6. Raffles;7. Mantle in Fremantle;


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8. Pepper and Salt;9. Cottesloe Beach Hotel;10. Red Cabbage;11. Bib and Tucker;12. Bread in Common;13. Pronto Restaurant / Jus Burgers

Many of these chefs and restaurants have continued to use Moojepin meat and are active customers. There are on-going discussions with chefs at other restaurants. In addition, there are a small number of on-line orders and there has been interest from chef’s interstate (samples were recently sent to Sydney).

Current supply is in low volumes (averaging approximately eight head per week) and is based on inconsistent demand (that is, there are no long-term locked in contracts). In addition, demand is for select cuts rather than the whole carcass. As an innovative business, Moojepin Merino Meat has had good up-take from these mid to high end restaurants. Chefs often prefer to purchase select cuts rather than the entire carcass creating an issue with profitable sale of the remaining carcass.

Current sales are achieved via direct contact with David Thompson or a referral. Peter Manifis, a well-regarded Perth chef and food ambassador has adopted a distribution and promoter role for Moojepin. Face book is actively used to promote Moojepin. Local shows, trade fairs, promotions, sporting clubs. Moojepin meat has been showcased at numerous food and cooking events showcasing WA products.

The Moojepin website is not currently developed to capture leads and generate sales as it was originally designed as an information based website rather than a marketing platform.

The reliance on David Thompson to generate sales is a current growth constraint. Additional channels need to be exploited to successfully secure additional customers and market growth. A promotor / distributor is required. Peter Manifis has been performing this role in part.

In addition, a key market constraint is the unreliable supply of sheep, which is currently based on the “open sourcing” model where each producer sells separately. The current Moojepin “supply chain” is traditional in nature where there is little or no cooperation and collaboration, there is limited trust or relationship building and the customer is treated as removed from the producer (at the end of the line).


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New IdeasA key motivation for the Thompsons to commence their innovative Moojepin Multi-Purpose Meat enterprise, is founded on a desire to increase the annual Moojepin ram sales and expand the number of producers “certified” under the Moojepin genetics. In doing, so they have successfully taken their product into new markets. There is now an opportunity to build on this start-up phase and establish profitability for all along the supply chain.

Currently Moojepin MPM has 30 commercial clients in Western Australia, running a total of approximately 70,000 sheep under the Moojepin genetic breeding system. Consistent and reliable supply volume of quality sheep meat is a significant business constraint under the current business model (low volume from one producer).

With consumer demand for quality clean and green food that can show full traceability and demonstrate how and where it has been produced increasing, there is potential for growth into lucrative market segments. There is an opportunity for accelerated commercialisation into new markets beyond the initial early adopters and restaurant market, to penetrate more deeply into a range of market segments in Perth and regional areas, as well as expanding beyond WA, to other states and into Asia.

This can only be achieved with collaboration and cooperation via a dedicated value chain and the aggregation of producers into a supply group, and possibly formation of a new commercial entity. The aggregation of supply will help supply into new markets and / or launch new products into existing markets.

2.3 DAFWA - Sheep Industry Business Innovation ProjectA weakness to achieving Moojepin’s growth targets is the current market reliance on open access to the sale of sheep. In addition, there is no or limited market supply chain connection and in general a lack of confidence, commitment and trust along the supply chain. In contrast to this traditional “open-market” sourcing model, there is an opportunity to establish a more collaborative approach based on a dedicated supply chain that aggregates producers as a strong and influential part of the supply chain that work in partnership along the supply chain for mutual benefit.

DAFWA’s Sheep Industry Business Innovation Project (SIBI) aims to “assist the industry build capacity to supply new markets for sheepmeat and live exports”. A key SIBI strategy to achieve this is to transform the “sheep supply chain to develop customer focused products for target markets”, and to do this by “developing new dedicated value chains and improving business and technical skills in the industry”. The SIBI project advocates the sheep industry works “together to capture new business opportunities”.

Moojepin MPM offers a unique opportunity to pilot this approach to a dedicated sheep / meat supply chain that is strongly customer focused on products for targeted markets. It has a strong foundation based on quality, consistency, and reliability. The genetics are well established and the product has been market tested over three years in Perth restaurants and at trade shows and food festivals. The product has established a strong brand via its nearly 20 years of genetic breeding and rigour, and its 21-day dry-aged meat product in the Perth restaurant market.


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3 Research and Investigation

3.1 Red Meat Production & Market shareBroadly, Moojepin competes in the red meat industry sector, which comprises beef / veal, lamb / mutton, and Pork by the ABS. Pork is often classified as a red meat and chicken competes in the sector as a popular and affordable protein. Over the last fifteen years, the red meat market share of sheep/lamb/pork meat have declined with beef taking up the shortfall and veal remaining steady but at much lower levels than the 1970s. The trends highlight the significant reduction in sheep meat compared to lambs and reflects consumer demand and a reluctance by major supermarkets to provide mutton and hogget in their meat mix.

The MLA Sheep Industry Fact Sheet states that: “Australia is the world largest exporter of sheepmeat, and is the world’s second largest producer of lamb and mutton (FAO). The off-farm meat value (domestic expenditure plus export value) of the Australian sheepmeat industry was approximately $4.83 billion in 2015-16 – up 2% on the 2014-15 period” (MLA estimate).

In 2015-16, Australia produced 516,366 tonnes carcass weight (cwt) of lamb and 196,040 tonnes cwt of mutton (ABS).

Based on 2015-16 figures, Australians eat around 9.5kg of lamb and 0.7kg of mutton per person (MLA Estimate). This puts us among the highest sheepmeat consumption in the world.

Total Australian Sheep meat production, which includes both lamb and mutton is around 700,000 tonnes cwt. Australia is the largest exporter of sheepmeat in the world (FAO 2013). However, our production is only approximately 8% of the world’s lamb and mutton supply in 2013 (FAO). At over two million tonnes cwt, China is by far the world’s largest lamb and mutton producing country (The MLA Sheep Industry Fact Sheet).

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Figure 1 Australian Red Meat Production values provided by the ABS

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Figure: Sheepmeat production (total both lamb and mutton)

3.2 MLA sheep market analysisSource: MLA’s Market Information – Ben Thomas, [email protected], and Rebecca Locke, [email protected] Australian Sheep: industry Projections 2017, Meat and Livestock Australia

The MLA’s Market information & Industry insights: Australian sheep industry projections 2017 report states that the “Australian domestic market is anticipated to remain the largest consumer and account for 48% of production, or 237,000 tonnes cwt”. The MLA report sees many encouraging signs coming from the market, for example, “domestic per capita consumption has stabilised in recent years, while at the same time the weighted average retail price has been increasing. To put this in perspective, domestic lamb retail prices in 2016 averaged just 10¢ shy of the record high set in 2011, at $14.51/kg, and per capita consumption is 8% higher now than what it was then”.

With regards exports, “Australian lamb shipments are anticipated to ease 4% year-on-year in 2017, to 220,000 tonnes shipped weight (swt)”. The MLA industry predictions note that while there are strong demand signals from the domestic market, internationally, signals are mixed. “For instance, the lifting of the government subsidy on imported Australian lamb in Bahrain will likely see reduced volumes to the region continue, while at the same time, the UK pound remains low and US cold store volumes of sheepmeat are currently down significantly from year-ago levels”.

Interestingly, MLA notes that “total Chinese sheepmeat imports in 2016 were subdued due to high domestic sheepmeat production in China”. The MLA anticipates China’s domestic production levels to be lower next year.

Given these elements, the MLA expects Australian sheep and lamb markets to benefit from reduced supplies and demand form domestic consumers. However, mutton exports may be set to fall further.

On the demand side, the major markets are likely to again be the US, China and the Middle East, while the Australian domestic market will account for 48% of production.




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Australian mutton exports were down 11% year-on-year for the January to October period, to 107,862 tonnes swt – underpinned by considerably reduced domestic production this year. Almost all export destinations registered a decline compared to last year. Encouragingly though, higher valued chilled mutton shipments more than tripled year-on-year, to 6,533 tonnes swt – accounting for 6% of total exports for the year-to-date, up from 2% for the previous three years. Frozen mutton exports declined 15% year-on-year, to 101,329 tonnes swt.

Source: MLA’s Market Information – Ben Thomas, [email protected], and Rebecca Locke, [email protected] Australian Sheep: industry Projections 2017, Meat and Livestock Australia

With regards to price, the current average retail price ($14.51/kg) is very close to the record highs of 2011 ($14.62/kg) and per capita consumption is presently 9.7kg, up 8% from where it was the last time prices were at similar levels to now. This is a positive indication of the present strength of the domestic market, relative to some export destinations.

Strong competition between the supermarkets has possibly assisted to arrest the decline in consumption. Given lamb's relatively high price point at the retail level, and provided there are no economic downturns, per capita consumption is forecast to remain steady over the projection period. This means that with underlying population growth, the total volume consumed in Australia is forecast to edge above 240,000 tonnes cwt by 2020, which will account for 46% of Australia's lamb production.




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Industry standardsAustralia has established an internationally-renowned livestock traceability systems. The National Livestock Identification System (NLIS) has been recognised as leader in red meat food safety and traceability (MLA press release 08 December 2016). A new red meat industry Integrity and Information Systems Company will take on responsibility for managing Australia’s traceability and quality assurance programs for beef, sheep and goat meat.

MLA Managing Director Richard Norton stated that, “because of our industry’s food safety and traceability systems, Australian red meat enjoys an impeccable reputation in global markets, with market share dominance in the important Japanese and Korean markets and sole access for chilled beef into China.”

The new, fully integrated integrity system will “streamline the management of Australia’s traceability and quality assurance programs for beef, sheep and goat meat”.

3.3 Restaurant Industry Analysis & TrendsThe restaurant industry has a nation-wide revenue of $14bn, with annual growth over the last five years of 5.6%. The sector employs 290,142, across 26,377 businesses (Source: IBIS World, Restaurants in Australia: Market Research Report Oct 2016).

The restaurants industry has had strong growth over the past five years, fuelled by changing social trends. “The industry is expected to post annualised growth of 5.6% over the five years through 2016-17, to total $13.5 billion. Busier lifestyles and diminishing leisure time have increasingly led consumers to turn to restaurants for meals. Restaurants have allowed consumers to combine dining with leisure and avoid spending time on food preparation. These trends are expected to continue in 2016-17, with industry revenue forecast to grow by 2.1% during the year” (IBIS World, Restaurants in Australia: Market Research Report Oct 2016).

“The Restaurants industry can be segmented into three main groups. The first is the high-end silver service or premium dining segment, which offers high-quality service, luxury settings and quality food


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and ingredients. Well-known or celebrity chefs often prepare the food and menu, with the high prices also reflecting the ambience and dining experience. The second is the mid-range dining segment, which typically offers good-quality food, moderate prices and a small range of takeaway food options. The third is the low-cost dining segment, which relies on quick service, high table turnover, low-price menus and a limited range of food and specialties. Restaurants in this segment generate higher takeaway revenue” (IBIS World, Restaurants in Australia: Market Research Report Oct 2016)

Consumer demand for quality food and fine-dining experiences has fuelled industry revenue growth over the past five years.

Market Segment National No. National $MCafé’s & Restaurants 14,000 2500 spent on foodLicenced Restaurants* 5200Catering Services 1500 930

Moojepin Merino Meat is a high quality red meat product, suited to the chefs of quality restaurants and quality focused chains (such as Grill’d Burgers, Jus Burgers) to gain customer acceptance that mutton can be high quality.

The focus then shifts to volume initially targeted to discerning shoppers at niche supermarkets (such as Herdsman’s Fresh, Second Ave IGA in Mt Lawley, and Fresh Provisions in Subiaco). And then major supermarkets (Coles, Woolworths), wholesale, catering companies, airlines, and general butchers.

3.4 Food Tourism Food and wine tourism is an important element in the visitor experience in Western Australia. “In 2013, leisure travel in WA was worth $4.6 billion and an estimated 1.1 million visitors participated in food and wine activities while on holiday or on a day trip” (Food & Wine Tourism in Western Australia, 2014, Australian Government, Austrade, via Tourism WA website).

The Tourism WA survey, 2014 Overview of Food & Wine Tourism Research notes that:

Experiencing good food & wine is one of the key factors in choosing WA Culinary tourism in western Australia is a good experience 68% of Singaporean visitors to WA agree that experiencing WA’s food and wine would be an

important part of a holiday there Visitors to WA rank an authentic, local produce as the must have culinary tourism offer An important fact for food and wine experiences … In restaurants, Domestic and UK visitors

seek great service, ambiance, locally-sourced ingredients, and a good range of dishes. For the Singapore market, a well-known chef and offer of a signature dish are much more important

The most appealing new or unique culinary tourism experiences are dining in remoteenvironments and provenance

3.5 Supply chain - ProcessorsSecuring the cooperation and collaboration of a committed meat processor will be a critical success factor. Most existing processors have their own branded meat products and their own farms and / or a strong alliance with selected producers. Such vertically integrated processors and producers have a


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competitive supply chain advantage over Moojepin. The major operational sheep processors in WA include:

Fletcher International (Albany); Dardanup Butchering Company (Bunbury) (domestic only); Beaufort River Meats (Wellard); Shark Lake Abattoir (Esperance); Hillside (Narrogin); Western Australian Meat Marketing Co-operative Limited (Katanning); Amelia Park Lamb (V&V Walsh) (Bunbury); Classic Meats (Bidfood); and Butterfield Beef (Ryan’s Meats)

Our analysis indicates these are the main competitors by way of meat products that would potentially target similar markets. With a focus on Western Australia, these processors are all competitors in the red meat market.

A key market advantage of these meat business is their integration from production to processing via ownership of an abattoir and processing and packaging facility (and / or their alliance to existing branded meat products).

Beaufort River Meats (Wellard)Beaufort River Meats (BRM) is Wellard’s abattoir and meat processing facility located in Beaufort River, 270 kilometres south of Perth.

Wellard is Australia’s largest cattle exporter and vertically integrated agribusiness. Wellard has supplied dairy and beef cattle and sheep and goats to the world for more than 30 years, and its investment in the live export industry is extensive. Based in Fremantle, the company’s operation spans the world and cover every aspect of the livestock export chain, including livestock selection and aggregation, pre-export quarantine facilities, feed milling, and a modern fleet of specialised “floating farms livestock carriers”.

Wellard is involved in meat trading and owns and operates an abattoir in Western Australia, Beaufort River Meats, which processes up to 2500 sheep and lambs a day, enabling Wellard to meet customer demand for both livestock and chilled meat.

Its expansion plans include a joint venture agreement with Fulida Group for the development of feedlots and abattoir in China to serve the growing meat market in that country.

(BRM/Wellard, 2016)

Western Australian Meat Marketing Co-operative LimitedWAMMCO International is the trading name of the Western Australian Meat Marketing Co-operative Limited. A WA cooperative registered under the Co-operative Act 2009. Its principal activities are the acquisition, processing and marketing of prime lamb.

WAMMCO is wholly owned and controlled by Western Australian lamb producers existing solely to maximise benefits to its active members. Controlled by a Board of Directors comprising a strategic mix of producer members, elected by active members, and independent directors.


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WAMMCO gives producers the opportunity to actively participate in, and benefit from, all aspects of their industry. Part of the Co-operative's core business is the "value adding" of premium quality lamb. From January 2009, WAMMCO commenced rewarding premium lamb producers an additional WAMMCO Select bonus payment. The system rewarded producers delivering carcasses with high lean meat yields, objectively assessed by the Viascan system. Eligible carcasses received an additional 5% payment.

(WAMMCO, 2016)

Fletcher International Exports Pty. LtdFletcher International Exports is an integrated processor and exporter of lamb and sheep meat products. A family-owned company, operating two processing facilities in Dubbo, New South Wales, and Albany in Western Australia. These plants have a combined processing capacity of more than 90,000 sheep and lambs per week, over 4.5 million head per year.

The Fletcher philosophy is to utilise as much of each animal as possible. Consequently, in addition to lamb and sheep meat products, wool and sheep skins, the company markets a diverse range of high quality by-products.

The expansion of the company’s farming interests has continued to increase the degree of vertical integration across the business. These interests have strengthened the livestock supply chain, while providing a source of quality crossbred lambs consistently throughout the year. The grain produced at the company’s properties is sold directly to end users in export markets.

(Fletcher International Exports, 2016)

Amelia Park and V&V WalshAmelia Park is a West Australian, family owned and operated business. The Amelia Park property is in Vasse, south west of Western Australia and has been owned by the Walsh Family for over 50 years. They produce lamb and beef products. Amelia Park sources their meat from a handful of farmers in the South West. Their producers have a strict feeding regime to ensure they produce a very clean product. They then hand select the best of the best lambs and cattle from these breeders for the Amelia Park range and put it through a strict selection criteria, which it must pass, before becoming an Amelia Park product. Technically this means that when you purchase an Amelia Park lamb or beef product you should be confident that is the very best of the best from Western Australia.

The Walsh family own V&V Walsh, Western Australia's largest meat processing facility, located in Bunbury. This is where Amelia Park products are processed. All Amelia Park lamb & beef are processed at the V&V Walsh abattoir. V&V Walsh was established by Mr Vern & Mrs Jean Walsh in 1957. Their son's Peter and Greg Walsh own and operate the business today. In the mid 1990’s, Peter and Greg started the Amelia Park brand.

Amelia Park lamb & beef products are offered to West Australian consumers at selected restaurants, local supermarkets, select butchers and speciality food store. Amelia Park has grown to become an international business. Amelia Park products are currently exported around the globe to China, Japan, Hong Kong, Mauritius and The Philippines. They have a permanent office in China.

(Amelia Park, 2016)


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Classic Meats (Bidfood)For over 20 years, Bidfood has been the one-stop supply solution distributing wholesale food, fresh produce and meat to the foodservice and catering industry across Australia. The Bidfood business includes logistics for the food service industry and refrigerated transport. Classic Meats is one of the key service units of Bidfood. They supply primal and portion control meat requirements to the foodservice industry. The Classic Meats range features quality products from well-known industry brands, through to budget cuts, frozen meat and a specially created sous-vide selection.

As well as stocking the leading supply partners to the meat industry, Classic Meats is the exclusive home of premium brands Emerald Valley, Bounty Premium and Homestead Pork. They have access to a full range of meat, including beef, lamb, pork, veal, game, poultry and processing facilities and equipment around the country.

Classic meats have an online ordering system and a mobile ordering application. They offer customers an exclusive dry aged meat program available on request.

(http://www.bidfood.com.au/services/classicmeats)


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4 Potential Models for Innovation The aim of the investigative project was to determine stakeholder interest in and potential commitment to forming a new group / entity that aggregates Moojepin Merino Meat Producers and collaborates along the Moojepin sheep meat value chain. Part of this investigation included research into potential models and a review of case studies of similar collaboration cooperation in agricultural supply chains. This was done via desktop research and stakeholder consultation via targeted interviews. This initial analysis enabled a broad presentation of options. It was conducted to determine which potential business model stakeholders might be interested in. Options for consideration included formation of:

A grower (marketing or supply) alliance via the formation of a non-trading not-for-profit, Incorporated Association; and / or

A commercial trading entity via formation of a cooperative or a limited liability company.

4.1 Not-for-Profit Grower Alliance Grower groups in the WA Grower Group Alliance (GGA) network are independent, self-directed, and predominately comprised of broadacre grain and livestock enterprises. They are community based groups of farmers who focus on production and environmental issues at a local and regional level. There are currently 45 groups within the GGA network and are located throughout the WA grain production zone from Binnu in the north, Bodallin in the east, and Esperance in the south east of the state. In addition, there are groups in the Pilbara and Kimberley and groups with a red meat production focus.

(Grower Group Alliance, 2016)

The Role & Potential Benefits of forming a Grower Group / AllianceGrower groups are independent, farmer driven, managed organisations with the ability to work with multiple stakeholders (government, research and development corporations, researchers, corporate, agribusiness) to deliver outcomes to members. The benefits of forming a not-for-profit, Incorporated Association include:

• Member based;• Central point of contact for their farming regions;• Information sharing locally and beyond;• Trusted information source; • Contribute to agriculture R&D;• Generally not-for-profit, non-government, independent; • Risk and commitment is limited; and• Built on collaboration, partnerships and alliances

Grower groups in WA range in size and function from small locally based production focused groups (such as the Kellerberrin Demonstration Group, or the Holt Rock Group) to larger more regional or state based theme related groups (such as the WA No Till Farmers Association). These groups all can attract funds via membership fees, sponsorship, and project funding, especially to conduct R&D. Formation of a grower or supply group alliance may represent an initial step along a process to


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collaboration. It may evolve into a commercial entity, remain in place even after formation of a commercial trading company or dissolve as needs change.

4.2 Cooperative Business ModelIs becoming a co-operative the right choice? If you belong to a group with a common interest, deciding which legal structure to use in pursuit of your goals is a very important decision. There are several options available, including:

Forming a partnership and operating under a registered business name; Incorporating as an association; Forming a co-operative; or Forming a limited liability company

(Cooperatives Good Business Guide WA Department of Commerce, Jan 2011).

The cooperative business model has the potential to “knock down barriers to growth, innovation and competition” (Chris Enright Cooperatives WA media release March 2016).

What is a co-operative? A co-operative is an autonomous association of persons who voluntarily join to meet common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise. It may be formed to provide goods or services to its members or to supply goods or services to the public.

Distributing co-operatives are unique. They differ from incorporated associations primarily because they can be formed to conduct a business that makes a profit for the benefit of individual members. Unlike proprietary limited companies, co-operatives do not have a limit on membership numbers. In addition, the ‘one member, one vote’ system differs from mainstream investors-owned companies where voting rights are directly linked to share ownership.

Two types of co-operatives operate in Western Australia – distributing co-operatives and non-distributing co-operatives. A distributing co-operative must have share capital; a non-distributing co-operative can choose whether to have share capital. The rules of a distributing co-operative allow returns or distributions to members on surplus or share capital. This type of co-operative aims to maximise returns to individual members by undertaking commercial functions beyond the capacity of an individual. The rules of a non-distributing co-operative must prohibit the return or distribution on surplus or share capital (if applicable) to members, other than the nominal value of any shares at winding-up

(Cooperatives Good Business Guide WA Department of Commerce, Jan 2011)

Role of cooperativesCo-operatives play an important role in our community and economy. They operate in industries as diverse as fishing, dairy production, water distribution, taxi operation and retailing. Currently co-operatives in Western Australia report annual revenues in billions of dollars.


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Co-operatives enable members to pool resources to achieve greater benefits than they could as individuals. Co-operatives belong to, and are operated for the benefit of, members – who generally share investment and operational risks, benefits gained, or losses incurred.

Co-operatives are based on values of self-help, self-responsibility, democracy and equality. The nature and extent of a co-operative’s operations depend on member support such as the amount of capital contributed, the personal efforts of directors and officers and members’ patronage of their co-operative.

(Cooperatives Good Business Guide WA Department of Commerce, Jan 2011)

Agricultural cooperativesA recent Senate Economics Reference Committee report into the co-operative and mutual sector in Australia notes that Co-operative Mutual Enterprises (CMEs) are not well understood in markets or by regulators in Australia. “They are formed to pursue different purposes from investor-owned companies but they exist and compete in the same markets as those entities. A greater understanding of their purpose and their governance model will provide a basis for the development of policies that enable Australia to obtain the best value from this business model”.

The Senate report notes that cooperatives “distribute wealth, control and ownership...they are self-help organisations that bring diversity, competitive forces and consumer choice to markets. They address market failure by enabling smaller market participants, enterprises or individuals, to compete in markets that favour larger entrants”.

The 2015 Agricultural Competitiveness White Paper recognised the competitiveness of growers' or producers' cooperatives. However, the Paper noted that “in strongly endorsing the advantages of the Co-operative model for farmers, the government also realises that information about the sector needs to be improved”.

“The benefit of a cooperative structure is it offers family farmers the ability to retain their property ownership but delivers them the scale to better influence what happens beyond the farm gate, and diversify their income. Farmer-owned cooperatives can also add competition in the market place if they add to the number of participants, and allow farmers to engage in additional parts of the value chain where profitable to do so. The recent success of some cooperatives has increased interest in them. But information on how to form a cooperative and the pros and cons of doing so is not readily available”.

The committee received evidence from several agribusinesses that promoted the value of the co-operative model to their sector. It was noted that the disparate and fragmented nature of agricultural lent itself to collaborative business models.

Australia’s farming and agribusiness systems are fragmented, with few agribusinesses having sufficient capacity to supply high value, high growth export market opportunities on a year-round basis. Collaborative business models are needed to achieve sufficient scale, implement quality assurance processes and co-ordinate activities including product development, marketing and distribution.

The 'supply and purchasing co-operative' as described by Professor Altman, Dean of Newcastle Business School, is a model which is of assistance to small farmers who can replicate the benefits afforded to larger producers by combining their purchasing power.


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This type of cooperative is quite important in agriculture where farmers establish a cooperative to obtain goods and services required for their business or for personal use at lower prices than would be possible if they go it alone. Thus, farmers can take advantage of economies of scale and scope that are afforded to larger corporate farms.

Professor Altman explained the features of a 'marketing co-operative', which is similarly utilised by smaller agribusinesses. This type of cooperative aligns the interests of producers with regards to marketing output to retailers or wholesalers. A marketing cooperative can store, process, and package output prior to sale. This allows farmers, for example, to take advantage of economies of scale and scope in storage and production, increasing their net income over what it might otherwise be. It serves to increase the bargaining and marketing power of farmers. In addition, a marketing cooperative can help stabilise farmers’ income through its inventory capacity, providing farmers with a relatively stable income as marketing prices fluctuate.

Co-operative Bulk Handling’s (CBH) integrated business model (storage, handling, transportation, marketing and port operations) seeks to ensure grain growers have greater influence and control throughout each element of the supply chain, as well as providing the vital interface between growers and their customers.

Importantly, in agriculture or other industries with assets such as land, the active membership requirement promotes a community of interest, centring on an activity or type of business, typically within a region or locality, which is practised in similar form as between members.

Niche agricultural cooperativesIn her paper, “The Agricultural Co-operative Business Structure Context – A Western Australian Study”, Elizabeth Cheong (2006) noted that many niche cooperative development in the 1980s based in sunrise industries such as deer, rabbits, emu and olives mostly failed as agricultural co-operative ventures. The reasons were stated as:

Initially the potential members in these niche sectors understood the co-operative concept at an intuitive level and this enabled initial discussion with potential members to commence.

However, at another level, probably financial, they were not prepared to commit to the initiative when the critical time came, leading to the collapse of the cooperative business enterprise (Munro, 2003).

Further, ventures into niche industries were often sidelines to the main commodity of farm businesses

Another factor was that many of the individuals involved in niche industries were more geographically dispersed than those with one commodity in a defined region (Munro, 2003).

Another major factor was that the farmers involved in niche production generally lacked the ability to see past the actual production of the niche product into developing it as a commercially viable consumer product for the retail market place.

The newness of knowledge involved in a niche industry also undermined confidence to develop the co-operative venture over a longer period. It was noted that, ironically, if the product did have some potential in the market place, invariably a ‘cashed up capitalist’ would come in and take it to the market place after the producer members of the niche sector co-operative had undertaken all the early feasibility research and development (Munro, 2003).


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Cooperatives in Agriculture – success factorsIn 20012, DAFWA conducted a seminar to assist collective business development. The “Routes to Retail Success” seminar analysed three established cooperatives and noted some key issues related to pursuing the cooperative business model.

For any business to generate margins it must have a point of difference that is valuable. The key point of difference with the three businesses analysed is their control over quality.

Each business promised, via their brand, to deliver quality product every time. To maintain margins, a valuable point of difference must be difficult for a competitor to copy

or entice it away. The three co-operatives analysed provided very clear final market information to their

members, including daily and weekly reports via websites of market conditions, results of consumer surveys and price payments that reflect the actual returns for that segment.

Some critical messages from the seminar included:

1. Co-operatives are businesses that are built on a common business goal. The goal needs to be well understood by the members and communicated to new members. It also needs to be revisited so that it remains a shared goal. A co-operative is not for everyone.

2. Co-operatives are businesses and they need to focus on margins (the difference between income and costs). By aggregating supply, members can exploit business advantages unavailable to individual producers (e.g. consistent supply of quality product, cheaper inputs, agronomy services etc).

3. Business planning is crucial, no matter how young or established the co-operative. It is especially important as a co-operative works to a common goal.

4. The three businesses analysed communicate with their consumers via their brands. The promises made by their brands and the co-operatives’ ability to deliver those promises means consumers will pay more for their (product) as they come to associate quality with the brand. Branding is useful only if it increases margins.

5. The board and management need to converse with their members about their common goal and the business plan to deliver it. Their ability to deliver means members will invest in the co-operative. Investment is useful only if it increases margins.

6. A common mistake is not having a plan to define how much value members will take from the business when they leave. The earlier an exit plan is agreed upon, the better.

4.3 Limited Liability CompanyAn entity that has a separate legal existence from its owner/s. Owners of a company are known as members or shareholders. The legal status gives a company the same rights as a natural person which means that a company can incur debt, sue and be sued. Companies are managed by company officers who are called directors and company secretaries.

Small business owners often use a company structure called a proprietary limited company (Pty Ltd). It does not sell shares to the public as it is a private company and has limited liability. Larger companies can sell shares publicly yet can still have limited liability and have the abbreviation Ltd after their name. To protect the personal assets of the owner/ shareholders. ASIC is responsible for


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registering companies. There is an initial registration fee to register a new company. Companies are required to renew their registration every year.

(Source: Australian Securities and Investment Commission Website, 2017)

Benefits of a company structureHaving its own legal entity and having a limited status means that the liability of the members or shareholders is limited and generally they will not be personally liable for the debts of the company. People often incorporate a company to protect their personal assets. It’s important to note that in some cases the owners (shareholders) of companies may still be liable for a company's debts, such as when they have provided personal guarantees to borrow money.

Another benefit of incorporating a company is that income generated by the company attracts a company tax rate, which is currently 30%. This may also be a disadvantage because the company tax rate applies from the first $1 of income generated.

As companies are legal entities there are additional and ongoing legal obligations that company officers must comply with under the Corporations Act.


Members of a companyA member of a company is commonly called a 'shareholder' and is the owner of the company. A member must be a person, a body corporate or a body politic. A member is an entity that can own property, sue or be sued. A business name is not a legal entity and therefore cannot be a member.

All companies must have at least one member. There is no limit on the number of members a public company may have, but a proprietary company must have no more than 50 members who are not employees of the company. Members of a company own the company but the company has a separate legal existence and the company's assets belong to the company. Similarly, members are not liable for company debts. A members’ financial obligation is to pay the company any amount unpaid on shares.

There are several ways to become a member of a company, including being listed as a member at the time that the company is registered with ASIC or agreeing to become a member of a company already registered.


Starting a companyFirst, decide if starting a company will best suite business needs, then:

Choose company name; Decide how the company will be governed; Understand the legal obligations as an officeholder; Obtain the consent of those who will be involved with the company; Register company; and


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Understand legal obligations regarding company name, Australian Company Number (ACN) and Australian Business Number (ABN).


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5 Stakeholder Engagement and Consultation

5.1 Identified stakeholders The stakeholder engagement was conducted in a way to build a strong foundation for any future business collaboration. This was achieved by bringing together key supply chain members that, under normal circumstances, have limited opportunity to interact.

Potential stakeholders for the project were identified under several broad categories: producers – existing and potential; and supply chain participants. The key stakeholder engagement was with producers, the stud breeder and Moojepin genetics developer (David Thompson), selected restaurant owners and chefs, and industry representatives.

Existing or potential Moojepin clients - There are currently 30 “certified” Moojepin producers. A sample of approximately 14 was directly consulted with.

Indigenous Primary Producers - Indigenous primary producers were identified as important potential Moojepin producers. However, a separate consultation process will be required to engage this group of stakeholders.

Livestock Agents - Stakeholder engagement with livestock agents such as Landmark and Elders, requires sensitivity and consultation was limited to an ex livestock agent.

Processors - Despite good efforts to engage processors in the consultation, there was a very real reluctance on their behalf to participate. Most meat processors in WA have existing alliances to sheep producers and / or their own branded meat product, hence, there was limited merit in pursuing engagement at this phase. An ex Q Lamb meat supplier was consulted regarding the lessons learnt form the Q Lamb experience with Hillside meat processor.

Distributors - Meat distributors are an important part of the Moojepin value chain and have a key role in the sales and marketing of the product. Peter Manifis is in a unique position to promote Moojepin as he is a well-known chef and food promoter.

Chefs and Restaurant Owners - Since 2013, approximately 13 restaurants have tested Moojepin Meat and / or presented Moojepin Meat as a menu item. Consultation included chefs from The Red Manna, Young George, and Must Wine Bar. In addition, approximately 10-15 leading Perth chefs attending the “Chef’s Master Class” held in conjunction with the stakeholder workshop at Yong George Restaurant. There was further consultation with the owners of Must Wine Bar.

Retail - Retail outlets include supermarket chains, (Coles and Woolworths), niche super markets (IGA, Fresh Provisions, Herdsman Fresh, Good Grocer), and food catering companies (such as Emirates Airlines).

Agencies and industry groups - Consultation was conducted with DAFWA, Meat and Livestock Australia, and the WA Grower Group Alliance. The CEO of Cooperatives WA was consulted on the benefits of forming a cooperative.


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Case studies - The CEO of the Sweeter Banana Company Cooperative was consulted regarding their pathway to success in aggregating Carnarvon producers and relaunching an existing product into the market.

5.2 Targeted Stakeholder InterviewsCarbon Neutral - Kent Broad, Director Business DevelopmentGeneral comments:

Interested in collaboration Potentially as a depot for dry cull ewes about 6-7 years Quality and consistency important Currently have 6,000 breeding ewes. Aim to increase to by about 7,000-8,000 head per year

for 10 years Goal to have approximately 26,000 ewes by 2018. Expansion will be dependent on finances, control of wild dogs, on-ground management, and

infrastructure upgrade to land holding Potential market benefits with the product origin, traceability and the story. For example,

Carbon Neutral awarded Banksia Sustainability Award, revegetating land, establishing Australian sandalwood tress, planting high nectar producing plant species to establish honey bee business, and engaging local Indigenous groups.

Carbon Neutral may consider investment in processing (such as buying, building, or a mobile abattoir)

Pros/cons current open source market system which is competitive, producers have ltd control/influence over price, ltd trust, spot price on day, ltd cooperation, collaboration. Pros/cons new model with supply chain collaboration & trust etc. based on aggregating producers with locked contracts for supply/demand.

“Because we are producing a superior product (and one that no-one else is doing at this stage) I don’t see it as just another ‘commodity’, so I am very much in favour of a long term contractual agreement where everybody makes enough to be profitable”

Issues and concerns:

“A values based production system is the only way to go (trust, empathy, and collaboration). We need to get back in control of how we are growing our food and it is to do with people as much as the animal. This leads into just how far to go with animal welfare issues and environmental issues (use of chemicals, artificial fertilisers). To get the group to agree to a set of standards could be difficult.”

Moojepin and aggregated producers - benefits, features, role, function, issues

“For me Moojepin Mutton is only the start. We need to use this as a catalyst to find markets for the rest of our sheep program (lambs, hogget).”

Forming a specific Moojepin grower group/alliance that can attract funds

“Always good to have investment but what happens to control? As mentioned on the farm, Auscarbon could become the ‘depot’ for group member sale animals – either Auscarbon buys


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them and ‘finishes’ them off, or some sort of similar arrangement that Craig Forsythe does with Northern cattle Stations in the Northern Ag Alliance.”

Benefits, Governance issues related to business model options (Cooperative business models, company/corporate business model issues)

“Not sure about these because they can quickly become top heavy and chew up a lot of early capital, but eventually economies of scale will make this sustainable”.

Chefs and Restaurant Owners - Must Wine Bar, Russell Blaikie, Head ChefGeneral points:

As a chef, very attracted and committed to key WA products Current model is unsustainable where marketing driven by producer If sales and marketing retained in-house, then likely the business will fall over (“ I have seen

this happen”) Will need to engage the right people and hand over some control and build good marketing

Supply Chain issues:

Model needs to lock in a good butcher for example like Classic meats (they do this well) Chefs need to know and understand the story of the product to help grow demand Trust in the value chain is paramount. Russell no longer sources beef from a butcher with a

branded beef product because the butcher supplied an alternative product but labelled it under the desired brand. Other chefs quickly hear about this.

For Russell, trust is simple in a commercial supply chain – if it is not the correct product to the expected standard “it is back on the truck”.

Trust needed throughout the supply chain – truck driver, butcher, chef, and consumer. Supply chain participants need educating Relationships are critical, as well as respect and loyalty Butchers are not in the marketing arena – in a commodity space. Hard to promote and

protect brands via butchers (“they are starved of money and expertise”) Mondo’s is good at this In general, large scale butchers have infrastructure and transport to be successful Smaller operators fall over as supply not always available when required Peter Manifis two key hats – 1. Chef, 2. Advocate of good food products. He does this via a

good understanding of good products, ways to market products and takes it back to basics and back to the producers

Market Issues:

Must build strong brand based on origin and quality and that you get that 100% of the time – this becomes a strong point of difference (and assist to protect product from deliberate incorrect and misleading labelling

Passion (such as that of a producer) means nothing if it is not a good product with exceptional flavour and eating

Product needs to be of consistent quality and supply If dealing with introducing new product to market, then requires more effort than just

competing with existing products


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Competition has points of difference related to different breads, consistency of quality and supply

Mutton is almost a new product in the market. Perception of product important therefore need to increase front end and work with consumers

Good brands promoted everywhere Mutton needs profile / promoting again – namely, via Woollies in store promote good

cooking Current Moojepin problem quantity and inability to scale up

Garry Gosatti part owner Must Wine Bar Has been “talking it up since the workshop” He is seeing the community want products with integrity He sees consumers wanting to understand what they are eating Some chefs have led this and some are getting changed along the way, therefore the timing

is good He has identified some weakness – problems can’t be solved and product promoted out in

the paddock. Must be further along the line Currently a bespoke product and therefore treated like other special products in the market.

Therefore, look at and modify pathway to suit Moojepin and that this probably won’t happen ground up (despite how good the product is), this will not create success on own.

Not even a distributor taking it on board will create enough success. Possibly need a speciality butcher? For example, Classic Meats did this with Butterfield beef

– they became the champion for it, selling it and bringing it to market Need speciality butcher (or several?) that sells into key chef’s trade and well known chefs

about town than can give the product momentum needed for example Mondo’s does this and is retail focused. Create momentum and volume

An option is that a speciality butcher buys the whole carcass and then does the dry-ageing – make process easy

A point of difference is the value chefs have for the product – this elevates the product Create certainty and establish number of carcasses required (lock in)

Carlo Gosatti part owner Must Wine Bar Very interesting product and very good to see the bigger picture and to bring together all in

the supply chain (producers and chefs etc.) Moojepin mutton has a place in the market and is packed with flavour Sees issues getting the product to market From a producer perspective, they know and understand production but don’t understand

marketing and brand development and how to bring a product to market Producers have limited knowledge of marketing, brand development, product and customer

development. Telling the production story is important but there are likely difficulties and barriers to

establish that link and buy in from consumers. That is from farmers, transport, distribution, restaurants.

This will require energy to tell the story and engage consumers

Meat & Livestock Australia Demand from overseas is high


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Recent visits to Middle East highlight the strong demand for Australian lamb and mutton – demand is stronger than current supply

Currently Middle East markets wont lock in contracts in advance Innovation and technology required for example in processing (more research to be done on

mobile abattoirs) There may be cash (capital) available overseas to invest in Australian supply chains MLA / Federal Government will consider matching funds that are attracted from overseas

into Australia (50:50 for large companies, 25:75 for producer groups) Consideration of different value chains – for example a future model where Australia

slaughters the animal the full carcass is shipped overseas and then packaged cuts are sent back to Australia?

On-going industry challenges with Australia’s higher labour costs On-going industry issue engagement of and greater collaboration with abattoirs and

processors

Former agribusiness agentStakeholder Engagement and commitment to the MMM Value Chain Concept – summary

Level of interest – medium; Willingness to participate – Agents may take some convincing. Not sure what value an agent would add to the integrated supply chain – apart from

payment – this would be very easy money for the agent – maybe negotiate to pay 2-3% instead of the normal 5%??

Specific needs of stakeholders that are critical to the program

Payment appears to be vitally important. Ram sales are very important to Agents – this is where the genetics are ‘on show and the individual attributes are ‘sold’. The quality of the product is vital – it is about brand awareness and integrity. This is where the Agents can support MMM in going national or international potentially.

Breeding stock lease is a good idea, however rarely is it very practical. Transport and carriers who have a gentle manner and professional business are vitally important – this comes right back to the integrity of the meat – ie no bruising

A centralised finishing property could work – consider the Red Star program that was undertaken by one of the larger stock firms in recent years. It became evident that the ‘backgrounding’ of the cattle in this program was extremely important – ie the planning, specific protocols and feeding regimen for the stock was vital. A notable 4 – 11% increase in annual profits for producers was enjoyed = less time in the feedlot.

Key cultural issues critical for participation

Live export is an important part of the sheep meat industry. It is not up to us to tell other cultures how to slaughter the animals. We are having to be vigilant to very influential minority groups that can upset the supply chain with little grounding and low education.

Halal is only a killing method and as such there should not be a problem – it does add on a few dollars in the production costs

It is important to understand the cultural differences of customers in and from Asian and MENA countries – such as supplying food before and during special religious or cultural events such as Ramadan


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The characteristics of the meat is super important – everything old is new again. I cook mutton and there is nothing better than an old-fashioned mutton roast or a mutton stew. You can’t get those same amazing flavours with lamb.

Ex Q Lamb ProducerStrengths (of Q Lamb Model):

Model based on an alliance of producers all supplying to the one processor Alliance producer members sold lambs to the processor (Hillside) Model was effective with strong alliance of producers supplying quality lambs under strict

code of practice and to committed processor Processor packaged under the Q Lamb brand Had well recognised brand and grabbed a significant market share Market share strongly based on reliable and consistent eating quality Quality assurance program and producer requirements for lambs were robust and became

industry standard and leader Current industry code of practice regarding lamb quality was designed by Q Lamb Market segments included network of IGA’s, speciality butchers, restaurants, major super

market chains, Singapore Airlines

Pitfalls:

Alliance producer members sold their lambs to the processor (Hillside). Processor owned the lambs while the Alliance of producers owned the brand. Producers felt they gave away control as they owned the brand but once they sold lambs to

the abattoir they didn’t own the lambs and therefore, had no control over brand. Producers lost control of marketing (branding, packaging, communication with customers

and markets) Management changed and communication became an issue As a start-up, the alliance model worked well. Needed change and transformation to enable

sustained growth and delivery of benefit to all Success led to reluctance for change or “active inertia”- the success meant that change and

transformation where not considered necessary (“not on the radar”) Other players in the market were allowed to catch up in terms of offering the same high

eating quality lamb Q Lamb struggled with being price competitive as others in the market caught up Forward pricing hard in lamb supply chain - inherently difficult. Were unable to lock in

contracts (especially relevant for commodity markets such as high volume supply to Middle East).

Q Lamb didn’t have a “next best thing” (a plan B) or a longer-term strategy to offer the market and to stay ahead and fresh

The producer alliance model had strength but was staffed by volunteers – couldn’t afford to pay people to professionally manage the “Alliance”

Had good contract supplying Singapore Airlines which was successful while Q Lamb was a new and different niche product on the market.

Lessons:

Airline menus constantly desire fresh and new products to entice customers


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Locking in a wholly committed processor is a vital element for of control and success Must maintain control over brand and product Any start-up business model needs to consider future growth Model needs to consider all phases of development and / or consider changes that might be

required as business grows and needs throughout the market and supply chain change Identify a capital investment pathway early and build into phased development Manage risk of brand and market reputation (for example – Moojepin ram sales as a brand,

versus Moojepin mutton sales). Must protect the genetic brand Manage risk of brand ownership and market reputation

Sweeter Banana Coop (Doriana Mangili, CEO)Benefits of cooperative business model:

They are businesses therefore they make money It is a bonus that members can be customers of that business as well as the owners Profit goes to members not shareholders The structure can give good transparency (takes the mystery out of doing business) Can gain scale and size that can’t achieve on own Help establish a consistency of product Helped to get a standard of processing and an automated system (that is a packing shed) So therefore, consistency locked in as is then regulated (at the packing shed level) Therefore, reliability and greater value Have a user pay system with user benefit Democratic not a socialist system Greater transparency is key and greater trust. All can see each payment and transaction in

terms of price, what paying, net return etc. Have large locked in contracts with Coles and Woolworths Recently attended and presented at a conference in NSW re “Farm Cooperation and

Collaboration” Via federal funds established by Barnaby Joyce approx. $14m available in partnership with

Southern Cross University to facilitate growers working together

Cooperatives WA (Peter Wells)Key points:

Forming a cooperative and advice given is always on a case by case process. That is there is no blank canvas or one size fits all model / approach.

It is important to think about the nature of the business, the proposed business model, the goals and business aspirations prior to determining the most suitable / appropriate legal structure

The legal structure should then be tested to see if it is the best to deliver success Long term the cooperative must deliver value to the core groups of members It is possible to sell up, have a trade sale to unlock value It is possible to have a cooperative with a defined life and / or one model that changes over

time, which may develop into a corporate model. Imperative to determine what the underlining / fundamental drivers for the cooperative are.

What is motivating people? Markets change over time and a cooperative must not get lock into one market.


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If the markets change then the cooperative also needs to change (consider Q Lambs)

Grower Group Alliance (Annabelle Bushell, EO) Key points:

Grower groups can be un incorporated or incorporated not for profit An incorporated group can seek funds to undertake the necessary business planning and

engage human resources A grower group or alliance can be a good first step to explore the best business model

(cooperative, or company) The group would be able to attract R&D funds to explore markets, products, processing The alliance group could remain in the longer term or evolve into a for profit entity Protecting and promoting brand a key There may be merit / future need for focus at several levels – genetic group, producer group,

supply group Potential sources of funds to consider – MLA Fast Track Innovation, Farming Together

Program, Grower Group Grants

5.3 Stakeholder Workshop FeedbackYoung George Stakeholder WorkshopWorkshop held on 10 October 2016 at Young George in East Fremantle. Approximately 18 people attended with most being current Moojepin producers. Two restaurants were represented with chefs and business owners – Red Manna and Must Wine Bar. A chef’s Master Class, showcasing Moojepin Meat we conducted at Young George after the workshop. Chefs, producers, restaurant owners, and business consultants could chat and mingle.

The workshop focused on the key supply chain challenges currently experienced and the opportunities of exploring a new value chain model based on aggregated Moojepin producers. Participants were asked to comment on the issues critical to their involvement in the new model and the key market issues that would need to be considered.

Stakeholder feedback from the workshop is outlined below.


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CHALLENGESWhat are the key supply chain challenges that

your business deals with?

OPPORTUNITIESWhat do you see as the key opportunities to

exploring a new value chain model?

PRODUCERS

Perception - people think merinos are not good to eat

Price volatility Kill space availability – on the farm ie where

to finish off Profit margin – cost base increases all the

time Perennial price takers Lack of control after the farm gate How to hold sheep in readiness for supply Abattoirs consistency / quality is random Economic benefit of bringing “other”

merino meat into supply chain / value chain – eg lamb, hogget, mutton, wethers

How to promote MPM ie the wool side of the story as well (is this an opportunity)

“Commodity” mentality of growers Value adding – getting people to want our

product

PRODUCERS

To value add (to existing business) Build long term sustainable business Develop recognised brand Promote the story - sheep happy life, tastes

good, leverage existing work Look for similar product and values Feed– supply “backgrounder” as important

part of the supply chain working relationships

Backgrounding facility – all through the same place

Feeding regime Production form different geographic

locations Explore non-mulesing or low mulesing Explore organic status Alliance with butcher’s shops or to own the

butchers shop To utilise the Katanning Centre Abattoir – do our own Mobile abattoirs & mobile hanging facilities Shark Lake – source partner

RESTAURANT OWNERS / CHEFS

Consistency of supply – staggered process Difficult to engage public in brand with stop

start (supply) Is there such a thing as seasonality (of

demand for product?) Fighting against retailer against everyday

availability – educate consumers about seasonality

Chicken and egg to get MMM off the ground and what to do with offloaded sheep

Need to “back up” the product – quality and consistency

Great on-going consistent product versus fashion product

RESTAURANT OWNERS / CHEFS

Consumers want to know where product comes form

Tourists want WA product Supply the story to restaurants for menus Educate consumers about food source,

seasonality, story Bespoke product Promote WA product and brand Promote traceability and brand story


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YOUR INVOLVEMENTWhat are your specific needs that are critical to

your involvement?

KEY MARKET ISSUESWhat are the key market issues that need to be

considered?

Go further – assurance to be paid for produce

Assurance product will be taken Clarity of supply – where product goes Confidence that product will go –

guarantee Contracts Incentives to commit – price Enough numbers to make it viable –volume Strong assurance about the upstream

processing and marketing will work Ok to commit for trial to test market and

will work Scale to a point – pilot / trail with risk

management the upscale Vision where margins are – up above

production Fair and equitable (win-win) Are there any particular requirements as a

producer – for commitment, for management?

Most efficient place to breed, turn off, abattoir

Parameters to supply eg non mulesed sheep

Consistent communication – the whole thing, feedback up and down

Shared values as a group Independent chair Strategic pathway and plan

Recognised brand Brand integrity Transparency Tell our story Understand the integrity / story, the one

percenters, honesty of the product Story Sheep in the right condition at the

right time Point of difference – recognised for it Graze for 1000 days – system 3.5 years of age Ambassador Provenance (domain) Stewards Animal welfare Low stress stock handling Free range- they are loved (Kleenex) Low level of chemical application Landcare, environmental stewardship Limited human intervention Healthy product Nutritional benefit – Fe, omega 3’s Flavour is king – don’t want bland Looking at cuts chef’s choices Chefs changing cooking styles, slow cooked,

pulled pork, pulled mutton Consistency of supply Quality, reliability Price stability Quality product, product variety

Moojepin Producers’ Stakeholder Workshop A second workshop was conducted on 24 February at DAFWA in South Perth. Worksop participants were current Moojepin producers with the aim of the workshop to confirm interest in collaboration and determine the preferred group structure & governance model. The workshop agenda allowed time to:

Communicate and consult with key stakeholders; Understand supply chain versus value chain and innovation; Understand business model options; Determine willingness to commit to a new model; Discuss group values and foundations;


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Outline funds required, administration & management; Identify critical issues for success; and Identify strategic pathway – critical development points

An analysis was undertaken looking at the strengths, weaknesses, opportunities and threats of a cooperative versus a company business model. The merits of a forming a grower supply group / alliance as an initial step in aggregation and collaboration were discussed.

STRENGTHS (internal to the group)

Cooperative Company

Greater control Potentially lower costs Smaller (size) Limited number of employees Lower overhead costs Could evolve into a company structure at

some stage Democratic therefore more creative Easier to keep the goal and vision in mind

and focused on Can be a strength that is driven by the

bottom up and with a strong vision Well run People with integrity Succession to company model can be done

(it is possible) Tax free environment Income distributed back to the members

(who pay tax) Attracting research & development funds Potentially good public image Opportunity for personal story (of product

origins) – the “face of the farmer” More appealing to the public Get to what the customers want Smaller, at start & more nimble Strength in numbers

Can get outside money and outside investors

Share market and attract share holders Therefore, can get larger amount of capital Less thought required from self that is the

board of directors make the decisions More accountability of company board

directing management what to do Company more top down – a strength if the

right people Strong (good) public image People (good if right) Potentially more on-going – it can be longer

term Research & development tax credits Can become large Limited liability


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WEAKNESSES (internal to the group)

Cooperative Company Dealing with people (members) coming in

and out (of the Co-op) Commitment? May be just producers – perception Potential disagreements between members Self-interest over groups/interests Dilution of your specific product If a farmer has not been in Moojepin for a

long time Producers may not invest in the skills

needed to run co-op Producers not necessarily very good

marketers Liability - who, where does it stop Size of co-op - middle management Board in-fighting Governance ? investment attraction Board rigged Lack of vision / passion Lack of capital Time commitment to run co-op Wrong chair and board and CEO Competition from others Maintain supply Ability to recover from event (eg drought) Lack of transparency (price driven model)

Possible to be profit driven Align changes in production size versus size

of shareholding Top heavy management ? classes of shareholders Lack of structure flexibility Being able to grow the right structure and

to maintain linkages with producers Not bringing in external expertise & non-

executive directors (NED’s) ? investment attraction Hostile takeover Passive take over Board rigged Lack of vision / passion Lack of capital Opportunity to go global or secure/buy

move of the supply chain Wrong chair and board and CEO Competition from other Company Might be easier for external takeover Another company or processor freeze

MMM out by price / production etc Ability to recover from event (eg drought) Trying to grow too quickly (price driven?)

OPPORTUNITIES (external to the group)


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Cooperative Company Branding – consumers like to see who owns

the product and where it comes from Not seen as “face-less”- easy to show there

are people behind it (perception) Values driven rather than profit driven Possibility to use multiple branding and

marketing opportunities Fast start-up Joint venture with aligned 3rd parties Government grants specific to co-ops Become a company in time Secure increased profits with decreased

overheads Easy start-up Protect interests of stakeholders

Opportunity to take over other companies Can make merges & acquisitions faster Can attract outside investment and capital Flexibility to secure growth options Opportunity to go global, or secure/buy

more of the supply chain Nimbleness Equity funding – outside shareholders Joint venture with aligned 3rd parties Public float Can be more flexible to enter/exit if listed Secure increased profits through ability to

employ

THREATS (external to the group)

Cooperative Company Wrong people with the wrong ideas

running off in the wrong direction Lack of vision and understanding the vision

(foundational) Not understanding the co-op model Thinking we are ‘across’ information/

markets etc and we’re not Lack of humility Lack of equity Poor business/strategic plans Succession Lack of knowledge

Wrong people with the wrong ideas running off in the wrong direction

Values (motives) can change as shareholder driven and project driven and growth driven at the expense of the Company

Lack of vision and understanding the vision (foundational)

Understanding company legislation Lack of humility Thinking we are up to date with company

model Losing control may be easier Hostile take overs. Passive take over Ambitions – over without right motives Lack of equity Poor business / strategic plans Succession Lack of knowledge Easier to move away from base – focus on

other areas

Workshop participants were asked to consider the different options for collaboration and note their preferences.


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OPTIONS: summary of key issues for each modelSUPPLY GROUP (Grower,

Alliance) COOPERATIVE COMPANY

Keep it simple, progress expands from a Grower Group then to co-op

Alliance of supply chain participants

Pilot – what are the numbers interested and where it is coming from?

A non-trading group, but can attract funds from MLA etc for R&D

Commitment - time, money or both

Grower group a good place to start see how much interest & commitment.

No financial or brand risk while you pilot it.

Need commitment of supply

Co-op can allow growers to commit to supply

How get commitment? Use contract numbers

such as 20% of flock, 20 head per week

Commitment - guarantee contract price for x% of flock

Better with a co-op in terms of risk management

If just a cooperative of producers not value chain need to have processors etc in cooperative.

A Company would have employees that do the work (that is not rely on producers as volunteers)

Get the right people Get the name right This might be where we

want to end up (but start with grower group)

Good option so as the farmer can stay as a farmer with a Managing Director (such as David Thompson) to run it


Workshop participants were asked to consider the merits of forming a grower / supply group either as a permanent structure or as a step towards greater collaboration and aggregation via a trading entity (cooperative or company structure).

N-F-P SUPPLY GROUP / ALLIANCE: summary of benefits and action steps Gentle entry step is to create a not for profit based grower group that is more a market entry

rather than a production group. Production of breed and feed well established Demonstrate commitment – take risks. If prepared to take a risk, then that demonstrates

commitment Moojepin certified producer – supply group 5-6 members to get things started 5 or 7 Board members or committee of management, incl 1 Chef, 1 marketing Membership fees (for example $1k - $5k) . Restaurants may have different fee structure Value chain engagement Must have clear strategic and business plan Must secure funds Will need expert advisers - such as an ex Abattoir owner, plus other successful businesses

(Carnarvon Sweeter Banana Co) Marketing can start with chefs at same time research into process logistics / detail Management needs:

market research (numbers, freezing regime / benefits, cuts, ageing) executive Officer frontline sales (for example $800/week plus commission) upgraded website with on-line sales landing page map out grant schedules / annual calendar of funds and programs

Research needs: Explore markets including frozen meat markets Different dry ageing processes (7, 14, 21 days) and meat quality Impact / benefits of freezing on meat quality Best packaging

Values and FoundationsMoojepin Merino Meat group values and foundations were discussed:

Customer focus Consistency – product & supply Reliability Quality Branding Control Innovation Minimum of four years with 100% Moojepin genetics

These values are consistent with the characteristics and critical success factors of the businesses analysed in numerous case studies.

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6 Financial analysis For analysis, we have assumed products will be produced by an entity which, for this analysis is called Moojepin Merino Meat Co. (MMMCo). MMMCo could be a partnership, joint venture, cooperative or company. The first part of the analysis works through only the viability of the product. Different structures are analysed later.

MMMCo will purchase whole live sheep from MPM producers at an agreed contracted rate based on the market and product profitability.

6.1 Products1. Whole Aged Merino (1 Sheep)2. Retail Meat Pack (1/3 Sheep)

This is an even value meat pack with 1 sheep making 3 packs3. Restaurant Quality Mix (3/4 Sheep)

These are the premium cuts and cuts in demand from restaurants totalling about 70-75% of the sheep by weight but 80-85% by valueThese could be sold to restaurants or other retail customers who do not want the retail pack.

4. Cheap cut/mince pack (1/4 Sheep)The remainder of the sheep from the Restaurant pack being the cheaper cuts to be diced or minced.It is assumed these would be sold as wholesale to a burger chain like Grill’d or diced to Indian restaurants or similar.These will also be sold to consumers at retail

6.2 Key Analysis Findings Financial modelling indicates a pathway to growth is achievable for Moojepin by aggregating Moojepin producers into a “supply group” and developing a marketing cooperative or becoming part of an existing cooperative.

The limiting factor for Moojepin is the significant marketing expenditure cannot be funded by a single farming family where the benefits from this expenditure would be shared by multiple farming families.

Based on research and investigation undertaken and the stakeholder engagement, initial options considered in this financial analysis include:

1. Status quo – low volume, supply select cuts to a limited number of restaurants, demand and supply unreliable, no producer collaboration or supply chain operation, supply chain relationships remain competitive / limited.

2. Some change – form grower / producer group alliance to commence planning for next steps and to attract R&D funds. No aggregation of supply, still supply on open market, no collaboration, unreliable inconsistent supply and market.

3. More progressive change – grower / producer group, lead to secure markets in restaurants and niche supermarkets.


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4. Major change innovation and transformation – industry leadership, form group, followed by Coop or Co. Secure lock in key contracts such as with large catering and food service companies (Emirates, Parliament House, Grill’d), exporters, , restaurants, niche / premium supermarkets, strong brand, range of products

6.3 Status QuoThe financial analysis of Moojepin Meat remaining a Niche only player shows that reasonable revenues can be achieved, however the product margins do not support this model as a sustainable standalone business or return the initial investment made by the single producer.

The Status quo financial modelling was limited by a peak debt of $600,000 and showed that a mix of online marketing and direct sales via 3 dedicated sales reps were required to expand the product into sufficient restaurants to bring about a breakeven after 5 years.

6.4 Producer AllianceA producer alliance involves a group of the current Moojepin producers working together on a supply side alliance. The alliance would need to support the program by providing shared capital and guaranteed supply quotas. With an alliance of producers there is an assumed 12.5% reduction in selling cost compared to a single operator due to the improved supply and trust from working with a larger group.


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As a Producer Alliance, MMMCo would initially employ 3 sales rep’s while keeping peak debt at $600,000. The alliance could grow revenues to move into the supermarket supply in 2021 resulting in a sustainable business within four years.

6.5 Producer Entity (Company or Cooperative)A producer co-operative / company involves a group of the current Moojepin producers formalising a separate entity to manage the MMM brand and sales. The producers would need to support MMMCo by providing shared capital and guaranteed supply quotas and MMMCo would grow as new producers converted their flock to MPM. With a dedicated entity, there is an assumed 25% reduction in selling cost compared to a single operator due to the improved supply and trust from working with a larger group that can grow with growth in the market.


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As a Producer entity, MMMCo can achieve initially employ 4 sales rep’s while keeping peak debt at similar levels to the single producer model. The alliance could grow revenues to move into the supermarket supply in 2021 resulting in a sustainable business within five years.

6.6 Value Chain Entity (Company or Cooperative)A Value Chain entity (either co-operative or company) involves a group of the current Moojepin producers joining together with processors and end customers formalising a separate entity to manage the MMM brand entire value chain.

The producers would need to support MMMCo by providing shared capital and guaranteed supply quotas and MMMCo would grow as new producers converted their flock to MPM. The processors would need to support MMMCo with shared capital, Process service level agreements with volume and quality commitments. The end customers would need to support MMMCo with purchase agreements and commitments to minimum volume, they may also agree to supply additional capital in return for a higher share of MMMCo.

With a dedicated entity, there is an assumed 37.5% reduction in selling cost compared to a single operator due to the improved supply, better quality control of the product and closer alignment between MMMCo and the end customers.

As a full value chain entity, MMMCo can achieve initially employ 7-8 sales rep’s providing national coverage and keeping peak debt at similar levels to the single producer model. The alliance could grow revenues to move into the supermarket supply in 2021 resulting in a sustainable business within five years.


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6.7 PlanningVolumeThe aim, over ten years is to grow demand from eight head per week to 2000 head per week, or 100,000 head annually. This will require supply form approximately 20 Moojepin MPM clients. Currently Moojepin MPM has 30 commercial clients in Western Australia, running a total of approximately 70,000 sheep under the Moojepin genetic breeding system.

Our financial modelling demonstrates profitability is reliant on product achieving general market acceptance and allowing supply to supermarkets and key value chains. The restaurant market will remain an important platform to drive market awareness of Moojepin Meat and driving take up of Moojepin Meat in the direct purchase, butcher and eventually the supermarket market segments.

Funds required to implementThe program will require $600,000-$800,000 with ongoing funding provided through profitability from recurring orders and continued marketing of the Moojepin direct ordering packs. The program’s success will be determined by success of restaurant sales and continued online orders of meat packs. Failure to achieve traction in either market segment according to the KPI’s set will impact on the ability of MMMCo to break even within the set funding. Management of sales and marketing KPI’s is essential to the success of MMMCo.


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Key AssumptionsAssumption Status Quo Producer Alliance Producer Co Value Chain CoWholesale Sheep Sales 100 500 500 500 Wholesale Growth % 30% 30% 30% 30%Sales Force Salaries Restaurant Sales 96,000$ 96,000$ 128,000$ 288,000$ Acquisition Cost per Restaurant 800.00$ 700.00$ 600.00$ 500.00$ New Restaurants Acquired pa 120 137 213 576 Restaurant Orders pa 13 13 13 13 Value of new Restaurant Sales pa 312,000$ 356,571$ 554,667$ 1,497,600$ Sales Force Salaries Value Outlet Sales 24,000 24,000 32,000 72,000 Acquisition Cost per Value outlet 600$ 525$ 450$ 375$ New Value Outlets Acquired pa 40 46 71 192 Value Outlet Sales pa 100 100 100 100 Value of new Value outlet Sales pa 201,600$ 230,400$ 358,400$ 967,680$ Marketing Budget 30,000$ 40,000$ 40,000$ 40,000$ Marketing Cost per Sale 30 30 30 30 Total new sales pa 1,000 1,333 1,333 1,333 Value of sales 100,000$ 133,333$ 133,333$ 133,333$ Supermarket Whole sheep per store 200 200 200 200 Supermarket Start Date 1/01/2024 1/01/2021 1/01/2020 1/01/2020

Product Pricing AssumptionsProduct Assumptions COGS Wholesale% Retail Price

Whole Aged Merino 125.00$ 90% 180.00$

Retail Meat Pack 68.33$ 100% 100.00$

Restaurant Quality Mix (75% sheep) 164.00$ 100% 200.00$

Mince Pack (25% sheep) 41.00$ 60% 84.00$

Sensitivity Analysis Online Marketing

Analysis of online marketing confirmed that MMMCo can pay up to $38 per sale for acquisition marketing without repeat sales. Repeat sales improve results dramatically. Marketing cost per acquisition of $30 or less produces sufficient profit to make this process viable.

Sales Force Acquisitions

Analysis of Sales force performance included testing average sales cost per new restaurant up to $1,400 per restaurant based on an average restaurant purchase of 13 packs per year (ie weekly for a season). At $1,400 per sale there is negligible financial benefit from new sales. There would only be a marketing benefit in showcasing the MMM product to consumers. At $1,400 per sale, financial support required from shareholders would double to over $1.6M.

A range of $500-$800 per sale was shown as viable from both a cash and profitability perspective. If sales are achieved at $500 per restaurant, then increasing the sales force improved profitability while reducing peak debt.


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7 Findings

7.1 Research OutcomesIndustry data is focused on lamb and it is much harder to source data on mutton only. This includes MLA data which is focused on lambs.

Mutton taste and the eating quality of mutton needs to be expanded along with market awareness and education regarding the “cook-by-cut “story.

Since 2008, lamb consumption has declined as price has increased. Market data on mutton consumption, separate to lamb data is required and long with mutton sales, export and geographic location of consumption.

There is strength in the eco-health movement – healthy land, healthy people and healthy animal.

There is a need to determine what processors are currently doing with mutton given it is hard to source. The reluctance of processors to engage and provide data on mutton confirms the need to collaborate to get better outcomes for Moojepin producers and more reliable supply for food service outlets and retail.

Not-for-profit “grower” groups are an effective way for producers to commence collaboration as a first step towards further development (such as forming a new commercial entity – company or cooperative).

The agricultural cooperative business model can help take advantage of economies of scale and scope in storage and production. They can help to increase net income and serve to increase the bargaining and marketing power of producers.

7.2 Summary of Stakeholder Engagement There is Interest in collaboration from several producers and value chain participants.

It is unusual for businesses at either end of the value chain to come together to discuss their business and involvement, such as happened at the Young George workshop where producers, distributors, chefs, and restaurants owners were jointly engaged. Great benefit seen in developing this relationship right from the start.

A key market point of difference for MMM is the branded integrity (this needs a coding system) to verify product. Not all premium meat brands have 100% branded integrity – the suggestion was made re questionable brand integrity related to beef where one high profile Perth chef immediately cut ties with a supplier that provided non-branded meat marketed as a premium brand. This is an issue stakeholders expressed concern with – how to get bigger but retain integrity and not compete head to head in market, that is to stay customised and not compete in the commodity space. Competing in a commodity market will attract commodity price.

The stakeholder engagement identified the following key points for commitment from a market point of view:

Quality of product; Consistency and reliability of supply and product;


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Integrity of group, brand, and product; Product range including whole carcass and packs; Strong relationships throughout the value chain; Increased market knowledge and awareness of product origins, and product transparency; Meat eating quality 100%; and Product ease of use (cuts, packaging, storing, ageing, freezing)

The stakeholder engagement identified the following key points for commitment from a producer point of view:

Reliability of demand Locked in market knowledge Price of product more even Need to lock in key contracts with customers Increased profit Gains without extra pull on time Engaging others to do the work under clear direction Integrity Brand Strong relationships - the relationship is very important Commitment of group members and demonstrated / secure commitment to the group Risk management imbedded from start Must be 100% Moojepin genetics under the “certification” requirements of four years Central backgrounding location (to get it right consistently) Producers are (in general) good at farming. Not good marketers Need to stick to, commit to a the Moojepin project for a number of years Market research and insights - back ground needed Need secured funding Manage risk: If ram breeders put in 5K and it falls over then lose them as ram client. Need to

flesh out how MMM ram sales is protected from damage elsewhere. Acknowledge that Thompson’s business is different to MMM as is everyone else’s

The engagement identified the following key organisational issues important for stakeholders:

Limited overheads and structure Small board of directors Identified core brand values Must have the right people in place Must plan for the evolution of the new group right from the start Start small, limit risk and exposure Start-up numbers with 5-7 committed producers Must be backed by a clear business plan

For each business participating in the proposed dedicated supply chain they need to carefully consider:

What do me and my business what to achieve?


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What are our long-term goals and does this new direction align with them? How will I / my business benefit from collaboration and cooperation? What benefit will a dedicated supply chain bring to my business?

7.3 Areas for research and development• Market education required re quality of meat. Educate chefs and customers• There needs to be greater value placed on farming techniques and sustainable operation• More work required on how to get market willingness to pay for “clean, green” supply

(Australia) • Determine the most productive dry aging process and develop it customised to customer

requirements - 7, 14, 21 days• Impacts/benefits of dry ageing on meat quality• Research required into the impact (benefit or not) of freezing (rapid freeze) post dry ageing

mutton on meat quality and, taste and texture. Developing the ability to add value by freezing has the potential to allow greater market control of timing to deliver to market

• Dry ageing rooms• Mobile abattoirs• Fleeces, skins, and offal – market research needed to secure product and markets.• Need to determine what is currently happening with wethers and mutton in WA (this will

require market information from processors).

7.4 Stakeholder Agreement and Commitment1. Commitment to collaborate and work together based on MMM genetics.2. Strong agreement that getting the right people involved for the right reasons and with

genuine commitment is vital, no matter what type of entity is formed.3. Commitment to initially form a not-for-profit incorporated association (limited risk) to

continue to explore markets and products prior to forming a new commercial entity (greater risk).

4. Agreement that getting organised is important and that this will start with attracting funds to form a supply-based group.

5. Agreement that drafting a constitution to create the new group is key. Once in place the group can look to attract funds for research and development including funds to complete a detailed business plan with the aim of forming a commercial entity (company or cooperative model).

6. Agreement that having a clear and upfront succession plan for future development is vital 7. Want to create a group where control is maintained, at the same time 8. Agreement that any future development needs to protect the separate interests of

members especially the genetic origins of Moojepin Merino and David Thompson’s ram breeding business.

9. A customer-centric approach is vital and engagement of all key partners in the “value chain”.10. The critical success factors displayed in other businesses need to form a solid foundation of

any new commercial entity. The key ones being integrity, quality, consistency, supply volume, and brand strength all based on exceptional genetics (guaranteed).


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8 Funding OpportunitiesDepartment of Agriculture and Food WAGrower Group R&D Grants Program

The Grower Group R&D Grants Program is a major component of the $22.1 million Agricultural Sciences R&D Fund, managed by the Department of Agriculture and Food, Western Australia (DAFWA), with Royalties for Regions investment. The Grower Group Grants Round 2 Program:

Up to $10.5 million will be invested in Round 2 Only WA-based, incorporated grower groups, and not-for profit, farmer-driven organisations

with an Australian Business Number (ABN), are eligible to apply While commercial companies, non-agricultural not-for profits and public sector research

institutions are not eligible to apply in their own right, their participation as a project partner/collaborator is strongly encouraged

Individual grants are between $20 000 - $500 000 Projects must be completed before 31 March 2019

Meat and Livestock Australia LA Donor Company (MDC)

Producer Innovation Fast-Track (Innovation Fast-Track)

A new initiative developed by MLA Donor Company (MDC) to catalyse producer innovation. Innovation Fast-Track is unlike any other MDC program. It aims to identify the industry trailblazers and provide the support and expertise required for them to innovate faster and further. An evolving pilot program, Innovation Fast-Track is designed to accelerate the adoption of innovations that have the potential to significantly improve farm and value chain performance. It provides the expertise, co funding and support to producers who are innovators, early adopters, Ag Tech entrepreneurs or future value chain leaders.

Innovation Fast-Track provides a supportive environment and a package that includes access to:

A confidential consultation process 75% co-investment by MDC (and 25% by producers) Technical and business expertise and resources The latest R&D and innovations in livestock production Supported design of customised business solutions Administration and management support Networks of like-minded, future-focussed producers.

Innovation Fast-Track, contact via: [email protected]

Meat and Livestock AustraliaPartners in Innovation Program

The objective of MLA's R&D partnership program is to significantly increase the level of investment in R&D by the red meat industry and increase the innovation culture and capability of individual enterprises and the industry as a whole. The objectives of the Partners in Innovation program include:


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1. Assisting individual enterprises within the Australian red meat industry to achieve greater competitiveness through innovation;

2. Increasing the number of successful commercialised innovations available to the red meat industry;

3. Achieving commercial returns and bottom line benefit for partner companies; 4. Building the capacity of companies in the red meat industry to establish innovation as a core

business strategy;5. Demonstrating to the wider industry the commercial benefits achieved from investment in

innovation.

Australian Government, Department of Agricultural and Water ResourcesFarm Co-operatives and Collaboration Pilot Program

Co-operatives and other collaborative business arrangements help farmers to own and control more of the food supply chain themselves, delivering greater returns at the farm gate. The Farm Co-operatives and Collaboration Pilot Program will arm farmers with knowledge and resources on different collaborative arrangements that can work for their business.

Southern Cross University is delivering the pilot program on behalf of the Australian Government. The Deputy Prime Minister made this announcement on 14 April 2016.

Over the coming months, Southern Cross University will announce a national program of work, including:

Establishing an online information resource for farmers and farm advisors on best practice collaboration

Making collaboration experts available to farmers so they can test their ideas Providing funding for farmer groups so they can get their collaboration ideas off the ground

For more information about the Farm Co-operatives and Collaboration Pilot and how you can benefit or get involved visit www.farmingtogether.com.au.

Email: [email protected]

Phone: 1800 00 5555

The Farm Co-operatives and Collaboration Pilot Program is part of the Australian Government's Agricultural Competitiveness White Paper, the government’s plan for a stronger agricultural sector.

Australian Government, Department of Agricultural and Water ResourcesAustralia-China Agricultural Cooperation Agreement (ACACA) Program

Applications for the 2017 ACACA program funding round have now opened

The Australia–China Agricultural Cooperation Agreement (ACACA) is a treaty level agreement between the Australian and Chinese governments designed to:

Enhance cooperation across agricultural industries Develop the trading relationship Provide a forum for the exchange of scientific information.



http://www.farmingtogether.com.au/

http://www.agriculture.gov.au/Pages/minister.aspx?link=http%3A//minister.agriculture.gov.au/joyce/Pages/Media-Releases/support-for-farmers-in-ag-supply-chains.aspx

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The Australia-China Agricultural Cooperation Agreement program (ACACA program) operates under this agreement. It is an ongoing, competitive grant program, with calls for applications every year, designed to develop Australia’s agricultural trading relationship with China.

China is now the world’s second largest importer of agricultural, food and fishery products, totaling over US$120 billion per annum, and is Australia’s largest agriculture export market (by value) with A$11.1 billion exported in 2015.

The ACACA program helps our farming and fishing industries unlock the new opportunities afforded through the China-Australia Free Trade Agreement (ChAFTA).

The objectives of the ACACA are to:

Promote bilateral cooperation in agriculture between Australia and China Develop the trading relationship Exchange scientific information to enhance cooperation and develop linkages between

Australia and China.

Specific funding priorities and rounds are set every two calendar years as agreed by the Chinese and Australian governments. The program will call for applications twice during the ACACA 2016 to 2017 program funding round. These calls will occur at least once per year subject to funding availability. Priorities and target areas of cooperation will be reviewed before each call for applications.

The agreed priorities and target areas of cooperation for the 2016 to 2017 funding round are:

eCommerce innovation Science and technology cooperation Sustainable agricultural technology Post-harvest storage and waste Sanitary and phytosanitary training Agricultural products processing Animal husbandry Food safety Trade and investment cooperation Commodity production research Exploration of niche markets.


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9 Recommendations There is great complexity in bringing together disparate parts of the Moojepin value chain. This stakeholder engagement process has shown just how enormous this task is. For many this has been the first time they have been engaged and consulted with about the challenges and opportunities that collaboration can achieve. To bring about lasting change and overcome the current mistrust in the supply chain, steps are needed to further strengthen relationships. To build on this initial interest and enthusiasm, a key recommendation is the formation of a supply group. Based on additional market research and planning, this can lead into the start of a larger commercial entity (cooperative or company business model).

There are some critical research areas that need covering and the supply group will be well placed to lead this research and secure funds in partnership with industry to undertake. At the same time, there are some key steps that Moojepin can do immediately to build market awareness and increase sales, principally website enhancement.

Form supply group/grower allianceEngage with the Grower Group Alliance to form new group (potential to access funds to assist with group set up).

Seek funds to prepare governance structure, draft constitution and rules, membership basis, undertake strategic plan for an aggregated value chain.

Secure funds / membership fees to employ executive office.

Use incorporated status of group to secure research and development funds for work related to dry ageing, freezing, processing, packaging, exporting, and securing new markets. This to lead into business plan development and formation of new commercial entity.

Form commercial entity (cooperative or company structure)Secure capital and funds to employ frontline sales and marketing forces and general manager. Prepare detailed market and business plan. This to include:

A targeted marketing and distribution plan will ensure the product reaches the target markets identified.

A product development pipeline will be required to secure markets and brand awareness. A marketing and communications map (including social media and media/PR) to build the

brand and generate awareness and sales. An upgraded website with a landing platform that can manage all sales and ordering Secure strategic partners – MLA, meat processors, exporters, targeted markets (such as,

retail, catering companies, food services)

Research needsEngage with industry to establish mutton market data at state, national and international level. This needs to include insights into which countries are consuming mutton and the current supply.

Collate existing and / or conduct new research into benefits of dry ageing and freezing.


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Determine potential of mobile abattoirs as a component of developing a Moojepin dedicated value chain based on aggregating producers.

Detailed analysis of market potential for Moojepin in the food service and retail space.

Moojepin website enhancementsStreamline process for potential customer to become a paying customer with locked in orders

Promote the benefits of Moojepin (cooking quality, the story behind the product)

Design customer “landing page” for easy customer sign up.

Website upgrade to be able to capture customer data and funnel leads (create a customer database).

Improve the search engine optimisation

Establish a secure on-line ordering and payment system.

Strategy Matrix: bringing people together to help them make sound business decisions related to land management and natural resources


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