Inda shaping up to be red hot

Lamb and mutton exports to India have bounced back to pre-Covid levels, but there are mixed feelings among meat companies about growth there. By Glenys Christian.

In Business9 Minutes
Quality NZ’s joint venture agreement with an Indian company will see a processing factory in Chandigarh producing lamb offerings such as meatballs, patties and kebabs.

Some meat companies are optimistic about future growth, others are wary about re-entering a market still concentrated on supplying high-end hotels, especially now Australia has signed a Free Trade Agreement (FTA).

In the 2018/19 year $1.8 million of lamb was sent to India; a volume of only 81 tonnes (t), but it had an average value of $22,359/t due to the high-priced segment it was filling. The following year trade dropped to half that tonnage and in 2020/21, at the height of pandemic, just 14t worth $200,000 was sent India’s way.

But 99t was exported in 2021/22, worth $1.5m, or an average value of $15,596/t. And last year from October to June exports totaled 89t, worth $1.4m or an average of $16,012/t.

Mutton exports were small at just 53t for the same period but worth an average $5689/t and future growth is expected.

Quality NZ exports 80% of all sheep meat to India. Executive director Geoff Allott believes it’s “on the cusp of becoming something special”. He says with 65% of Indians under 35 and many of them never having experienced eating sheep meat, it’s very much a developing market.

Quality NZ was set up 11 years ago and counts amongst its shareholders Alliance with a 10.8% stake, and cricketing greats Sir Richard Hadlee, Brendon McCullum, Stephen Fleming and Daniel Vettori. Allott, a former Black Cap and NZ Cricket board member, says it’s taken time to establish relationships in India. An Indian subsidiary was set up which now services 360 five-star hotels in 43 cities. All but three of Quality NZ’s 25 staff are based in India at offices in Mumbai, Kolkata, New Delhi and Bangalore.

Seventy percent of the company’s exports are lamb, mainly the prime cuts of racks, loins and shanks, with the remainder mutton. But Allott says by the end of this year the split is more likely to be 60:40 as Quality NZ moves into using more of the frozen carcases sent there.

It recently entered a joint venture agreement with an Indian company with links to international fast-food players such as Subway and Dominos.

This will see a processing factory in Chandigarh produce value-add lamb offerings such as meatballs, patties and kebabs.

“We’re localising products into different areas, along with ready to eat alternatives,” Allott says.

Eventually there will also be exports to surrounding countries where NZ is already sending lamb, but carrying out processing in India will make this more cost effective. Quality NZ is building its own ecommerce platform, planning to offer not only lamb but NZ dairy, seafood and fruit sales by the end of the year.

Already having the world’s largest population and a 6.5% gross domestic product growth rate, India is predicted to move from being the world’s tenth largest economy five years ago to the third in a short time.

“It’s going to be the super-powerhouse of the world,” Allott says.

“It’s growing by the size of the NZ economy every year.”

He believes NZ needs to listen to what India wants, take a holistic view and stick with an agreed strategy.

“We’ll benefit if we put the effort in.”

Chief executive of the Meat Industry Association (MIA) Sirma Karapeeva says it’s disappointing Australia pipped NZ at the post with its FTA.

“It’s a difficult and complex market,” she says.

“We want to sit down with the Government and other sectors to see what a strategy looks like and how we can gain trust from India.”

Alliance’s general manager global sales Shane Kingston says India remains a market of potential opportunities with his company exporting all its lamb there through Quality NZ.

“The population and also economic prosperity are pointing in the right direction.”

There have been challenges alongside tariffs, such as provincial regulations, in-market channel problems and India being at a different level of maturity to many other markets for NZ lamb.

“It’s a long-term play. NZ needs to stay at the 4-star hotel level while penetrating more parts of the market.”

With Australia’s recent $250m investment into the Indian market there was no doubt it would be NZ lamb’s major competition. But Kingston thinks the Australian agreement could provide a blueprint for a similar deal with NZ.

“Alliance has a very active growth plan we are comfortable we can achieve. And with zero tariffs that would accelerate.”

Silver Fern Farms’ (SFF) chief customer officer Dave Courtney says the company had a presence in India up until three or four years ago. But then it faced challenges in export volumes and product expansion.

He says the Indian market is heavily focused on the high-end restaurant trade so the demand was mainly for lamb French racks. It is an item in high demand in Europe and the United States, where it helps sell other lamb items as a parcel.

“With India having this focus and not paying any premiums, we decided to withdraw from the market.”

Courtney says pricing would exclude lamb from being an option for most Indians. But the country’s growth and relative closeness to NZ means SFF would always consider opportunities there. To that end they’re taking part in a delegation there in early September to assess any new potential.

Sanctions kills market

Karapeeva says Iran had looked like a very good market for NZ lamb a few years ago as Iranians remembered the product from the 1980s when there were surpluses to sell. In 1985 shipments hit a high of more than 130,000t but then tailed off through the 1990s. In 2017, when the Ministry for Primary Industries negotiations resulted in access opening up again, exporters were cautiously optimistic, which was backed up in 2018 when $2.2m worth of lamb was sent; 90% frozen and 10% chilled.

“There was real excitement.”

But trade sanctions now made it difficult to get product into the country, and meat companies and banks have found it hard to get paid for shipments that did reach there.

“There are better options elsewhere,” Alliance’s Kingston says.

“We’ve no plans of doing any business there in the short to medium term.”

And SFF has the same story, saying its lack of interest in the market is due to logistical challenges on top of pricing.