AWB International has launched an unprecedented campaign to cement Australian wheat as the world’s best, and to stay ahead of the rising competition in the international grain market.
AWB International General Manager, Sarah Scales, said in the face of a new wave of competition from aggressively priced wheat exports, AWBI was working to shift the quality profile of the national crop to capture more of the higher value, differentiated markets.
Ms Scales said as part of the “Shaping the Future” strategy, AWB this week launched a nationwide promotional campaign.
In a first, the campaign involves the use of television advertisements to highlight the growing competitive threat, and urge Australian growers to play their part in responding. These advertisements will begin hitting the television screens in WA from tomorrow.
“Our approach must be to differentiate our wheat product even further to make inroads into high value markets and to support these products with improved and tailored technical support,” Ms Scales said. “This will require significant investment by AWBI of between $5 and $10 million.”
“The fact is that Australian wheat is under increasing pressure in the international market, both from traditional exporters who are improving their product, and from the new front of low priced non-traditional exporters who are securing a long term position in the market.
“Non-traditional exporters, particularly the Former Soviet Union and Black Sea region, have increased production steadily, and in recent years have accounted for as much as 40% of world trade volumes.
“As well, producers in Europe and North America are being further subsidised to grow white wheat to target core Australian markets.
“Australian wheat has established a reputation as a global benchmark for high quality, but our competitors are working hard to close the gap. We can not afford to sit still, and we must be prepared to respond by further differentiating our wheat and pushing harder into high quality and high value markets,” Ms Scales said.
According to research undertaken by AWB National Pool in conjunction with the Boston Consulting Group last year, increased competition could, in a do nothing scenario, lead to a wheat price decline of over US$15/t over five years.
“Through the Single Desk marketing system we have been successful in developing targeted wheat products to meet exacting customer requirements. But, we must now take this to the next level if we are to continue to retain and develop high value wheat markets,” Ms Scales said.
“To capture this value, we need to shift the quality profile of the Australian crop. For example, our hard wheat, such as APH and AH, needs to have stronger sponge and dough properties to suit the premium bread customers and compete in new markets against Dark Northern Spring wheat. Our soft wheat needs to be tailored to cater for the specific cake and pastry markets of Asia, and by improving the colour and texture of our existing noodle wheat we can protect the market we have developed for those products,” Ms Scales said.
AWB last year launched Premium Choice Varieties as part of the Golden Rewards active payment system.
“Premium Choice Varieties is all about improving the overall quality of the National Pool, and tailoring it to meet customer requirements.
“We have identified some high performing varieties and offered a premium to encourage more producers to grow them. By increasing the overall quality of the AWB National Pool, we can present a high value wheat product to high value markets,” Ms Scales said.
Ms Scales said AWB had identified key strategic markets for Australian wheat.
“We are targeting customers in Asia, where we can achieve good values for a differentiated product, and where we have a freight advantage over our competitors. We are aiming to export more than 60% of volumes by 2009, and we are on track, having exported 10 million tonnes to Asia for the first time in 2004,” Ms Scales said.
“We are currently looking at our office locations to ensure we have people within these markets to provide new levels of support and technical service for our customers,” Ms Scales said. “We expect to soon be establishing new offices in strategic markets such as China.”
“For this program to be successful, it is critical that farmers realise the challenges we face in the international market, and participate in the response,” Ms Scales said.
The five key planks in the AWB strategy are to:
- further develop differentiated Australian wheat products for high value customers,
- have differentiated sales and technical services for high value markets,
- create seamless and efficient supply chain,
- improve trade advocacy and market access, and most importantly,
- ensure growers understand and are engaged in this strategy.
Ms Scales said, as outlined by research conducted by the Boston Consulting Group released last year, this approach would require additional investments of between $5 and $10 million.
“Our goal is to target that investment to get the best results. We believe adopting this strategy through the Single Desk system will protect an estimated $350 million, and potentially create further additional value for the Pool,” Ms Scales said.
“Everything flows from understanding the needs of target customers and servicing them better – only by doing so can we maximize growers’ profitability,” Ms Scales said.