Earlier this week, Pakistan’s commerce minister was heard congratulating a local meat processing company that has recently been allowed to export meat to Malaysia. Although this won’t be the first Pakistani meat exporting entrant to the Malaysian market, the Far Eastern nation imports nearly $1 billion worth of meat and edible meat offals (HS code 02) every year. Thus, the license represents a serious win for local meat exports which have recorded double digit growth during 11MFY21.
In the past, Pakistan’s annual meat exports of $0.3 billion have been aimed for destinations in the Gulf and Middle East, which account for more than three-fourths of exports. Geographical proximity, coupled with its preference for zabeeha, means Pakistan is a natural exporter to markets in Gulf. Historically, Pakistani exporters have competed with neighbouring India in Gulf, which has the dominant market share, earned largely on competitive price terms. That makes India’s over 50 percent market share in Malaysian meat imports less daunting, considering local players’ past experience at handling competition from the more dominant player. But will reality meet expectations?
While Pakistan’s exporters may very well be able to compete internationally on pricing, they have frequently lagged in achieving product diversification and value-addition. Up to 75 percent of Pakistan’s meat exports – both beef and mutton - consist of fresh or chilled carcasses, most of which is shipped via air. Fresh/chilled exports have a very short expiry, ranging no more than two to three weeks in most markets. Exporting fresh or chilled carcasses means selling the whole zabeeha (butchered) animal after removal of blood and waste, with little room to earn premium on prime meat cuts.
Although the global (bovine) meat trade market is evenly divided between fresh/chilled and frozen meat – with 45 and 55 percent share respectively – frozen meat has a much longer shelf life and allows processors to earn a higher bang for their bucks. In particular, frozen boneless meat fetches the best unit price in developed markets, compared to frozen or fresh/chilled bone-in meat. Processing into boneless meat cuts also leaves behind bones, carcass, blood – and most importantly – offals and organs, which can be further processed into value-add products that have a high value niche market in some regions.
Significantly, Malaysian market is also dominated by import of frozen boneless meat, where Indian processors have reigned supreme. Because of longer geographical distances and higher air cargo charges, Indian exporters have a small share in the fresh or chilled category, which is instead dominated by Australian exporters. Do Pakistani exporters have what it takes to compete in the boneless meat segment?
For that to happen, exporters will first need to wear big boys pants and stop engaging in a price war with each other, a race to bottom where every player is a loser, either through lower volume or compromised margins. Instead, winning in the boneless meat category requires investing in dedicated machinery, but more importantly, also in development of brand and value proposition.
While exports will not graduate to artisanal prime cuts overnight, winning in the boneless segment will take more than just de-boning the meat. Privately, several big names in the industry complain of little to no training for butchers, who live up to the comical meaning of their job title in their treatment of the primal cut and the carcass. But few if any players have engaged in on-the-job training programs for their staff.
The opportunity exists. The gates are open. And Malaysia may only be the doorstep to the $15 billion Far Eastern frozen boneless meat market. But are exporters prepared?
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