Corporate Plan for Meat Promotion Wales (HCC) 2018-2021 - Hybu Cig Cymru Meat Promotion Wales

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Corporate Plan for Meat Promotion Wales (HCC) 2018-2021 - Hybu Cig Cymru Meat Promotion Wales
Hybu Cig
           Hybu Cig Cymru
                    Cymru
           Meat Promotion
           Meat Promotion Wales
                          Wales

Corporate Plan for Meat Promotion Wales (HCC) 2018-2021
Corporate Plan for Meat Promotion Wales (HCC) 2018-2021 - Hybu Cig Cymru Meat Promotion Wales
Hybu Cig Cymru
             Meat Promotion Wales
Contents

                                                           Page

   Executive Summary                                        2
                         Hybu Cig Cymru
   About HCC                                                4

   Introduction                                             5

   Current status of the Welsh Red Meat Sector              7

   SWOT Analysis                                           12

   Delivery Mechanisms (2018-2021)                         16

   Finance                                                 28

   Monitoring and evaluation                               31

   Annex 1 - Graphical presentation of financial summary   32

                                                                  1
Corporate Plan for Meat Promotion Wales (HCC) 2018-2021 - Hybu Cig Cymru Meat Promotion Wales
Executive Summary
The Strategic Action Plan for the Welsh Red Meat Industry (2020 Vision) sets out the
strategic direction for HCC, to work towards “a profitable, efficient, sustainable and innovative
Welsh red meat industry which benefits the people of Wales, which is resilient to political and
environmental change, and is capable of responding competitively to ever changing market
trends”.

However, the impact of the UK’s decision to leave the EU (Brexit) and its impact on future
trade relationships with the EU on the Welsh red meat industry is uncertain. The negotiations
regarding the terms for Brexit have commenced and unless this process is extended, the UK
is scheduled to leave on 29 March 2019. Given the reliance of the Welsh red meat sector on
the EU for more than 90 per cent of its red meat export trade, the consequences could
however be profound. Therefore the HCC Board feel it is timely to revisit the priorities of the
Strategic Action Plan, to ensure they are focused on supporting the long term aspirations for
the sector and to help sustain a viable red meat industry in Wales post-Brexit.

The HCC ‘Vision to 2025’ sets out the focused strategic direction for HCC and identifies the
investment priorities which will contribute to the profitability, sustainability and global
competitiveness of the red meat and livestock industry. Nine priority areas form the
foundation of HCC’s vision.

 2025 Vision - Priorities
  Positioning red meat from Wales as a premium product
  EU trade opportunities developed for Welsh red meat
  Domestic (GB) consumption of red meat from Wales maximized
  New consumers for Welsh red meat sought in established markets
  A greater percentage of Welsh red meat exports outside the EU
  Development of a competitive Welsh red meat industry
  Reduction in the impact of Welsh red meat production and processing on the climate,
   the environment and waste
  Contingency planning in terms of future trade, production and processing post-Brexit
  Effective communication throughout the industry to ensure unity of purpose

In line with the Strategic Action Plan and HCC’s vision to 2025, this Corporate Plan (2018-
2021) identifies six delivery mechanisms for the next three years, sets out key performance
indicators and outlines expected outcomes.

                                                                                               2
Corporate Plan for Meat Promotion Wales (HCC) 2018-2021 - Hybu Cig Cymru Meat Promotion Wales
HCC Delivery Mechanisms (2018-2021)
 Develop export markets for Welsh red meat
 Develop home markets for Welsh red meat
 Develop red meat brands and products to create and sustain a strong and competitive
  brand position
 Collate and disseminate market intelligence and research at Wales, UK and global level
 Support relevant programmes of R&D activities
 Facilitate and encourage supply chain efficiency

                                                                                           3
About HCC
Purpose and Mission
HCC is the industry-led levy body organisation responsible for the development, promotion
and marketing of red meat from Wales.

HCC collaborates with all sectors of the red meat industry – from farmers to retailers – and
works to build the industry and develop profitable markets for PGI Welsh Lamb, PGI Welsh
Beef and pork from Wales.

In the UK and in many important markets worldwide, HCC works with processors to
strengthen business opportunities and undertakes regular promotional programmes. Across
the whole supply chain, HCC undertakes research and development, shares information and
supports training, to ensure the Welsh red meat industry is in a position to improve quality,
increase cost-effectiveness and add value to Welsh red meat products.

Funding
The principle source of income of HCC is derived from Welsh Red Meat Levy which is jointly
paid by producers and slaughterers/exporters, raised on all cattle, sheep and pigs
slaughtered in Wales (which are fit for human consumption) or exported live.

Board of Directors
HCC is wholly owned by Welsh Ministers and appointments to the HCC Board are made by
the Welsh Ministers in accordance with the provisions of the Government of Wales Act 2006.

The HCC Board comprises 11 non-executive directors (including the Chairperson). The
current HCC Board took office in April 2017 for a three-year period (membership can be
viewed at www.hccmpw.org.uk/about_hcc/hcc_board). The HCC Board is representative of
farmer and processor levy payers and others who possess skills relevant to the future
development of the organisation.

In addition to the Board, a range of Committees exist to carry out development and advisory
work on an ongoing basis.

                                                                                           4
Introduction
The Strategic Action Plan for the Welsh Red Meat Industry (2020 Vision) was prepared by
HCC in close consultation with the Welsh red meat supply-chain and the Welsh
Government. The Action Plan identifies the priorities, objectives, targets and actions for the
Welsh red meat industry that will help to address key challenges and bring about a positive
impact on the employment and the growth of the rural economy in Wales.

The Action Plan is intended to provide a pathway forwards whilst being flexible enough to
allow the Welsh red meat industry to respond to changing circumstances in a timely and
appropriate manner. It seeks to be ambitious, yet realistic. It is outcome driven and, as such,
specific financial targets for 2020 are included in order to provide a clear and focused
measure of success.

The vision for the Strategic Action Plan is “a profitable, efficient, sustainable and innovative
industry which benefits the people of Wales; a red meat industry which is resilient to political
and environmental change and capable of responding competitively to ever changing market
trends”. It identifies two strategic priorities:
     Increase demand for Welsh red meat products (thereby increasing sales and returns);
       and
     Improve production efficiency (thereby increasing quality supply) whilst maintaining the
       environment and landscape of Wales.

HCC Vision
In light of the uncertainly brought about the UK’s decision to leave the EU (Brexit), the HCC
Board felt it was appropriate to revisit the priorities of the Strategic Action Plan, to ensure
they were focused on supporting the long term aspirations for the sector and to help sustain a
viable red meat industry in Wales post-Brexit.

The negotiations regarding the terms for Brexit have commenced and unless this process is
extended, the UK is scheduled to leave on 29 March 2019.

The HCC Vision to 2025 considers the strategic risks in terms of trade, production and
processing of red meat from Wales, not least of which is the substantial contribution that
agricultural support currently makes towards profitability. It also considers possible longer-
term opportunities. However, uncertainty regarding trade arrangements for the UK and the
future status of the workforce in Wales (which includes highly skilled migrant workers) means
that it is still very difficult to predict and to direct activity for a Welsh red meat sector that is
currently reliant upon the EU for more than 90 per cent of its red meat export trade.

The impact of Brexit has not changed the aspirations of the Strategic Action Plan but it does
present significant challenges for the Welsh red meat sector in terms of how the vision is
achieved.

                                                                                                   5
HCC’s vision provides strategic direction for the red meat sector through to 2025. It sets out a
direction for how the HCC Board believe that Welsh Red Meat Levy monies should be
focused in order for HCC to undertake its statutory functions in a way that will bring maximum
benefit on behalf of the whole sector in a post-Brexit economy.

Given the scale of the Welsh red meat industry (and the Welsh sheep sector in particular)
and the continuing need for export markets to balance demand in the domestic (UK) market
to maximise producer returns, the following nine priority areas form the foundation of HCC’s
vision.

                              Positioning red meat from Wales as a premium product
                              EU trade opportunities developed for Welsh red meat
  2025 Vision - Priorities

                              Domestic (GB) consumption of red meat from Wales maximized
                              New consumers for Welsh red meat sought in established markets
                              A greater percentage of Welsh red meat exports outside the EU
                              Development of a competitive Welsh red meat industry
                              Reduction in the impact of Welsh red meat production and processing on the
                               climate, the environment and waste
                              Contingency planning in terms of future trade, production and processing post-
                               Brexit
                              Effective communication throughout the industry to ensure unity of purpose

In line with HCC’s vision to 2025, this Corporate Plan now sets out the key areas of work
that have been prioritised by HCC’s Board of Directors for the effective use of Welsh Red
Meat Levy monies during the three year period from 2018-2021.

The success of this Strategic industry Action Plan relies on close working between
governments, FSA Wales, Natural Resources Wales, HCC and all industry stakeholders.

                                                                                                                6
Current status of the Welsh red meat sector
Red Meat Consumption
The overall long term trend in lamb, beef and pork consumption continues to be one of
decline. Changing demographics of smaller households with busy lifestyles and the need for
quick and easy meal solutions continue to drive demand. Within this there has been a move
for a more consistent size of carcase that can be processed into cuts more cost-effectively.
Price remains a key driver and red meat faces increasing competition from cheaper sources
of protein such as chicken, fish and non-meat proteins. Demand for beef has remained
relatively static although the perceived inconsistency in its eating quality remains a challenge
and can affect consumer purchasing.

Alongside this, the wider social and political factors continue to exert considerable influence
on consumer purchasing. Public perception of the possible adverse affect of red meat within
their diet on health and the move towards flexitarian eating is increasing. These, together
with open debate on the environmental impact of livestock production, present particular
challenges with respect to red meat consumption. Whilst Brexit may stimulate consumer
demand for home-produced goods this must be considered in relation to these constraints as
well as to the relatively high costs of production and a highly seasonal supply (lamb).

This generates increasing pressure to develop new, innovative and healthy Welsh red meat
products that can provide versatile solutions and assist in achieving carcase balance.

There is also increasing need to educate consumers about the importance and health
benefits of red meat as part of a balanced diet and to counter the sometime negative public
perception of a subsidised industry that has an adverse effect on the climate.

Trade in Red Meat from Wales
With only five percent of the red meat produced in Wales consumed in the home (Wales)
market, Wales continues to be heavily dependent on domestic markets - particularly England
- and global export markets. More than a third of red meat produced in Wales is exported
outside the UK, predominately to the EU. In 2016, close to 26,200 tonnes of sheepmeat and
nearly 15,000 tonnes of beef were exported from Wales, which alongside exports of skins,
hides and offal were estimated to be worth £185 million.

These overseas markets are also crucial to help ease the continuing strain on carcase
balance by seeking the highest value markets for the different cuts. Markets where there is
demand for lower-value cuts and offals can deliver improved returns to the Welsh industry, as
these cuts have little or no value on the domestic market.

The ability to attract a premium for Welsh red meat is key to success and it will be important
to maintain PGI status or an equivalent protected food name status for Welsh Lamb and
Welsh Beef. Opportunities to build on the PGI brand to include other factors such as eating
quality and consistency must be explored.

                                                                                              7
In addition to existing EU and non-EU markets, HCC is currently working alongside
Governments to achieve market access for Welsh red meat in USA, China and Saudi Arabia.

The potential impact of Brexit on trade in red meat from Wales and sheepmeat in particular
could be profound. The possible scenario of a “hard Brexit” with no trade deal in place
between the UK and the EU would see the UK revert to trading with the EU on the same
basis as other World Trade Organisation members, with UK exports subject to MFN tariffs.
The Agri-Food and Biosciences Institute (AFBI)1 predict that this would lead to significant
disruptions to trade between the UK and EU-27 countries and producer prices in the sheep
sectors are projected to decrease by 30%. A radical unilateral trade liberalization
arrangement, where tariffs on imports from the EU and the rest of the world are reduced (or
even zero) would have an even bigger impact with scenario producer prices in the beef and
sheep sectors predicted to decrease by 45% and 29%, respectively. Free trade deals with
countries outside of the EU who have a potential high demand for red meat from Wales are
appealing but the timescales required to negotiate these are likely to be considerable.

The reliance of the Welsh red meat sector on export markets does, however, bring with it a
susceptibility to political and economic volatility and the value of the pound. Efforts must
therefore be made to identify and develop markets that can spread both the economic and
political risks.

1
 Impacts of Alternative Post-Brexit Trade Agreements on UK Agriculture: Sector Analyses using the FAPRI-UK
Model, John Davis, Siyi Feng & Myles Patton (Agri-Food and Biosciences Institute) and Julian Binfield
(University of Missouri), August 2017.
                                                                                                        8
Production and Processing
The Welsh red meat sector currently accounts for the largest share of Welsh Agricultural
Output (45%, worth a forecasted £648 million, in 20162). In 2015 the Welsh agricultural
industry directly supported a workforce of around 58,3003 people.

     Red Meat Processing
     There are currently 19 operational red meat abattoirs in Wales and the Welsh red meat
     slaughtering industry contributes approximately £460 million per annum to the Welsh
     economy.

     The review of the Welsh abattoir and processing sector undertaken in 2016 indicated that
     there was capacity for expansion. However, opportunities to optimise throughput in Welsh
     abattoirs continues to be limited by a number of factors that have a substantial impact on
     the future performance of the sector. These include factors such as declining livestock
     numbers, increasing regulatory compliance, cost for disposal of by-products, the relatively
     low value of hides, skins and offal, as well as the shortage of skilled slaughter and
     butchery workers. The potential risks presented by a “hard Brexit” are likely to have a
     further significant impact on these and not least of which are livestock supply and a
     reliance on migrant workers from within the EU.

     A core challenge remaining is how to secure product and supply chain innovation, market
     intelligence and effective marketing in an industry where primary production is spread
     between a large number of small businesses, many of which are already under financial
     pressure, and where the processing industry is dominated by a small number of
     companies, many of which have their headquarters outside of Wales. Continued co-
     operation and collaboration across the red meat sector will be essential to help meet this
     challenge.

     Red Meat Production

                 4.65 million                      168,000 beef cows
                                                                                      4,000
                breeding ewes                        (over 2 years,
                                                                                  breeding pigs
                                                        calved)

        No. sheep holdings:                    No. beef cattle holdings:          No.pig holdings:
               14,023                                7,435                         1,369

2
    Source: Welsh Government. Aggregate Agricultural Output and Income, 2016.
3
    Source: Welsh Government. Welsh Agricultural Statistics 2015. October 2016.
                                                                                                     9
Welsh red meat production is dominated by sheep. Breeding sheep numbers have
increased in recent years reaching 4.65 million ewes in June 2017 and representing some
30% of the UK flock. The beef breeding herd in Wales continues to decline since the end
of ‘coupled’ support payments, although numbers have stabilised in recent years. The pig
sector in Wales is small (representing approximately 0.4 percent of total value of Welsh
Agricultural output) and typified by a relatively large number of smaller holdings.

Welsh livestock production systems predominantly use forage based systems and around
83% of the active cattle and sheep holdings are within the designated Less Favoured
Areas (LFA) of Wales. Grazing therefore plays an important role in the conservation of the
hills and landscape of Wales and its biodiversity through the management of terrain that is
not practical to manage by any other means. Hence red meat production not only supports
the rural economy of Wales but helps to sustain Wales’ natural resources, preserve the
landscape and environment, and is inextricably linked with the food and tourism industries
that Wales’ economy and rural communites rely upon.

The size of the Welsh sheep sector and the fact that, unlike Scotland and England, almost
16 per cent of the throughput of lambs at auction markets in Wales during 2016 was still
considered as “light lambs” (finished lambs weighing less than 32kg) highlights an
additional challenge facing the Welsh sheep sector as the UK moves towards Brexit.

The increasing consumer demand for cuts means that there is now a requirement for
larger lamb carcases (greater than 14kg) for both home and export markets. HCC’s
challenge is to help the industry to make progress in terms of the number of lamb and beef
carcases reaching the required specifications (particularly with respect to the production of
light and super light lambs) and to secure buy-in among producers to the fundamental
rationale behind these requirements to make the supply chain more efficient.

As export destinations are pursued that are further afield and opportunities to extend the
UK season for Welsh lamb in particular are sought, efforts must be made across the
industry to improve the shelf-life of PGI Welsh Lamb. Commercial drivers are already
influencing progress in the processing sector and it will be important for producers and
auction markets to fully understand their role in terms of presenting clean livestock for
slaughter.

Enabling producers to get feedback from the eventual destination of their livestock remains
a challenge particularly within the sheep sector where a significant percentage of finished
lambs are sold via livestock markets. HCC will continue to support the development and
establishment of mechanisms that will allow feedback to producers who supply via
livestock markets.

The scale of the Welsh sheep sector also means that considerable efforts must be made
in preparing red meat producers for a farming future that does not rely on subsidy for
viability. Whatever the Brexit scenario, the most efficient farms will be best placed and so
the need to address and lower the cost of production on Welsh sheep and beef farms will
be imperative. It will be crucial to support the industry in making the necessary changes in
productivity and efficiency to help mitigate the impact of Brexit on their businesses.
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Improvements in technical efficiency can also help mitigate / control greenhouse gas
emissions and the development of climate change indicators for sheep and beef
production could provide the ability to measure and promote the green credentials of
Welsh red meat production. New technologies can offer practical improvements and
potential ways to quantify difficult to measure traits such as meat yield and eating quality.
A possible shift in the balance of production towards cattle may also need to be
considered.

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SWOT Analysis

Red meat businesses in Wales operate within a number of constraints so it is important they
maximize opportunities and strengths.

Red Meat Industry SWOT
There are a number of political, economic, social, technological and environmental
considerations for the Welsh red meat industry, many of which will have a substantial
impact on future resilience, performance and profitability of the sector.

   Strengths
  Large supply of lambs, cattle and pigs produced mainly off natural grass/ forage systems –
   appeals to consumers who have a strong perception of red meat from Wales and its
   environmental and animal welfare credentials
  Production mainly from a base of family farms, robust to most commercial conditions -
   traditional base of experience in good stock farming coupled with environmental
   management
  A variety of breeds and production systems to meet differing domestic and export demand
   requirements
  Well developed international sales experience (lamb in particular) has created a strong
   image and reputation of PGI Welsh Lamb and PGI Welsh Beef from Wales
  Ability to segment markets and to identify niche market opportunities
    Weaknesses
  Heavy reliance amongst primary producers on support payments
  The Welsh red meat sector has a relatively high cost of production which exacerbates the
    need for premiumisation of red meat from Wales
  Primary production is spread between a large number of small businesses – limits
    product and supply chain innovation, gathering market intelligence and effective
    marketing
  Limited exploitation of advancing animal and plant genetics
  Low level of reinvestment
  Seasonality of production and variable carcase quality restricts marketing opportunities
  Purchased feed and straw from outside Wales is relatively expensive due to transport
    costs – affects financial performance
  Limited communication/ coordination and collaboration between supply chain partners
  Wales is heavily dependent on supplying into the domestic markets, particularly England
    (accounting for 60% of Welsh red meat sales) which poses a risk should conditions/
    markets change and demand in this market decline/ cease
  The reliance of the Welsh red meat sector on export markets brings with it a susceptibility
   to political and economic volatility and the value of the pound

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Opportunities
 Negotiations regarding the re-apportionment of levy that is currently collected and used in
  England (and Scotland) from animals that are born and reared in Wales should provide a
  mechanism to return monies to Wales, thereby supporting the industry and encouraging re-
  investment
 Attract people to work within the Welsh red meat industry through training provision and
  supporting agricultural related studies
 Maintain and enhance the recognition and positive perception of the Welsh red meat
  brands amongst target consumers in existing and emerging UK markets - consumers are
  increasingly seeking the reassurance of a high quality product of known origin. PGI
  designations allow the Welsh red meat industry to demonstrate its traceability credentials
 New product development can be focused on a changing consumer base and for a
  different generation of consumer so that the industry is well placed to supply specific
  sections of society with premium Welsh red meat
 Demographics and demand drivers are altering the demand for red meat products and
  there is now an increasing demand for cuts and consistent sized carcases - Wales has
  considerable scope to increase the number of lamb and beef carcases that reach the
  target specifications
 Targeted marketing of red meat (lamb in particular) within countries that are geographically
  close presents many advantages but the Welsh red meat industry must continue to seek
  markets outside of the EU in order to maximise opportunities and spread risk. Overseas
  markets are crucial to help ease the continuing strain on carcase balance by seeking high
  value markets for the different cuts
 Development of new, innovative and healthy Welsh red meat products will provide versatile
  solutions and assist in achieving carcase balance
 Increased shelf-life of lamb through processors in Wales could help in opening up market
  opportunities in overseas markets
 Inform and educate consumers about the importance and health benefits of red meat as
  part of a balanced diet
 Opportunities to reduce cost of production through on-farm efficiency, uptake of relevant
  training and knowledge transfer
 Market intelligence will enable producers to understand market requirements
 Investment in relevant R&D will enable the red meat sector to take advantage of
  technological advancements in order to compete in a global marketplace Continued co-
  operation and collaboration across the red meat sector is required
 On-site improvements through R&D and market intelligence could bring about
  advancements in innovation and technology – automation of abattoir processes could offer
  improved efficiencies and long term cost savings
 The ability to generate “green credentials” for red meat from Wales is another key element
  that would help to enhance consumer perception of red meat

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Threats
 The UK’s decision to leave the EU, its single market and the CAP has created a huge
  amount of uncertainty
 Brexit could have a profound affect on trade in red meat from Wales (sheepmeat in
  particular) as trade agreements will need to be re-negotiated
 Brexit could result in a reduction in livestock numbers and/ or a loss of processing
  facilities in Wales
 Brexit is expected to impact on labour availability in Welsh red meat slaughtering/
  processing sector as the sector is heavily reliant on migrant workers from within the EU
 Ageing farmer population and few new entrants
 Climate change (adaptation and mitigation - pressures to reduce GHG emissions from
  livestock, and challenge to meat consumption)
 Price remains a key driver and red meat faces increasing competition from cheaper
  sources of protein such as chicken, fish and non-meat proteins
 Public perception of the possible adverse affect of red meat within their diet on health and
  the move towards flexitarian eating is increasing
 Declining livestock numbers, rising production costs, animal disease outbreaks,
  increasing regulatory compliance, cost for disposal of by-products, the decreasing value
  of hides, skins and offal, as well as the shortage of skilled slaughter and butchery
  workers limits opportunities to optimise throughput in Welsh abattoirs
 Maintaining red meat production whilst responding to environmental change is a
  challenge, particularly with open debate on the environmental impact of livestock
  production

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SWOT for Corporate HCC
There are also a number of strategic strengths, weaknesses, opportunities and threats
facing HCC.

    Strengths
   High quality motivated staff with breadth of experience and high work ethic
   Good standing with farmer stakeholders and good relationship with trade associations
   Good communication and political network
   Delivery focused remit
    Weaknesses
  Declining levy income – relatively small budget seeking to compete with larger
   competitors
  Spreading finite resources broadly – wide statutory remit
  Restrictions of operating under state aid rules
  Managing stakeholder expectations - market and industry activities have a long gestation
   period before reaching fruition
    Opportunities
   Greater efficiencies through closer working with other sector bodies
   DEFRA, Welsh Government and Rural Development Plan funding
   Red meat levy redistribution
   Use of new communications technologies to enhance reach and to facilitate more targeted
    and interactive engagement with a wide range of audiences
    Threats
  Government policies, particularly as a result of Brexit, could lead to reduced livestock
   numbers, affecting Welsh Red Meat Levy income
  Access to European structural funds, particularly in light of Brexit, ceases or reduced
  Future legislation arising following Brexit may not recognise Protected Food Name
   schemes
  Animal health and traceability issues may undermine consumer confidence and lead to fall
   in demand for Welsh red meat
  Closure of existing export markets
  Public perception of red meat is adversely affected by public health scare
  Increasing imports reduces trade demand for Welsh red meat
  Exchange rate fluctuation
  Increasing importance of UK Government in terms of negotiating trade and lack of direct
   HCC influence on UK policy
  Increasing expectation of levy payers in terms of levels of delivery against remit and within
   a limited (and decreasing) budget

                                                                                                   15
Delivery Mechanisms 2018-2021
This Corporate Plan is directed by HCC’s Vision to 2025, which identifies nine priority areas
for action. This Plan is focused on cost-effective delivery and recognises the importance of
measuring the impact of investments. Collaboration, cooperation and communication across
the industry is integral to achieving success.

The focus for delivery is through two operational departments (Market Development and
Industry Development) and these are supported by the Communications, Corporate Strategy
and Policy, and Corporate Services departments.
    Market Development - aims to increase returns to the Welsh red meat industry by
       maximising the sales value of Welsh red meat.
    Industry Development - works within the red meat industry in Wales to improve quality
       and increase cost effectiveness in a sustainable way.
    Communications - ensures that information regarding developments relating to Welsh
       red meat as well as the full range of HCC’s activities are made known to stakeholders
       and consumers.
    Corporate Strategy and Policy - works to develop and implement strategies and inform
       decisions regarding the Welsh red meat industry.
    Corporate Services - supports the operational delivery of the business and controls the
       resources required.

With Brexit negotiations ongoing, the details of the likely route to EU exit will continue to
unfold during 2018. The HCC Board recognises that the ability for the UK Government to
secure a “soft Brexit” with an appropriate transition period is paramount to safeguard the
Welsh sheep sector in particular, but that HCC must continue to prepare the industry for the
eventuality of a “hard” Brexit and impact of the potentially extreme trading scenario that
would then unfold.

This means that resources cannot focus on just one or two key areas and must continue to
be deployed across a wide range of export and domestic marketing activities whilst starting to
prepare the Welsh production and processing sectors for the scenarios that could eventually
unfold.

HCC input to Welsh Government Roundtable Groups, policy forums and other future industry
shaping meetings will be essential to keep the survival of the Welsh red meat industry at the
heart of all discussions regarding future trade, regulation and land use as well as discussions
surrounding the future of the rural economy and communities that rely heavily on red meat
production and processing. Communications activity will also need to ensure that decision-
makers and levy-payers are aware of the likely impact of potential scenarios and of HCC’s
contingency planning.

The pursuit of these activities in parallel places significant pressure on the budget available
from Welsh Red Meat Levy and so HCC will work to ensure effective delivery of the Welsh
Government funded Export Enhancement Programme and will continue to work closely with

                                                                                            16
AHDB and QMS to maximise the benefits from the combined activity that has been agreed
 using the ring-fenced monies.

 The planned HCC delivery for 2018-2021 is summarised below.

Strategic     A profitable, efficient, sustainable and innovative Welsh red meat industry which
Action Plan   benefits the people of Wales, which is resilient to political and environmental change,
Vision        and is capable of responding competitively to ever changing market trends

Strategic     Increase demand for Welsh red           Improve production efficiency (thereby
Action Plan   meat products (thereby increasing       increasing quality supply) whilst maintaining
Objectives    sales and returns)                      the environment and landscape of Wales

Board 2025    1. Positioning red meat from Wales as a premium product
Priorities    2. EU trade opportunities developed for Welsh red meat
              3. Domestic (GB) consumption of red meat from Wales maximized
              4. New consumers for Welsh red meat sought in established markets
              5. A greater percentage of Welsh red meat exports outside the EU
              6. Development of a competitive Welsh red meat industry
              7. Reduction in the impact of Welsh red meat production and processing on the
                 climate, the environment and waste
              8. Contingency planning in terms of future trade, production and processing post-
                 Brexit
              9. Effective communication throughout the industry to ensure unity of purpose

HCC            Develop export markets for Welsh red meat
Delivery       Develop home markets for Welsh red meat
               Develop red meat brands and products to create and sustain a strong and
                competitive brand position
               Collate and disseminate market intelligence and research at Wales, UK and global
                level
               Support relevant programmes of R&D activities
               Facilitate and encourage supply chain efficiency

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The following tables highlight the key activities and indicators of success (KPIs) for HCC for
the next three years (2018-2021) and provide an indicative budget for each delivery area.
Where new KPI’s have been set, baselines will be established in year 1 (2018-2019),
allowing progress against these baselines to be measured in subsequent years.

Develop export markets for Welsh red meat
Priorities:
  A greater percentage of Welsh red meat exports outside the EU
  EU trade opportunities developed for Welsh red meat
Outcomes:
  Growth in the Welsh red meat share of market value
  Increased trade and consumer demand for Welsh red meat products in the export market
                                                                        18/19        19/20   20/21
Activity                                                               Target Date

Established markets
(France, Germany, Italy, Denmark, Spain & Switzerland)

    Provide agent support to Welsh processors in established export    Q1-Q4    Q1-Q4       Q1-Q4
     markets to identify new opportunities and increase volume and
     value of sales to existing customers
    Provide key account support in established export market to        Q1-Q4    Q1-Q4       Q1-Q4
     build on existing relationships with customers, increasing
     volumes and value of Welsh Red Meat sold through existing
     channels
    Attend relevant trade shows in established markets to identify     Q1-Q4    Q1-Q4       Q1-Q4
     new opportunities for Welsh Red Meat processors in established
     markets and build on relationships with existing customers
    Devise, develop and deliver consumer, retail, food service and     Q1-Q4    Q1-Q4       Q1-Q4
     wholesaler marketing campaigns in established markets to
     increase brand awareness and improve perception of Welsh
     Lamb and Welsh Beef

Developing markets
(UAE, Canada, Qatar & Sweden)

    Identify, prioritise and attend appropriate shows in developing    Q1-Q4    Q1-Q4       Q1-Q4
     markets to engage with potential new retail and wholesale
     customers and build on relationships with existing clients.
    Work to improve relationships that assist in the development of    Q1-Q4    Q1-Q4       Q1-Q4
     trade in developing markets such as government agencies and
     officials, e.g. achieving relevant halal certification
    Devise, develop and deliver consumer, retail, food service and     Q1-Q4    Q1-Q4       Q1-Q4
     wholesaler marketing campaigns in developing markets to
     establish brand awareness and improve perception of Welsh
     Lamb and Welsh Beef

                                                                                                18
Develop export markets for Welsh red meat (continued)
                                                                       18/19        19/20    20/21
Activity                                                              Target Date

Potential new markets
(USA, China, KSA & Japan)

  Continue participation in UKECP meetings and UK and Welsh           Q1-Q4        Q1-Q4    Q1-Q4
   Government forums to advise and keep abreast of
   developments
  Provide direction to Export Certification Ltd with respect to       Q1-Q4        Q1-Q4    Q1-Q4
   priority/target markets to ensure efficiency.
  Collaborate with GB levy bodies to maximise benefits from           Q1-Q4        Q1-Q4    Q1-Q4
   non-competitive work to deliver the highest level of value for
   money for Welsh levy payers.
  Develop and exploit relationships that will allow access to high    Q1-Q4        Q1-Q4    Q1-Q4
   value markets therefore achieving the highest possible returns
   to the supply chain in Wales.
  Participate in trade missions, fact finding                         Q1-Q4        Q1-Q4    Q1-Q4
   missions and attend exhibitions/ conferences in potential new
   markets to maximize the visibility of Welsh red meat in markets

Delivery of the Enhanced Export Programme                              Q1-Q4        Q1-Q4    Q1-Q4

KPIs                                                                  Target

  Sales of PGI Welsh Lamb and Welsh Beef maintained or               Establish      >4%     > 4%
   increased in established markets evidenced by volume and/or        baseline
   value data on sales to each account/country provided by main
   exporting processors
  Consumer awareness of PGI Welsh Lamb and Welsh Beef                Establish     ≥ 4%     ≥ 4%
   maintained or increased in established markets measured            baseline
   through conducting consumer research using online methods
   in target markets and use of social media analytic software
  Increased sales in developing markets evidenced by volume          Establish     > 5%     > 5%
   and/or value data on sales to each account/country provided        baseline
   by main exporting processors
  Increase in number of potential new markets where trade is          1 New        1 New    1 New
   established                                                         market       market   market

Budget
   - Established markets                                              £745,000 £750,000 £750,000
   - Developing markets                                               £ 94,000 £100,000 £100,000
   - Potential new markets                                            £ 63,000 £ 70,000 £ 70,000
   - Enhanced Export Programme                                        £441,000 £500,000 £500,000

                                                                                                 19
Develop home markets for Welsh red meat
Priorities:
  Domestic (GB) consumption of red meat from Wales maximized
Outcomes:
  Growth in the Welsh red meat share of market value
  Increased trade and consumer demand for Welsh red meat products in the domestic market
                                                                    18/19        19/20   20/21
Activity                                                           Target Date

Retail
  Provide key account support in the retail sector including       Q1-Q4        Q1-Q4   Q1-Q4
    multiple, online and independent businesses
  Support red meat sales through independent retailers through     Q1-Q4        Q1-Q4   Q1-Q4
    the delivery of a strategic programme of activity

Consumer
  Manage the undertaking of marketing, PR and promotional          Q1-Q4        Q1-Q4   Q1-Q4
   campaigns for consumers (including effective engagement at
   the Royal Welsh Agricultural Show)
  Identify and develop brand partnerships to bring added value     Q1-Q4        Q1-Q4   Q1-Q4
   to consumer facing campaigns
  Educate/inform consumers of benefits of Welsh red meat in a      Q1-Q4        Q1-Q4   Q1-Q4
   healthy diet

Foodservice
  Increase volume and value of Welsh red meat procured by          Q1-Q4        Q1-Q4   Q1-Q4
   public bodies
  Deliver processor account support programmes enabling the        Q1-Q4        Q1-Q4   Q1-Q4
   Welsh red meat industry to benefit directly from the work and
   to assist in providing strategic steer to activity
  Develop support to Welsh red meat customers in the HoReCa        Q1-Q4        Q1-Q4   Q1-Q4
   sector

                                                                                             20
Develop home markets for Welsh red meat (continued)
KPIs                                                            Target

  Consumer awareness of PGI Welsh Lamb, Welsh Beef and         Establish   > 2%     > 3.5%
   Pork from Wales maintained or increased in the UK market,    baseline
   measured through conducting consumer research using online
   methods in target markets and use of social media analytic
   software
  Increase in Welsh red meat procured by public bodies in      Establish   > 3%     > 3%
   Wales. Evidenced by volume and/or value data on sales to     baseline
   each account provided by main processors / wholesalers
  Increase in number of multiple retailers engaged in             +2        +1       +1
   promotional activity
  Butchers club membership maintained or increased              ≥ 230      ≥ 233   ≥ 235

Budget
   - Retail                                                     £281,000 £280,000 £280,000
   - Consumer                                                   £771,000 £760,000 £760,000
   - Foodservice                                                £122,000 £120,000 £120,000

                                                                                            21
Develop red meat brands and products to create and sustain a strong and competitive
position
Priorities:
  Positioning red meat from Wales as a premium product
Outcomes:
  Growth in the Welsh red meat share of market value
  Increased awareness and improved consumer perception for Welsh red meat
                                                                       18/19        19/20   20/21
Activity                                                              Target Date

  Sustain PGI scheme membership for Welsh Lamb and Welsh              Q1-Q4        Q1-Q4   Q1-Q4
   Beef, and increase where possible
  Develop and deliver innovative ways to ensure integrity of PGI      Q1-Q4        Q1-Q2
   scheme
  Enhance the status of red meat brands as flagship products for      Q2-Q3        Q2-Q3   Q2-Q3
   the Welsh food industry and secure the buy-in of consumers,
   decision-makers and levy payers (including effective
   engagement at the Winter Fair)
  Inform and influence political actors (including discussions on     Q1-Q4        Q1-Q4   Q1-Q4
   PFN status post-Brexit)
  Work with industry partners to evaluate the objective               Q1-Q4        Q1-Q4   Q1-Q4
   measurement of the eating quality of beef using the Meat
   Standards Australia grading system
  Explore opportunities for New Product Development (in               Q1-Q4        Q1-Q4   Q1-Q4
   relation to lamb) and seek collaborative funding opportunities
   for research and development
  Communicate key messages on the factors which influence             Q3-Q4        Q1-Q4   Q1-Q4
   the shelf-life of Welsh Lamb and continue efforts to secure
   funding to develop an industry blueprint for all sections of the
   supply chain
  Input provided to proposals on smoked skin on sheep meat            Q3-Q4        Q3-Q4   Q3-Q4

KPIs                                                                  Target

  PGI scheme membership sustained                                       60          60      60
  Increased shelf-life of lamb through processors in Wales           Establish     ≥ 3%    ≥ 5%
                                                                      baseline
  Increased stakeholder awareness of HCC activity (measured          Establish     > 2%    > 2%
   through online survey)                                             baseline

Budget                                                                £289,000 £290,000 £290,000

                                                                                                  22
Collate and disseminate market intelligence and research at Wales, UK and global
level
Priorities:
 Development of a competitive Welsh red meat industry
 New consumers for Welsh red meat sought in established markets
 Contingency planning in terms of future trade, production and processing post-Brexit
 Effective communication throughout the industry to ensure unity of purpose.
Outcomes:
 Enhanced industry knowledge and understanding of markets needs and trends
 Enhanced productivity and efficiency
 Growth in the Welsh red meat share of market value
 Increased consumption of Welsh red meat
                                                                        18/19        19/20   20/21
Activity                                                               Target Date

  Collate and analyse Welsh, UK, EU and global market                  Q1-Q4        Q1-Q4   Q1-Q4
     intelligence data
  Undertake trade and marketing research that will identify and         Q3           Q3      Q3
     illustrate buying patterns (trade and consumer) and potential
     new market opportunities
    Research findings incorporated into targeted plans,                 Q4           Q4      Q4
     campaigns and stakeholder communications
    Communicate intelligence data, policies, consumer and retail       Q1-Q4        Q1-Q4   Q1-Q4
     trends and the work of HCC to levy payers, stakeholders and
     policy makers
    Represent the red meat sector in EU Exit Roundtable                Q2-Q4        Q1-Q3
     discussions and relevant policy forums providing valued and
     insightful market and trade intelligence
    Undertake modelling work to assess the impact of EU Exit on       Q2 & Q4
     the Welsh red meat industry which will inform the
     development of interventions to help the industry prepare for
     various exit scenarios
    Deliver a strategic communications programme,                      Q1-Q4        Q1-Q4   Q1-Q4
     incorporating PR, electronic media and public affairs activity,
     which grows the knowledge, recognition and support for the
     sector among stakeholders
    Inform decision-makers so that they are aware of the impact        Q1-Q4        Q1-Q4   Q1-Q4
     of current and future public policies on the red meat industry
    Inform the public about the positive contribution of the red       Q1-Q4        Q1-Q4   Q1-Q4
     meat industry to Wales’s society and economy

                                                                                                     23
Collate and disseminate market intelligence and research at Wales, UK and global
level (continued)
KPIs                                                           Target

  Increased understanding of micro and macro economic          ≥ 20%    ≥ 25%    ≥ 25%
   factors on the red meat industry
  Regular updates on market and consumer trends issued to      ≥ 10%    ≥ 12%    ≥ 15%
   increased number of individuals within supply chain
  Relevant reports and papers provided to policy makers as     ≥ 70%    ≥ 75%    ≥ 80%
   required (satisfaction rating (SR) collated)                   SR       SR       SR
  Increase engagement of email communications to
   stakeholders through:
       - Average open rates                                     > 25%    > 27%    > 30%
         -   Average clickthrough rates                         > 3%     > 3.5%    > 4%
         -   Email bulletins                                      25      25        25
  Increase engagement on corporate Facebook and Twitter         5%       5%       5%
   accounts
  Increase engagement via corporate website (sessions)          10%       5%       5%
  Increasing media coverage of proactive press releases and     10%      10%      10%
   articles reinforcing key messages (press coverage)
Budget                                                         £231,000 £230,000 £230,000

                                                                                          24
Support relevant programmes of R&D activities

Priorities:
  Development of a competitive Welsh red meat industry
Outcomes:
  Improved business management skills and industry resilience
  Enhanced productivity and efficiency
                                                                    18/19        19/20   20/21
Activity                                                           Target Date

  Regularly communicate with research bodies to keep abreast       Q1-Q4        Q1-Q4   Q1-Q4
   of developments that could benefit the red meat sector
  Evaluate R&D priorities to ensure their relevance to current       Q2          Q2      Q2
   and possible future production and processing challenges
  Develop a new R&D strategy for the red meat sector in Wales       Q4
  Maintain a research and development portfolio relevant to the    Q1-Q4        Q1-Q4   Q1-Q4
   needs of Wales, and work collaboratively where possible to
   maximise levy expenditure
  Disseminate and communicate R&D activity to levy payers          Q1-Q4        Q1-Q4   Q1-Q4

KPIs                                                               Target

  Positive Return on Investment on R&D portfolio                    ≥ 1:4       ≥ 1:4   ≥ 1:5
  Increased producer awareness of relevance of R&D portfolio      Establish     ≥ 30%   ≥ 40%
   to their businesses                                             baseline

Budget                                                             £131,000 £130,000 £130,000

                                                                                               25
Facilitate and encourage supply chain efficiency
Priorities:
  Development of a competitive Welsh red meat industry
  Reduction in the impact of Welsh red meat production and processing on the climate, the
    environment and waste
Outcomes:
  Improved business management skills and industry resilience
  Improved animal health, welfare and disease prevention
  Improved supply, transparency and consistency of product and enhanced supply chain linkages
  Increased uptake of techniques which support climate change targets and minimize greenhouse
    gas and methane emission
  Enhanced productivity and efficiency
                                                                        18/19        19/20   20/21
Activity                                                               Target Date

  Provide information to help producers to improve technical           Q1-Q4        Q1-Q4   Q1-Q4
     efficiency through genetic improvement, improved flock and
     herd health and welfare and better utilisation of grass/ forage
     and to mitigate against climate change
    Cultivate relationship with Farming Connect to influence and       Q1-Q4        Q1-Q4   Q1-Q4
     provide a strategic steer in delivery of the annual programme
    Deliver Selection for Slaughter training (lamb and beef) and       Q2-Q4        Q2-Q4   Q2-Q4
     monitor impact to improve producer understanding of market
     requirements
    Support and encourage Welsh beef and sheep pedigree                Q1-Q4        Q1-Q4   Q1-Q4
     breeders to performance record and CT scan
    Promote market requirements and HCC activity to future             Q3-Q4        Q3-Q4   Q3-Q4
     farmers through engagement with Farming Connect’s Agri-
     Academy, NSA Next Generation etc.
    Attend relevant health and safety in agriculture meetings and      Q1-Q4        Q1-Q4   Q1-Q4
     ensure that relevant messages are incorporated into relevant
     communications
    Develop and deliver technical information to improve               Q2-Q4        Q1-Q4   Q1-Q4
     processor knowledge and opportunities for cost-reduction
     through increased carcase utilisation and waste reduction
    Work closely with key stakeholders, Courtauld 2025,                Q1-Q4        Q1-Q4   Q1-Q4
     WRAPCymru and Welsh Government
    Work with Welsh Government and industry to develop                  Q1
     environmental standards to substantiate the Welsh Lamb and
     Welsh Beef brands

                                                                                                 26
Facilitate and encourage supply chain efficiency (continued)
KPIs                                                              Target

  Increase level of understanding of market requirements          ≥ 25%      ≥ 30%   ≥ 30%
   following attendance at events
  Increased number of pedigree breeders in Wales performance      ≥ 5%       ≥ 10%   ≥ 15%
   recording
  Reduction in waste produced by Welsh red meat processors       Establish   ≥ 5%    ≥ 8%
                                                                  baseline
  Increase level of understanding within primary production on    ≥ 20%      ≥ 25%   ≥ 30%
   GHG lowering mechanisms/activities could be adopted
   following attendance at events

Budget                                                            £216,000 £220,000 £220,000

                                                                                          27
Finance
Income

Welsh Red Meat Levy Funding
The principle source of HCC’s income is derived from Welsh Red Meat Levy which is jointly
paid by producers and slaughterers/exporters, raised on all cattle, sheep and pigs
slaughtered in Wales (which are fit for human consumption) or exported live.

Since April 2012 the Welsh Ministers have been responsible for setting and raising Welsh
Red Meat Levy. Through a Delegation Agreement, HCC collect the levy from sheep, beef
and pigs at the point of slaughter in Wales and undertake the statutory functions in relation to
the Welsh red meat industry.

Statutory levy has existed in the red meat sector for a number of years to fund activities to
assist with the development of this sector, notably work that would not be done under normal
market conditions. This results from the fact that producers in these sectors, and in many
cases processors too, are too small to be able to resource such areas of work themselves.

The Accounting Officer is personally responsible for ensuring Welsh Red Meat Levy is spent
appropriately.

External Funding and Resources
Enhanced Export Programme (Welsh Government)
This three year programme will commence in January 2018 and will enable HCC to:
   Extend the work to maintain market share within the EU before departure from the EU
      and establish a strong platform for future trading through support packages for a
      minimum of 8 key accounts across the major EU export countries.
   Undertake further market development within third country markets that are in their
      infancy to increase awareness of the Welsh Lamb and Welsh Beef brands. Hong Kong,
      Canada and the Middle East as well as Switzerland and Norway are the main existing
      markets outside of the EU that offer good potential growth and a potential buffer
      against the uncertainties of the EU market. This programme will deliver activities that
      will exploit our existing knowledge and contacts in these markets.
   Other relevant markets include Qatar, Jordan and Iran, where red meat products from
      the UK have access but there is no or very limited trade. These markets are likely to
      deliver small volumes initially but with the potential to grow and to demand
      carcasses and cuts outside of the preferred specification for the UK market such as
      light lambs.
   Intensify the work to obtain access to new markets and establish the Welsh Lamb
      and Welsh Beef brands in Saudi Arabia, USA and the People’s Republic of China.

                                                                                             28
Levy Reapportionment
HCC will work alongside the Red Meat Levy Boards across GB (AHDB and QMS) and with
the Welsh Government to further the negotiations regarding the re-apportionment of levy that
is currently collected and used in England (and Scotland) from animals that are born and
reared in Wales.
    HCC will support the Welsh Government in effecting the necessary interim
     arrangements to ensure the direction of ring-fenced funding for GB-wide activities
     prioritises the needs of the red meat sector in Wales. HCC will undertake work to
     accelerate collaborative activity in areas such as export access, international shows,
     research and development, health and nutrition.
    HCC will continue to seek a permanent solution regarding the re-apportionment of levy,
     to the benefit of Wales.

Other
HCC will also work collaboratively with relevant organisations in order to seek funding and
establish projects.

Expenditure

The structure of the Income and Expenditure account reflects the nature of the activity
undertaken – Annex 1 graphically shows the split for the three years outlined in this Plan.

Expenditure budgets are based upon the income available and upon the following
assumptions:
    Costs are based upon the activity plans for the individual departments, with due regard
     to the source of funding.
    Personnel costs are budgeted to increase by 1.5 percent based upon staff levels at 31
     March 2018.
    No depreciation has been provided in respect of the building.
    No provision for bad debts or related legal costs has been provided.

                                                                                         29
Summary Income and Expenditure

                                                Budget         Budget    Budget
                                              12 months      12 months 12 months
                                               to Mar 19      to Mar 20 to Mar 21
Income:
                                                £000           £000         £000

Levy
Cattle Gross                                         682           690        690
Sheep Gross                                        2,792         2,800      2,800
Pigs Gross                                            40            40         40
AHDB levy repatriation                               200           200        200

                         Total Gross Levy          3,714         3,730      3,730

RDP                                                      -           -         -
WG - Export                                            441         500       500
EU - Market Promotion                                    -           -         -
Other Income                                            28          30        30

                             Total Income          4,183         4,260      4,260

Expenditure:

Export:
 - Established markets                                 745         750       750
 - Developing markets                                   94         100       100
 - Potential new markets                                63          70        70
 - Export Enhanced Export Programme                    441         500       500
Home:
 - Retail                                              281         280       280
 - Consumer                                            771         770       770
 - Foodservice                                         122         120       120
Development of brands                                  289         290       290
Market intelligence                                    231         230       230
Research & Development                                 131         130       130
Supply chain efficiency                                216         220       220
Corporate costs                                        799         800       800

                         Total Expenditure         4,183         4,260      4,260

                          Surplus/(Deficit)             0             0        0

                                                                                30
Monitoring and Evaluation

As part of the fulfilment of its objectives, HCC has an established monitoring framework
which:
  Allows HCC to measure progress in meeting its objectives;
  Provides valuable management information to the management team and Board of HCC;
  Allows HCC to communicate its performance to external stakeholders on an ongoing
    basis; and
  Provides a basis for evaluation at an appropriate time.

The monitoring framework extracts the actions and measurements from within the
Operational plan and monitors the performance against these targets throughout the year.

                                                                                      31
Annex 1 – Graphical presentation of financial summary

                                                        32
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