In the first of our new series "Meat the Supplier" we talk with Connor FitzGerald, the General Manager of the Asia-Pacific division of a business responsible for approximately 70 per cent of McDonald’s’ global beef and pork footprint.
Read on to hear about how Fulton Market Group supports McDonald’s in their meat procurement, and some of the key misconceptions about the supply chain.
What is your role at Fulton Market Group and where are you based?
I am the General Manager of Fulton Market Group, or FMG, and in very simple terms, our business supplies beef and in selected countries pork to McDonald's Globally.
I'm talking to you from Sydney. We have a team here in Sydney, a couple of people who work in Queensland, and then we have other offices in Chicago, Oklahoma City and a small presence in Buenos Aires in Argentina.
My work is across a region called ‘APMEA’ in the McDonald's world, which covers Asia Pacific, Middle East and North Africa.
What is the role of Fulton Market Group within the wider market and supply chain?
Our business in technical terms is a consolidated procurement business for McDonald's, and as the title suggests, we consolidate all the procurement for McDonald's’ requirements.
The consolidated procurement model has existed for McDonald’s in Australia for about 20 years, but in North America it has only existed since 2017. The Australian market is very used to us and our presence, but it takes it takes a bit of time to get embedded in a country, and our team in Chicago has done a very good job of that since 2017.
The value of our business to McDonald’s is that we bring a level of coordination – instead of five voices doing lots of different things and paying lots of different prices, we enable McDonald’s, which has a big volume requirement, to streamline it all through one channel.
Food safety and, assuring supply are, of course, our number one priorities. A customer must be able to walk into any McDonald’s restaurant, anywhere in the world, and be able to order any burger on the menu. In Australia and the US, we buy a lot of chilled products, and our patty processing partners we have a specific short time frame to convert the beef raw material into beef patties to maintain our food safety & quality standards.
With the volume that McDonald’s requires, there is a lot of active management of the supply chain, to make sure the product meets or exceeds McDonald’s stringent specifications. That is all based on decades of testing to ensure that food safety and quality standards are meet and maintained.
Our supply chain teams have a huge role in the management of that. Essentially, we have trucks with combo bins for the raw material buzzing all around the US. In the case of Australia, it is similar, making sure that processors don't run out of raw material.
How long have you spent in the industry, and have you spent time in any other parts of the supply chain?
I actually grew up on a sheep farm in the New England region, just near Rangers Valley.
After school, I went up to the Northern Territory and worked for AACo on the Barkly and then came home and did a Rural Science degree at UNE. In between, I used to go out to my friends’ properties at Narromine and Trangie and work with cotton, wheat and sheep. I always really enjoyed the practical, primary production side.
When I finished university, I went and worked in shipping at a plant in Dubbo. From there, I have worked mostly in sales and marketing, exporting and trading roles.
What do your day-to-day operations look like for you and your team?
We only have one customer and that is McDonald’s, so that is our focus.
Day-to-day, the first of two main interfaces is the supply side, with the meat processors. Think of all of the major meat primary processors in the country – we are buying from all of them And this is the same for New Zealand.
And then, on our sales or customer focussed side, there are the McDonald’s-approved meat processing suppliers that manufacture and produce their beef patties. Technically, they are our customers, so we are talking with them daily, looking at their capacity and then having conversations from there around what they need today, what they need next week and what they need next month from a chilled and frozen perspective.
That is on the domestic side of the business across Australia and New Zealand.
On the export side, it's a similar conversation, really, but with a longer lead time. We are having very similar conversations with Japan, China and Korea, finding out how they are running, what their stocks are like and what they need. So, it is about finding that out and then taking those requirements and sourcing the markets to purchase that product.
Separate to that, but increasingly for a customer like McDonald's, we do some longer term work around supply chain resiliency, sustainability and food safety and quality. We take the announcements and aspirations of a big global business like McDonald's and try and translate that into actionable, practical solutions and initiatives here in Australia and New Zealand.
A project which we have recently been working across is in the resilience of the supply chain – if something were to happen in Australia from an animal disease perspective and markets react accordingly, what would happen? We are involved in the background just making sure that, should this happen, we've got different levers to pull.
On the exporting side, what are the key countries you export to, and are there any in particular which are key growth markets?
Our company puts meat into Australia, New Zealand, Japan, China, Korea, Taiwan, the Philippines, Malaysia, the UAE and Jordan. We also export to a number of other markets indirectly, through Tyson Foods in Queensland who produce patties, and then export them to Thailand and Indonesia.
The biggest volume market for us is either Australia or the USA – they trade places on an annual basis but are both very big volume markets for us. In terms of Australian or New Zealand product, in Asia our biggest markets by some margin are Japan, China and Korea. We are also buying a fair bit of meat from Argentina, Brazil and Uruguay, and putting that into Malaysia and China.
What have been the biggest issues or risks within the supply chain from your perspective?
Animal disease risks are always present for us. African Swine Fever was kicking off in China just as we were taking over this business in Australia, and with China being the biggest pork producer and importer in the world, that was certainly a nasty one early on.
Weather also has a significant impact. I remember in April or May 2020, we started to see the beginning of the end of the drought in the eastern states. We saw the beef supply chain going from big turn off, dry conditions, cattle everywhere, and Australia’s herd contracting dramatically in 2017 through to 2019, to overall cattle supply tightening up sharply as moisture conditions started to improve throughout 2020. And then it didn’t change much through to 2022, which I think was a 40-year low in beef production for this country. We were not even processing 95,000 head a week for what seemed like 12 months.
Covid has also had an impact, of course. Though McDonald’s had a very good couple of years from a volume and performance perspective, it did create some problems in the supply chain side, particularly in on-plant labour. It is starting to improve now, but without migrant labour from southeast Asian countries, it has put a bit of a handbrake on production. If we didn’t have as much absenteeism at processing plants than what we’ve had in the last year, we’d be processing over 140,000 cattle per week, no problem. It has been frustrating knowing that there are cattle out there but the processing part of the supply chain doesn’t have the staffing capacity to process them in accordance with the supply.
To summarise, we pretty much started our business and then had three of the tightest years for cattle marketing and beef production that the industry has had for a very, very long time.
Based on seasonal conditions, do you notice a change in how lean or fatty the cattle are? How does that impact your business?
We have noticed generally this year that we are getting a greater predominance of medium chemical lean (CL), from 75 to 80, which, speaking generally, is a result of a greater cohort of better conditioned cattle that are rolling through. We send the processors anything from a 50 to a 95CL and the patty processors then grind and blend the meat to the desired CL. McDonald’s typically run between 75CL and 85CL.
We are certainly seeing a greater availability than previous years of about a 65CL and a 75CL.
In short, we do notice subtle fluctuations in availability of CLs based on the season.
Australian exporters can export up to around 450,000 tonnes to the United States at a zero tariff rate. Through these quotas, what percentage of this would be trim in comparison to whole cuts?
You’re bang on, and we have only gone close to hitting that quota once in the last 30 years, so it’s a good quota to have.
As far as the mix of forequarter and hindquarter trim and primals, it’s a good question. We are a registered importer in the United States, so we get a little bit more visibility. We are consistently in the top 10 red meat importers in the United States and we are all trim, so that is saying something. I would guess that it is probably approximately 70 to 75 per cent trim, or manufacturing meat of some description, and around 30 per cent cuts.
Increasingly over the last five to ten years, we have seen the emergence of all natural, grass-fed, hormone-free, antibiotic-free programs. And that’s important, I think, because there can be some price premiums out there for cattle that are eligible and certified for those types of programs.
Has an increase in South American processing impacted demand?
In terms of demand, Brazil in particular has pumped a heap of meat into the United States. Brazil has a quota of 60,000 metric tonnes which is usually gone by March or April of any given year. When they are then out of quota, Brazil is subject to a 26.5 per cent tariff to send product to the United States. What is important about that is that Brazilian product is cheap enough that they can send product in when it is out of quota, and it remains competitive. In a year like this, when China is a bit softer on the imports, Brazilian exporters can still look to the United States and realise that even with that tariff, Brazil can send product there and it is worth their while.
In the US we are seeing a greater proportion of South American product. But McDonald’s doesn’t use South American product in the US – McDonald’s only use US, Australian and New Zealand product. So, we don’t use the product at all, but our competitors do. The other big, quick service restaurant chains use the South American product and that is having a dampening effect on demand for Australian and New Zealand product in that market.
Finally, what are some interesting facts about the supply chain or industry which growers may not know?
Okay, I have a couple of random ones!
Firstly, the biggest market for Australian goat is the United States, by a long way. There is a very large Muslim population in the northeast corner of the country, through Boston, New York and Detroit. Australia processes approximately 30,000 to 35,000 tonnes a year and around 28,000 tonnes of that goes to the United States. Probably not a well-known fact, but that is where Australian goat meat goes!
Another one from more of a market perspective is that Australia is currently processing approximately 135,000 cattle a week at the moment. When the industry is close to full capacity we can do up to 180,000 and the long-term average is anywhere from 145,000 to 150,000. So, while you might hear that we are having a big week in processing at 135,000, there is actually a lot of upward room for improvement there.
This might also be interesting – the average manufacturing meat or trimming is about 25 to 30 per cent of an average carcass. To help visualise this, imagine a baker rolling out some dough on a table, and they get out their biscuit cutter and cut out all of their biscuits. Once the biscuits have been removed, what is left is the trim. About 30 per cent of the beef Australia produces will be trimming or manufacturing product, ending up in meatballs, sausages, ground beef or similar.
And for McDonald’s-specific left-field facts, is that there’s two main beef patty sizes, the Big Mac &/or Cheeseburger patty which is one-tenth of a pound (or approx. 45 gms) and the Quarter Pounder patty, which is one quarter of a pound (or approx. 114gms). Last year we purchased enough beef to make over 300 million quarter pounders!
