In this instalment of our series ‘Meat the Supplier’, we sat down with Darren Thomas, Managing Director of Thomas Foods International (TFI), to discuss the processing landscape in Australia and internationally.
What is your role at TFI and where are you based?
I’m the Managing Director of TFI though I still call myself a livestock buyer; I was at the markets just last week. I spend a lot of time on airplanes these days, but Adelaide, South Australia is still, and always will be, the location of our organisation’s head office.
What is your background?
I was born into the livestock industry; some of my earliest memories as a kid are of sitting at Gepps Cross watching cattle being unloaded. My dad was a livestock buyer, working for Bob Rowe at the time. My foray into the industry was through following my dad around, back then we were really livestock traders; buying cattle from point A and selling them at point B and hoping for a profit somewhere in between.
I never really set out to become involved in the business. I played a lot of sport during school and got involved in the industry during the school holidays. I started clerking for dad at the markets at Gepps Cross on a Tuesday, and it grew from there.
In my early 20s, they needed a buyer in the south-east of South Australia, so I went down there, travelling back and forth to Adelaide for football training each week.
It wasn’t until 1996 that we started processing in our own right by leasing a meatworks complex, processing around 1000 sheep and about 300 cattle a day. In 1999 we had the opportunity to purchase the processing site at Murray Bridge, and that is where our business really changed. We went from being traders and small wholesale exporters to fully-fledged meat processors.
Tell us a bit about the TFI business in the United States.
We have had two major inflection points in our business to date. Firstly, purchasing the Murray Bridge site, meaning we could become processors in our own right. The other was in 2009 when we bought into a partnership with our biggest US customer FoodComm, the largest importer of chilled beef and lamb into the US.
The reason for that purchase was to build on a strategy of making the supply chain as efficient as possible. We were proactively seeking to consolidate all the different layers of the supply chain with the end goal of becoming more valuable to the customer and being able to pay the supplier, in this case a farmer, more.
From there, we built up our business in the US. In 2013 during a really busy time around Easter, we were being let down a bit by our cold storage suppliers and distributors. Greg Bourke, now Chairman of TFI USA, and I decided to take a leap and build our own facility, and so we did. We travelled to Philadelphia, found a parcel of land and that was the beginning of a very significant investment in our business in the US.
We are now beginning to outgrow that facility, and we’re looking to building a big cooking facility in Chicago, and a second case ready plant in the central south.
The Chicago facility will produce pre-cooked meals, and the like. You can sell as many shanks and racks as you like, but we want to look at producing some of those secondary items. The US is a very multicultural and time-poor country, so we can appeal to a range of different markets this way, also using as much of each animal that we can.
The US business is big, and I’ve always said it will outgrow our Australian operation in terms of turnover due to the size and scale of the US. That business has a turnover of probably US$1.7 billion this year, and it doesn’t only buy Australian meat. We buy a lot of meat from Australia, but also from countries in South America, like Uruguay, Paraguay and Argentina. Argentina is a serious challenger to Australia in terms of the quality of its meat. The US business also buys Dutch veal and New Zealand lamb.
We want to continue investing worldwide, with offices currently in Japan, Korea, Singapore, Brazil and the UAE to name a few. We’re opening receival centres in the UAE and in Saudi Arabia and we’re looking at opening our first facility in northern China, in Harbin.
We have a large processing facility in the Netherlands, which also serves as a storage and distribution centre for Europe. We also have smaller facilities in the United Kingdom and Canada.
These investments are being made to enhance supply chain efficiency and to extract maximum value from the commodity. We have always leveraged the natural competitive advantage of Australian meat in our business; today, the strong global reputation of Australian meat is incredible.
What do you see as the biggest opportunities in the US for Australian producers?
There is huge opportunity for Australian grass-fed beef. The reputation it now has is amazing, and that is through a lot of hard work from producers. I was speaking to someone very senior in a major US supermarket who said they had tried Australian grass-fed beef 10 to 12 years ago and it was never any good, but the change they have noticed since then has been huge. It has a lot to do with the investment in genetics and the hard work that the Australian primary production sector has done. To now be hearing that some in the US prefer Australian grass-fed to their traditional corn-fed beef, is fantastic and testament to the dedication and commitment of producers.
Organic options are growing in the US with people are wanting to be healthier, and grass-fed and organic beef comes in to play there. We have been running an organic grain-fed program for about a decade and it’s still going strong.
Despite some misconceptions, the demand for meat-based-protein is going to continue, and plant based isn’t going to take over tomorrow, so producers should feel very well placed.
What is the US appetite like for Wagyu, or those more premium cuts?
Still very strong. We work with a number of Wagyu businesses and brands to help distribute their product.
Wagyu is an interesting one; going back 20 years ago I didn’t know if it was just going to be a fad, but it’s definitely here to stay. As a processor, you must have a Wagyu brand in your kit.
Can you expand on your earlier comments regarding the South American meat sector?
As I said earlier, Argentinian meat is emerging as a challenger to Australian meat and one part of that is the improving quality and shelf life. Australia is number one in the world for food safety, no doubt, and we are now teaching other countries how it is done so they are getting better. That, combined with their cheaper cost of both production and doing business (e.g. construction and utilities), they have a huge advantage over Australia. They also have some very skilled workers, which is the number one challenge for Australian processing.
In Australia, we have to really concentrate on either being really, really productive, or on producing a higher end product which will get the right money.
The South American meat sector have their own challenges though. Their herds are under pressure, and like Australia, they are not immune to drought cycles. A real threat to South American beef is the world continuing down the path of sustainability. Sustainability is of course, a big word. It encompasses a lot and is not just about greenhouse gases. Deforestation for example is a big challenge in South America. At TFI we use a program called ‘Safe Trace’ and that ensures that our meat is not being sourced from any of the ‘red zones’.
What does the current production cycle look like at your Murray Bridge facility?
The Murray Bridge facility is up and running; it has been for about 18 months now. When the fire happened back in 2018, which was devastating, we had to make the best of it. It gave us an opportunity to do something that hadn’t been done in Australia for a long time: build a new processing plant, and that’s what we did.
It is beef only at the moment and the facility is something we are very proud of. In terms of employee safety, animal welfare, amenities, packaging and automation, it is incredible, and we have made some productivity gains there.
We are currently processing 700 head and will be moving to 800 head per day shortly. The ultimate goal within the next few years is 1200 head per day. Some of that growth will come through our investment in our Tintinara feedlot, where we have finished our first and second development phases. We are currently at 35,000 head, and the third phase will take that up to 50,000. It’s a great story in itself; we employ 60 or 70 people in Tintinara, which is a very small town.
Week in week out, we’re probably processing around 4000 cattle per week, and approximately 165,000 small stock per week.
When do you expect to start bringing small stock production into Murray Bridge?
We have a plan for a 12,000 head per day lamb plant at Murray Bridge. As the demand for lamb grows, we will need to build that. We have a 10-year master plan which we have committed to. I think we’ll complete it well before then, but we are of course still at the liberty of the cycles of flocks and herds.
We also still have capacity to grow small stock in the existing plants; Stawell for example will be going to a double shift.
What are some of the biggest changes you have seen in the processing industry throughout your career?
The science behind processing has changed; I’ve seen changes in the way we look at meat, grade it, and describe it more scientifically to guarantee eating quality. Even the science behind how we slaughter and chill.
That also flows back to what producers have done over time, and their investment in genetics, which has improved the wider industry.
There have been significant advancements in automation in small stock. The ‘LEAP’ systems that Scott Automation has put in place at JBS, ALC and in our own facilities have been a huge step forward. Some of the imaging systems are amazing. But until you can get an MRI machine that can work at a rate of 14 per minute, you’ll never automate slaughtering completely.
There are lots of things which have changed for the better. We have been able to improve processes, making it safer over time, and make improvements from an animal welfare perspective. That’s how the industry has been able to survive in such a high-cost environment.
We have plenty of investment going on in the industry, and I hope that gives producers confidence. We will always have ups and downs in our industry, but hopefully they can see we are committed, and we see a bright, long future in this industry.
