The Economic Impact of PSE

In section 3 we discussed the consumer reaction to the problem. The PSE meat is already denser due to water loss during the breakdown of the carcass into retail cuts. There will be further loss while it sits in the retail pack awaiting purchase, but it doesn’t end there. Once the meat begins to undergo cooking there is a further loss as the muscle contracts under heat.

This means for the consumer that their tried and true cooking regime of, say, 5 minutes per side which has stood them in good stead in the past, now produces a disastrous toughness. This is the inconsistency the consumers talk about.

But in economic terms the ongoing drip between slaughter and retail purchase represents money, as meat is sold by weight.

General Quality Cost Models

Quality costs form an insidious leakage from the profits of any business and they are generally poorly understood and rarely quantified. The reasons for this are:

·       in each quality cost category (see below) the loss is relatively small but cumulatively large.

·       when observed by staff they are deemed relatively unimportant.

·       rarely does a business devote accounting expertise to quantify them.

In spite of this, at the Eleventh Annual Conference on Productivity at Utah State University, quality experts maintained that most American companies spend 15-25% of annual sales on the costs of quality, when they should be spending about 2.5%.[1]

While many general management accounting textbooks provide various models of the type and nature of these costs, the Australian Standard AS2561-1982 Guide to the Determination and Use of Quality Costs provides perhaps the best model.

Identification of Quality Costs

These fall into four general accounting categories

Prevention costs: costs incurred in planning, implementing and maintaining a quality management system that is intended to ensure conformance to quality requirements.

Appraisal costs: costs incurred in measuring and auditing design, products, components and materials in order to establish the degree of conformance with quality requirements.

Internal failure costs : costs that arise where products, components and materials fail to conform to quality requirements prior to transfer of ownership to the customer.

External failure costs: costs that arise where products, components and materials fail to conform to quality requirements after to transfer of ownership to the customer.

The various data sources of the quality cost categories are further explained in Appendix 1

This paper intends to focus solely on the wastage caused by excessive drip-loss as a result of Pale Soft and Exudative (PSE) pork and the steps the retail sector can take to combat its presence. The quality costs categories are presented in full to show that poor quality pork can incur a raft of costs on the retailer, some of which are difficult to quantify (e.g. loss of sales through non-purchase due to visual appearance, loss of repeat sales through product dissatisfaction).

Developing the Model

To develop a coherent model there are some key variables that we need to  quantify:

·          what is the average PSE incidence in New Zealand pigs?

·          what muscles are affected?

·          what percentage of the carcass is implicated?

·          what is the process between slaughterhouse and retail cabinet?

An estimate of PSE

Unfortunately the New Zealand meat industry has not universally adopted on-line PSE monitoring so any estimate of the mean PSE incidence must be derived from surveys. The incidence of PSE in pork in Australia is estimated to be up to 28% (Warner and Eldridge 1988[2]). In New Zealand Morel (1994[3]) arrived at a similar figure of 0-29%.For the purposes of this paper we will assume the mean of the local PSE incidence lies between 10% and 20% and will present the cost model in both scenarios.

Top performing PQIP certified supply chains operate at about <7.0%

Muscles Implicated in PSE

The physical PSE condition arises from the rapid post-mortem fall in pH while the carcass is still hot, so the muscles involved are those that are a) prone to rapid pH fall and/or b) retain heat after slaughter due to insulation (i.e. deep muscles of the hind leg.

Percentage of the Carcass Affected

Extensive dissection trials were conducted by Frasers Bacon, Bay City Meats and New Zealand Pork in January 1997. From these trials it is possible to estimate the average weight of the muscles that will be impacted by PSE. The following data was obtained:

Table 5: Average yield in Kgs from dissection trials

Slaughterhouse to Retail Cabinet

There are a multitude of factors that impact on the total drip loss between the slaughterhouse and the final product offered for sale. Perhaps the most important is the degree of slicing that the product is subject to. While water is forced from the muscle cells into the surrounding connective tissue in PSE, there will be little drip as long as the carcass remains intact. Once breakdown and slicing occur then drip-loss occurs as a function of the water holding capacity and surface area of the meat.

Table 6: Timeline from slaughter to retail

The above process flow is obviously a boxed-pork operation and has been chosen on the assumption that the major retail chains are all moving in this direction over the medium term.

Drip Loss Estimates

The total drip loss experienced by an individual cut can be influenced by a large number of factors. In the cost model below there is an assumption that abuse is minimised. This product abuse can include the following which will increase the amount of drip-loss:

·      slow chilling

·      freezing and thawing

·      stacking of chilled carcasses rather than hanging (including carcasses dropped in transit)

·      removal of membranes from primals

·      incomplete vacuum packing (i.e. where bag does not provide uniform pressure over the total cut surface. In extreme cases this can increase drip six-fold over Modified Atmosphere Packaging (MAP) controls (Knight and Offer 1988[4])).

·      forced packing and over-filling of cartons

·      stacking of over-full cartons in storage and transport

·      inadequate cool storage (meat stored at 10^oC will show 50-100%

·      greater drip than that stored at 0^oC. (O’Keefe and Hood 1981[5])

Therefore the cost model will show a best possible scenario and assume that the above abuse is minimised, as it is in PQIP compliant operations

The following table shows the percentage drip loss at each major stage of the process for a 67.4kg carcass.

Table 7: Percentage drip loss comparisons – PSE/Normal (after Leach et al.[6])

This quite clearly shows the difference between a PSE and non-PSE carcass is the value of 1.02kg of fresh meat, prior to cooking. As PSE is generally isolated to leg and loin muscles, the value of this extra Kg is the price of loin or leg cuts.

The Quality Cost Model

The following cost model is based on the assumption that a major retailer is utilising 300 pigs per week. Retail prices are from one major retailer (March 7, 2000) at Leg steaks $13.99/kg, Butterfly (loin) steaks $14.99/kg and Stir fry $10.99/kg

The cost analysis has been conducted for both 10% and 20% PSE on the assumption that the population mean will fall between these two values.

Assuming that the mean PSE rate was at the lower level (10%), by eliminating both PSE related drip loss and the need for soak pads, the retailer would have savings of ($23,056.49 + 24,812.58 =) $47,869.07.

If 50% of this saving could be provided as an incentive to suppliers for the provision of PSE free pigs then the incentive would be ($23,934.53/15600 =) $1.54/pig while putting another $23,934.53 onto the bottom line of the business. Of course the extra advantage is the capacity to provide greater satisfaction to customers with respect to eating experience