If I had any say in the matter, which I don’t, I would tell the farmers calling for change in the meat industry to concentrate on consolidating the marketing activities rather than trying to force some sort of amalgamation of the whole supply chain.
Even getting a co-ordinated marketing system off the ground will be no mean feat; it has been tried several times in the past and obviously did not succeed. But it can be done.
Calls for more consolidation in the industry, to get greater efficiencies and overcome the capacity problem that leads to procurement wars have been a regular feature of the industry. As sheep numbers dropped from 70 odd million in the mid-1980s to the current levels, capacity problems have been a recurring issue.
While there has been consolidation in the industry over the years, it is a long-term and expensive game and unfortunately there tends to be more losers than winners; Weddels, Borthwicks, Co-operative Wholesale Society, Canterbury Frozen Meat, Waitaki, Dawn Meats, Hawke’s Bay Farmers, Richmond, Fortex are some that come to mind. Freesia Investments was set up to bring about some consolidation, but that also proved to be a mission impossible.
Any student of the history of the industry will recognise that a move to consolidate the production sector of the industry brings some reduction in competition in the short-term, but invariably results in farmers agitating to start up a competing company in the misguided view that they need to be able to ensure that the big companies are not ripping them off.
Unfortunately, they are just contributing to the overcapacity problem that they complain about; the industry history is littered with farmer-owned or inspired companies that start with a hiss and a roar. Once the initial glamour has worn off, they become just another player and, unless they have some significant point of difference, they sink into oblivion trailing clouds of glory. See the list above.
So why not keep the present structure for procurement and processing, and concentrate on the marketing?
Very few commentators seeking change in the industry ever looks seriously at the selling side of the business (it is mostly still ‘selling’, not marketing) where there is costly duplication of activities in all the major markets, with the companies all competing to sell basically the same products to buyers who are lying in wait for them.
While companies may claim differentiation of their products through company branding, and some minor variations in services, to give themselves the warm fuzzies, the product they are selling is still ‘New Zealand Lamb’.
It is time for the New Zealand industry to look seriously at their marketing systems; they have a well-established and functioning model in North America now trading as ‘The Lamb Company’, where there is collaboration between three of the major lamb companies, with ownership and returns being based on a co-operative model.
The idea would be to get the New Zealand exporters together in other major markets pushing their market advantages in a concerted manner via a co-operative marketing entity, rather than relying on the old fragmented approach. A co-operative marketing approach should be easily recognised in many of the EU countries, where large co-operative marketing organisations thrive, as well as in those countries that rely on centralised buying and distribution.
This suggestion is likely to bring a deluge of the time-honoured arguments from the established companies about the difficulties in co-ordinating supplies, but the Lamb Company manages to resolve such difficulties. Companies may also claim there would be problems with maintaining relations with established customers, but it seems the customers have no problems in switching suppliers when it suits them; the recent switch by M&S from Silver Fern Farms to Alliance is a case in point.
The prospect of a centralised marketing body, similar to the Fonterra model may be asking too much. That only came to fruition after years of centralised control by the NZ Dairy Board via marketing acts and regulations, which may be anathema to the authorities and some neo-liberal farmers these days.
There have been numerous attempts in the past to bring the industry together, including several Meat Industry commissions and taskforces, as well as the Secret Seven that tried in the 1990s, but the differences in cultures and personalities as well as the complexities of the process proved virtually insurmountable. A move to establish co-ordinated co-operatively owned marketing companies may be a daunting task but it can be done.
Mick Calder says he’s a ‘generalist’ having started in agricultural science then marketing economics and trade policy and finished in business management and administration, with elements of bookkeeping and legal drafting thrown in. His professional roles include former board secretary for the New Zealand Meat Board and later the NZ Lamb Company. He was co-author, with Janet Tyson, of Meat Acts, a history of the New Zealand meat industry from 1972 to 1997, which makes fascinating reading (Published 1999: ISBN: 0-9582052-2-1). He has written countless other reports, newsletters and articles for magazines and newspapers. He also maintains his own blog, Agriphile.