While a great deal of fuss has been made about the suggestion that the meat industry needs to restructure along the lines of the dairy industry and Fonterra, there has also been a plethora of commentators (present company included) pointing out that there is a more than a tankerload of difference between the form and structure of the two industries, writes industry commentator Mick Calder.
Setting up a meat industry equivalent of Fonterra would be far from easy, and if the Fonterra history is anything to go by it would take about 100 years, with World Wars, Government Purchase and a helluva lot of industry politics and in-fighting. That is not to say that the meat industry has not been through some elements of that history, but the difference is that the dairy industry has stuck with the co-operative and largely centralist model.
In the current circumstances, both industries obviously face the same problems with exchange rates and interest rates. But the recent announcement of the new dairy industry strategy provides some pointers for the stakeholders in the meat industry to ponder on. While some of the detail of the strategy could be useful, it is the way it was developed that is of much more significance.
The media release notes that the strategy was developed by the industry body, Dairy NZ, in partnership with the Dairy Companies Association of NZ, Federated Farmers of NZ dairy section and the Dairy Women’s Network. In other words, the impression is (rightly or wrongly) the various sectors of the industry collaborated to develop the strategy, with only a modicum of assistance from a consultancy firm as a project manager. So all of the dairy industry stakeholders had a hand in the development of the plan and as a consequence they all own it.
Compare and contrast this with the recent Red Meat Sector industry Strategy, which virtually relied on outside consultants to analyse the industry problems and come up with their suggestions for a strategic plan. As such the strategy is really a consultant’s report which the industry stakeholders acting separately or together, can accept (as a whole or in part) or forget as they choose. Their major contribution to forming a collaborative strategy was basically just paying for it. By the way,what has happened to that expensive strategy?
But that is only part of the story. The Meat Industry Excellence group, like others before it, became disenchanted with the state of the industry and agitated among farmer suppliers to deliver some change in structure. In addition, apart from the attendance of some company directors at the meetings, it was and is a farmer-led initiative. Farmers are now endeavouring to formulate a strategy for structural and operational change with only minor contributions from the processors. And where are the marketers?
At the same time, the four major meat companies have been meeting to develop some new ideas for the future development of the industry. But they have only been talking to themselves with little or no communication with other stakeholders as to what is being considered, and how it may or may not affect their operations. They can probably claim that competition law prevents them from too much covert collaboration, but where is the transparency and trust they all talk about?
All signs pointed to some form of co-operation in processing, which will cost many millions of dollars to achieve, with consequent implications for farmer and shareholder returns. Then there were suggestions of a reincarnation of the Tradeable Killing Rights proposals, but that would require some legislative intervention, which is usually eschewed by the red meat industry.
Now it appears the solution for the companies is to swing the onus for change back to the farmer/suppliers with the exhortation that they should each commit their product to one meat company for a definite period. There is no suggestion of any offer from the companies to encourage this altruistic move.
So the differences in approach between the two industries are quite stark. It is possible there were some aspects of the dairy industry strategy talks that were commercially sensitive and needed to be discussed in camera, but the overall impression is that they involved all parties. The meat industry has been mouthing the word collaboration for the last six months but all they do is go into their own little huddles and talk among themselves.
Former secretary for the New Zealand Meat Board and the NZ Lamb Company, MickCalder 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.