ANZCO starts energy management programme

One of New Zealand’s largest exporters is set to save more than $2 million a year and enhance its global reputation as a sustainable producer through a company-wide energy management programme.

The Energy Efficiency Conservation Authority’s EECA Business announced yesterday it would support the initiative over two years to help meat processor and exporter ANZCO generate long-term energy savings in its New Zealand plants.

With annual sales of $1.25 billion, ANZCO Foods Ltd processes and markets New Zealand beef and lamb products around the world. The firm employs over 3,000 staff world-wide and has 11 meat processing plants in New Zealand.

This programme will target a reduction in its processing plant energy use by 25 gigawatt hours (GWh), returning ongoing annual savings of $2.45 million after two years.

EECA Business general manager Ian Niven says that making better use of its energy will provide far-reaching benefits for the company and congratulated the company on its vision.

“Globally New Zealand is recognised for sustainably produced, premium quality meat products. And energy efficiency is one of the best ways to strengthen environmental credentials.

“By taking a lead in energy efficiency, ANZCO is making significant energy cost savings and signaling to its customers that it is committed to sustainable production,” he says.

Mark Clarkson, ANZCO Foods.

ANZCO managing director, Mark Clarkson says the programme will deliver on many levels for the company.

“Sustainability is key to the ANZCO brand and we are always looking for new ways to build on our reputation for environmentally responsible production, so reducing energy costs is a priority.”

The programme involves the establishment of a group-wide energy management plan, led by a team responsible for putting in place up to $5 million of identified energy efficiency projects.

With the assistance of one of EECA Business’ industrial programme partners, ANZCO will set up a system to help keep the programme on-track, measure efficiency outcomes, and develop case studies for a number of the projects.

Ian Niven says management commitment is key to the programme achieving its objectives.

“From the Board of Directors through to site operations, ANZCO leadership has indicated it wants to foster a culture of efficient energy use throughout the company.

“Such commitment is important to the success of making enduring improvements to energy management.”

EECA Business funding of up to $450,000 will be made available in stages upon achievement of various programme milestones.

Meat industry lacks leadership according to Cooke

The National Meat Workers Union’s General Secretary Grahame Cooke stated last Monday the large loss published by Alliance Group would be the first of several for the 2012 year. His point is fairly accurate, confirmed by Silver Fern Farms’ loss announced on Tuesday, writes industry commentator Allan Barber.

Of the other companies ANZCO and Blue Sky Meats will file their results with the Companies Office at the end of March. AFFCO is now a wholly owned subsidiary of Talley’s and doesn’t disclose its results, although the Meat Workers Union says (optimistically) these will be horrendous because of the lock out earlier this year. AFFCO’s results may not be as bad as all that because of the lack of a peak kill.

Cooke’s next point was the losses would inevitably lead to more industry rationalisation; this in turn would cause job losses for the meat workers who have already been affected by several plant closures in recent years. Job and earnings security suffered from fewer stock numbers and shorter season with workers being paid piece rates for shorter shifts; also higher average weights mean better productivity which is true for lambs, but not cattle.

His final point was about the lack of industry leadership in spite of the fact there are a number of good individual companies, all competing vigorously with each other. Cooke said the meat industry has not changed in the last fifty years with poor marketing and plant closures quickly followed by the addition of more capacity. He described the industry graphically as behaving like a cow with its head chopped off.

A look at the Union’s website provides more information on this topic: plant capacity has increased over the past decade with new plants, rebuilds and upgrades at nine plants across the country as well as capacity increases at several more. The Union believes the Government must initiate a ‘meat summit’ to address this.

So the questions are whether Cooke is correct or the industry is behaving in a perfectly rational manner.

My first reaction is the Government will never initiate a summit, almost certainly just another talkfest, because it realises the industry has a functioning commercial model. It competes in a global market and government should never interfere with privately owned businesses, provided they comply with the law. The meat industry has its own industry body, the MIA, which deals with all sorts of industry issues, but not those which impinge on competition between its members.

In addition, land use changes dictated by relative sector profitability will continue to occur regardless. The government would not be wise to get involved in picking winners or hobbling one sector’s ability to adjust its processing facilities.

My next reaction is meat processors and exporters are not the whole industry. There is a value chain which starts behind the farm gate and finishes in restaurants or consumers’ homes. The Red Meat Sector Strategy, FarmIQ and other company based initiatives attempt to define what can be done to join links in the value chain so they contribute to higher, more consistent returns. But it’s up to the farmers to produce to these specifications.

Meat exporters have done a great job over recent years to convert yesterday’s freezing industry into a sophisticated red meat member of the food industry, while also expanding into high value medical and other non-food product areas. More can always be done, but the industry has moved light years from the age of subsidies.

However, this process of modernisation has of necessity been achieved at a cost to overall jobs and terms of employment. The older plants were inefficient and built to service a different industry structure from a previous age. The period following deregulation and more particularly the removal of subsidies saw many farmers in serious financial straits, so their only option was to change farming practice or land use or sell. An unavoidable, even desirable, outcome was a big decline in sheep and prime beef numbers, offset to some extent by the growth in the dairy industry and the US manufacturing beef market.

Owen Poole made the point to me the losses are a sheepmeat problem and Alliance has responded by making the appropriate plant decisions, such as closure of Mataura sheepmeat processing, doubling Mataura’s beef capacity, increased venison processing at Smithfield and rendering at Lorneville. Keith Cooper also confirmed his satisfaction with SFF’s footprint in relation to livestock volumes, having already taken some tough capacity decisions.

This emphasises the regular requirement for new plant configurations to meet the demands of the market place and consequently the workforce must adapt as well. My experience tells me the meat industry does a pretty good job of responding to changes in market conditions, while generally trying to keep its workforce employed. But there is no future in keeping inefficient plants running to protect workers’ jobs, because these will disappear sooner rather than later.

Equally there are no prizes for leaving customer orders unsupplied when competitors are still prepared to process livestock. I certainly wouldn’t fancy the chances of the industry leader who sets an example by refusing to pay the money and has to tell Tesco or Marks and Spencer his company can’t supply because the stock costs too much this week.

Leadership is not as simple as it appears.

The item has appeared in NZ Farmers Weekly and at Allan Barber’s blog Barber’s Meaty Issues.

Chuffed to be recognised by peers

Lamb processor Craig Hickson was “chuffed” when he learned he was to be awarded the 2012 Allflex Federated Farmers Agribusiness Person of the Year in July. Adding a new Welsh meat plant to his business portfolio this year too, makes it one to remember in his business journey.

“It’s very pleasing to be recognised by your peers,” admits the managing director of Progressive Meats.

The astute Hawke’s Bay businessman’s speciality has lain in seeking solutions for plant processes that meet modern demands and also for challenging convention. Over most of the last 40 years (up to 2007) he has been in operation, the straight speaking Hickson has deliberately steered away from direct involvement in exporting leaving others to concentrate on that while he has focused on the niche of contract processing product for exporters.

Recognised as one of the meat industry’s leaders, he holds a seat on the Meat Industry Association (MIA) council and represents industry on the boards of Beef+Lamb NZ Ltd and the New Zealand Meat Board and an assorted array of other directorships.

Born in Canada to Kiwi parents, the young Craig Hickson was moved to Waipukurau when he was three months and later, at age seven, to Havelock North. His schooling was completed at Hastings Boys High, with vacations spent working at the Hawke’s Bay Farmers Meat Company Whakatu works, before he progressed on a HBMC scholarship to Massey University. There, he graduated with a B Tech in food technology, specialising in the engineering side – which has stood him in good stead through several new plants and plant renovations since. Later, he added a BA in economics and marketing to his list of accomplishments.

However, at that stage, pure food technology was not for the young red-headed Hawke’s Bay lad. In 1975, he found himself a job at the Meat Producers Board as product development officer, before leaving in 1980 to develop his own business – a small lamb packing plant in Hastings, Progressive Meats, which opened with his wife in October 1981.

In order to satisfy customer demand for contract services over the years, the Hicksons were involved with a few others in the ownership, design, planning, contruction and operation of Lamb Packers Feilding Ltd and Progressive Gisborne Ltd – and also with Lean Meats Oamaru through a minority shareholding in Lean Meats Ltd.

Having sold their 50 percent share in Feilding and Gisborne to Bernard Matthews NZ Ltd (BM) in 2005, Hickson was part of a syndicate that bought 100 percent back again in 2007 – the same slaughter and processing plant in Gisborne, and slaughter plant in Feilding plus a further processing plant in Waipukurau – when BM decided to withdraw from New Zealand to concentrate on its UK operations.

New meat plant in Wales

Matching supply to demand is also the reason for the purchase in April this year of a small Welsh meat processing plant Cig Calon Cymru (pronounced kig kalon – like talon – kumru, roughly translated as ‘Meat from the heart of Wales’), at Crosshands, near Lllanelli in South Wales. The plant is principally a beef processor, with a small lamb line.

Hickson explained that they had been looking for a suitable processing opportunity in the area to supply lamb year round to British consumers – the British and New Zealand lamb production is largely complementary for chilled. This enables New Zealand lamb to be supplied during the December to May period, when Welsh lamb is in short-supply and then Welsh lamb during the June to November period, when New Zealand lamb is in shorter supply benefiting both sets of producers. It will go into the same packaging with the country of origin clearly labelled.

The name of the company will remain as is and the plant will continue to process beef, but the branding for CCC product is yet to be determined. The management team will include New Zealander Jim Goodall who has the role of general manager. According to Hickson, plant staff are pleased that the company will have a new lease of life, while the local farmers are “reserving their judgement”.

Federated Farmers here have welcomed the initiative as it sees the move is an example of the vertical integration called for in several recent reports and shows there is life in New Zealand’s traditional markets. However, it is not novel, maintains Hickson pointing to Silver Fern Farms’ previous ownership of Brooks of Norwich, which enabled it to process frozen cuts to retailers’ exacting specification in-market, and other New Zealand companies, such as Alliance, Affco and Anzco, which have had in-market representation for many years and, in some instances, association with local processors.

He’s pleased there’s a ‘family’ connection too. The Hicksons own a 1,500ha farm in Hawke’s Bay and the farm manager’s wife, Denise, is Welsh, hailing from St Clairs which is near where the new plant is situated.

Slow product development

Hickson has observed very slow progress of new meat product development in terms of ready-to-eat products over the past four decades since his graduation.

“The major development area has been in the form of natural cuts and portion-size,” he says.

One fundamental reason he gives for the slow development of lamb ready meals is that lamb is a relatively high priced meat as a competing ingredient. Another is the fact that the nature of lamb fat means that it solidifies at a higher temperature than beef or pork making it tricky to work with. It is best served hot or cold, not warm.

One famous product victim of the rising price of lamb was the Bernard Matthews lamb roast, a frozen product that did very well in Britain. The concept was based on the company’s technology and marketing machinery for its famous turkey roast and was so successful it led to a plant being built here in Waipukurau to manufacture the lamb version.

The product did very well until the price of lamb increased beyond what this market segment would support, he explained, and  volumes diminished to extinction. By then, BM had developed lines in chilled and frozen portion-controlled and weight-ranged lamb products for its range.

The new McDonald’s lamb burger, which has been trumpeted about recently, is one of only two examples of a commercial lamb ‘fast food’ item. The other being a doner kebab made from lamb flaps.

Contribution to processes

Hickson believes his most valuable contribution to industry has been to plant processes. Progressive Meats was at the forefront of changes to shiftwork, which though it had already been in place in the ‘follow on departments’ in plants, it was not utilised in slaughter and boning rooms. He gained union agreement in 1986, following a five week strike, just over a year before implementation in 1988.

“Shiftwork enabled small plants to be competitive, through the improved utilisation of capital,” he says.

It was its work on relationships with farmers that enabled Progressive to be the first company in 1987 to offer forward commitment arrangements for lamb supply. “At the time, other industry participants thought forward commitments were not viable and would fail,” Hickson said. But they didn’t.

Progressive was also one of the first companies to move away from the Meat Board’s grading system, which had been designed for carcase specifications, and adapt it for its own customers’ specifications for cuts.

“We talked to our farmers and encouraged them through payments to produce lambs to specification.”

After legislation changed to ban smoking in the workplace, he embarked on a lengthy court fight to establish whether a purpose-built, negatively-pressured smoking room next to the cafeteria at Progressive’s Hastings plant was outside the ‘workplace’. The challenge was lost, but had a silver lining.

“The legal wording was ambiguous and I thought, had the room been deemed not  a workplace workers would not need to change clothes to go outside for a smoke, saving time, and their smoke wouldn’t disrupt other non-smoking employees.”

In the end, the court decided the room was ‘a workplace’ and workers did need to smoke outside the building. As Hickson himself is not a smoker, in fact he says he is “vitriocally opposed”, his support surprised his employees.

“Industrial relations have never been so good as just after that court decision,” he says, adding that the union financially contributed towards the defence of the case.

Looking to the future

Looking to the future, he commented that the Red Meat Sector Strategy (RMSS) is essentially a collation and synthesis of the views of industry participants.

“It didn’t deliver anything new but it is in a coherent form and advocates the development of future business along the lines of what, in many cases, is already going on,” he says.

However, ‘competition to buy’, tends to restrict the rate of progress to that of other competing companies in the field. While there is a high degree of consensus when interviewing participants one-on-one, it is a different matter when actions are observed in the cold commercial, competitive reality, he believes.

He sees the major challenge for the industry is for pastoral sheep, beef and deer farming to be a competitive land use option (at the margin) compared  to dairying, forestry, viticulture and horticulture, among other uses.

“In 40 years, I’ve seen a dramatic change in the Hawke’s Bay Heretaunga plains, which was once prime finishing land for livestock and is now covered in apples, crops grapes, and other viticulture.”

Lifting prices is an obvious target, but is constrained by the fact that lamb is already a relatively high priced meat, he believes.

“Reduction in wastage getting the product to consumers is another target as is endeavouring to negotiate a larger share of what the consumer pays with supermarkets and food service people generally taking between 30 to 50 percent of what the consumer pays.”

“Sheep are a dual product animal and we neglect wool at our peril,” he says. ”We need to be actively seeking new applications to lift demand and hence returns, particularly for the mid-micron and strong wool,that are traditionally used in carpet making. Wool hasn’t kept pace with lambing percentage increases, or inflation and if we could arrest the decline, and reverse the trend, sheep farming will be more profitable and grow.”

During his spare time, hobbies include managing his 60 hectare farm around he and his wife’s home in Haumoana, where he keeps deer near to the house, “nice to look at and easy to keep.” He has a love of classic cars and still owns the first one he bought when he was 19, a 1954 MG TF. He plays tennis and cricket and enjoys sailing on Lake Taupo.

When asked what was his most proud moment over his career to date, Hickson paused to reflect and said he had difficulty picking one moment as they blend into each other.

“I’ve never felt as though I’ve climbed a mountain, I’ve always been on a journey.”

+++

Craig Hickson

  • 1970 to 1973 – B Tech (Food), Massey University.
  • 1973 – Management trainee at Hawke’s Bay Farmers Meat Company, Whakatu.
  • 1975 – Joined Meat Producers Board staff as product development officer. Completed BA in Economics and Marketing Victoria University.
  • 1981 – Hicksons start small meat packing house Progressive Meats.
  • 1982 – Designs , builds and commissions small venison plant alongside Progressive Meats for ‘start up’ local farmer company, East Coast Venison.
  • 1987 – Plan and design venison plant in Feilding for East Coast Venison.
  • 1987 – Design, build and commision lamb slaughter at Progressive Hastings.
  • 1990 – Takes a minority interest in Lean Meats Ltd.
  • 1993 – Takes a minority interest in Te Kuiti Meats Ltd.
  • 1994 – Buys venison plant in Hastings and, with partner John Signal, the venison plant in Feilding from Venison New Zealand (formerly East Coast Venison).
  • 1995 – Builds Lamb Packers Feilding Ltd.
  • 1998 – Builds Progressive Gisborne Ltd.
  • 1999 – Builds replacement slaughter plant at Hastings (original only 13 years old).
  • 2003 – A principal in setting up Progressive Leathers Ltd at Whakatu.
  • 2005 – Sells Feilding and Gisborne Lamb interests to Bernard Matthews.
  • 2006 – Takes a majority interest in Te Kuiti Meats Ltd.
  • 2007 – Syndicate, including Hickson, purchases Bernard Matthews NZ Ltd’s lamb-processing and exporting operations in New Zealand and renames it Ovation New Zealand Ltd (plants at Gisborne, Waipukurau and Feilding).
  • 2012 – Allflex Federated Farmers Agribusiness Person of the Year.
  • 2012 – Hicksons purchase Welsh meat processor Cig Calon Cymru.

Current directorships: Progressive Meats Ltd, Ovation New Zealand Ltd, Lean Meats Ltd,Te Kuiti Meats Ltd, Progressive Leathers Ltd, MIA Council, Beef + Lamb NZ Ltd, Meat Board Ltd, Ovita Ltd. The Hicksons also farm sheep, beef and venison on 1,500 hectares in the Maraetotara/Elsthorpe district in East Coast Hawke’s Bay.

An abridged version of this article appeared in Food New Zealand magazine (October/November 2012).

 

Alliance to transfer Mataura sheepmeat processing to Lorneville

Alliance Group announced this afternoon its intention to close its sheep and lamb processing operations at its Mataura plant and transfer them to its main Southland lamb plant at Lorneville, reports Allan Barber.

Mataura’s beef facility which has recently had a $15 million upgrade will continue to process beef with its remaining staff count of more than 400.

This decision is still up for final consultation with the workforce and union but, as always, this is a formality in as much as the decision has already been made. However, the media release indicates that other options could emerge during the consultation process. If the proposal remains unchanged, approximately 260 workers will be offered the chance to transfer to Lorneville with a further 65 engineering, administration and management staff also affected.

In a media release, Alliance’s chief executive Grant Cuff refers to the company’s status as one of Southland’s largest employers, emphasising its duty as a cooperative to its shareholders to operate the plant configuration most appropriate to the available stock numbers. Significant efforts had been made to retain complementary sheep, lamb and beef processing at Mataura, but declining stock numbers have made this unsustainable.

Cuff refers to the strength of Alliance’s balance sheet, which will enable it to withstand the challenge of a difficult period for the industry as a whole. He also says: “We are confident in the long-term outlook and these changes are essential to allow the company and its 5,000 farmer shareholders to benefit from the demand for New Zealand meat products in the global market.”

Today’s announcement confirms the rumours of industry rationalisation that have been circulating in recent days. The fact that Alliance has made the first move does not mean there won’t be further changes in due course affecting either the South Island’s other large cooperative Silver Fern Farms or ANZCO’s Canterbury Meat Packers operation near Ashburton.

However Alliance’s move will provide a small breathing space before further capacity or structural changes are necessary.

ANZCO MD new B+LNZ director

New B+LNZ board member: Mark Clarkson

Mark Clarkson, managing director of ANZCO Foods Ltd and a Meat Industry Association (MIA) Council member, has recently been appointed to the Board of Beef +Lamb NZ (B+LNZ) as one of two processor-exporter representatives nominated by the MIA.

Before beginning his current role with ANZCO Foods in March 2004, Clarkson was the chief executive of ANZCO subsidiary CMP Canterbury for 10 years. Prior to that, he was the general manager of Five Star Beef Limited, a 50:50 joint venture with Itoham and ANZCO.

Mark Clarkson joins the other processor-exporter representative on the board, Craig Hickson of Progressive Meats and the six farmer-elected board members.

Clarkson replaces Keith Cooper, chief executive of Silver Fern Farms who resigned earlier this year, having sat on the B+LNZ board since 2009.

Published in Food NZ (June/July 2012).