01 May 2009
Elders success creates problems for Meat & Wool NZ
Meat & Wool New Zealand, the farmer-good organisation that took over from the Wool and Meat Boards in 2004, is seeking a renewed farmer mandate for the compulsory levies that fund its activities.
Because so much of its work is essential for the future of the sheep and beef industries, the organisation can't be allowed to fail. But it will be a struggle getting support for the increased levies it needs to maintain existing activities in the face of inflation and falling sheep numbers.
There's the usual farmer suspicion about the value for money they are getting from their own organisations. But with lamb prices on the up and up, that could be overcome.
More worrying is growing controversy about Wool Partners International - a joint venture between PGG Wrightson and Wool Grower Holdings. WGH began life as the Wool Industry Network (WIN), a marketing ginger group set up by MWNZ in 2005 with taxpayer assistance.
Although WIN was charged with unifying growers and delivering an "industry-wide vision" for the future of the wool industry, its definition of 'wide' did not come from the Oxford dictionary. In a continuation of a long tradition of would-be wool market reformers, WIN's consultation with exporters, merchants and most brokers was perfunctory at best, creating inevitable grievance.
Vitriolic debates about how to improve wool prices and the role of farmer-owned ventures in the supply chain have been a feature of farmer politics ever since Adam first put the rams out on Erewhon.
Given this history, it was inevitable that the WIN decision to set up the WPI joint venture with PGG Wrightson would create ructions. This was a challenge to many of the vested interests in the wool industry and competed directly with an existing farmer co-operative and its joint venture, Elders Primary Wool (EPW). From an accountability perspective it also involved shepherding farmers into a joint venture with PGG Wrightson, in which PGGW's wool division was valued at $37.5 million.
In December 2008, guided by PR impresario Iain Morrison, trade interests responded. Under the banner of the United Wool Marketers Group they argued that growers should not be interfering in the free market, but should join with sheep farmers around the world and promote wool over synthetics to a new generation of shoppers.
The creation of a groundswell of farmer opinion opposing reform is a tactic the industry has used successfully in the past, most notably during the Great Wool Debate of 1973.
But this time it didn't happen. Wool prices have accelerated downhill in recent years, even during the recent commodity boom. This and their failure to communicate with growers until presented with a threat to their business status quo, meant the trade had little goodwill or credibility to drawn upon.
In contrast, despite limited public relations activity, wool growers have been taking EPW very seriously indeed. A joint venture between stock firm Elders, wool exporter J S Brooksbank and farmer co-operative Primary Wools, EPW believes in creating a direct marketing link between the grower and consumer, backed by powerful brands.
While it shares this vision with WPI, the contrast in corporate styles between the two ventures could not be more marked. Low-key blokey EPW, which puts performance before promise, strikes a real chord with farmers. Many note with approval that EPW is performing in the marketplace without the support that WPI has enjoyed from the WIN initiative.
In contrast, the WPI hype machine is viewed with suspicion. WPI's purchase of PGG Wrightson's ailing wool division is seen as imprudent. And its exclusive access to the use of the Fernmark brand, developed by the Wool Board for the benefit of all growers, is seen as unfair.
Mandating and remandating levies under the Commodities Levies Act involves a huge amount of hard work by board members, senior executives and public relations teams. In MWNZ's case, none of them need the aggravation caused by WPI, which can only detract from consideration of the very many worthwhile things done by the organisation on the industry's behalf.
The news this week that EPW has acquired exclusive rights to technology that will enable wool to be traced from the scour to the carpet retailer, thereby providing the provenance needed to develop a strong brand, makes the MWNZ sell even more difficult. Why should growers fund PGG Wrightson's wool industry exit strategy when EPW is showing WPI its heels?
MWNZ will therefore be hoping that WPI gets a resounding grower endorsement from a 32 meeting roadshow now underway. If it doesn't, MWNZ will just have to live with the resulting opprobrium. Too much water has gone under the bridge to undo the deal.
Either way, expect MWNZ to progressively distance itself from its love child. Equity and sound governance demand that farmer-good bodies should give equal support to all marketers who meet objective ‘good practice' criteria. EPW clearly does that.
MWNZ directors may also have learned an important lesson - that when political organisations get involved in commerce they put their organisation's mandate, as well as their own, in jeopardy.Declaration of interest: WHAM formerly acted for the Wool Exporters Council and WoolPro and was also involved in the promotion of GrowerCo, an initiative that was based on many of the principles now being promoted by EPW and WPI.
- Trevor Walton