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09 December 2009

Silver Fern boss deserves place on Power List

 

Keith Cooper's rebranded Silver Fern Farms still faces huge challenges


The elevation of Keith Cooper, chief executive of NZ's largest meat company Silver Fern Farms to the Listener's 2009 Power List, is well-deserved.

Until the start of the decade, the company was notorious for its bunker mentality, bullyboy tactics and unwillingness to co-operate with other industry players. The company's reputation reached its nadir in the aftermath of its takeover of Richmond when its machinations were publicly revealed to have been illegal, unethical and ultimately extremely costly for its farmer shareholders.

The chairman at the time, Jim Pringle, got the message. He reined in his pugnacious chief executive Stewart Barnett and began the process of changing the company culture. Keith Cooper was groomed as Barnett's successor.

Since he moved into the Big Office, Cooper has transformed the business at all levels. He's open and communicative with suppliers, the media and the wider farming community. He takes advice from some of the best strategists in the business. ‘Right-sizing' of the business has removed costly excess processing capacity. Debt has been reduced.

Farmers are no longer afraid to ask curly questions at shed meetings. The company's marketing, which has long been far better than its critics would allow, has been taken to a new level. The former freezing company which became a meat company is indeed being transformed into a consumer-focussed food marketer.

Despite these successes, Silver Fern Farms is still vulnerable. Its level of indebtedness is much higher than its main competitors Alliance Group and AFFCO. The profitability of all three firms also depends heavily on the throughput of livestock, which is on a long-term downward slope.

The focus of the company on plate to pasture marketing gets the big tick from marketing experts, but it too is vulnerable in its early years to price and supply instability. The global meat industry, like all commodity trades, has until recently been heavily driven by price on the day.

While modern retailers say they want high quality at a stable price, they have been known to sing a different tune if a competitor starts undercutting them with product of similar quality. Farmers too, say they will happily forgo spot market highs in return for stable and economic prices, but how big does a price spike have to be before the lure of the commodity trade becomes irresistible? Time will tell.

Coopers' biggest challenge is to make sheep farming profitable again. A major drought this autumn will be all it takes for many hard-pressed sheep farmers or their bankers to say ‘enough'. Once their harder hills have been planted in carbon forests and their better flats have been converted to dairy there is no going back.

Declining stock numbers are likely to force the two farmer co-operatives to start talking mergers again. The last attempt at a wedding failed on the rocks of differing cultures and personal antagonism.

Cooper would be strategically wise to prise open that particular door. In June this year he nailed it firmly shut with a series of advertisements in the farming media which took a potshot at Alliance's marketing skills.

Goodness knows what these ads were trying to achieve. There's enough bad blood between the two co-ops without creating more, especially at a time when exporters need to be competing to maximise the market opportunity overseas, rather than indulging in destructive competition at home.

So far as WHAM can tell, those ads have been Cooper's only mis-step so far. Apart, that is, from the unconsummated deal he negotiated with PGG-Wrightson. Its failure proved to be a lucky and profitable escape for SFF.

If, along with his other skills, Cooper keeps making his own luck the farmer owners of SFF will hope he stays at the helm and on the Listener's Power List for some years to come.

[ends]

- Trevor Walton


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