By Allan Barber
Keith Cooper’s resignation from the board of Beef & Lamb New Zealand, sudden as it appeared to be, had been brewing for a time.
Cooper had previously expressed frustration with farmer directors’ lack of commercial awareness, terming it 'naivety', and obviously believed B&LNZ was getting involved in areas it should leave to the meat companies, such as market development.
The problem for the sheep and beef farmer organisation is that it must submit itself to a referendum every three years under the Commodity levies Act.
At the last referendum, it lost its mandate to collect levies on wool and goats, and came within a narrow margin of losing its mandate altogether.
This resulted in a change of name from Meat and Wool NZ to Beef and Lamb, a significant reduction in staff numbers, particularly those based at Head Office in Wellington, and a substantial refocusing of activities funded by the farmer levies it collects.
Its members gave B&LNZ a very clear message they were dissatisfied with the way their money was being spent and demanded change.
The major area of change has been in the amount and manner of market investment: traditionally expenditure on marketing and promotion has been directed at generic marketing, firstly of New Zealand lamb in major markets, including UK, Germany, France, Canada and USA, and New Zealand grass fed beef in North Asia where the demand is biggest for prime beef, as distinct from commodity grinding beef for fast food chains in North America.
The level of meat company funded promotion was very low with the farmer body taking responsibility for almost all expenditure on generic promotion of lamb and beef which is produced by farmers. The reaction against carrying all the responsibility for this type of promotion mirrors the decision several years ago to drop generic promotion of wool, including the Woolmark, which some would say started a long, slow downturn in the wool market globally.
There are arguments both ways here – either it should be the farmers’ responsibility for promoting their own product which the companies only process and take to market, essentially unbranded except for the powerful New Zealand brand identity with all the positive attributes associated with it; or it should be a joint responsibility, that of the farmers and the marketers.
The difficulty with the second alternative is that not every company wishes to contribute which means that you end up with a fragmented approach, possibly promoting a single company’s brand as distinct from the well recognised New Zealand mark.
Silver Fern Farms and, I understand, some other companies are not happy with B&LNZ’s new approach to jointly funded marketing programmes, because this places restrictions on their freedom of operation in the marketplace.
Keith Cooper has indicated he believes farmers should allow their meat company of choice to invest on their behalf instead of allowing B&LNZ to dictate how these funds should be spent.
Cooper’s frustration may be further exacerbated by the allocation of Primary Growth Partnership money to B&LNZ and industry partners to conduct research behind the farm gate which threatens to set up a competitor for FarmIQ, the SFF, PGG Wrightson and Landcorp funded company which was the first in line for PGP funding. If this is the case, it would be naïve, because improvement behind the farm gate was an area specifically identified for action in the Red Meat Sector Strategy.
The meat industry has long been considered to be relatively dysfunctional with cut throat competition for livestock procurement and in the market. This is an unfortunate outcome of an industry structure which differs significantly from the dairy industry, simply because the sheep and beef farmer can choose when and where to send his livestock, whereas the dairy cockie has to commit to one dairy company who will collect the milk daily.
The sector strategy seemed to herald a new beginning when farmers and processors committed to work together, headed by their respective representative organisations, but Keith Cooper’s withdrawal from the board of B&LNZ may well signal deterioration in the relationship.
It would be sad if the gains made during the last two years, when prices and farmer incomes have been much improved, are lost.
But it may be too much to hope that the meat industry will change its operating model, with both sides working harmoniously together.
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Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country where he run a boutique B&B with his wife. You can contact him by email at allan@barberstrategic.co.nz or through his blog at http://allan.barber.wordpress.com.
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