Allan Barber reviews the strategic and operational choices facing the Alliance Group, with its new industry-outsider CEO, David Surveyor

By Allan Barber

Four months into his new job as CEO of Alliance, David Surveyor is really loving the challenge of heading a global business which is so crucial to farmers, consumers and New Zealand as a whole.

He has always been interested in the agrifood space, as he terms it, and enjoys getting to know New Zealand through its agricultural producers.

In contrast with his previous roles in steel and building materials, the biggest difference in the meat industry is the question of livestock supply with so many factors outside the company’s control.

Variable climatic conditions and land use change are just two of the main ones.

At Alliance its cooperative status demands a lot of time seeing things from the supplier perspective which is not such a major factor in manufacturing industries, while all meat companies need to spend more time focused on the market.

However he sees several similarities between the meat sector and other industries he has been involved in, like management of large sites, focus on costs and efficiencies, and developing the right market positioning strategy.

Rather than talking to me about the meat industry as a whole, Surveyor prefers to relate his thoughts and views mostly to Alliance and what he sees as the strategic issues and opportunities the company wants to address.

He makes the point Alliance has both the scale and balance sheet strength to build a market position, while the whole industry can benefit from increasing protein demand from the growing middle class in countries like China, South East Asia, India and Africa in the longer term.

He believes New Zealand is neither big nor strong enough to drive global prices, but he doesn’t think there is much undercutting of competitors happening in the market. While he accepts New Zealand exporters may occasionally be guilty, this is not the issue limiting market prices. This will be achieved by the industry building a stronger market position over time.

While Alliance has its own individual brands that it promotes, he is also willing to build a cooperative New Zealand brand where commercial logic dictates and points to the New Zealand Lamb Company in North America which markets Silver Fern Farms, Alliance and ANZCO product under a single brand.

At present Alliance is busy doing strategic work on a number of fronts, all designed ultimately to improve profitability while adhering strictly to the cooperative principle of rewarding its farmer shareholders. The first priority is to define its values and principles as a cooperative and in the near future discuss the results of this process with shareholders in order to gain supplier feedback.

The second priority is to secure its supply base by improving the range of livestock pricing models offered to farmers. There may be three or four different pricing models which suit the differing needs of supplier groups, but they will all be consistently fair and transparent.

The other main priorities are aimed at efficiency and the market: firstly to ensure improved business efficiency by a balance between optimum cost structures and the appropriate production loading of plants; secondly by the development of new channels to market and new products.

Surveyor has a clear grasp of both Alliance’s short and long term strategic imperatives. Short term the company has tried hard to formulate an appropriate response to what has been a very difficult season for farmers; it has also put a lot of thought into changes to the livestock schedules.

It is also striving to improve cost structures by belt tightening across the business.

Particularly pleasing is a 24% improvement in safety performance compared with last year, because business performance definitely improves in line the safety record. Alliance also recently announced an energy saving programme in agreement with the Energy Efficiency and Conservation Authority which aims to reduce annual energy use and carbon emissions by 2017, resulting in annual savings of $620,000.

Long term strategies include the developing a set of cooperative principles to which the company can aspire, clear, transparent and competitive livestock pricing structures, sustainable efficiency improvements, greater people capability and new ways of connecting with domestic and international customers. The company’s domestic meat business has been given the challenge of finding growth pathways and the initial results of this can already be seen.

On the subject of the broader industry, Surveyor says he prefers commercial solutions to government legislation; it is up to farmers to decide where they want to send their livestock, preferably to a cooperative as proof of support for cooperative principles. He believes MIE wants essentially the same thing as Alliance - a really strong farmer owned cooperative.

He also sees the respective roles of B+LNZ and Federated Farmers as critical to the future success of the meat industry, citing the Red Meat Profit Partnership as hugely important as a means of lifting farmer performance to the point where more sheep and beef farmers achieve the profitability of the top 20%.

At the end of my conversation with him, I came away with a very positive feeling about the potential contribution of a chief executive who has come to the industry without any baggage or preconceived ideas. I wish him every success !

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Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country. He is chairman of the Warkworth A&P Show Committee. You can contact him by email at allan@barberstrategic.co.nz or read his blog here ». This article was first published in Farmers Weekly. It is here with permission.