Monday, October 17, 2016

It’s not enough for a Cooperative to simply market itself as one to get your business!

In theory I am a strong advocate of cooperatives as quite simply the producers are the shareholders of the entity and as such you would expect everything to be done in the best interest of the shareholder.  However in reality I am far from convinced this is the case.

My concerns in this regard have again been highlighted by the official signing of the Silver Fern Farms (“SFF”) Joint Venture arrangement with a Chinese company.    Alliance Meats (“Alliance”), who I am a shareholder and supplier of, have reiterated in their meetings, articles, weekly emails etc that “we are the only cooperative left and as such the only one that truly has the farmers’ interest at heart”.  I am paraphrasing here, but this has been a familiar marketing theme for over 12 months now.
The problem is this in itself is not a good enough reason to supply a cooperative.  It would be if the theory holds true above, but I am not sure that it is, a cooperative ALSO has to be good successful business that commands support and loyalty of its shareholders through its business acumen, returns, integrity, transparency etc

In a recent article Murray Taggert (Chairman of Alliance) apparently said “Grand Farms wanted to process more imported meat and was pushing more to an ‘up market’ level”.   Grand Farm being the processing giant in China that Alliance is looking to strengthen their existing relationship with (their words not mine).  I am sorry but isn’t this the very thing that we don’t want (it was certainly one of my concerns with the SFF joint venture): that we remain a supplier of whole carcases of lamb/mutton.    How does such an arrangement whereby a company in china processes the meat, into presumably the cuts the consumer wants (‘up market level’), extract more money for me the shareholder/supplier of Alliance.   The added value is surely going directly to the Chinese company Grand Farms!   I would have thought such an arrangement was the antithesis of what most, if not all, meat industry commentators suggest should happen if we are to extract more added value through the chain of supply, so the farmer, in this case Alliance shareholders, received higher returns at the gate.

Then on top of this Alliance has now entered into a joint venture with the New Zealand Merino Company   (“NZM”) to process and market merino meat under the Silere brand.   In my humble opinion, this was originally simply a contract entered into by SFF with the primary purpose to procure livestock.  I understand a premium was paid, which no doubt was ultimately cross subsidised by other suppliers to SFF at the time. 

I thought SFF may have actually stumbled into a good thing here, as historically most would accept that merino (or merino cross)  and Southdown (or Southdown cross) lamb is the best tasting meat (incidentally this to do with the fineness of the wool translating into fine textured meat, something that any experienced stockman will tell you, but I have yet to see any meat company do trials on).  However I was reliably informed by an Alliance executive, in a general discussion some months back, that there were major issues with Silere brand because the colour of the meat made the marketing of it very difficult.

Logically if it was a great money spinner, why would SFF give it up?  The cynic in me wonders if the premiums that I understand were paid by SFF for Silere meat, which they now have no legal obligation to pay, and more importantly no longer wish to pay because there is no money in it, is why SFF’s partnership with NZM is now at an end.

Accordingly if any of these things (if not all) of the above are correct, why have Alliance entered into partnership with NZM to process and market this Silere brand.  Moreover if Alliance pays a premium, because again it’s back to the same old chestnut of procuring stock, then I for one will be bloody annoyed at subsidising a brand and product which presumably has not been a success to date.
I will continue to supply Alliance, but I have to say that my loyalty is being seriously tested and realistically it’s not far from being broken.

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