Meat and Wool’s proposition sensible, but funding market development is a challenge

The final proposition sent to farmers this week must be voted on before 28 August, the final result of the referendum to be announced within the following week. Mike Petersen, Chairman of Meat & Wool New Zealand, is confident the proposition reflects what farmers said they wanted during the extensive consultation round from one end of the country to the other over the last three months.

 

The consultation process appears to have demonstrated majority acceptance of the need for future investment, with MWNZ seen as the logical organisation to co-ordinate and provide leadership for the sector’s future development. However there is a vocal minority mainly in the far south willing to spend several thousand dollars on promoting a No vote and a counter proposal to support only on-farm R&D through much lower levy rates. Naturally Mike Petersen is optimistic this campaign will gain little traction.

 

How successful the consultation round proves to be depends on the satisfaction of sheep and beef farmers with the proposed levies and the areas of activity they will fund. MWNZ says what has changed since the initial proposal in April is more focus on three programme areas, farm, market and people, funded by a significantly reduced budget range of $36-37 million, down from $39-46 million originally.

 

The main financial changes are $4 million less on R&D and meat market development, although both these areas are tagged to benefit from other sources of funding – the Government’s Primary Growth Partnership is expected to match Meat Board Reserve funding for approved innovation projects, while meat companies will be encouraged to increase their contributions to market development activities.

 

These programmes are likely to be the ones which pose the greatest challenges, but will also produce the greatest long-term benefit to farmers and the sheep and beef sector as a whole. It’s not immediately clear how MWNZ will differentiate between on-farm research and PGP jointly funded projects, but it appears to be governed by the scale of projects to be approved by Government and Meat Board. The increasing level of contribution by meat companies to market development activities over the five year levy term will be the toughest piece of negotiation facing MWNZ, but it’s also the area which farmers will be looking at carefully to see whether their meat companies of choice are prepared to come inside the tent.

 

The proposal demands an increase of $1 million a year from meat companies over the life of the levy term, building from $2 million today to $7 million with MWNZ’s expenditure actually reducing over the same period….and that’s where it gets tricky. Market development expenditure is a mixture of the generic promotion of New Zealand lamb and beef and specific projects targeted at developing new markets.

 

A good example of a generic programme is the UK campaign for New Zealand lamb, carried out more or less consistently over many years, causing many UK consumers to rate our lamb as at least equal to, if not better than the domestic product. Without MWNZ this programme would not happen, because the meat exporters have insufficient money to sustain it, even if they are willing to work together. The big stumbling block is persuading all the companies to contribute to a generic campaign, as past experience has shown it only works for a limited time before one of the companies decides it wants to spend its scarce promotional money on its own brand campaign. The rest then pull out because they don’t want to support free loaders.

 

So the end result is invariably MWNZ funds the umbrella generic activity, while it works with the companies on specific new market development work to get New Zealand meat off the ground.

 

Several meat exporters already collaborate with MWNZ on a market development programme in China and other emerging markets, whereas AFFCO has remained independent, saying it can achieve better results by working with other Talley’s companies which form a diversified food group. As long as AFFCO isn’t seen to be riding on the coat tails of the jointly funded work, the two programmes will be able to co-exist quite happily.

 

Assuming MWNZ gets its vote of confidence from levy payers, it must work closely with the Meat Industry Association and MIA members: to develop an achievable industry strategy, identify suitable innovation projects to meet PGP criteria and negotiate a workable scale of contributions from the meat companies for market development projects with specific outcomes.

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One Response to “Meat and Wool’s proposition sensible, but funding market development is a challenge”

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