International promotion is essential, whoever pays for it

The recent AGM at Te Kuiti was a watershed in more ways than one, not just because it symbolised Meat & Wool’s desire to connect more strongly with grassroots farmers, but also because Mike Petersen laid down a strong challenge to the meat industry.

I get the strong impression the two parties are irritated with each other – Meat & Wool is disappointed with the pin being pulled on the Emerging Markets Project, yet another example of the meat companies failing to come to the party, while meat company chairmen I have spoken to are really annoyed at being blamed for the failure of a project, where the business case didn’t even come close to making commercial sense.

At the AGM Owen Poole explained to the audience just how far away from being acceptable the Emerging Markets or essentially China project really was, while emphasising Alliance’s willingness to engage in principle with Meat & Wool in any project which meets certain criteria: an acceptable business case, a minimum of bureaucracy and a majority of the industry’s volume.

In the case of China, the original business case predicted 10,000 tonnes to be exported to that market, whereas the final plan, prepared independently on behalf of Meat & Wool, three of the four largest meat companies, and NZ Trade & Enterprise, cut the forecast volume to below 1,000 tonnes with a reduction of $30 million in Net Present Value over a 10 year timeframe. This was hardly a minor change which Alliance was prepared to ignore. Furthermore there is no valid comparison between the projected China sales structure and NZ Lamb Company in North America which, as Devco, had been a single desk seller for 21 years.

Mike Petersen’s frustration may be understandable after the failure to make progress on any of the more recent projects – Meat Industry Taskforce, single industry good body, and finally the Emerging Markets – but it’s been different companies in each case which underlines the difficulty of getting agreement across a wide range of industry participants. I also sense concern on Meat & Wool’s part at the difficulty of engaging positively with its levy payers who have in short order voted down the wool levy, got rid of a long serving director and sent a strong message about their future expectations of industry collaboration.

This last point will be the hardest to achieve and failure could well cause Meat & Wool’s demise, unless the organisation’s communication with its levy payers succeeds in addressing their concerns. Allowing itself to be backed into a dead end, by raising hopes meat companies will share the costs of generic promotion is a sure recipe for disaster. Meat & Wool should instead focus on working with the industry to develop realistic business cases for individual products and markets to which companies will be happy to contribute.

Both Meat & Wool and the meat companies are in agreement generic promotion in the major markets of UK, Europe and North America is essential, because it has been the single biggest influence on building the strength of the New Zealand Lamb brand. But expecting individual meat companies to act as one to fund generic promotion under the control of a farmer representative organisation is a compete non-starter.

If levy payers reject Meat & Wool’s mandate to spend part of their levy on market promotion, it will be all over for New Zealand sheep farmers because they will have destroyed the one weapon which can guarantee their future prosperity. This would be ironical when you consider lamb prices in export markets have never been higher than they are today.

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