End of an era for southern cooperatives

Alliance Group chairman Owen Poole retired at the end of September after five years on the board and 15 in top management roles, while Eoin Garden, Silver Fern Farms’ chairman since 2007 is retiring at the AGM in December.

 

Both men in different ways have provided notably determined leadership of their respective companies through particularly difficult times for the meat industry. Although each will retire with some regrets at not being able to lead the way to a permanent recovery, it will be a relief to step back from the limelight and leave the battle to their successors.

 

Poole has been succeeded by North Canterbury farmer Murray Taggart who ironically was voted off the Alliance board at the same AGM as previous chairman John Turner, resulting in Poole being appointed the company’s first independent chairman. That was a consequence of farmer disaffection with low lamb prices, so in spite of some recovery before the last price drop nothing much has really changed.

 

Garden was already a board member of SFF at the time the last chairman Reece Hart was voted off the board for similar reasons. In the cooperative world there is little security of tenure, although consistently good prices make life a lot safer, as can be seen from Sir Henry van der Heyden’s time as chairman of Fonterra.

 

Poole as an appointed rather than elected director was less vulnerable than his predecessor, although I suspect his long history with Alliance as Chief Operating, then Chief Executive Officer gave him a degree of credibility a farmer elected director may struggle to achieve. It is also a fact that Alliance’s financial performance has for the most part been pretty good except for the disastrous 2012 year when the whole industry performed badly.

 

The role of director of a cooperative in an industry as challenging as the meat industry is a thankless one. Farmer directors are answerable to, and dependent for re-election on, their farming constituency, but realistically they have little influence on company performance which is the job of management.

 

Poole led the campaign a few years ago to achieve a consolidation of 80% of the meat industry which ultimately failed through lack of commitment from enough of the big processors. He now believes this won’t happen despite the efforts of the Meat Industry Excellence Group, because it would require three of the private companies to sell to the cooperatives. There is not enough support from the private companies, nor would farmers be able to raise the requisite capital.

 

MIE is being careful not to try to achieve the apparently impossible goal of a merger of SFF and Alliance, unlike the defunct Meat Industry Action Group. However MIE’s deputy chairman John McCarthy says they have some plans and people on board to make some good progress in the near future.

 

Inevitably the new chairmen of the two cooperatives, Murray Taggart and Rob Hewett who will succeed Garden, will have their work cut out to convince their farmer shareholders that they can negotiate their way to a prosperous future. It will be interesting to see whether MIE’s plans hold any interest for the two companies and how they can take into account the rest of the meat industry which is not cooperatively owned.

 

For almost thirty years the industry has had strategic reviews and reports from international consultants and bankers which have resulted in takeovers, closures, and mergers. The authors of Red Meat Sector Strategy set out to identify how the industry could replicate the kiwifruit and dairy industries, but realised that wouldn’t work.

 

So focus has to be restricted to those strategies that can be influenced like alignment of procurement, on farm productivity and market cooperation. One elephant in the room is industry structure, but fixing this won’t cure the problem.

 

Inevitably chairmen will come and go and restructuring will occur at intervals, but as long as there is no unified commitment by farmers to support their company of choice, the meat industry’s volatility will be a continuing frustration.

 

It is a regrettable legacy that Owen Poole and Eoin Garden who have put so much effort into securing the industry’s future leave it in not notably better shape than when they took on the challenge as chairman of their respective cooperatives. However they can both be proud of the significant changes in strategy and structure their companies have achieved under their leadership.

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