Alliance Group chief executive Surveyor says disrupted supply chains are the norm and last season Alliance struggled to find cold storage at times.
Alliance Group is expecting an improved financial result for the coming year, but warns shipping issues have hit cashflow and generated higher than planned debt and inventory.
Speaking at a virtual roadshow this week, chief executive David Surveyor says the co-operative has been trading profitably due to more value being captured from the market, expanding its branded product programme and improved plant efficiency.
“Our issue all year has not been one of sales, but one of shipping,” Surveyor said.
Chair Murray Taggart says disrupted shipping logistics is expected to continue for another 12 to 18 months.
At the peak season Alliance can load 550 containers a week, but a shortage meant on occasion last season they could only access 220/week.
Taggart says part of the problem is the one million empty containers sitting in Asian ports while exporters in South America, Southern Africa and Oceania face a one million container deficit.
Surveyor says disrupted supply chains are the norm and last season Alliance struggled to find cold storage at times.
He praised staff for the way they have managed the issue and for continuing to deliver product to customers.
“A consequence of the global supply chain disruption has been significant cost and freight increases,” Surveyor said.
“The spot rate cost of reefer boxes has increased fourfold.
“As shipping companies impose surcharges on containers, we are passing these cost increases on to the market where we can, in particular through the price we are selling our products.
“In real terms, the increased supply chain costs is the equivalent of a 45c/kg weight on the livestock schedule.”
Increased volumes of red meat are being sold through premium branded programmes Handpicked Lamb, Handpicked Beef, Silere and Te Mana, as these markets grow.
Alliance has recently signed new distribution contracts for it branded product.
This includes Tesco, where Te Mana will be stocked in 300 stores, Premium Butchery in China and with Marks and Spencer, into which branded sheep meat and beef will be stocked in 11 stores in Singapore.
Surveyor says the aim is to leverage the co-operative’s accumulated history from its supplier’s farms through differentiated brands.
In response to shareholder requirements, Alliance has increased by 33% the number of beef cattle processed in three years, with new facilities at Pukeuri and Levin.
The venison facilities at Lorneville have been reconfigured to also handle cull cows, freeing up the Mataura plant to process prime cattle.
Surveyor says Alliance has launched a branded Angus beef programme and will next year announce a new Wagyu-branded range.
Labour shortage remains a significant challenge and Surveyor says the Government must allow the industry to access more foreign workers.
Alliance continues to seek NZ workers and is also addressing the wants and needs of its existing workforce, with more than 3300 staff finished or enrolled in various training and development programmes.
Manufacturing manager Willie Wiese says Alliance has partnered with Air NZ to streamline the arrival of what foreign workers it has been allowed to recruit.
These have flown directly into Christchurch to minimise potentially mixing with the public to reduce the risk of contracting and spreading covid.
He says plants have new higher level cleaning and security systems and structures in place and an agreement with workers provides flexible staffing within and across plants should a covid case be discovered in a works.
“We believe that by bringing all this together, we are significantly in a better position to respond to an outbreak,” Wiese said.
