Wednesday, April 24, 2024

Unlocking the next layer of value

Neal Wallace
Murray Taggart leaves the Alliance Group in much better shape – and a safer place to work – than he found it when he became chair 11 years ago.
Reading Time: 4 minutes

The government is being urged to stay the course in pursuit of a free trade agreement with India even if it means initially excluding dairy.

Retiring Alliance Group chair Murray Taggart said India has enormous potential as a sheepmeat market, but if trade negotiators want a comprehensive free trade agreement that includes dairy, then it will be difficult.

“Frankly, including dairy and getting it through? They’re dreaming,” Taggart said.

India is the world’s largest dairy producer and has an active farming lobby, Taggart said.

Speaking to Farmers Weekly as he prepared to leave the post he has held for 11 years, he said the government should start with less comprehensive agreement, nurture relationships with the Indian government and sector groups and then renegotiate terms.

Alliance has since 2013 been supplying QualityNZ, a company owned by New Zealand cricketers Sir Richard Hadlee, Stephen Fleming, Daniel Vettori and Brendon McCullum, with its Pure South branded lamb, which is sold to 340 five-star Indian hotels in 25 cities.

In 2020 Alliance bought 10.4% of QualityNZ, which also supplies seafood and wine.

Alliance moved into India to avoid being overly reliant on China and given the year-on-year growth, Taggart believes there are significant market benefits for NZ sheepmeat exports.

Taggart retires as Alliance chair next month after a career that has traversed the meat industry’s inevitable boom and bust cycles but which has seen the co-operative’s turnover grow from $1.4 billion to $2bn.

His tenure began after a difficult 2012 financial year in which Alliance reported a $51 million loss on turnover of $1.37bn.

Consecutive profits followed, peaking in 2022 at $117.2m on turnover of $2.2bn.

It ends with the economic tsunami of last year: weakness in China and  high inventory and staffing costs in preparation for a drought that never eventuated, which resulted in a $97.9m loss.

Taggart said the market appears to correct itself every 10 years, but it takes another two or three years to recover that lost ground.

Taggart began his working career in retail, credit and corporate banking for ANZ with the intention of one day going farming.

His brother had settled on the family farm at Oxford in Canterbury, and when he decided to switch careers and go fishing, Taggart and his wife Gina took the opportunity to shift onto the farm.

Believing there were opportunities for meat companies to capture more value, in 2002 Taggart was elected to the Alliance board as a supplier-director.

What he found was an industry where change was difficult because of the fine margins, large capital requirements and a market that regularly corrected itself.

“You don’t actually get an opportunity to move the peg forward,” he said.

Having lost his board seat in the 2007 election, Taggart was re-elected in 2010 and elected chair in 2013.

He found an antiquated business using a 1983 computer system that was so old, the developers had advised they were no longer going to support it.

Most of the growth in the co-operative’s turnover was due to rising global prices, driven predominantly by China, but Taggart said Alliance continuously looks to add value, a process that is not quick and is never ending.

A recent example of a new product is female cattle reproductive tissue, which is being freeze-dried and used in pills that are sold into the health and wellbeing market.

“We have a whole pipeline of projects. We have looked at the carcase and asked ourselves ‘Where is the next layer of value?’”

It was also an industry that did not take health and safety seriously enough.

“Back then total recorded injury frequency rates were over 100 per one million hours worked. It is now 13.5, the lowest in the industry,” Taggart said.

“Our employees should have the right to go home each night to their families.”

One of the first steps taken to reduce injury rates was to install blade-stop saws, with the co-op buying the new manufacturer’s full year’s production.

Taggart said governance of a co-operative can be challenging not only for the legal responsibilities directors have for health and safety, resource management and finance, but also in being accessible to shareholders.

He said this accessibility deters potential independent directors and management candidates who do not have that responsibility in private companies.

Finding farmer director candidates is becoming more difficult and Taggart said it is the duty of all shareholders to find those who are suitable.

While he is optimistic about the future of Alliance, Taggart said an enduring issue is ensuring the strength of the co-operative’s balance sheet.

It is a regular tussle to ensure livestock suppliers have sufficient shareholding to match the number of animals they supply.

In recent years Alliance has retained funds off stock supplied, actively sought shareholders to share up to match their supply volumes and retained distributions.

Taggart said managing primary sector businesses has been complicated by government changes to labour laws and policies that make it advantageous for investors to convert farmland to forestry.

He cannot see an end to the trend of falling sheep and beef numbers.

“We are at the mercy of world markets, so we don’t need competition from a government-created artificial carbon market.”

Taggart intends spending more time on his 730 hectare livestock and cropping farm while also continuing his governance career as chair of forestry company Taumata Plantations Ltd (“we don’t convert farmland to forestry”) and a director on FMG’s board and several others.

He said he has had a privileged career.

“I feel really privileged to have had opportunities, learnt so much, had amazing experiences and having met wonderful and incredible people.”

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